Press Release Fullerton India Credit Company Limited

1 Press Release Fullerton India Credit Company Limited April 16, 2018. Ratings Amount 1. Instrument Rating Rating Action (Rs. crore). Non-Convertible 4,000 CARE AAA; Stable Reaffirmed Debentures (Enhanced from 3,500 crore) [Triple A; Outlook: Stable]. 600 CARE AAA; Stable Subordinated Debt Reaffirmed (Enhanced from 450 crore) [Triple A; Outlook: Stable]. 4, Total (Rupees Four Thousand Six Hundred Crore Only). Details of instruments/facilities in Annexure-1.. Detailed Rationale & Key Rating Drivers The ratings factor in Fullerton India Credit Company Limited 's (FICCL) strong parentage of Fullerton Financial Holdings (FFH), a step down subsidiary of Temasek Holdings Private Limited , Singapore (Temasek) and the group's demonstrated management and capital support to FICCL.

2 The ratings further factor in FICCL's experienced management, relatively moderate financial profile, comfortable capitalization levels, stable asset quality parameters; albeit some deterioration during FY17 (refers to period from April 01 to March 31) due to demonetization, robust Credit underwriting & risk management systems, shift towards secured lending portfolio and well matched liquidity profile. Continued parent shareholding & support, asset quality, profitability and capital adequacy are the key rating sensitivities. Detailed description of the key rating drivers Key Rating Strengths Strong promoter group with demonstrated and continued support: FICCL belongs to the Temasek group which is promoted and backed by the Government of Singapore.

3 Temasek Holdings (Pvt) Ltd. is the ultimate holding Company of FICCL. The Temasek group holds shareholding in FICCL through its investment arms Angelica Investments Pte. Ltd. ( ) and Fullerton Financial Holding Pte. Ltd. ( ). The parent has demonstrated support over the years to FICCL. and has been regularly infusing capital in the Company to support growth. During FY17, FICCL received equity capital of crore from the promoter group. Experienced management team: FICCL has in place a governance framework with level based escalation matrix and a committee based approach with oversight from Board of Directors (BoD). The BoD has two executives from the parent Company and four independent directors in addition to the Managing Director and Chief Executive Officer (MD & CEO).

4 Mr. Gan Chee Yen, who has been working with Temasek since 2003 and is the CEO and Board member of FFH is the Chairman of FICCL. FICCL has an experienced top management team drawn from banks and other financial services companies. Ms. Rajashree Nambiar took over as the MD & CEO of FICCL from February, 2018 replacing Mr. Shantanu Mitra who retired from the Company with effect from December 31, 2017. Prior to joining FICCL, Ms. Nambiar was CEO & ED of India Infoline Finance Limited (IIFL) for the last three and a half years and has more than 25 years of strong experience in retail banking in India . Prior to joining IIFL, she spent 22 years with Standard Chartered Bank within the retail segment. Financial profile: During FY17, the Company reported Profit Before Tax (PBT) of crore on total income of ,643.

5 Crore as compared to PBT of crore on total income of ,277 crore during FY16. The Company took a one-time extraordinary provision of crore against volatility in the rural portfolio performance caused by demonetization. The Company has re-assessed its loan portfolio and with improvement in collection has written back some of the provision during H1FY18 (refers to period from April 01 to September 30). FICCL's Return on Total Assets (ROTA) stood at for FY17 as compared to for FY16 largely on account of increase in Credit costs as well as slowdown in certain 1. Complete definition of the ratings assigned are available at and other CARE publications 1 CARE Ratings Limited Press Release asset classes. During 9 MFY18 (refers to period from April 01 to December 31), FICCL reported Profit Before Tax (PBT) of crore on total income of ,952 crore as against a PBT of core on total income of ,002 crore during 9 MFY17.

6 The Company followed provisioning policy which was stringent compared to RBI requirement. Till June 30, 2017, FICCL provided on standard assets at for its urban businesses and at for its rural businesses, which was higher as compared to RBI requirement of However, post Q1FY18, FICCL has revised its provisioning on standard assets to bring it in line with extant RBI guidelines. Had the Company applied the provisioning followed till March 31, 2017, PBT for H1FY18 would have been lower by crore. Comfortable capital adequacy: As on March 31, 2017, FICCL reported Capital Adequacy Ratio (CAR) of [ : ]. and Tier I CAR of [ : ] aided by infusion of equity capital during the year coupled with moderation in growth in loan portfolio. The Company reported a comfortable CAR of (Tier I CAR: ) as on December 31, 2017.

7 Factors constituting risk Declining proportion of unsecured lending portfolio: FICCL initially started its operations in 2007 as predominantly an unsecured lender with focus on small ticket personal loans to self-employed individuals. However, due to the financial crisis and consequent Credit losses during the period 2009-10, the Company shifted towards secured lending. After a change in strategy, the proportion of unsecured loans has declined from around 77% as on March 31, 2010 to around 53% as on March 31, 2017 ( : 51%). Although, decline in proportion of unsecured lending portfolio has impacted the yields; reduction in cost of funds has helped the Company offset the impact on margins. Analytical approach: The rating is based on the standalone assessment of FICCL along with the benefits and support derived from its parent, Fullerton Financial Holdings, part of the Temasek group.

8 Applicable Criteria Rating Methodology- Non-Banking Finance Companies Criteria for assigning Outlook to Credit Ratings CARE's Policy on Default Recognition Rating of Short-term Instruments Rating Methodology: Factoring Linkages in Ratings Financial ratios - Financial Sector About the Company Fullerton India Credit Company Limited (FICCL) is registered with RBI as a deposit accepting NBFC (NBFC-D-SI) with a well- diversified portfolio comprising personal loans, loan against property (LAP), rural loans and vehicle loans. FICCL is a step down subsidiary of Temasek Holdings (Private) Ltd. (THL), Singapore (Temasek). Temasek holds entire equity stake in FICCL through its investment arm - Fullerton Financial Holdings Pte, Singapore (FFH) (wholly owned subsidiary of Temasek).

9 FFH, incorporated in January, 2003, is a wholly owned subsidiary of Temasek and its arm for holding strategic investments in the financial services sector. FICCL had AUM of ,597 crore ( ,508 crore) as on March 31, 2017 comprising of personal loans (34%), LAP (35%), rural financing (24%) and vehicle loans (two wheeler, car loans and commercial vehicle loans) (7%). The operations of FICCL are spread across India through a network of 526 branches as on March 31, 2017 spread across 22 states of India covering 600 towns and 50,000 villages. Brief Financials (Rs. crore) FY16 (A) FY17 (A). Total operating income 2,277 2,643. PBT 430 331. Interest coverage (times) Total Assets* 13,339 14,412. Net NPA (%) ROTA (%) A: Audited * Adjusted for Deferred Tax Assets and Intangible Assets Status of non-cooperation with previous CRA: Not Applicable 2 CARE Ratings Limited Press Release Any other information: Not Applicable Rating History for last three years: Please refer Annexure-2.

10 Note on complexity levels of the rated instrument: CARE has classified instruments rated by it on the basis of complexity. This classification is available at Investors/market intermediaries/regulators or others are welcome to write to for any clarifications. Analyst Contact: Name: Aditya Acharekar Tel: 022-6754 3528. Mobile: + 91-9819013971. Email: **For detailed Rationale Report and subscription information, please contact us at About CARE Ratings: CARE Ratings commenced operations in April 1993 and over two decades, it has established itself as one of the leading Credit rating agencies in India . CARE is registered with the Securities and Exchange Board of India (SEBI) and also recognized as an External Credit Assessment Institution (ECAI) by the Reserve Bank of India (RBI).