Other Equity

Description of the nature and purpose of Other Equity (refer Statement of Changes in Equity) :

Statutory reserve as per Section 45-IC of the RBI Act, 1934

Statutory reserve represents reserve fund created pursuant to Section 45-IC of the RBI Act, 1934 through transfer of specified percentage of net profit every year before any dividend is decLared. The reserve fund can be utilised only for limited purposes as specified by RBI from time to time and every such utilisation sha! be reported to the RBI within specified period of time from the date of such utilisation.

Capital redemption reserve (CRR)

Capital, redemption reserve represents reserve created pursuant to Section 55 (2) (c) of the Companies Act, 2013 by transfer of an amount equivalent to nominal value of the Preference shares redeemed. The CRR may be utiLised by the Company, in paying up unissued shares of the Company to be issued to the members of the Company as fuLLy paid bonus shares in accordance with the provisions of the Companies Act, 2013.

Securities premium

Securities premium is used to record the premium on issue of shares. The reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.

General reserve

General reserve is created through annual transfer of profits at a specified percentage in accordance with applicable regulations under the erstwhile Companies Act, 1956. Consequent to introduction of the Companies Act, 2013, the requirement to mandatory transfer specified percentage of net profits to General reserve has been withdrawn. However, the amount previously transferred to the GeneraL reserve can be utiLised onLy in accordance with the specific requirements of the Companies Act, 2013.

Employee stock options outstanding

The Employee Stock Options outstanding represents amount of reserve created by recognition of compensation cost at grant date fair vaLue on stock options vested but not exercised by empLoyees and unvested stock options in the Statement of profit and Loss in respect of equity-settled share options granted to the eligible empLoyees of the Company and its subsidiaries in pursuance of the EmpLoyee Stock Option PLan.

Retained earnings

Retained earnings or accumulated surplus represents total of al profits retained since Company's inception. Retained earnings are credited with current year profits, reduced by losses, if any, dividend pay-outs, transfers to GeneraL reserve or any such other appropriations to specific reserve.

Employee Stock Option Plan

The Company had allotted 48,45,025 Equity shares (face vaLue of ^ 2/- each) under EmpLoyee Stock Option Scheme 2010 at par on 3 February 2011 to Mahindra and Mahindra Financial. Services Limited Employees' Stock Option Trust ("the Trust”) set up by the Company. The Trust holds these shares for the benefit of the employees and issues them to the eLigibLe employees as per the recommendation of the Compensation Committee.

Pursuant to the Rights issue of one equity share for every equity share heLd as on record date, at an issue price of ^ 50 per Equity Share (incLuding a premium of ^ 48 per Equity Share), made by the Company, 20,63,662 equity shares have been aLLotted to the Trust in respect of its rights entitlement on 17 August 2020. ALL the option hoLders (beneficiaries) under existing grants have automaticaLLy became entitLed to additionaL options at ^ 50/- per option as rights adjustment and accordingLy, the number of outstanding options stand augmented in the same ratio as the rights issue. ALL the terms and conditions appLicabLe to these additionaL options issued under rights issue shaLL remain same as originaL grant.

Upon exercise of stock options, incLuding additionaL options issued as per Rights issue, under the scheme by eLigibLe empLoyees, the Trust had issued 57,62,513 equity shares to empLoyees up to 31^st March 2023 (31^st March 2022: 51,19,799 equity shares), of which 6,42,714 equity shares (31^st March 2022: 9,90,139 equity shares) were issued during the current year. This has resulted in an increase in equity share capitaL by ^ 0.13 crore for the year ended 31^st March 2023 (31^st March 2022: ^ 0.20 crore).

f) Determination of expected volatility

The measure of voLatiLity used in the BLack-SchoLes option pricing model, is the annuaLised standard deviation of the continuously compounded rates of return on the stock over a period of time.

The determination of expected voLatiLity is based on historicaL voLatiLity of the stock over the most recent period that is generaLLy commensurate with the expected Life of the option being vaLued. The period considered for voLatiLity is adequate to represent a consistent trend in the price movements and the movements due to abnormal events are evened out.

Accordingly, since each vest has been considered as a separate grant, the model considers the volatility for periods, corresponding to the expected Lives of different vests, prior to the grant date. VoLatiLity has been calculated based on the daily dosing market price of the Company's stock price on NSE over these years. Similar approach was foLLowed in determination of expected volatility based on historical volatility for aLL the grants under the scheme.

I n respect of stock options granted under EmpLoyee Stock Option Scheme 2010, the accounting is done as per the requirements of Ind AS 102 - Share-based payment. ConsequentLy, ^ 4.55 crore (31^st March 2022: ^ 9.20 crore) has been incLuded under 'EmpLoyee Benefits Expense' as 'Share-based payment to empLoyees' based on respective grant date fair vaLue, after adjusting for reversaLs on account of options forfeited. The amount incLudes cost reimbursements to the hoLding company of ^ 1.05 crore (31^st March 2022: ^ 2.70 crore) in respect of options granted to empLoyees of the Company and excLudes net recovery of ^ 0.22 crore (31^st March 2022: ^ 0.30 crore) from its subsidiaries for options granted to their empLoyees.

Employee benefits

General description of defined benefit plans Gratuity

The Company provides for the gratuity, a defined benefit retirement pLan covering quaLifying empLoyees. The pLan provides for Lump sum payments to empLoyees upon death whiLe in employment or on separation from empLoyment after serving for the stipuLated period mentioned under The Payment of Gratuity Act, 1972. The Company makes annuaL contribution to the Gratuity scheme administered by the Life Insurance Corporation of India through its Gratuity fund.

Post retirement medical cover

The Company provides for post retirement medicaL cover to seLect grade of empLoyees to cover the retiring empLoyee and their spouse up to a specified age through MedicLaim poLicy on which the premiums are paid by the Company. The eLigibiLity of the empLoyee for the benefit as weLL as the amount of medicaL cover purchased is determined by the grade of the empLoyee at the time of retirement.

Through its defined benefit pLans the Company is exposed to a number of risks, the most significant of which are detaiLed beLow:

Asset volatility -

The pLan LiabiLities are caLcuLated using a discount rate set with references to government bond yieLds; if pLan assets underperform compared to this yieLd, this wiLL create or increase a deficit. The defined benefit pLans may hoLd equity type assets, which may carry voLatiLity and associated risk.

Change in bond yields -

A decrease in government bond yieLds wiLL increase pLan LiabiLities, although this is expected to be partiaLLy offset by an increase in the vaLue of the pLan's investment in debt instruments.

Variability in withdrawal rates -

If actuaL withdrawaL rates are higher than assumed withdrawaL rate assumption then the gratuity benefits wiLL be paid earLier than expected. The impact of this wiLL depend on whether the benefits are vested as at the resignation date.

Regulatory Risk -

Gratuity Benefit must compLy with the requirements of the Payment of Gratuity Act, 1972 (as amended up-to-date). There is a risk of change in the reguLations requiring higher gratuity payments (e.g. raising the present ceiLing of ^ 20,00,000, raising accruaL rate from 15/26 etc.).

Inflation risk -

The present vaLue of some of the defined benefit pLan obligations are caLcuLated with reference to the future saLaries of pLan participants. As such, an increase in the saLary of the pLan participants wiLL increase the pLan's LiabiLity. The post retirement medical benefit obligation is sensitive to medical inflation and accordingly, an increase in medical inflation rate would increase the plan's liability.

Life expectancy -

The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan participants, both during and after the employment. An increase in the life expectancy of the pLan participants wiLL increase the pLan's LiabiLity.

If actual mortality rates are higher than assumed mortality rate assumption than the gratuity benefits wifl be paid earlier than expected. Since there is no condition of vesting on the death benefit, the acceleration of cashflow wiLL Lead to an actuariaL Loss or gain depending on the reLative vaLues of the assumed saLary growth and discount rate.

complexity involved in the vaLuation it is highly sensitive to the changes in these assumptions. ALL assumptions are reviewed at each reporting date. The present vaLue of the defined benefit obligation and the reLated current service cost and pLanned service cost were measured using the projected unit cost method.

The Company's contribution to provident fund, superannuation fund and national pension scheme aggregating to ^ 70.23 crore (31^st March 2022: ^ 59.17 crore) has been recognised in the Statement of profit and Loss under the head EmpLoyee benefits expense.

Additional disclosures

i) During the financiaL years ended 31^st March 2023 and 31^st March 2022, the Company has not granted any Loans or advances in the nature of Loans to promoters, directors, KMPs and the reLated parties (as defined under the Companies Act, 2013), either severaly or jointly with any other person (a) repayable on demand or (b) without specifying any terms or period of repayment.

ii) There is no Benami Property heLd by the Company and there is no proceedings have been initiated or pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and ruLes made thereunder.

iii) DiscLosure of transactions with the companies struck off under section 248 of Companies Act, 2013 or section 560 of Companies Act, 1956.

iv) There is no charges or satisfaction in reLation to any debt / borrowings yet to be registered with ROC beyond the statutory period.

v) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017.

vi) Utilisation of Borrowed funds and share premium:

A) The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall-

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or

(ii) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries;

B) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall -

(i) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(ii) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

vii) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year.

viii) There are no transactions which have not been recorded in the books of accounts and has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961. ALso, there are no previously unrecorded income and related assets.

ix) All the secured non-convertible debentures of the Company including those issued during the year ended 31^st March 2023 are fuly secured by pari-passu charge on Aurangabad office (wherever applicable) and / or

exclusive charge on present and/or future receivables under Loan contracts/Hire Purchase/Lease, owned Assets and book debts. Further, the Company in respect of secured listed non-convertible debt securities maintains 100% security cover or higher security cover as per the terms of Term Sheet/ Offer document/ Information Memorandum and/or Debenture Trust Deed, sufficient to discharge the principal amount and the interest thereon.

The asset cover available as on 31^st March 2023 in respect of listed secured debt securities is 1.09 (March 2022: 1.09).

Transactions in the nature of change in ownership in other entities Transactions pertaining to previous year ended 31^st March 2022:

Pursuant to the Share Subscription, Share Purchase and Shareholders' Agreement dated 20 August, 2019 with Ideal Finance Limited, Sri Lanka ("Ideal Finance”) and its existing shareholders for investment of the third and final tranche for acquisition of shares of Ideal Finance from its existing shareholders, the Company had completed the acquisition of the balance 20% of the Equity Share Capital aggregating 2,91,29,032 Equity Shares of Ideal Finance from its existing shareholders for ^ 33.97 crore on 8 July 2021, resulting in an increase in the Company's stake in Ideal Finance from 38.20% to 58.20% with a cumulative investment of ^ 77.97 Crore. Consequent to this investment, Ideal Finance has become a Subsidiary of the Company effective 8 July, 2021 and the name was changed to Mahindra Ideal Finance Limited.

Capital management

The Reserve Bank of India vide its circular reference RBI/2019-20/170 DOR (NBFC).CC.PD No.109/22.10.106/ 2019-20 dated 13 March 2020 outlined the regulatory guidance in relation to Ind AS financial statements from financial year 2019-20 onwards. This included guidance for computation of 'owned funds', 'net owned funds' and 'regulatory capital'. Accordingly, effective from the financial year ended 31 March 2020, the 'regulatory capital' has been computed in accordance with these requirements read with the requirements of the Master Direction DNBR. PD. 008/03.10.119/2016-17 dated September 01, 2016 (as amended).

The Company's capital management strategy is to effectively determine, raise and deploy capital so as to create value for its shareholders. The same is done through a mix of either equity and/or convertible and/or combination of short term /long term debt as may be appropriate.

The Company determines the amount of capital required on the basis of operations, capital expenditure and strategic investment plans. The capital structure is monitored on the basis of net debt to equity and maturity profile of overall debt portfolio.

The Company is subject to the capital adequacy requirements of the Reserve Bank of India (RBI). Under RBI's capital adequacy guidelines, the Company is required to maintain a capital adequacy ratio consisting of Tier I and Tier II Capital. The total of Tier II Capital at any point of time, shal not exceed 100 percent of Tier I Capital. The minimum capital ratio as prescribed by RBI guidelines and applicable to the Company, consisting of Tier I and Tier II capital, shall not be less than 15 percent of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off-balance sheet.

"Tier I Capital" means owned fund as reduced by investment in shares of other non-banking financial, companies and in shares, debentures, bonds, outstanding Loans and advances incLuding hire purchase and Lease finance made to and deposits with subsidiaries and companies in the same group exceeding, in aggregate, ten per cent of the owned fund.

"owned fund” means paid up equity capitaL, preference shares which are compuLsoriLy convertible into equity, free reserves, baLance in share premium account and capitaL reserves representing surpLus arising out of saLe proceeds of asset, excLuding reserves created by revaLuation of asset, as reduced by accumuLated Loss baLance, book vaLue of intangibLe assets and deferred revenue expenditure, if any.

"Tier II capital” includes the following -

(a) preference shares other than those which are compuLsoriLy convertibLe into equity;

(b) revaLuation reserves at discounted rate of fifty five percent;

(c) GeneraL provisions (incLuding that for Standard Assets) and Loss reserves to the extent these are not attributable to actuaL diminution in vaLue or identifiable potentiaL Loss in any specific asset and are avaiLabLe to meet unexpected Losses, to the extent of one and one fourth percent of risk weighted assets. 12 month expected credit Loss (ECL) aLLowances for financiaL instruments i.e. where the credit risk has not increased significantLy since initiaL recognition, shaLL be incLuded under generaL provisions and Loss reserves in Tier II capitaL within the Limits specified by extant reguLations. Lifetime ECL shaLL not be reckoned for reguLatory capitaL (numerator) whiLe it shaLL be reduced from the risk weighted assets.

(d) hybrid debt capitaL instruments; and

(e) subordinated debt to the extent the aggregate does not exceed Tier I capitaL.

Aggregate Risk Weighted Assets -

Under RBI GuideLines, degrees of credit risk expressed as percentage weightages have been assigned to each of the on-baLance sheet assets and off- baLance sheet assets. Hence, the vaLue of each of the on-baLance sheet assets and off- baLance sheet assets requires to be muLtipLied by the reLevant risk weights to arrive at risk adjusted vaLue of assets. The aggregate shaLL be taken into account for reckoning the minimum capitaL ratio.

Leases

I) In the cases where assets are taken on operating lease (as lessee) -

As a Lessee, the Company's Lease asset cLass primariLy consist of buiLdings or part thereof taken on Lease for office premises, certain IT equipments and generaL purpose office equipments used for operating activities.

I n accordance with the requirements under Ind AS 116, Leases, the Company has recognised the Lease LiabiLity at the present vaLue of the future Lease payments discounted at the incrementaL borrowing rate at the date of initiaL appLication as at 1 ApriL 2019, and thereafter, at the inception of respective Lease contracts, ROU asset equaL to Lease LiabiLity is recognised at the incrementaL borrowing rate prevaiLed during that reLevant period subject to certain practicaL expedients as aLLowed by the standard.

The weighted average incrementaL borrowing rate of 7.85% has been appLied to Lease LiabiLities recognised in the baLance sheet at the date of initiaL appLication.

(i) Operating segments

There is no separate reportable segment as per Ind AS 108 on 'Operating Segments' in respect of the Company.

The Company operates in single segment only. There are no operations outside India and hence there is no external, revenue or assets which require disclosure.

No revenue from transactions with a single external, customer amounted to 10% or more of the Company's total, revenue in year ended 31^st March 2023 or 31^st March 2022.

(ii) Frauds reported during the year

There were 91 cases (31^st March 2022: 178 cases) of frauds amounting to ^ 2.68 crore (31st March 2022: ^ 5.13 crore) reported during the year The Company has recovered an amount of ^ 0.65 crore (31^st March 2022: ^ 2.24 crore) and has initiated appropriate legal, actions against the individuals involved. The cLaims for the unrecovered Losses have been Lodged with the insurance companies on merit basis.

The Company's pending litigations comprise of claims against the Company primarily by the customers and proceedings pending with Income Tax, Sales Tax / VAT and other authorities. The Company has reviewed al its pending litigations and proceedings and has adequately provided for where provisions are required and disclosed the contingent liabilities where applicable, in its financial statements. The amount of provisions / contingent liabilities is based on management's estimate, and no significant liability is expected to arise out of the same.

The Company has reviewed al its pending litigations and proceedings and has adequately provided for where provisions are required. The Company does not expect the outcome of these proceedings to have a materialy adverse effect on its financial performance and financial position regarding the amounts disclosed above, it is not practicable to disclose information on the possibility of any reimbursements as it is determinable only on the occurrence of uncertain future events.

Transfer of financial assets

Transferred financial assets that are not derecognised in their entirety

The Company has transferred certain pooLs of fixed rate Loan receivabLes backed by underlying assets in the form of tractors, vehicLes, equipments etc. by entering in to securitisation transactions with the SpeciaL Purpose VehicLe Trusts ("SPV Trust”) sponsored by Commercial banks for consideration received in cash at the inception of the transaction.

The Company, being Originator of these loan receivables, also acts as Servicer with a responsibility of coLLection of receivabLes from its borrowers and depositing the same in CoLLection and Payout Account maintained by the SPV Trust for making scheduled payouts to the investors in Pass Though Certificates (PTCs) issued by the SPV Trust. These securitisation transactions also requires the Company to provide for first Loss credit enhancement in various forms, such as corporate guarantee, cash coLLateraL, subscription to subordinated PTCs. as credit support in the event of shortfaLL in coLLections from underLying Loan contracts. By virtue of existence of credit enhancement, the Company is exposed to credit risk, being the expected Losses that wiLL be incurred on the transferred Loan receivabLes to the extent of the credit enhancement provided.

In view of the above, the Company has retained substantiaLLy aLL the risks and rewards of ownership of the financial asset and thereby does not meet the recognition criteria as set out in Ind AS 109. Consideration received in this transaction is presented as "Associated LiabiLity reLated to Securitisation transactions” under Note no. 17.

The foLLowing table provide a summary of financial assets that have been transferred in such a way that part or al of the transferred financial assets do not qualify for derecognition, together with the associated liabilities:

Any unspent amount at the end of the financiaL year wiLL be treated as per the provisions of the existing CSR Law. Any surpLus arising out of the CSR Projects or Programs or activities shaLL not form part of the business profit of the Company.

The Company has set up the Mahindra Finance CSR Foundation (incorporated on 2nd ApriL, 2019) as a whoLLy-owned subsidiary company registered under Section 8 of the Companies Act, 2013 to promote and support CSR projects and activities of the Company and its subsidiary companies. The Company impLements its CSR programs through the Mahindra Finance CSR Foundation.

The Company has identified CSR Thrust Areas for undertaking CSR Projects/ programs/activities in India. The actuaL distribution of the expenditure among these thrust areas wiLL depend upon the LocaL needs as may be determined by the need identification studies or discussions with LocaL government/ Gram panchayat/ NGOs. The Company shaLL give preference to the LocaL area and areas around which the Company operates for CSR spending. Thrust areas incLude heaLth, education, environment and other activities.

The amount spent or contribution / donations made towards CSR activities is charged to Corporate SociaL ResponsibiLity (CSR) expenses, in the statement of Profit and Loss.

The CSR activities of the Company shaLL incLude, but not Limited to any or aLL of the sectors/activities as may be prescribed by ScheduLe VII of the Companies Act, 2013 amended from time to time. Further, the Company reviews the sectors/activities from time to time and make additions/ deLetions/ cLarifications to the above sectors/activities.

During the year ended 31^st March 2023, the Company has incurred an expenditure of ^ 41 crore (31^st March 2022: ^ 28.69 crore) towards CSR activities which incLudes contribution / donations made to the trusts which are engaged in activities prescribed under section 135 of the Companies Act, 2013 read with ScheduLe VII to the said Act and expense of ^ 3.50 crore (31^st March 2022: ^ 0.79 crore) towards the CSR activities undertaken by the Company. The amount incLudes ^ 7.79 crore towards unspent amount of the previous financiaL year

The CSR activities of the Company shaLL incLude, but not Limited to any or aLL of the sectors/activities as may be prescribed by ScheduLe VII of the Companies Act, 2013 amended from time to time. Further, the Company wiLL review the sectors/activities from time to time and make additions/ deLetions/ cLarifications to the above sectors/activities.

Detail of amount spent towards CSR activities:

a) Gross amount required to be spent by the Company during the year is ^ 37.13 crore (31^st March 2022: ^ 37.51 crore).

Corporate Social Responsibility (CSR)

The Corporate Social Responsibility Committee ('CSR Committee' Board level) is responsible to formulate and recommend to the Board the CSR PoLicy indicating the activities faLLing within the purview of ScheduLe VII to the Companies Act, 2013, to be undertaken by the Company, to recommend the amount to be spent on CSR activities presented by the FinanciaL Services Sector CSR CounciL ('FSS CSR CounciL') and to monitor the CSR PoLicy periodicaLLy.

Funding and Allocation:

For achieving the CSR objectives through impLementation of meaningfuL and sustainabLe CSR Projects, the CSR Committee wiLL aLLocate for its AnnuaL CSR Budget, 2% of the average net profits of the Company made during the three immediateLy preceding financiaL years, caLcuLated in accordance with the reLevant Sections of the Companies Act, 2013 read with the Companies (Corporate SociaL ResponsibiLity PoLicy) RuLes, 2014.

The Company may spend up to 5% of the totaL CSR expenditure in one financiaL year on buiLding CSR capabiLities. The Company may aLso make contributions to its Corporate Foundations/Trusts i.e. K. C. Mahindra Education Trust and Mahindra Foundation, towards its corpus for projects approved by the Board. The CSR Committee wiLL approve the CSR budget annuaLLy on receiving the recommendations from FSS CSR CounciL.

Financial Risk Management Framework

In the course of its business, the Company is exposed to certain financial risks namely credit risk, interest risk, currency risk & liquidity risk. The Company's primary focus is to achieve better predictability of financial markets and seek to minimise potential adverse effects on its financial performance.

The financial risks are managed in accordance with the Company's risk management policy which has been approved by its Board of Directors.

Board of Directors of the Company have established Asset and Liability Management Committee (ALCO), which is responsible for developing and monitoring risk management policies for its business. The Company's financial services business is exposed to high credit risk given the unbanked rural customer base and diminishing value of coLLateraL. The credit risk is managed through credit norms established based on historical experience.

49.1 Market Risk

Market risk is the risk that the fair value or future cash flows of financial instruments wiLL fluctuate due to changes in market variables such as interest rates, foreign exchange rates, etc. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while maximising the return.

a) Pricing Risk

The Company's Investments in Commercial Papers, Certificate of Deposits with Banks and Mutual Funds are exposed to pricing risk. A 5 percent increase in market price would increase profit before tax by approximately ^ 103.36 crore (31^st March 2022: ^ 41.72 crore). A simiLar percentage decrease would have resulted equivalent opposite impact.

b) Currency Risk

Currency Risk is the risk that the vaLue of a financiaL instrument wiLL fluctuate due to changes in foreign exchange rates. Foreign currency risk arise majorLy on account of foreign currency borrowings. The Company's foreign currency exposures are managed in accordance with its derivative Risk Management PoLicy which has been approved by its Board of Directors. The Company manages its foreign currency risk by entering into forward contract, cross currency swaps, principal and interest rate swaps. Other derivative Instruments may be used if deemed appropriate.

c) Interest Rate Risk

The Company uses a mix of cash and borrowings to manage the Liquidity & fund requirements of its day-to-day operations. Further, certain interest bearing Liabilities carry variabLe interest rates.

Interest Rate risk on variable rate borrowings is managed by way of interest rate swaps, wherever necessary.

Interest Rate sensitivity

The sensitivity analysis below have been determined based on exposure to interest rate for both derivative and non-derivative instruments at the end of reporting period. For floating rate liabilities, analysis is prepared assuming the amount of liability outstanding at the end of the reporting period was outstanding for the whole year

49.2 Credit Risk Management

Credit risk is the risk that the Company wifl incur a Loss because its customers fail to discharge their contractual obligations. The Company has a comprehensive framework for monitoring credit quality of its retail and other loans primarily based on Days past due monitoring at period end. Repayment by individual customers and portfolio is tracked regularly and required steps for recovery are taken through foflow ups and LegaL recourse.

The Company reviews the credit quaLity of its Loans based on the ageing of the Loan at the period end. Since the company is primarily into retail lending business, there is no significant credit risk of any individual customer that may impact company adverseLy, and hence the Company has caLcuLated its ECL aLLowances on a coLLective basis.

Inputs considered in the ECL model

In assessing the impairment of financial loans under Expected Credit Loss (ECL) Model, the assets have been segmented into three stages. The three stages reflect the general pattern of credit deterioration of a financial instrument. The differences in accounting between stages, relate to the recognition of expected credit Losses and the measurement of interest income.

The Company categorises loan assets (except Trade advances) into stages primarily based on the Days Past Due status.

Stage 1: 0-30 days past due

Stage 2: 31- 90 days past due

Stage 3: More than 90 days

The Company categorises Trade advances into stages primarily based on the Days Past Due status.

Stage 1: 0-60 days past due Stage 2: 61- 90 days past due Stage 3: More than 90 days

The Company applies the simplified approach to providing for expected credit losses prescribed by Ind AS 109, which permits the use of the lifetime expected Loss provision for trade advances, lease and other receivabLes. The Company has computed expected credit Losses based on a provision matrix which uses historical credit Loss experience of the Company.

(i) RBI measures to relieve COVID-19 related stress - Resolution Frameworks Assessment of loan modifications on credit risk:

During the previous years ended 31 March 2021 and year ended 31^st March 2022, the Company had implemented resolution pLans in order to provide reLief to borrowers adverseLy impacted due to onslaught of multiple waves / variants of COVID-19 Pandemic under the resolution framework 1.0 vide circular no. RBI/2020-21/16 DOR. No.BP.BC/3/21.04.048/2020-21 dated 6^th August 2020 for personaL Loan customers and resoLution framework 2.0 vide circuLar No. RBI/2021-22/32 DOR.STR.REC.12/21.04.048/2021-22 dated 5^th May 2021. The loan modifications executed under both these schemes have not been classified as renegotiated as they are as a result of market-wide customer relief programme and not borrower-specific. The Company continues to monitor the recoverability of Loans granted in accordance with these circuLars and is continue to carry higher provisioning over and above the model provisioning based on the repayment behaviour on these loan accounts. (refer Note 57 for detaiLed disclosure as per formats provided by the RBI).

(ii) Impact of COVID-19 related uncertainties

The outbreak of COVID-19 led to nationwide lockdown from March 2020, which graduaLLy phased out over the next few months basis the local level spread of the pandemic. The nation was impacted by the second wave of the pandemic in the first half of the fiscal year 2022 which again slowed down the economic activities to a Limited extent. Despite the successful roLL out of vaccines around the worLd, a varying degree of uncertainty remained throughout the year ended 31^st March 2022. This was caused by new variants of COVID -19, varying vaccine effectiveness and the need for reimposing of government - imposed restrictions. This uncertainty is reflected in the Company's assessment of impairment Loss aLLowance on its Loans which are subject to a number of management judgements and estimates. In reLation to COVID-19, judgements and assumptions incLude the extent and duration of the pandemic, the changes in the macro-economic outLook and its associated impact on the impairment caLcuLations.

The methodoLogies and assumptions appLied in the impairment Loss aLLowance caLcuLations have primariLy remained unchanged from those appLied whiLe preparing the financiaL results for the year ended 31 March 2022. The Company has been updating the ECL modeL with the Latest set of data on reasonable periodic intervaLs and continued the same for the year ended 31^st March 2023, to capture the significant changes in macro-economic growth prospects and shifts in market drivers and changes in risk profiLe of customer credit exposures. Output of ECL modeL refresh is aLso factored in computation of provisions. The Company hoLds provision towards expected credit Loss on financiaL assets as at 31^st March 2023 aggregating to ^ 3,294.71 crore (as at 31^st March 2022: ^ 4,508.83 crore).

(iii) Definition of default

The Company considers a financiaL asset to be in "defauLt” and therefore Stage 3 (credit impaired) for ECL caLcuLations when the borrower account becomes more than 90 days past due on its contractual payments.

(iv) Exposure at default

"Exposure at DefauLt” (EAD) represents the gross exposure baLance when defauLt had occurred. EAD is subject to impairment caLcuLation for Stage 3 assets. Future Expected Cash flows (PrincipaL and Interest) for future years has been used as exposure for Stage 2.

(v) Estimations and assumptions considered in the ECL model

The Company has made the foLLowing assumptions in the ECL ModeL:

a) Loss Given Default (LGD):

- LGD represents expected Losses on the EAD given the event of defauLt, taking into account, among other attributes, the mitigating effect of coLLateraL vaLue at the time it is expected to be reaLised and the time vaLue of money determined based on appropriate discount rate. It is an estimate of the Loss from a transaction given that a defauLt occurred.

GeneraLLy, common LGD is appLied on the exposures in aLL the three stages.

WhiLe, the generaL approach / methodoLogy remains the same, the measurement of ECL on retaiL vehicLe Loans is done on a sLightLy differentiated approach as mentioned here beLow.

- For Stage 3 assets with an ageing more than 18 months (540 DPD) (stressed portfoLio), provision is caLcuLated by appLying LGD at higher rate. Higher LGD rate is determined based on the historicaL Loss that has occurred during the tenor of individuaL assets forming part of specific portfoLio of contracts with an ageing of more than 18 months (540 DPD) at the historicaL period end date (i.e. 42 months from the reset /reporting date) based on the average Life of the portfoLio and is considered as modeL provision for ECL caLcuLation;

- For Stage 3 assets with an ageing up to 18 months (540 DPD), provision is caLcuLated by appLying the Composite LGD rate#;

- For Stage 1 and Stage 2 assets, continue to derive and appLy Composite LGD rate in caLcuLation of Loss aLLowances.

# Composite LGD rate: It is an estimate of the Loss from a transaction given that a default occurs. It is based on the historical Loss on the portfolio that has occurred during the tenor of the individual assets forming part of the portfolio.

For calculating LGD, the Company takes into consideration the Stage 2 assets that have reached 90 DPD in the past and Stage 3 cases of historical period end date (i.e. 42 months from the reset /reporting date) based on the average Life of the portfoLio. Actual, cash flows pertaining to this portfoLio from the first default date to current reset/reporting date are then discounted at Loan EIR rate for arriving at this Loss rate.

b) Probability of Default (PD):

- It is an estimate of likelihood or risk of default occurring over a particular time horizon.

- The measurement of risk of defaults is computed on homogenous portfolios, generaLLy by nature of Loans, tenors, underLying coLLateraL, geographies and borrower profiLes. The defauLt risk is assessed using PD (probability of default) derived from past behavioural trends of default across the identified homogenous portfoLios. These past trends factor in the past customer behaviouraL trends, credit transition probabiLities and macroeconomic conditions. The assessed PDs are then aligned considering future economic conditions that are determined to have a bearing on ECL.

- For Stage 1 assets, 12 months PD is considered which represents default events that are possibLe within 12 months after the reporting date.

- For Stage 2 assets , life time PD is considered which represents default events that are possibLe over the expected Life / tenor of the financiaL instrument.

- PD is applied on Stage 1 and Stage 2 assets on a portfolio basis;

- For Stage 3 assets, PD is aLways at 100% as these are impaired assets.

(vi) Measurement of ECL

ECL is measured as follows:

• Financial assets that are not credit impaired at the reporting date:

ECL for Stage 1: Gross exposure is multiplied by PD and Composite LGD percentage to arrive at the ECL allowance;

• Financial assets that have had a significant increase in credit risk (SICR) since initial recognition (unless they have low credit risk at the reporting date) but that do not have objective evidence of impairment:

ECL for Stage 2: Future Expected Cash flows (PrincipaL and Interest) for respective future years is multiplied by respective years Marginal PDs and Composite LGD percentage and thus arrived ECL allowance is then discounted with the respective loan EIR to calculate the present value of ECL aflowance. In addition, in case of BiLLs discounting and ChanneL finance, as the average Lifetime is of 90 days, a time to maturity factor of 0.25 is used in the ECL computation.

• Financial assets that are credit impaired at the reporting date:

ECL for Stage 3: Difference between the gross exposure at reporting date and computed carrying amount considering EAD net of LGD and PV of actuaL cash flows tiLL reporting date incLuding compounded interest at loan EIR on net carrying value.

For Stage 3 assets in retail portfolio, ECL alowance is calculated separately as folows:

- Stage 3 assets with ageing up to 18 months (< =540 DPD) ECL aLLowance = (Gross exposure on reporting date less Required Carrying value-A)

Required Carrying vaLue-A ={EAD Less ECL aLLowance at Composite LGD rate Less PV of actuaL cashflows tiLL reporting date pLus interest compounded @ Loan EIR]

- Stage 3 assets with ageing more than 18 months (>540 DPD)

ECL aLLowance = (Gross exposure on reporting date Less Required Carrying vaLue-B)

Required Carrying vaLue-B ={EAD Less ECL aLLowance at Higher LGD rate Less PV of actuaL cashflows tiLL reporting date pLus interest compounded @ Loan EIR]

- Undrawn loan commitments:

ECL on undrawn loan commitments is calculated basis the Stage in which that particular customer already exists.

(vii) Forward Looking Information

Historical PDs has been converted into forward looking PD which incorporates the forward looking economic outlook. Considering that major chunk of borrowers in the retail portfolio is from rural area, AgricuLture (reaL change % p.a.) is used as a macroeconomic variabLe. AgricuLture (reaL change % p.a.) stands for Percentage change in reaL agricuLturaL vaLue-added, incLuding Livestock, forestry and fishing, over previous year. In case of SME and BiLLs Discounting portfoLio, ReaL GDP (% change p.a.) is used as the macroeconomic variable.

The macroeconomic variabLes considered by the Company are robust reflections of the state of economy which result into systematic risk for the respective portfolio segments.

AdditionaLLy, three different scenarios have been considered for ECL caLcuLation. ALong with the actuaL numbers (considered for Base case scenario), other scenarios take care of the worsening as well as improving forward looking economic outlook.

(viii) Assessment of significant increase in credit risk

When determining whether the credit risk has increased significantLy since initiaL recognition, the Company considers both quantitative and qualitative information and analysis based on the Company's historicaL experience, incLuding forward-Looking information. The Company considers reasonabLe and supportabLe information that is reLevant and avaiLabLe without undue cost and effort. The Company's accounting poLicy is not to use the practicaL expedient that the financiaL assets with 'Low' credit risk at the reporting date are deemed not to have had a significant increase in credit risk. As a resuLt, the Company monitors aLL financiaL assets and Loan commitments that are subject to impairment for significant increase in credit risk.

Based on the assessment by the Company, the RBI resolution framework for loan restructuring and moratorium relaxation announced in previous years to the borrowers recognising the detrimental impact of COVID-19 has not been deemed to be automaticaLLy triggering significant increase in credit risk. The Company continued to recognise interest income during the current and previous year on such cases and in the absence of other credit risk indicators, the granting of a stress resolution framework and moratorium period did not result in accounts becoming past due and automatically triggering Stage 2 or Stage 3 cLassification criteria.

As a part of the qualitative assessment of whether a customer is in default, the Company also considers a variety of instances that may indicate unlikeliness to pay. In such instances, the Company treats the customer at default and therefore assesses such loans as Stage 3 for ECL calculations. Such qualitative factors include:

• A Stage 3 customer having other loans which are in Stage 1 or 2.

• Not to consider Uncleared cheques as on reporting date for outstanding DPD calculation for retail vehicle loans

• Retail vehicle loans, where asset has been repossessed.

• Cases where Company suspects fraud and legal proceedings are initiated.

• SME loans where the Company has resorted to its rights under the SARFAESI Act.

Further, the Company cLassifies certain category of exposures in to Stage 3 and makes acceLerated provision up to 100% based on quaLitative assessment impLying the significant deterioration in asset quaLity or increase in credit risk on seLective basis. The Company reguLarLy reviews it's ECL modeL based on actual Loss experience and update the parameters used for ECL calculations.

(ix) Policy for write off of Loan Assets

The gross carrying amount of a financial, asset is written off when there is no reaListic prospect of further recovery. This is generaLLy the case when the Company determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write- off However, financial assets that are written off could stiLL be subject to enforcement activities under the Company's recovery procedures, taking into account Legal, advice where appropriate. Any recoveries made from written off assets are netted off against the amount of financial assets written off during the year under "Bad debts and write offs” forming part of "Impairment on financiaL instruments” in Statement of profit and Loss.

(x) Analysis of inputs to the ECL model with respect to macro-economic variable

The beLow tabLe shows the vaLues of the forward Looking macro-economic variabLe used in each of the scenarios for the ECL caLcuLations. For this purpose, the Company has used the data source of Economist InteLLigence Unit. The upside and downside % change has been derived using historicaL standard deviation from the base scenario based on previous 8 years change in the variabLe.

Level of Assessment - Aggregation Criteria

The Company recognises the expected credit Losses (ECL) on a coLLective basis that takes into account comprehensive credit risk information.

Considering the economic and risk characteristics, pricing range, sector concentration (e.g. vehicLe Loans in unorganised sectors) the Company calculates ECL on a collective basis for aU stages - Stage 1, Stage 2 and Stage 3 assets.

The contractual amount outstanding on financial investments that has been written off by the Company during the year ended 31^st March 2023 and that were stiLL subject to enforcement activity was nil (31st March 2022: nil).

Significant changes in the gross carrying value that contributed to change in loss allowance

The Company mostly provide loans to retail individual customers in Rural and Semi urban area which is of small ticket size. Change in any single customer repayment will not impact significantly to Company's provisioning. all customers are being monitored based on past due and corrective actions are taken accordingly to Limit the Company's risk.

Concentration of Credit Risk

The Company's loan portfolio is predominantly to finance retail automobile loans. The Company manages concentration of risk primarily by geographical region in India. The following tables show the geographical concentrations of Loans and trade advances:

Maximum Exposure to credit Risk

The maximum exposure to credit risk of loans and investment securities is their carrying amount. The maximum exposure is before considering the effect of mitigation through collateral.

Narrative Description of Collateral

Collateral primarily include vehicles purchased by retail loan customers and machinery & property in case of SME customers. The financial investments are secured by way of a first ranking pari-passu and charge created by way of hypothecation on the receivabLes of the other company.

Quantitative Information of Collateral

The Company monitors its exposure to loan portfolio using the Loan To Value (LTV) ratio, which is calculated as the ratio of the gross amount of the loan to the value of the collateral. The value of the collateral for Retail loans is derived by writing down the asset cost at origination by 20% p.a on reducing balance basis. And the vaLue of the coLLateraL of Stage 3 RetaiL Loans is based on the Indian BLue Book vaLue for the particular asset. The value of collateral of SME loans is based on fair market value of the collaterals held.

49.3Liquidity Risk Management

Ultimate responsibility for Liquidity risk management rests with the board of directors, which has established Asset and Liability Management Committee (ALCO) for the management of the Company's short, medium and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

a) Maturity profile of non-derivative financial liabilities

The following tables detail the Company's remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The amount disclosed in the tables have been drawn up based on the undiscounted contractual cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows. To the extent that interest flows are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period. The contractual maturity is based on the earliest date on which the Company may be required to pay.

b) Maturity profile of derivative financial liabilities

The following tabLe detaiLs the Company's Liquidity anaLysis for its derivative financiaL instruments. The tabLe has been drawn up based on the undiscounted gross inflows and outflows on those derivatives that require gross settlement. There is no derivative instruments that is settLed on a net basis. When the amount payabLe or receivable is not fixed, the amount discLosed has been determined by reference to the projected interest rates as iLLustrated by the yieLd curves at the end of the reporting period.

There were no transfers between Level 1 and Level 2.

Valuation methodologies of financial instruments not measured at fair value

BeLow are the methodologies and assumptions used to determine fair vaLues for the above financial, instruments which are not recorded and measured at fair vaLue in the Company's financiaL statements. These fair vaLues were caLcuLated for disclosure purposes onLy.

Short-term financial assets and liabilities

For financiaL assets and financiaL LiabiLities that have a short-term maturity (Less than tweLve months), the carrying amounts, which are net of impairment, are a reasonable approximation of their fair vaLue. Such instruments include: cash and balances, trade receivables, balances other than cash and cash equivaLents, trade payabLes and investment & borrowings in commerciaL papers. Such amounts have been cLassified as LeveL 2 on the basis that no adjustments have been made to the baLances in the balance sheet.

Loans and advances to customers

The fair vaLues of Loans and receivabLes are caLcuLated using a portfoLio-based approach, grouping Loans as far as possibLe into homogenous groups based on simiLar characteristics. The fair vaLue is then extrapoLated to the portfoLio using discounted cash flow modeLs that incorporate interest rate estimates considering aLL significant characteristics of the Loans. This fair vaLue is then reduced by impairment aflowance which is already calculated incorporating probability of defaults and Loss given defaults to arrive at fair value net of risk.

Financial Investments

For Government Securities, the market value of the respective Government Stock as on date of reporting has been considered for fair value computations. Since market quotes are not available in the absence of any trades, the carrying amount of Secured redeemable non-convertible debentures is considered as the fair value.

Issued debt

The fair vaLue of issued debt is estimated by a discounted cash flow modeL incorporating interest rate estimates from market-observable data such as secondary prices for its traded debt itself

Deposits from public

The fair vaLue of deposits received from pubLic is estimated by discounting the future cash flows considering the interest rate applicable on the reporting date for that class of deposits segregated by their tenure and cumulative/ non-cumulative scheme.

Except for the above, carrying vaLue of other financiaL assets/LiabiLities represent reasonabLe estimate of fair value.

The Company has not entered into any exchange traded derivative.

b) Exchange Traded Interest Rate (IR) Derivatives

The Company is not carrying out any activity of providing Derivative cover to third parties.

c) Disclosures on Risk Exposure in Derivatives

Qualitative Disclosures -

i) The Company undertakes the derivatives transaction to prudently hedge the risk in context of a particular borrowing or to diversify sources of borrowing and to maintain fixed and floating borrowing mix. The Company does not induLge into any derivative trading transactions. The Company reviews, the proposed transaction and outline any considerations associated with the transaction, including identification of the benefits and potential risks (worst case scenarios); an independent analysis of potential savings from the proposed transaction. The Company evaluates aLL the risks inherent in the transaction viz., counter party risk, Market Risk, Operational. Risk, Basis Risk etc.

ii) Credit risk is controlled by restricting the counterparties that the Company deaLs with, to those who either have banking relationship with the Company or are internationafly renowned or can provide sufficient information. Market/Price risk arising from the fluctuations of interest rates and foreign exchange rates or from other factors shafl be closely monitored and controLLed. NormaLLy transaction entered for hedging, wiLL run tiLL its life, irrespective of profit or Loss.

However in case of exceptions it has to be un-winded only with prior approval of M.D / CFO / Treasurer Liquidity risk is controLLed by restricting counterparties to those who have adequate facility, sufficient information, and sizeable trading capacity and capability to enter into transactions in any markets around the world.

iii) The respective functions of trading, confirmation and settlement should be performed by different personnel. The front office and back-office role is weLL defined and segregated. ALL the derivatives transactions is quarterly monitored and reviewed by CFO and Treasurer. all the derivative transactions have to be reported to the Board of Directors on every quarterLy board meetings incLuding their financiaL positions.

b) Details of Financial Assets sold to Securitisation / Reconstruction Company for Asset Reconstruction

During the current year and the previous year, the Company has not soLd any financial, assets to Securitisation/Reconstruction Company for asset reconstruction.

V) Disclosures relating to loans transferred / acquired through assignment / novation and loan participation

During the current year and the previous year, the Company has not transferred or acquired any Loan exposures through assignment / novation and loan participation.

During the current year and the previous year, the Company has not transferred or acquired any stressed Loans.

VI) Exposures

a) Exposure to Real Estate Sector (refer note no. 55 (A) (1))

b) Exposure to Capital Market (refer note no. 55 (A) (2))

c) Details of financing of parent company products

Of the total, financing activity undertaken by the Company during the financial, year 2022-23, 50% (31^st March 2022: 47%) of the financing was towards parent company products.

d) Details of Single Borrower Limit (SGL) /Group Borrower Limit (GBL) exceeded by the NBFC

During the current year and the previous year, the Company has not exceeded the prudential, exposure Limits for SingLe Borrower Limit (SGL) /Group Borrower Limit (GBL).

e) Unsecured Advances

As at 31^st March 2023, the amount of unsecured advances stood at ^ 4,638.98 crore (31^st March 2022: ^3,363.35 crore). There are no advances secured against intangibLe assets.

VII) Miscellaneous

a) Registration obtained from other financial sector regulators

During the current year and the previous year, the Company has not obtained any registration from other financiaL sector regulators.

b) Disclosure of Penalties and strictures imposed by RBI and other regulators

i) The Reserve Bank of India ("RBI”) vide its press reLease dated 22 September 2022 had directed the Company to cease carrying out any recovery or repossession activity through outsourcing arrangements. The said prohibition was Lifted by RBI effective 4 January 2023 based on the submissions made by the Company and its commitment to strengthen its recovery practices and outsourcing arrangements, tighten the process of onboarding third party agents and strengthen accountability framework as per its Board approved action pLan.

ii) The RBI had by an order dated 5 April 2023 imposed a monetary penalty of ^ 6.77 crore on the Company for deficiencies in reguLatory compliance with the RBI directions on fair practices reLating to disclosure of annuaLised rate of interest charged on Loans to certain borrowers at the time of sanction and faiLure to give notice of change in terms and conditions of Loan to these borrowers. The Company has paid the said penalty amount.

iii) BSE Limited had imposed a fine of ^ 1.4 Lakh GST under ReguLation 60(2) of SEBI (Listing ObLigations and DiscLosure Requirements) ReguLations,2015 for inadvertent deLay of 1 day in intimation of record date to the stock exchange in the month of March 2022 for payment of interest on non-convertibLe debentures. The Company has paid the said penaLty amount.

c) Related Party Transactions

(refer note 51)

d) Rating assigned by credit rating agencies and migration of ratings during the year Credit Rating -

During the year under review, CRISIL Ratings Limited (CRISIL), has upgraded the rating of the Company's Long-term Debt Instruments, Subordinated Debt programme and Bank FaciLities as 'CRISIL AAA/ StabLe' and the Company's Fixed Deposit Programme as 'CRISIL AAA/StabLe', respectiveLy. The 'AAA/StabLe' rating indicates a highest degree of safety with regard to timeLy servicing of financiaL obLigations. The rating on the Company's Short-term Bank Loans and CommerciaL Paper has been reaffirmed at 'CRISIL A1 ' which indicates very strong degree of safety regarding timeLy payment of financiaL obLigations.

During the year under review, India Ratings & Research Private Limited (IND), which is part of Fitch Group, reaffirmed the rating of Company's Long-term instrument and Subordinated Debt programme to 'IND AAA/StabLe' and PrincipaL protected market Linked debenture: IND PP-MLD AAA/StabLe. The Company's Short Term CommerciaL Paper has been rated at IND A1 and as assigned IND-AAA/STABLE ratio to the Company's Fixed Deposit Programme.

During the year under review, CARE Ratings, aLso reaffirmed the 'CARE AAA/StabLe' rating to Company's Long-term debt instrument and Subordinated Debt programme.

During the year under review, Brickwork Ratings India Private Limited (BWR) has, reaffirmed the 'BWR AAA/ StabLe' rating of the Company's Long-term Subordinated Debt Issue.

The 'AAA' ratings denote the highest degree of safety regarding timeLy servicing of financiaL obLigations. Such instruments carry Lowest credit risk.

VIII) Net Profit of Loss for the period ,prior period items and change in accounting policies

There are no such materiaL items which require discLosures in the notes to Accounts in terms of the reLevant Accounting Standard.

IX) Revenue recognition

Refer note no. 2.6 under Summary of Significant Accounting PoLicies.

X) Indian Accounting Standard 27 (Ind AS 27) - Consolidated and Separate Financial Statements (CFS)

ALL the subsidiaries of the Company have been consoLidated as per Ind AS 27. Refer consoLidated financiaL statements (CFS).

vi) Institutional set-up for liquidity risk management

The Liquidity Risk Management framework of the Company is governed by its Liquidity Risk Management PoLicy and Procedures approved by the Board. The Asset LiabiLity Committee of the Board (ALCO) and Asset LiabiLity Management Committee (ALMCO) oversee the implementation of Liquidity risk management strategy of the Company and ensure adherence to the risk toLerance/Limits set by the Board.

The Company maintains a robust funding profile with no undue concentration of funding sources. In order to ensure a diversified borrowing mix, concentration of borrowing through various sources is monitored. The Company maintains a positive cumulative mismatch in aLL buckets. As on March 31, 2023, the Company maintained a Liquidity buffer of approximately ^10,450 crore.

Definition of terms as used in the table above:

a) Significant counterparty:

A "Significant counterparty” is defined as a singLe counterparty or group of connected or affiLiated counterparties accounting in aggregate for more than 1% of the NBFC's totaL LiabiLities.

b) Significant instrument/product:

A "Significant instrument/product” is defined as a singLe instrument/product of group of simiLar instruments/products which in aggregate amount to more than 1% of the NBFC's totaL LiabiLities.

c) Total liabilities:

Total liabilities include aLL external liabilities (other than equity).

d) Public funds:

"Public funds” includes funds raised either directly or indirectly through public deposits, inter-corporate deposits, bank finance and aLL funds received from outside sources such as funds raised by issue of Commercial Papers, Debentures etc. but excLudes funds raised by issue of instruments compuLsoriLy convertible into equity shares within a period not exceeding 5 years from the date of issue. It incLudes totaL borrowings outstanding under aLL types of instruments/products.

e) Other short-term liabilities:

ALL short-term borrowings other than CPs and NCDs with originaL maturity Less than 12 months.

i) The disclosures as above shaLL be based on the sector-wise and industry-wise bank credit (SIBC) return submitted by scheduled commercial banks to the Reserve Bank and published by Reserve Bank as 'SectoraL Deployment of Bank Credit'.

ii) In the disclosures as above, if within a sector, exposure to a specific sub-sector/industry is more than 10 per cent of Tier I Capital of a NBFC, the same sha! be disclosed separately within that sector Further, within a sector, if exposure to specific sub-sector/industry is less than 10 per cent of Tier I Capital, such exposures shall be clubbed and disclosed as "Others” within that sector

5) Unhedged foreign currency exposure

Details of its unhedged foreign currency exposures:

As at 31^st March 2023: Nil

As at 31^st March 2022: Nil

Policies to manage currency induced risk:

Currency Risk is the risk that the value of a financial instrument wil fluctuate due to changes in foreign exchange rates. Foreign currency risk arise majofly on account of foreign currency borrowings. The Company's foreign currency exposures are managed in accordance with its Foreign Exchange Risk Management Policy which has been approved by its Board of Directors. The Company manages its foreign currency risk by entering into forward contract and cross currency swaps.

Section - II

A) Breach of covenant

During the current year and previous year there is no instances of breach of covenant of Loan avaiLed or debt securities issued.

B) Divergence in Asset Classification and Provisioning

DiscLosure of detaiLs of divergence, if either or both of the foLLowing conditions are satisfied:

a) the additional provisioning requirements assessed by RBI (or National Housing Bank(NHB) in the case of Housing Finance Companies) exceeds 5 percent of the reported profits before tax and impairment Loss on financial instruments for the reference period, or

b) the additional Gross NPAs identified by RBI/NHB exceeds 5 per cent of the reported Gross NPAs for the reference period.

As per the RBI inspection report for the reference period 31^st March 2022, the assessment of Divergence in Asset Classification and Provisioning is beLow the threshoLd as defined under a) and b) above and hence the details as required in tabular form is not presented here.

Disclosures as required under Guidelines on Liquidity Risk Management Framework for NBFCs issued by RBI vide notification no. RBI/2019-20/88 DOR. NBFC (PD) CC. No.102/03.10.001/2019-20 dated 4 November 2019

As per the GuideLines on Liquidity Risk Management Framework for NBFCs issued by RBI vide notification no. RBI/2019-20/88 DOR.NBFC (PD) CC. No.102/03.10.001/2019-20, al deposit taking NBFCs are required to maintain Liquidity Coverage Ratio (LCR) from 1 December 2020, with the minimum LCR to be 50%, progressively increasing, til it reaches the required level of 100%, by 1 December 2024.

Disclosures as required under Guidelines on Liquidity Risk Management Framework for NBFCs issued by RBI vide notification no. RBI/2019-20/88 DOR. NBFC (PD) CC. No.102/03.10.001/2019-20 dated 4 November 2019

As per the GuideLines on Liquidity Risk Management Framework for NBFCs issued by RBI vide notification no. RBI/2019-20/88 DOR.NBFC (PD) CC. No.102/03.10.001/2019-20, al deposit taking NBFCs are required to maintain Liquidity Coverage Ratio (LCR) from 1 December 2020, with the minimum LCR to be 50%, progressively increasing, til it reaches the required level of 100%, by 1 December 2024.

Qualitative information:

The Company has implemented the guidelines on Liquidity Risk Management Framework prescribed by the Reserve Bank of India requiring maintenance of Liquidity Coverage Ratio (LCR), which aim to ensure that an NBFC maintains an adequate LeveL of unencumbered HQLAs that can be converted into cash to meet its liquidity needs for a 30 calendar day time horizon under a significantly severe liquidity stress scenario.

LCR = Stock of High-Quality Liquid Assets (HQLAs)/Total Net Cash Outflows over the next 30 calendar days HQLAs comprise of Cash*, Investment in Central and State Government Securities, and highly-rated Corporate Bonds and Commercial papers, including those of Public Sector Enterprises, as adjusted after assigning the haircuts as prescribed by RBI.

* Cash would mean cash on hand and demand deposits with Scheduled Commercial Banks.

Total net cash outflows are arrived after taking into consideration total expected cash outflows minus total expected cash inflows for the subsequent 30 calendar days. As prescribed by RBI, total net cash outflows over the next 30 days = Stressed Outflows - [Min (stressed inflows; 75% of stressed outflows)]. Total expected cash outflows (stressed outflows) are calculated by multiplying the outstanding balances of various categories or types of liabilities and off-balance sheet commitments by 115% (15% being the rate at which they are expected to run off further or be drawn down). Total expected cash inflows (stressed inflows) are calculated by multiplying the outstanding balances of various categories of contractual receivables by 75% (25% being the rate at which they are expected to under-flow)

The Liquidity Risk Management framework of the Company is governed by its Liquidity Risk Management Policy and Procedures approved by the Board. The Asset Liability Committee of the Board (ALCO) and Asset Liability Management Committee (ALMCO) oversee the implementation of liquidity risk management strategy of the Company and ensure adherence to the risk tolerance/limits set by the Board.

The Company maintains a robust funding profile with no undue concentration of funding sources. In order to ensure a diversified borrowing mix, concentration of borrowing through various sources is monitored. Further, the Company has prudential limits on investments in different instruments to maintain a healthy investment profile. Risks relating to foreign currency and interest rate is mitigated by entering in corresponding hedge transactions. Any potential collateral calls from the same forms a miniscule part of cash outflows. There is no currency mismatch in the LCR. The above is periodically monitored by ALMCO and reviewed by ALCO.

Disclosure as required under Guidelines on Resolution Framework for COVID-19-related Stress issued by RBI

During the year, to relieve COVID-19 pandemic related stress, the Company has invoked resolution plans for eligible borrowers based on the parameters laid down in accordance with the resolution policy approved by the Board of Directors of the Company and in accordance with the guidelines issued by the RBI on Resolution Framework 2.0 dated 5 May 2021.

On 12 November 2021, the Reserve Bank of India (RBI) had issued circuLar no. RBI/2021-2022/125 DOR.STR. REC.68/21.04.048/2021-22, requiring changes to and cLarifying certain aspects of Income Recognition, Asset Classification and Provisioning norms (IRACP norms) pertaining to Advances. On 15 February 2022, the RBI had issued another circular no. RBI/2021-2022/158 DOR.STR.REC.85/21.04.048/2021-22 providing time til 30 September 2022 for implementation of provisions of above mentioned circular. Accordingly, the Company has implemented the updated norms under IRACP w.e.f 1 October 2022.

The RBI has also clarified that this circular does not, in any way, interfere with the extant guidelines on implementation of Ind-AS by NBFCs. Accordingly, the financial results for the year ended 31^st March 2023 and previous year ended 3^1st March 2022 have been prepared in accordance with Indian Accounting Standards ('Ind AS') notified under the Companies (Indian Accounting Standards) Rules, 2015, as amended, as the Company continues to foLLow the extant model provisioning norms, as per the Board approved Expected Credit Loss (ECI ) policy.

The Reserve Bank of India, under ScaLe Based Regulations (SBR), has categorised the Company in Upper Layer (NBFC-UL) vide its press reLease dated 30 September 2022. The Company has put in pLace a Board approved poLicy for adoption of enhanced reguLatory framework and implementation pLan for adhering to new set of regulations under SBR framework as per the prescribed timeLines.

On 21 October 2022, the Company entered into a Share Purchase Agreement with IncLusion Resources Private Limited (IRPL) to acquire baLance 20% equity stake in its subsidiary Mahindra Insurance Brokers Ltd (MIBL) at a consideration of ^ 206.39 crore. This proposed transaction is subject to the approvaL of Insurance ReguLatory and DeveLopment Authority of India (IRDAI). Subsequent to the acquisition, MIBL wiLL become a whoLLy owned subsidiary of the Company.

During the year ended 31^st March 2023, in reLation to serious economic crisis evoLved over a period of time resulting in currency devaLuation and worsening business situation in Sri Lanka, the Company had reviewed future cash flow estimates of its Sri Lankan subsidiary, Mahindra IdeaL Finance Limited (MIFL). Based on these projections, the Company had obtained a vaLuation report from an independent vaLuer for vaLuation of its equity stake in MIFL. As per the vaLuation report, which is prepared using discounted cash flow method, and based on the management assessment, the recoverabLe amount of the investment in MIFL is Lower than the carrying amount of investment and accordingLy an impairment Loss provision of ^ 54.51 crore was recognised as an exceptionaL item in the Statement of profit and Loss for the year ended 31^st March 2023.

i) A comparison between provisions required under extant prudential norms on Income Recognition, Asset Classification and

Provisioning (IRACP) and impairment allowances made under Ind AS 109 (Continued)

Since the total, impairment allowances under Ind AS 109 is higher than the total, provisioning required under IRACP (including standard asset provisioning) as at 31^st March 2023 and 31^st March 2022, no amount is required to be transferred to 'Impairment Reserve' for both the financial, years. The gross carrying amount of asset as per Ind AS 109 and Loss allowances (Provisions) thereon includes interest accrual, on net carrying value of stage - 3 assets as permitted under Ind AS 109. While, the provisions required as per IRACP norms does not include any such interest as interest accrual, on NPAs is not permitted under IRACP norms.

The balance in the 'Impairment Reserve' (as and when created) shall not be reckoned for regulatory capital.. Further, no withdrawals shall be permitted from this reserve without prior permission from the Department of Supervision, RBI.

ii) As at 31^st March 2023 and 31^st March 2022, there were no Loan accounts that are past due beyond 90 days but not treated as impaired, i.e. all 90 DPD ageing Loan accounts have been classified as Stage-3 and no dispensation is considered in stage-3 classification.

iii) Policy for sales / transfers out of amortised cost business model portfolios Sale/transfer of portfolios out of amortised cost business model:

As a short-term financing arrangement, the Company has been transferring or setting certain pools of fixed rate loan receivables backed by underlying assets in the form of tractors, vehicles, equipments etc. by entering in to securitisation transactions with the Special Purpose Vehicle Trusts ("SPV Trust”) sponsored by Commercial banks for consideration received in cash at the inception of the transaction. As a part of annual budgetary planning and with the objective of better liquidity and risk management, the Company, at the beginning of the year, obtains approval of Asset Liability Committee and Risk Management Committee of the Board of Directors for undertaking securitisation transactions of certain value of standard assets comprising the collateral based loan receivables at appropriate times during the year

These transactions are carried out after complying with RBI guidelines on securitisation of standard assets. The consideration received through such securitisation transactions is utilised for funding regular vehicle loan disbursements to customers who service their loans through fixed installments over a specified period of loan tenor. Besides using securitisation as alternate financing tool, it is also being used as a effective Balance sheet management through better liquidity and risk management by transfer of assets from risk averse to risk takers.

When the assets in the form of loan receivables are sold / transferred to an SPV/Bank through securitisation transaction, then on a consolidated portfolio level, such sale/transfer does not change the Company's business objective of holding financial assets to collect contractual cash flows.

The Company remains exposed to credit risk, being the expected losses that witt be incurred on the securitised loan portfolio to the extent of the credit enhancement provided. Any increase in losses as compared to the expected Loss shatt require the Company to present its credit enhancement / cash collateral to help compensate the investors. This is as per the requirement of the Reserve Bank of India. Thus, the Company as per Ind AS 109 has retained substantially att the risks and rewards of ownership of the financial asset.

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially att of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially att of the risks and rewards of ownership and does not retain control of the financial asset.

I f the Company enters into transactions whereby it transfers assets recognised on its balance sheet, but retains either all or substantially all of the risks and rewards of the transferred assets, the transferred assets are not derecognised.

Accordingly, these financial assets are not derecognised by the Company from the financial statements prepared under Ind AS. Since the contractual terms of these financial assets give rise to cash flows, that are solely payments of principal and interest, on specified dates, these assets meet the SPPI criterion and are thus continued to be recognised in the books at amortised cost.

(i) Figures pertain to Long-term borrowing basis original maturity of more than one year (excludes External Commercial Borrowings, Inter-corporate borrowings between a parent & subsidiaries and securitisation portfolio outstanding); and

(ii) Figures are taken on the basis of cash flows/principal maturity value, excluding accrued interest, if any.

Events after the reporting date

There have been no other events after the reporting date that require disclosure in these financial statements.

Previous year figures have been regrouped /reclassified wherever necessary to conform to current year presentation.

Signatures to Notes 1 to 65