Dewan Housing Finance Corporation Ltd.

Chairman and Managing Director’s Foreword

Dear Members, A Year of Fulfillment

FY 2017-18 was a defining year for DHFL both in terms of financial performance and strategic growth. To all our stakeholders, crossing the Rs, 1 lakh crore mark in Assets Under Management (AUM) is a matter of immense pride and a great milestone to recognize and celebrate. Looking back at the journey that began 34 years ago, a humble beginning mounted on a profound vision of the Founder to enable homeownership for every needy Indian, translated into a fulfilling achievement. Needless to say, very few Institutions share such an accomplishment of building scale on small value loans. This accomplishment has lent us a new strength that has set us on the path of a larger vision of making the DHFL Brand a household name.

We are committed to further strengthening our capabilities that allow us to serve various financial needs of our customers - offering not only home loans but also protection and security for a better future.

Building on our Founder Late Shri Rajesh Kumar Wadhawan’s Vision, we stay committed to enabling inclusive growth as a thrust of our business objectives and thus contribute to a more equitable world.

The Indian Economy

Indian businesses have successfully coped with numerous policy-led realignments and the financial services sector has been witnessing regulatory-led credit quality changes which will enable a secured future for the market.

Compared to the global scenario, the India story remains buoyant and holds significant potential. Firm government reforms, businesses adjusting to transformational policy changes like demonetization, GST, RERA, etc. and increased spending on welfare and infrastructure needs gels well with the revival of India’s growth theme. In FY 2017-18, India grew by 6.7 percent and the IMF growth forecast is 7.4 percent for FY 2018-19 and 7.8 percent in FY 2019-20. It is noteworthy that China’s growth in FY 2018-19 will be 6.8 percent making India regain the crown of the fastest growing country among emerging economies.

The World Economy Gathering Speed

According to the International Monetary Fund (IMF), the world economy is gathering speed. To make this gain sustainable, shared priorities across economies, which include structural reforms and working towards inclusive growth models, need to be implemented. The IMF report mentions that 2017 saw the best global growth in seven years, having grown by 3.7 percent. While the growth is broad-based, notable upward surprises in Europe and Asia contributed to the record numbers.

Events around the world in the past year demonstrate a growing willingness of the political leadership to solve geopolitical and trade-related conflicts through debate and dialogue. This approach of world leaders across politics, businesses and regulatory affairs, to find solutions to systemic macro-economic imbalances by sitting across the table bodes well for a more equal world. That said, there are sporadic threats to the world economic order due to country-led populist measures, ambitions of regional dominance and imbalanced growth within and across economies.

In the financial sector, global growth is showing signs of picking up with enhanced consumer sentiment. The year also saw global financial institutions spending increased time either on meeting risk and governance-led regulatory demands, or consolidating or shedding divisions for operational efficiency. Simultaneously, new-age fintech start-ups are disrupting traditional forms of financial services delivery. The Indian growth story, especially in the housing finance sector, remains robust.

Affordable Homes Create an Equitable World

Uneven economic growth results in increased human conflicts, creating an undercurrent of larger social unrest. As urban growth is an integral part of the anticipated global progression, six out of 10 people will reside in urban areas by 2030. By that time, the World Bank estimates, our world will need 300 million new housing units.

Governments, policymakers and businesses like ours should not look at this merely as an economic opportunity but also as a social value-addition that will create a more equitable society. Indeed, lop-sided development lets the gap between the wealthy and the poor increase, which will only foster societal conflicts and impede growth momentums.

Research has shown that (affordable) homeownership yields four distinct measurable social benefits, viz., better health for homeowners and their children, reduced crime rates, investment in education due to disciplined savings and increased community-based civic engagement. This is reason enough for us to ensure that homeownership becomes a priority for the civil society. This is also the core thought behind the theme for this fiscal’s Annual Report - ‘Giving India A Home’, driving the need to create a better India by expanding financial inclusion.

Globally, 93 percent of home-seeking adults do not have access to formal housing finance options. For DHFL, this has been at the core of our foundation and business strategy, as facilitating homeownership to marginalized sections through affordable finance helps create a society that is more equal, fair and civil.

Housing for All by 2022

India accounts for 20 percent of the global house construction target. We are set to witness the largest urban transformation of the 21^st century under the guidance of our honorable Prime Minister Shri Narendra Modi’s Pradhan Mantri Awas Yojana (PMAY). The scheme aims to build about 60 million housing units to provide homes to all Indians by 2022.

Urbanization opens up job opportunities and helps reduce inequality Urbanization cannot be overlooked in the quest for development, although it is imperative that we strike the right balance between agrarian reforms, rural enterprises and urban growth to achieve a sustainable transition to urban-led growth. By 2030, 40.76 percent of India’s population is likely to live in cities and by 2050 the country will lead the global urbanisation surge along with China, Indonesia, Nigeria and the United States. Since half a billion of these new consumers will need to have a roof over their heads, it has become critical to re-engineer socioeconomic fabric with special emphasis on safeguarding relegated communities and promoting semi-urban regions.

Globally, 93 percent of would-be homeowners do not have access to formal housing finance options. In India, the situation has improved significantly since the introduction of PMAY in 2015. At DHFL, we have always aimed at implementing transparent, effective and humane credit appraisal measures which ensure that the marginalized sections with no presence in the formal banking system, have access to finance for owning a home.

Measures like the dedicated Affordable Housing Fund (AHF) in National Housing Bank that will be funded from the priority sector lending shortfall and fully-serviced bonds authorized by the Centre, are encouraging. Further, in March 2018, the Union Cabinet approved the creation of the National Urban Housing Fund (NUHF) of Rs, 60,000 crore to fast-track the implementation of PMAY (Urban).

These initiatives point towards the Government’s earnestness to ensure the success of the ‘Housing for All by 2022’ mission. Your Company’s market leadership will ensure that we stand to gain from the wide spectrum of opportunities supported by the Government’s proactive policies that will optimize our cost of funds.

HFCs - Financing India’s Housing Infrastructure

Recent events in the Indian banking and financial sector have seen a strong push by the Government, judiciary and regulators to clean up the system. Armed with the IBC Act (2016), banks and lenders in our country are going through a testing time. After banks faced setbacks for lending to the realty and allied businesses, finance for these sectors have dried up. While return of banks as the key player in the credit delivery system is essential, non-banking finance companies (NBFCs) and Housing Finance Companies (HFCs) have taken the lead to ensure that finance is available both on the supply and demand side for infrastructure projects like affordable housing. I firmly believe that the recent measures will result in a robust and healthy credit culture.

Though this short-term pain was inevitable, these events have proved that NBFCs are vital for the Indian formal lending setup. The combination of the inherited structural strength of Indian

NBFCs, along with the entrepreneurial approach to business, has evolved them into trusted yet accountable lending entities. It is estimated that the contribution of NBFCs in the total retail lending will increase to 17.1 percent in FY 2018-19, as compared to 13.1 percent in FY 2014-15 and 9.4 percent in FY 2005-06.

With DHFL being a prominent HFC in the country focussed on affordable housing finance, it is a matter of pride and satisfaction that we are contributing to building India’s infrastructure dream. Our Founder, Late Shri Rajesh Kumar Wadhawan instituted DHFL on the premise that homeownership gave people deep roots, strong wings and the freedom to pursue their dreams. His vision today has assumed a priority focus of national scale and has evolved into a paradigm for social and economic development. Through our business conduct, DHFL is helping to build more depth into the financial system by creating more mortgage service businesses and generating more liquidity in the capital market, thus in a way promoting a more secured social environment.

Building a Leadership Brand with Trust, Transparency and Technology

In today’s world of real-time reportage, social media amplification and low consumer trust in brands for the safekeeping of their confidential data, we want to conduct ourselves in a manner that builds stakeholders’ trust. Let me assure you that we are building an organization of committed leaders across the hierarchy. Integrity, ethics and empathy are embedded in every member of our professional team, which is passionate yet purposeful in its conduct.

We want our organizational platform to become an enabler that nurtures and grows future leaders from within the ranks.

We want to attract the best talent to our Company where entrepreneurial freedom and a professional work environment are provided in equal measure.

Today, customer-centricity has a new meaning. Recent examples of data breach of user information have created global political crisis, making businesses vulnerable to unintentional misuse. We want to leverage technology as a key enabler to serve customers in a more efficient, quick and non-intrusive manner. We want to use the insights garnered from behavioral economics and big data to build long-term customer relationships.

Similarly, we want to use technology to build a backend system that ensures a high level of credit evaluation and monitoring, risk practices and safety of our consumers’ data. The establishment of Central Processing Units at Mumbai and Hyderabad were key events in this direction. In my previous letter, I had spoken about a ‘phygital’ approach -the best of Physical and Technology mix in reaching and serving customers. We have made considerable progress in this direction and are now equipped to serve them through an omni-channel strategy of online and branch networks.

The biggest opportunity and risk to our business today is technology-led disruption. With the millennial joining the workforce, we must build an organization that is agile. According to a report by Boston Consulting Group, more than half of all new Internet users will be in rural communities and they will constitute about half of all Indian Internet users by 2020. Where traditional organizations will have to retreat, we will need to move forward with digital financial inclusion to cater to digitally native consumers who have leapfrogged to the forefront of digital finance.

We are continuously looking at fintech innovations that will help us serve customers with speed, surety, safety and security. We want to become an organization where the customer is at the centre of our growth trajectory, surrounded by prudent business practices, humane ethos and sustainable action towards the environment and society. And with over 9,500-plus employees, we aim to be a preferred employer brand.

DHFL’s investment in Fintech brand ‘Early Salary’ - a technology platform for lending to salaried class to draw down against future salary is a significant step in building synergy with the new world of technology-based lending.

Sustainable and Prudent Performance

Currently, we have more than 5,90,000 (this figure excludes FD customers) customers and more than '' 1 trillion AUM. This achievement reinforces our position among the top two housing finance companies in India. We will continue to focus on bringing down our cost of funds in the coming years.

During the year, your Company retained CARE’s highest AAA (Triple-A) credit rating. We delivered a robust performance yet again, registering 18.15 percent revenue growth of Rs, 10,464.45 crore for the year ending March 31, 2018. Profit before tax and exceptional items stood at Rs, 1,756.62 crore, an increase of 25.26 percent on a Y-o-Y basis. Our loan portfolio witnessed growth at 27.51 percent to Rs, 91,932.32 crore as on March 31, 2018.

In our endeavour towards furthering our Founder’s vision and facilitating the Government’s national mission, we were acknowledged by ‘My Liveable City’ and knowledge partner ‘National Housing Bank’ as the ‘Best Performing Primary Lending Institution’ under Credit-Linked Subsidy Scheme (CLSS) for Middle Income Groups (MIG) for highest number of credit subsidies under PMAY This accomplishment is truly a tribute to our Founder’s noble vision.

Over the past three decades, we have nurtured the DHFL brand with diligence. Today, DHFL enjoys significant trust and recognition among our customers and peers. Our Insurance (Life and General), Mutual Fund and Education Finance are rapidly scaling up, and we are open to synergistic business evaluations in the micro-finance and other similar sectors.

As conveyed in my opening remarks, we are embarking on a larger mission of making DHFL a partner in every household need, financial and beyond, in line with our mission to ‘Giving India a Home’, with many reasons to smile and celebrate.

WGC - Taking our Learnings to the World, Learning from the World

WGC (Wadhawan Global Capital Ltd.), our Promoter Group entity, continues to build on the Group’s synergies and looks at the global arena for new, disruptive business opportunities in the fintech sector. The aim of the parent platform is two-fold - first, being able to consolidate learning’s, customer insights, process efficiencies and people leadership across various group companies. It will also act as a knowledge-led strategy think-tank to share best practices and build group competencies.

Today, the Group’s leading businesses and new-age investments ensure a

contemporary growth strategy and approach. With a group AUM of USD 22 billion, we have recently forayed into the wealth management space.

Empowering Communities through Compassionate Conduct

DHFL’s business model has empathy ingrained in its conduct, to empower the marginalized to become part of the mainstream through respect and achievement of homeownership. Our CSR efforts continue to be aligned with the same principle of making a real on ground impact. To widen the canvas further, enlist partnerships and build sustainable models through research and innovation, we constituted a Section 8 Company - DHFL Changing Lives Foundation - with a key focus on ECCE (Early Childhood Care and Education). Alongside, we will continue our CSR work in the areas of skill development, financial literacy, rural development and sports.

While education is a key CSR focus area for Indian corporate, not many programmes are dedicated to the implementation of the National ECCE policy despite the segment being recognized as a high-priority area by the Government. Through DHFL Changing Lives Foundation, we aim to bridge this gap with a focus on the core areas of education, nutrition, child-friendly anganwadi infrastructure and stakeholder empowerment. We have partnered with various governmental agencies and private entities in pursuit of these objectives.

During the last fiscal, our skill development centres across 23 Tier II and III locations provided training to 6,000 youth in 12 job roles. As part of our village transformation mission, we have introduced a tobacco control programme to make these villages tobacco free. Our financial literacy programmes have reached out to 40,000 households to aid transition from informal to formal housing, create livelihood linkages and linkages with Government welfare schemes. Additionally, the programme promotes the Government’s PMAY scheme.

Building an Equitable Society

With gap between the segments amongst the population widening, any development that bridges this gap is considered a step towards a sustainable future. As an organization, we will continue to conduct ourselves with prudence, while we strive towards benefiting our customers, maximizing stakeholder wealth and thus, building a world that is equal, fair and democratic for every citizen. It is indeed a proud moment for all of us to be associated with an organization that helps bridge this gap and contributes towards building a more equitable world.

In our mission which we call ‘Giving India a Home’, our Endeavour is to widen the compass of our homeownership initiatives to drive financial inclusion in a manner that is designed to carve a more equitable society.

I would like to thank all our stakeholders including employees, customers, regulators, financial institutions, vendors, etc. for making this journey memorable and worthwhile. I am confident that with your continued support and cooperation, we shall succeed in leading our mission to a successful conclusion, committed in line with the Government’s mission of ‘Housing for All by 2022’.

Thanking you,

With Best Wishes,

Kapil Wadhawan