HDB Financial Services Ltd

FY 2024-25 was a year of disciplined execution and balanced growth, underscoring the strength of our strategy and the resilience of our model.

As we reflect on the past year, I am filled with deep appreciation for how our growth has not been a solitary pursuit but a collective outcome. An outcome shaped by the commitment of our people, the strength of our processes, the relevance of our products and the depth of our partnerships. They are interwoven into our culture, defining how we serve customers, manage risk, embrace innovation and build for the long term. Together, these elements have enabled us to evolve into one of India's most trusted retail-focussed NBFCs, even as we step confidently into a future filled with promise.

Macro View: Resilience Amid Global Uncertainty

The global economy entered 2025 navigating a dynamic and uncertain landscape. While growth remained steady at 3.3% in CY 2024, rising geopolitical tensions and a sharp shift in trade policy implemented by sweeping tariff measures, prompting retaliatory actions from major nations. These developments pushed effective tariff rates to record highs, delivering a significant shock to global trade and macroeconomic stability.

The abrupt and unpredictable nature of these changes exacerbated market volatility, undermined the reliability of traditional forecasting models and introduced fresh challenges for both policymakers and businesses. Against this backdrop, global headline inflation is now expected to moderate more slowly, easing to 4.3% in CY 2025 and 3.6% in CY 2026, amid persistently elevated price levels in several advanced economies.

As the global landscape continues to evolve, adaptability and enhanced regional cooperation will be critical in sustaining economic growth and mitigating emerging risks.

Riding on India's Growth Story

India continues to reinforce its position as the world's fastest-growing large economy, with GDP growth projected at a steady 6.7% over the next two fiscal years. This momentum is underpinned by strong domestic demand, policy continuity and the rapid formalisation of the economy. A strong digital public infrastructure, a young and productive workforce and the growing penetration of organised credit are creating a solid foundation for long-term, broad-based growth.

More importantly, credit is reaching underserved geographies and firsttime borrowers. This is helping widen the base of financial participation with 32% of new-to-credit borrowers coming from rural areas as of December 2024, reflecting deeper inclusion across regions and demographics. This convergence of macroeconomic momentum, digital infrastructure and financial formalisation places India on a unique growth trajectory which is broad-based, inclusive and sustainable.

Regulatory Evolution and Technology as a Driver

The NBFC sector has undergone a pivotal transformation with the implementation of the RBI's Scale- Based Regulation (SBR) framework, tighter governance norms and greater alignment with banking standards. These developments have materially raised the bar on compliance, risk management and customer centricity. Our classification under the Upper

Layer of the SBR has helped us further strengthen board oversight, strengthen internal controls and upgrade our risk and audit architecture. Strong regulatory guidance has catalysed a transformation in the NBFC space, reflected in better-performing portfolios and more diversified funding strategies. We see this evolving regulatory architecture as a catalyst for building institutional strength. It has encouraged us to take a sharper view of balance sheet durability, governance discipline and stakeholder alignment. These shifts are reinforcing our foundation for prudent, scalable growth.

Year in Review: Performance and Progress

FY 2024-25 was a year of disciplined execution and balanced growth, underscoring the strength of our strategy and the resilience of our model. Buoyant demand, particularly from MSMEs and retail borrowers, led to a disbursement increase of about 8.6% year-on-year with about 3.7 Mn new customers added during the year. We recorded a net profit of ' 2,176 Crore while maintaining a Gross Stage 3 (GS3) asset ratio of 2.26%. This performance reflects the strength of our underwriting, which continues to drive consistent outcomes. It is also supported by our predominantly secured loan portfolio, which offers greater protection in volatile conditions and enhances long term asset quality. Our phygital model comprising a network of 1,771 branches and digital infrastructure continues to resonate across segments and makes us well-positioned for the next phase of our journey.

Strengthening Our Foundation for the Road Ahead

Our funding strategy remains conservative and well-calibrated to support growth while managing risk. We continue to maintain a comfortable liquidity buffer and a positive ALM profile across buckets. The same is reflected in our Liquidity Coverage Ratio (LCR) of 161.34%, well above the regulatory requirement, ensuring resilience under stressed conditions. Our ability to raise funds at competitive rates underlines our strong credit profile, supported by high-quality assets and prudent provisioning.

Strategic Direction: Sharpening the Focus

As we look to the future, HDBFS stands on a foundation of scale, prudence and consistency. Our strength lies in our balanced loan portfolio, diversified presence across urban and semi-urban geographies and strong underwriting practices. Our expansion efforts will continue to target Tier 2 and Tier 3 cities, where significant credit gaps persist and demand remains high. These regions represent untapped potential and by focussing on them, we can meet the rising aspirations of underserved customers.

Technology remains at the core of our growth strategy. We are investing in digital platforms that enhance every stage of the customer lifecycle from acquisition and underwriting to servicing. This omni-channel approach has already led to over 97% of our loans being digitally originated, improving both speed and efficiency. By streamlining our operations, we are not only enhancing the customer experience but also increasing our operational efficiency.

Our balance sheet remains strong, with a CRAR of 19.22%. Additionally, our diversified borrowing profile ensures that we have the flexibility to navigate the changing macroeconomic environment.

We have continued to focus on strengthening the internal audit function as well as various risk management areas. This has helped us ensure that our journey ahead is smooth and calibrated.

A Word of Thanks

On behalf of the Board, I extend my deepest gratitude to our customers, employees, regulators, promoters and stakeholders for their continued trust and belief in our vision. Every milestone we achieve is built on collective effort and shared conviction. As we step into a new chapter, we remain committed to growth that is responsible in spirit, deliberate in execution and deeply anchored in purpose, driven by our people and guided by the values that define us.