Ribbit Capital: Lending study – Final Materials

August 2022
 We have covered all key elements of the scope, and we’ll be sharing our integrated
perspectives today
Capital supply potential for Unsecured Loans from Funding & Business models used, and risk Benchmarking of players and understanding
banks/ NBFCs undertaken across models best in class
Key questions

• How much capital supply is there from • What is the risk Fintechs are taking on their • How does Fintech performance compare
Banks/ NBFCs for unsecured loans? books? to traditional players on channels and
Could Fintech companies scale 10x? economics?

• Benchmark key Fin-tech vs traditional

• Archetypes of lenders: banks/ NBFCs (deep dive on Bajaj):
• Capital supply potential from Banks/ NBFCs in – Archetypes: Banks & NBFCs, PSPs (UPI/QR
next 3-5 years – Economics/ RoA
players), Fintech players (Aggregators/ Distributors/
– Availability from various funding instruments: > Cost of funding
Financiers), P2P lenders, Card players (CC/ Neo-
> Deposits > Cost of collections (Opex, processing)
cards)
> Debt (bonds/ debentures), > NII, Fee income
> Equity • Capital sourcing details (Type, tenure, > Credit costs/ NPA/ DPD
> Alternate forms of capital (e.g. securitization) commitments etc.) for each archetype > Interest rate/ cost of funds advantage
– Extendable credit for unsecured loans, considering a) key – Source of funds (self, partnership with banks/ – Capital sourcing: Tenor, Equity requirements,
ratios (CD ratios, debt to equity ratio etc.), and b) portfolio NBFCs, co-lending) Commitments
balance across loan types – Alternate forms of capital like debentures, ECB, – Risk sharing
securitization etc. > Model deployed (FLDG, co-lending)
• For Unsecured loans – > Level (% of risk undertaken)
Scope

– Top 5-10 NBFC/ Bank partners supplying capital

– Current penetration of banks, NBFCs? Latent demand?
– How much is served by Fin Techs and how will that evolve
in the future?
– What is the full potential on Fin Tech lending?
– Innovative funding models by Fintechs and likely
evolution of funding models
– GTM play and channel
> Customer segments served (demographics,
credit score, DQ levels)
> Key distribution channels (offline/ online)
– Acquisition partnerships/ hooks
– Underwriting & collection capabilities

• Implications / insights for Ribbit portfolio companies – what changes may be required for each firm in their approach ?
• Macro credit update on the Indian consumer- credit performance over time across Fintechs, Banks & NBFCs

NDL 220810_Ribbit Capital FinTech ... Fully covered Partly covered 2

Sources: We have informed our view through 50+ market participant conversations,
PortCo discussions and secondary research across relevant sources
SUMMARY SOURCES

Primary Sources: In-depth conversations with Senior Leadership in Industry (N=53) PortCo discussions (5 Companies)
Former Head of Partnerships – OneCard Group Product Mgr. BNPL – MoneyTap
Fintech Chief Product Officer
players Manager Corporate Finance & Investor Relations - Early Advisor - MoneyTap
Salary Chief Risk Officer
(N=30) Senior Group Manager – Lending at Navi
Head – Lending, Vice President – Navi Investor Relations Head
Bus. Head - Alliances & Partnerships – EarlySalary
VP Bus. Head of PL – PayTM Founder & CEO
Former VP Strategic Partnerships – Flexiloans
Former COO Payments Bank– PayTM Chief Financial Officer + 2
CoFounder – Flexiloans
Bus. Head and VP – PayTM Founder & CEO
Former VP Partnerships – Indifi
Senior Manager – PayU Co-founder & MD
Former Dir. Of Growth – INDmoney Head of PL partnerships- PayU
VP- Management
Head of Corp Strategy and Partnerships – KISSHT Dir. of Partnership and Sales – PayU
CTO / Cofounder - KISSHT Head of Partnerships – Slice
Chief Business Officer – KISSHT CFO – Slice Secondary sources
Vice President – KreditBee Advisor & Interim CFO - Slice
Head of Products – UniCard
Former Bus. Prod. Mgr. – KreditBee
Head of Partnerships and Alliance – UniCard
VP New Iniatives & Strategy – LendingKart
Head of Operations – Upgrade
Director of Colending – LendingKart

Traditional National Sales & Product Head - Bajaj Finance Axis AVP Credit - AXIS Bank Limited
Limited Banks
Credit Chief General Manager- Commercial Credit Group
NBFCs (N=10) - State Bank of India
Former Snr. Bus. Head - Bajaj Finserv
(N=11) Former National Head UPI and Partnerships – Bajaj Cluster Head - SBI MUTUAL FUND
Finserv
HDFC Head of DCM Credit - HDFC Bank
Current Head - Strategic partnership - Credit Saison
ICICI Product Lead - Digital Lending at ICICI Bank
Head of Policy and Credit - Personal Loans & MSME ICICI Head - Key Initiatives, Retail - ICICI Bank
Loans at DMI Finance IDFC Business Head - Digital Lending - IDFC First
IndusInd Bank Associate VP - IndusInd Bank
Group CFO - DMI Finance Analyst Reports
COO - Fullerton India Credit Company South Head Fintechs – South Indian Bank
Head of Digital – IIFL Union Bank of India Chief Manager - Union Bank of India Company websites,
Director & Head - Emerging Business - Northern Arc mobile applications and
Capital RBI Former Executive Director – RBI
Others annual reports
AVP Debt & Structured Financing - Tata Capital Fund Manager & Dealer Fixed Income PMS -
(N=2)
Current Head & COO - Vivriti Capital LIC Mutual Fund

NDL 220810_Ribbit Capital FinTech ... 3

AGENDA

Capital supply/ demand for unsecured retail loans

Business model, capital planning & key risks

Summary messages (Capital supply)

• Unsecured retail lending is a $120-140B o/s market in India, with Fintechs accounting for $4-5B (3-4%). Going forward, we believe Fintechs can grow 6-7x by FY27, with need for
$2.5-3B equity infusion in base case ($5-5.5B infusion in conservative case). At a market level, Fintech currently do 40-45% of the o/s via in-house NBFC arm & rest 55-60%
coming from partner financiers (NBFCs & Banks) via FLDG & Co-lending models. Going forward, partner-based book to grow to 65-70% share, driven by a) high willingness &
availability of capital for partner financiers b) ease of scalability for Fintechs (need for lower capital from debt & equity for in-house NBFC)

– Multiple NBFCs participate in lending via Fintech partnerships, with Fullerton, IIFL & DMI finance being the top contributors. Going forward, we see NBFC capital via Fintechs growing at 50%+ driven by a) capital
supply growth for partner NBFCs (20-25% growth outlook going forward), b) increasing number of NBFCs showing willingness for Fintech partnerships, and c) increasing share of Fintech based lending in the
overall NBFC books (likely to reach 23-25% from current ~14%)

– Banks have been relatively more cautious in Fintech partnerships, with IDFC bank accounting for 70-80% contribution. However, banks like Federal, ICICI, KVB have been catching up, as Fintech books
demonstrate performance & maturity over time (with other players likely to follow suite). Given scale of Fintech financing being relatively small vs. overall bank financing ($4-5B vs. $100-105B of unsecured
retail loans from banks, $1.6T total bank advances), even a small proportion of bank financing diverting towards Fintechs can open up abundant capital supply for Fintechs

• It is critical for lending-focused Fintechs to have an in-house NBFC arm, to a) protect against extreme regulatory action with ban on FLDGs, requiring partner-based lending
to be only via co-lending, & b) safe-guard growth ambitions in case of unavailability of capital supply from partners. This would however imply need for raising capital via a)
debt (traditional avenues being large NBFCs & NCDs, with newer avenues like securitization & ECBs) & b) commensurate equity capital infusion (D/E ratio of 3-4 at an industry level)

• RBI regulation on PPI cards pose a risk to the card-based lending products from Fintechs, given the need for PPI to be funded only via bank a/c (and not via credit lines).

• Credit risk (NPAs/ DPD) is an additional risk that Fintechs need to plan for, especially the ones catering to near-prime & subprime segments (<750 credit score). Fintechs
with higher share of focus on this segment can ideally a) plan for appropriate capital provision, to plan for extreme NPA scenarios, b) pro-actively monitor collections at regular
intervals (15-day, 30-day etc.) & c) leverage tested base for cross-selling high-ticket/ long tenure loans

NDL 220810_Ribbit Capital FinTech ... 5

India is home to ~300M households earning ~$2.7T annually; total consumption at
$1.8-1.9T today with only 8-10% credit penetration
TO D AY CONSUMPTION
India comprises of ~300M households with ~$2.7T in Overall level of financing low in living expenditure (single digits), with
income and ~$1.8-1.9T in consumption durables being the highest credit penetrated category
~300M Pre-tax HH Capital Expenditure HH Living Expenditure
Consumption
Income (Primarily secured credit) (Primarily unsecured credit)

High $0.6-0.65T $0.2-0.25T

11M (4%)

Upper mid $1.1-1.2T $0.7-0.8T

80M (27%)

Lower mid $0.55-0.6T $0.55-0.6T

106M (35%)

Low $0.3-0.35T $0.3-0.35T

102M (34%)

FY22 ~$2.7T ~$1.8-1.9T

Note: Low income: <$4k, Lower-mid: $4-8.5K, Upper-mid: $8.5-36K, High income: >$36K income per HH in real term; Grocery: Dining incl. Grocery, Dine out & Food Delivery; Travel & conveyance: spend on airline, taxi, train, etc.; Others: incl. HH services
(e.g., domestic help, water, entertainment, etc.); Health incl. only OOPE expenditure by HHs; Home improvement includes Home furniture; Source: Nielsen, Euromonitor, Bain IP, secondary research
NDL 220810_Ribbit Capital FinTech ... 6
This offers a ~$350B addressable opportunity for unsecured loans across different
income types
TO D AY CREDIT DEMAND

Unsecured credit demand in India - Market potential for lending players Remarks and Sources
# of Households (~300M) Bain – WEF report on India
Segmented by income consumption, Secondary research
Low: ~102M Lower Mid: ~106M Upper Mid: ~80M High: ~11M

Average annual income (~$9K) Bain IP, secondary research

Low: ~$3K Lower Mid: ~$5.5K Upper Mid: ~$15K High: ~$53K

Total Household income (~$2.7T)

Low: $300-350B Lower Mid: $550-600B Upper Mid: $1.1-1.2T High: $600-650B

% of households needing credit (~49%) Bain IP, Market participant

interviews, Customer research
Low: 95% Lower Mid: 60% Upper Mid: 40% High: 30%

Average need for credit Bain IP, Market participant

(depending on specific use cases, based on allowable FOIR) interviews, Customer research-
Low: $700-900 Lower Mid: ~$1.6K Upper Mid: ~$4K High: ~$9K
triangulated top down based on
allowable FOIR (Fixed obligations
to income ratio)
Total Addressable Credit demand (~$350B)
Low: @90-100B Lower Mid: $100-110B Upper Mid: $120-130B High: $30-40B

Note: Low income: <$4k, Lower-mid: $4-8.5K, Upper-mid: $8.5-36K, High income: >$36K income per HH in real term; Sources: market participant interviews, NDL
RBI, Bain analysis 220810_Ribbit Capital FinTech ... 7
Of this ~$350B, only $120-130B is being served today, with majority supply coming
from banks; Fintech share at 3-4% today
TO D AY SERVED MARKET

Credit supply at $120-130B (~35% of overall demand); Overall supply coverage at ~35%, with greater coverage
bank have majority share with ~80% of the supply at higher income bands
Capital for Fintech lending in-turn sourced from
NBFCs (in-house & partner) & bank partners Income
21% segments Demand Supply Served market
3
Low $90-100B $6-7B 6-8%
2

Bajaj (24-26%
growth) + other Lower mid $100-110B $25-30B 25-30%
NBFCs growing
at 18-20%

Upper mid $120-130B $60-65B 45-50%

1
High $30-40B $25-30B 85-90%

Total ~$350B $120-130B ~35%

• Demand supply delta due to mix of factors – a) Awareness b) Access c)

Approval/ Eligibility d) Affordability and e) Supply constraints
• Lower income segments (low and lower mid) disproportionally hit due
to lack of awareness about organized channels and limited eligibility
Source: RBI data, Market participant interview, secondary research, Bain analysis

NDL 220810_Ribbit Capital FinTech ... 8

1 Banks fulfil their supply by means of deposits, debt & equity; Unsecured retail loans
account for ~6% of total bank outstanding at $100-105B
TO D AY CAPITAL S UP P LY
Unsecured retail lending from Banks at
$100-105B (~6% of total outstanding) Key sources of Capital for Banks
Share Share
Instrument (FY22) Trend Description
• Deposits are the primary source of capital for banks and established banks with
large customer base can rely on deposits to meet their capital requirements

• During covid, due to the volatile macro-environment, increasing number of

~$2,270B
Deposits customers viewed deposits as a safe option and preferred investing in them
(83%)

• Public sector banks are the largest holder of deposits, but they have seen a
decline in their share from ~73% (FY17) to ~60% (FY21) owing to strong growth
of pvt. sector banks (~16% in FY17-22 vs 5% for public sector banks)
• Borrowings from India constitute ~75% of total borrowings, this share has
increased from ~55% in FY17 as the delta between cost of borrowing in India
vs. overseas has gone down due to volatile macro-environment and high cost of
~$215B hedging
Debt
(8%)
– Borrowings from RBI and interbank borrowings constitute a smaller share and are typically
used by banks to meet capital adequacy requirements

– Borrowings from institutions are a key source for smaller banks with low base of deposits

• Reserves and surplus constitute ~90% of equity for banks:

– Pvt. Sector banks have witnessed strong growth in retained earnings (25-30% growth over
~$245B FY18-21) at the back of higher RoA (1.3-1.5%)
Equity
(9%)
– In addition to retained earnings, share premium constitutes 40-50% of reserves & surplus

$2.7T of liabilities translates to ~$1.6T of

Total Liabilities* $2.7T outstanding, resulting in outstanding to liabilities
ratio of 60% (largely stable historically)
Note: *Liabilities do not include non-financial liabilities accounting for 3-5% of balance sheet; FY22 figures extrapolated basis FY21 values.
Source: RBI, Market participant interviews, Bain analysis
NDL 220810_Ribbit Capital FinTech ... 9
2 NBFCs fulfil their supply predominantly via bank borrowings, debentures and equity;
Unsecured retail lending at 5-7% of the portfolio (~$25B)
TO D AY CAPITAL S UP P LY
Unsecured retail lending from NBFCs
at ~$25B (5-7% of total outstanding) Key sources of Capital for NBFCs
Include credit outstanding
Share Trend
Share
disbursed to customers by
Instrument (FY22) FY13-17 FY17-21 Description
fintech (NBFCs contribute 70-
80% of fintech outstanding) • Bank borrowings enable NBFCs to meet their ALM1 requirements as
tenure of term loans/ working capital loans is flexible, and these loans
can solve for short to mid term capital requirements
• Depending on scale, banks allocate between 5-10% of their outstanding
Bank ~$125B to NBFCs to gain exposure to certain geographies/ customer segments
22-23% to 18-19% to
borrowing (25%) 18-19% ~25% • Banks have increased allocation to larger NBFCs post thorough
analysis of liquidity condition (D/E of less than 4-5), governance, and
performance track record (NPA in line with category benchmark)

• NBFCs with strong ratings (AA, A) able to raise capital through

Debt debentures; aim to meet long term ALM requirements and gain
protection from interest rate volatility
~$150B • Buyers of issued debentures include debt MFs (50-60%), insurance
Debentures 33-34% to 37-38% to
(30%) 37-38% ~30% companies (20-25%), pension funds, family offices, etc
• Includes quasi-debt instruments
Share for debentures and other
debt post IL&FS crisis in 2018

• Other debt includes commercial papers (share decline to 2-3% post rapid
~$90B growth up to 6-7% in FY17 owing to CP induced liquidity crisis) and inter-
Other debt corporate borrowings
(18%)
• Includes alternate forms of capital

~$120B • Established NBFCs have aggregation of equity via retained earnings

Equity Equity
(25%) • Early stage/ small scale NBFCs rely on equity infusion to raise capital

Total $495B of liabilities translates to ~$420B of outstanding, resulting in

~$495B outstanding to liabilities ratio of 85% (largely stable historically)
Details in subsequent page
liabilities3
Note: 1. ALM stands for asset liability management, 2. FY22 figures extrapolated basis FY21 values; 3) Liabilities do not include non-financial liabilities accounting
NDL
for <3% of balance sheet; *Includes ~2% of deposit
220810_Ribbit Capital FinTech ... 10
contribution from deposit taking NBFCs (predominantly Housing Finance companies) Source: RBI, Market participant interviews
2 In addition to bond market debentures, NBFCs are also exploring capital sourcing
via quasi-debt instruments & alternate avenues
TO D AY CAPITAL S UP P LY

Description Tenor

Subordinated • Unsecured debt which is lower in priority to other forms of debt

Quasi-debt debt (loans or 3 years or
instruments debentures) • RBI allows subordinated debt to be used as tier 2 capital to meet capital adequacy requirements; hence typically mid-to-large NBFCs raise 3-5% of AUM as > 5 years
subordinated debt

Perpetual debt • Irredeemable debentures that bear coupon till dissolution of the firm (however, lender has an option of selling the debt in secondary market or use a put
Quasi-debt option)
instruments can have Perpetual
an option to attach a • RBI allows perpetual debt to be used as tier 1 capital; however currently low salience with NBFCs (only 2-3 of the top NBFCs have raised perpetual debt
‘kicker’ i.e., link part amounting to <2%% of total AUM)
of the coupon/
interest to share Convertible • Debentures convertible to equity after a pre-determined time period at the option of lender or automatically
price accretion debentures 1 to 5
• Used by small NBFCs to incentivize lenders with a lower risk instrument to lenders in case they are not able to raise equity (low salience currently with years
small to medium NBFCs)

External • Debt availed from foreign financial investors, typically at rates at par or slightly lower than domestic rates depending upon interest rate environment;
Alternate Commercial however increasingly expensive in the recent past due to high cost of currency hedge (increased USD/ INR volatility) 5 to 10
avenues for Borrowing years
(ECB) • ECBs are used to diversify lender risks for NBFCs e.g., in 2018 liquidity crisis, many even AAA rated NBFCs were asked to pre-pay their debt to banks by
capital resetting the floating interest rates to very high levels. Large NBFCs like Bajaj, Tata, Aditya Birla typically raise 3-6% of AUM as ECB

Securitization • PTC: Loans sold via special purpose vehicles that issues bonds to investors backed by those loans; In FY22, PTC accounted for ~45% of securitization loans,
of which vehicle loans contributed ~15%
Securitization & co- PTC, DA:
lending allows NBFCs • Direct assignment (DA): Loans sold directly to banks who take on the right to collect EMIs; used by banks as a way to grow loan book without opex or to meet Tenure
to offload part of their priority sector lending requirements; In FY22, DA accounted for ~55% of securitization volumes (lower than 65-70% seen in earlier years) and was dominated depends
balance sheet to other by mortgaged backed loans on
financier, and hence, underlying
are not direct sources • Typically used by small NBFCs as a liquidity management tool; currently, money raised via securitization can be 30-50% of total borrowings for small NBFCs
asset
of capital (~5% at an overall level)

• It is primarily re-allocation of capital and has limited-indirect impact on overall capital supply (promotes more external capital raising by larger NBFCs)

Co-lending • NBFC’s tie up with banks to jointly lend to a customer on both their books
-
• Co-lending is typically done by smaller NBFCs as a way to circumvent lack of capital to meet demand; currently, <15% of AUM for small NBFCs are under co-
lending arrangements
Note: Quasi-debt instruments are defined as securities that have one or more of the following features: returns linked to stock prices (via a kicker), repayment priority above common equity but lower than common
debt, have a pre-determined rate of minimum return, are convertible into equity Source: Market participant interviews, RBI, secondary research
NDL 220810_Ribbit Capital FinTech ... 11
2 Mature NBFCs raise majority of debt capital from NCDs & bank lending, with rest
coming from securitization, deposits & other sources
DIRECTIONAL

Avg. mature
NBFC (non-
deposit taking)

Loan
~$85M $181M ~$400M ~$710M ~$720M ~$9B ~$10B ~$12B ~$20B ~$75B
advances(1)

Equity 53% 28% 29% 22% 16% 22% 16% 14% 25% 19% 15-25%

Debt(2) 47% 72% 71% 78% 84% 78% 84% 86% 75% 81% 75-85%

Debt from 17%

17% 34% 51% 44% 58% 35-50%
Banks
47% 39% 34% 28%
Debt from
26% 34% 3% 17% 5% - <5%
NBFCs

NCD 25% 27% 39% 25% 30% 33% 44% 51% 43% 39% 30-50%

Deposits - - - - - 15% - - 25% 32% -

Other(3) 31% 5% 6% 15% 6% 6% 17% 15% 15% 1% 5-15%

Note: (1) Taken from FY22 Balance sheet, $1= INR 75; (2) Source of funds excludes provisions, payables, etc. (3) Other debt instruments include ECB, securitization, CD
Source: Annual reports, Market participant interviews, Bain analysis

NDL 220810_Ribbit Capital FinTech ... 12

2 Public sector banks have relatively higher share of outstanding towards NBFCs (10-
15% for 4/5 top PSBs), and account for 70-75% of bank outstanding to NBFCs
DIRECTIONAL

% Share of NBFC
Total Outstanding % NBFC Outstanding of total NBFC Outstanding Outstanding

$365-370B 6-7% SBI has lower share for $20-25B3 “Public sector banks have
NBFCs due to higher
relative focus on retail historically had higher
(~36% 5 v/s 15-20% for exposure to NBFCs vs
$90-95B ~15% other PSBs) $11-15B private sector banks owing
to corporate relations
Top 5 (Union bank extending funds
$85-90B ~15% $11-15B 55-60%
Banks1 to Hinduja Finance with
Ashok Leyland as a corporate
$95-100B ~14% $11-15B client) and low share of
retail book”

$100-105B ~11% $9-12B Head, MSME and Business

Loans, Union Bank of India

Other PSBs $200-250B 9-10% $20-25B ~15%

“Private sector banks looking
to increase their exposures
$180-185B 5-6% $9-11B to NBFCs driven by
improving performance
Top 3 (lower NPAs) and better risk
Private $105-110B ~8% $7-10B ~16% adjusted returns vs industrial
Banks credit. We expect private
sector banks to increase
$85-90B ~3% $2-4B
contribution going forward
in the next 4-5 years”
Other Banks2 $275-325B 4-6% $12-18B ~10%
AVP, Credit, Axis Bank

All banks ~1,600B 7-8% ~$125B4 100%

Note: 1. Top 5 selected based on NBFC outstanding. 2. Other Banks include other pvt. banks, SFBs, foreign banks. 3. Estimated NBFC outstanding for SBI for FY22 based on historical share of outstanding, stable at 6-7%. 4. Excludes public finance
institutions 5. Excludes MSME and Agri loans. Source: RBI, Market participant interviews, company filings, Bain analysis. NDL 220810_Ribbit Capital FinTech ... 13
3 Fintechs do 40-45% of their lending via in-house NBFC, with rest distributed across
NBFCs & Bank partners
OUTSIDE-IN DIRECTIONAL

Fintechs source 40-45% of their capital via their in- … while NBFC & Bank partners help fulfil the remaining
house NBFCs… capital needs, via Co-lending/ FLDG arrangements
Loan Capital supply from
% on in- partners (off-book) Loans on
Book
Fintech house own NBFC
(FY22, From From
NBFC (FY22, $M)
$M) NBFCs Banks

Moneyview 350-400 ~5% 85-95% <5% 20-25 a

Money Tap1 100-150 ~40% ~60% ~0% 50-60
~70% due to
Kredit bee ~600 40-50% 40-50% 5-10% 275-300 Cred – IDFC
partnership
Kissht ~300 50-60% 40-50% ~0% 150-175 b
PaySense ~175 90-95% ~5% 0-5% 160-165

CRED 600-700 <5% ~5% 90-95% 20-30

Navi 200-250 ~100% ~0% ~0% 200-250

Zest Money ~200 20-25% 70-75% ~5% 40-50

c
Capital Float ~70 ~30% <5% 65-70% 20-25

Slice ~500 ~80% ~20% ~0% 380-400

OneCard ~200 ~0% ~0% ~100% 0

Uni ~150 ~0% ~100% ~0% 0

A part of NBFC capital (partners & in-house) comes from banks as well- so
Total $3.4-3.7B 40-45% 30-35% 25-30% $1.3-1.5B banks effectively are the source for 40-45% of capital going to Fintechs

Note: 1. Money tap sources 20% loans from their in-house bank, however, only acts as an aggregators for 50% of the book for RBL bank. 2. Zest has ~25% NDL
of its loan book on its220810_Ribbit
in-house NBFCCapital FinTech ... 14
Source: Market participant interviews, Bain analysis
3 Within Banks, IDFC Bank accounts for majority of capital to Fintechs; Within NBFCs,
Fullerton, IIFL & DMI are top partners
OUTSIDE-IN DIRECTIONAL

a Bank Co-lending partners b NBFC Co-lending partners

Retail Unsecured Retail Retail Retail

Loan Book Lending lending of unsecured Lending
FY22 Loan Book unsecured of unsecured
($B) through the retail supply to FY221 through
($B) the fintech supply to
Fintech fintech loans fintech ($B) Fintech
loans fintech ($B)

~13 7-8% 95%-100% 0.8-1 ~3 ~11% 90-100% ~0.31

$600-700M from
2
CRED – IDFC ~4.5 ~9% ~70% ~0.28
~20 0.5-1% 95%-100% ~0.1 partnership
3
0.4-0.5 ~65% 90-100% ~0.25
~110 <0.1% 95%-100% <0.1
~0.5 ~20% 90-100% ~0.09
Sub Total ~1
ICICI has taken a cautious approach and ~0.7 ~12% 90-100% ~0.08
partnered with very few fintechs to get an
Coverage of initial sense on the feasibility & viability of ~0.3 ~50% ~50% ~0.07
these banks lending via fintechs ~80%
~0.2 ~12% 90-100% ~0.03
Total $1.1-1.2B Sub Total DMI and Credit Saison consider fintech 1.1-1.2
partnerships as a key focus area to drive
Coverage of overall growth (50%+ lending via Fintechs);
potential risk in adverse market conditions. ~75%
these NBFCs
Other NBFCs (Fullerton, IIFL, InCred & Northern
Total arc relatively more resilient owing to diversified $1.4-1.6B
lending book, eventually translating to lower risk of
capital supply crunch from supply partners

Note: 1. Consolidated financial statement considered 2. Loan book as per balance sheet assets (excluding securitized loans) 3. For DMI finance, loan book for FY22 prorated basis latest available data (FY21)
Source: Company filings, Market participant interviews, Bain analysis

NDL 220810_Ribbit Capital FinTech ... 15

3b NBFCs partnering with Fintechs (1/2): Varying degree of focus towards equity &
debt capital
TO D AY CAPITAL S UP P LY FY21 PUBLISHED DATA

Fullerton India IIFL Finance DMI Finance

• Predominant focus on debt • Predominant focus on debt • Predominant focus on equity

route: Key debt Instruments route: Key debt instruments route, via SuMi TRUST Bank,
include NCDs (~50% share), include NCDs, securitization New Investment Solutions &
Sub Debt, commercial papers and term loans from banks, NXC Corp.
& ECB NHB & other financial – $47M round led by Sumitomo Mitsui
– Rated AAA on long-term debt by institutions Trust Bank in ‘22
CRISIL, ICRA, and CARE Given high salience
– Rated AA Negative on NCDs – $123M round led by NXC
of lending via Corporation in ‘20
– ~250 institutions as NCD and subordinated debt by ICRA
buyers/ debt suppliers (incl. and CARE fintechs, DMI
Banks, MFs, Insurance positions itself as a • AA- rated company by ICRA
Companies) – Rated A1+ on commercial paper
by ICRA and CRISIL
quasi-fintech and and has also raised funds
– ECB contributes 3-4% of the has raised capital at through NCDs
capital – Raised ~$90M (FY21) unsecured desirable valuation
subordinated NCDs – Raised a $200M round in ‘20, 100%
– Explored securitization in FY21 subscribed by foreign portfolio
(~$100M) direct assignment – $1.5B securitization & and
investors through voluntary
assignment txn. (FY21)
retention route
• Key fintech partners:
• Key fintech partners:
Moneyview, Moneytap, • Key fintech partners:
Zestmoney, Paysense,
Kreditbee, Paysense Moneyview, Stashfin,
Kreditbee, Moneyview
Zestmoney, Moneytap
• Share of lending through
• Share of lending through
fintech: 10-15% • Share of lending through
fintech: 10-12%
fintech: 60-70%

Note: Does not include trade payables and non-financial liabilities. Debentures include convertible bonds, non-convertible bonds, perpetual debt, subordinated bonds. NCD: non-convertible debentures, MLD: market-linked debentures, MF: mutual funds.
Source: Company annual reports and press releases

NDL 220810_Ribbit Capital FinTech ... 16

3b NBFCs partnering with Fintechs (2/2): Varying degree of focus towards equity &
debt capital
TO D AY CAPITAL S UP P LY FY21 PUBLISHED DATA

Northern Arc Incred Vivriti

• Predominant focus on debt • Balanced across equity & • Balanced across debt &
route: Key debt instruments debt: Key debt instruments equity: Key debt instruments
include NCDs, term loans include debentures, term loans include NCDs and term loans
and commercial papers & inter corporate borrowings – Rated AA+ on NCD-covered,
– Bank borrowing makes ~40% – Rated A (stable) on NCDs and long MLD-covered by ICRA
of total debt term bank facilities by CRISIL
– Key debt suppliers incl. HNIs,
– ~45 investors as debt suppliers – Rated A1 on commercial paper by wealth management company,
in FY21 (incl. MFs, private CRISIL and CARE large MFs like Nippon India
wealth mgmt. firms & HNIs) Mutual fund, Axis Mutual fund
– Raised ~$82M through issuance
– Rated A+ on NCDs, long-term of NCDs of which ~$60M is under – Overall ~35 lenders; raised
bank facilities, MLDs and TLTRO & PCGS ~$90M from bank borrowings
subordinated debt by ICRA in FY21
– Raised ~$87M through term loans
and working capital from banks
• Key fintech partners: • Key fintech partners:
Moneyview, Kreditbee, EarlySalary, Kreditbee,
• Key fintech partners:
EarlySalary, Zestmoney, Kinara Capital, Upmoney,
Zestmoney, EarlySalary,
Early Salary Finwego
Kreditbee, Moneyview

• Share of lending through • Share of lending through

• Share of lending through
fintech: 12-15% fintech: 12-15%
fintech: 20-25%

Note: Does not include trade payables and non-financial liabilities. Debentures include convertible bonds, non-convertible bonds, perpetual debt, subordinated bonds. The Bank borrowings for IIFL Finance includes borrowings from banks, NHB and
financial institutions. Source: Company annual reports and press releases. NCD: non-convertible debentures, NHB: National Housing Bank, TLTRO: Targeted Long-Term Repo Operation, PCGS: Partial Credit Guarantee Scheme, MF: Mutual funds.

NDL 220810_Ribbit Capital FinTech ... 17

3c In-house NBFCs: In-house NBFCs of Fintechs are primarily funded by other large
NBFCs, with limited salience of funding from banks and other debt instruments
Banks are expected to increase capital OUTSIDE-IN DIRECTIONAL
funding to captive NBFCs as the business
Debt Sources for in-house NBFC model scales and shows signs of success
Fintech D/E
NBFCs Banks Others

Contribution outlook -
“We are largely dependent on other large NBFCs for
70-80%
10-15% 5-10% capital as private sector banks have stringent
2.5-3.5 (MAS, Northern Arc, requirements around profitability, portfolio mix, loan
(AU Small Finance, Kotak) (NCDs)
Fedbank, Mannapuram)
vintage etc. before they consider lending capital to
3-4
70-80% 10-15% 5-10% our in-house NBFC”
(Northern Arc, DMI Finance) (IDFC first bank) (NCDs) Corp. finance & Investor Relations, Early Salary
80-90%
5-10%
3-4 (Edelweiss, Aditya Birla -
(AU Small Finance)
Capital)
“We aim to increase contribution from banks for
80-85% 5-10% our in-house NBFC to make the debt split more or
5-10%
3-3.5 (Northern Arc, MAS, Credit (AU Small Finance, Utkarsh
less even between banks and NBFCs…this will
(NCDs, Securitization)
Saison, Vivreti, Tata Capital) Small Finance, Kotak, ICICI)
enable access to a cheaper and more stable
65-75% 10-15% source of capital. We’re in conversations with
10-15%
2.5-3 (Credit Saison, Vivreti, (AU Small Finance bank,
High share Incred) Kotak)
(NCDs, CPs) multiple banks to take this forward”
from banks
given PayU 25-30% Co-Founder and CTO, Kissht
60-65%
Finance, the 3-4 (HDFC, SBI, Small finance 5-10%
(Tata Capital)
parent, is an banks)
established “Typically banks only provide capital to captive NBFCs
20-30%
NBFC 3-4 20-30% 50-60% after the fintech has shown signs of success and
(NCDs, CPs, Securitization)
has become sizeable…in the earlier stages, captive
~67% NBFCs get a large chunk of their capital from other
9.5 ~33% -
(NCDs)
PortCos

NBFCs such as Aditya Birla Capital”

~52%
1.1 ~37% ~11%
(NCDs, Securitization) Business Head, Digital lending, IDFC First
0.5 ~100% -

Overall 3-4 65-75% 20-25% 10-15%

Note: (1) Zest & Axio data is taken from public MCA filings for FY21 (latest data unavailable from documents); mix would have changed substantially in FY22 owing to rapid growth of loan book (2) Debt excludes
provisions, payables, etc. | Source: Market participant interviews, MCA Filings, Bain analysis NDL 220810_Ribbit Capital FinTech ... 18
Going forward, India consumption will reach $3-3.2T by FY27 (~335M households),
driven by rising disposable income, premiumization and rural access
FUTURE CONSUMPTION
India expected to reach 335M households in FY27 with Increased disposable income, premiumization and
~$4.5T in income and 3-3.2T in consumption access in rural India driving growth in spend
~335M Pre-tax
Consumption Rising disposable • India will add ~42M upper mid income & ~8M
Income high income households who will drive growth
income & middle-
High class expansion in specific categories
$1.7-1.8T $0.7-0.8T
20M (6%) – Households spend 2-2.5x higher on essential
products, 3-4x higher on services and drive 15-20 p.p.
higher durables penetration as they move into higher
income segments
Upper mid $1.7-1.9T $1.3-1.4T
122M (36%)
Premiumization • Premiumization of products and services
– ~50% of incremental spend expected through
consumption of premium products and addition of new
categories for consumers (apparel, personal care and
Lower mid
F&B to see significant increase)
120M (36%) $0.65-0.7T $0.65-0.7T
– Millennials and Gen Z to drive consumption owing to
brand consciousness and aware about new models of
consumption (e.g. – ride sharing)

Low
Increased access • Access constraints in developed rural areas
73M
$0.25-0.3T $0.25-0.3T in semi-urban/ (1.5-2x lower spend than urban HH with same
(22%)
income) likely to reduce with rising internet
rural India
and e-commerce penetration

FY27 ~$4.5T $3-3.2T

Note: Low income: <$4k, Lower-mid: $4-8.5K, Upper-mid: $8.5-36K, High income: >$36K basis income per household in real terms. Source: Bain IP, market participant interviews, secondary research

NDL 220810_Ribbit Capital FinTech ... 19

This translates to a ~$540B addressable market for unsecured loans in FY27
FUTURE CREDIT DEMAND

Credit demand in India - Market potential for lending players Remarks and Sources
# of Households (~335M) Bain – WEF report on India
Segmented by income consumption, Secondary research
Low: ~73M Lower Mid: ~120M Upper Mid: ~122M High: ~20M

Average annual income ($13-14K) Bain IP, Customer research on

Low: ~$3.4K Lower Mid: ~$5.5K Upper Mid: ~$15K High: ~$90K expected income increase –
triangulated top down based on
expected inflation
Total Household income (~$4.5T)

Low: $250-300B Lower Mid: $650-700B Upper Mid: $1.7-1.9T High: $1.7-1.8T

% of households needing credit (~42%) Bain IP, Market participant

interviews, Customer research
Low: 95% Lower Mid: 60% Upper Mid: 40% High: 30%

Average need for credit Bain IP, Market participant

(depending on specific use cases, based on allowable FOIR) interviews, Customer research-
Low: ~$1K Lower Mid: ~$2K Upper Mid: ~$5K High: ~11.5K
triangulated top down based on
allowable FOIR (Fixed obligations
to income ratio)
Total Addressable Credit demand (~$540B)
Low: $80-85B Lower Mid: $140-150B Upper Mid: $240-250B High: $65-70B

Note: Low income: <$4k, Lower-mid: $4-8.5K, Upper-mid: $8.5-36K, High income: >$36K income per HH in real term; Sources: market participant interviews, NDL
RBI, Bain analysis 220810_Ribbit Capital FinTech ... 20
1 Capital supply from banks likely to grow at 10-12%, translating to ~$280B
outstanding for unsecured loans
FUTURE CAPITAL S UP P LY

Bank Unsecured retail lending can

reach ~$280B (~10% of outstanding) Key sources of Capital for Banks in FY27
Share of unsecured Instrument FY221 FY27 CAGR Description
retail increase from
6% to 10% of total • Historical growth at ~10% (FY17-22). Future growth slightly higher than historical
outstanding growth, due to:
~$2,270B ~$3,850B – Increase in bank account penetration and overall financial inclusion in tier 2-3 cities,
Deposits ~11%
(83%) (82%) specially driven by small finance banks, will lead to increase in deposits
– Due to macro-economic uncertainty customers will continue to view deposits (FDs3) as a safe
investment instrument in the short-mid term

• Banks view institutions as a key source to raise domestic debt, future growth
will be in line with historical pre covid growth of 10-11% (FY17-19), share of
domestic borrowing expected to increase to 80-85% from currently 75%
• A slow growth of 3-4% is expected for borrowings outside India
~$215B ~$380B – Access to cheaper capital not available in current environment due to high interest rate cost of
Debt ~12% hedging (high volatility in USD/ INR)
(8%) (8%)
• Interbank borrowings are expected to grow in line with historical trend to meet
capital adequacy requirements as needed; RBI borrowing to remain stable
(2-3% of deposits) to manage compliance & other requirements

• Historically capital has grown at 17% (FY17-22) but is expected to growth at

14% driven by
– Growth for PSUs expected to be slower due to limited capital infusion by government
– Private banks are expected to grow in line with historical trend
~$245B ~460B
Equity ~14% • Reserves and Surplus are expected to grow faster in future at ~13% (vs 10%
(9%) (10%)
historically, FY17-22), as RoA is expected to improve across banks:
– RoA for private sector banks expected to reach pre-covid levels of ~1.7% by FY27 from current
RoA of ~1.2%
– Similarly, RoA for PSBs to improve and reach 0.7% from current levels of 0.3%

Total $4.7T liabilities, translates to ~$2.9T outstanding

~$2.7T ~4.7T 10-12%
Liabilities2 (60-62% outstanding to liabilities ratio for banks)
Note: 1. Calculated basis extrapolation of FY21 figures. 2. Liabilities do not include non-financial liabilities accounting for 3-5% of balance sheet. 3. FD stands for Fixed deposits.
Source: Bain analysis, Market participant interviews
NDL 220810_Ribbit Capital FinTech ... 21
2 NBFC supply to grow faster at ~16%, translating to ~$80-90B outstanding for
unsecured loans
FUTURE CAPITAL S UP P LY

Unsecured retail lending at $80- Key sources of Capital for NBFCs in FY27
90B (9-10% of total) Instrument FY222 FY27 CAGR Description
Include credit outstanding
• Bank funding for NBFCs has historically grown at 25% (FY17-22); NBFC
by fintech (NBFCs
contribute 85-90% of fintech outstanding (as % of total bank outstanding) increased from 4% (FY17) to 7-8% in
FY22, with increased confidence in underwriting/ collection capabilities of
outstanding) Bank ~$125B ~$250B
~15% larger NBFCs + channel for diversification for banks
borrowing (25%) (24%)
• NBFC outstanding likely to settle at 8-9% in steady state (FY27), implying
tapering growth- Banks have started to closely monitor financial conditions of
NBFCs before lending and have also started lending more via structured credit
• Capital through debentures has historically grown at ~13% (FY17-22); Key
Debentures saw slower than usual growth buyers (Mutual funds, insurance funds, and pension funds) view NBFC
over last few years due to caution post IL&FS, debentures as a relatively high yield product to invest and are bullish on
Increase in DHFL, and adverse pandemic impact continued purchase of A+ rated NBFC debentures
share of Debt
unsecured to • Funding through debentures is expected to grow at ~18%,
Increase in
share of retail ~25% from ~$150B ~$355B – MF (50-60% of NBFC debentures): DCM markets to become active in investing in NBFC debentures
Debentures ~18% gradually and move towards pre-pandemic & pre -IL&FS levels; Additional growth driven by a)
lending for ~18% in FY22 (30%) (34%) growing AUM of debt mutual funds (16-18% likely growing forward) & b) increase in share of debt
NBFCs to AUM invested in NBFC debentures (14% to 17-18%)
– Insurance (20-25% of NBFC debentures): Growth in investment pool of insurance funds (14-16%
~40% from likely growing forward) driven by growing insurance premiums and higher insurance penetration
~30% in FY22
• Subordinated debt to grow at 15-16%, in line with overall capital to meet liquidity
requirements (part of tier 2 capital)

• Other debt options will grow slightly faster than historical rate of ~12%
~$90B ~$165B
Other debt ~13% (FY17-22), as alternate sources of capital such as ECB will gain prominence post
(18%) (15%) macro environment stabilization; there is also an increasing securitization trend

• Historically equity has grown at ~18% (FY17-22) and is expected to grow at a

similar rate driven by
~$120B ~$260B – As more NBFCs mature, contribution to retained earnings expected to increase; reserves and
Equity Equity ~17%
(25%) (25%) surplus have grown at ~20% CAGR over FY17-21 for NBFCs and expected to grow similarly
– Equity infusion as new age NBFCs and fintech captive NBFCs would bring in additional equity to begin
operations

Total ~$1050B liabilities, translates to ~$930B outstanding (85-90%

~$495B ~$1,050B ~16%
Liabilities* outstanding to liabilities ratio for NBFCs, which is in-line with historical)
Note: 1. ALM stands for asset liability management, 2. Calculated basis extrapolation of FY21 figures; Key components of other debt include commercial papers, inter corporate borrowings, and ECB; *Total liabilities
includes deposits (~2%) and do not include non-financial liabilities accounting for <3% of balance sheet; Source: Bain analysis, Market participant interviews
NDL 220810_Ribbit Capital FinTech ... 22
3c In-house NBFCs: Going forward, as in-house NBFCs scale up, they can see
increasing funding from bank debt, NCDs & sources like ECB/ securitization
DIRECTIONAL

Current source of funds Model balance sheet for in-

Rationale Mature NBFCs
for in-house NBFC house NBFC (FY25-27);

Equity ~25% 17-22% 15-25%

• Leverage ratio of 4-6 D/E in the steady state
Debt ~75% 78-83% 75-85%

Debt from Banks ~20% 35-40% 30-40%

• With growing business maturity (low NPA,
profitability, etc.), a portion of NBFC lending
Debt from NBFC ~65% 15-20% gets replaced by bank lending over time <5%

• NCD- With increasing scale & portfolio maturity,

NCD ~10% 25-35% 40-45%
NCD route likely to scale up

• ECB- Growth expected due to increased interest

from foreign bodies (e.g., KreditBee, Zest already
raising debt from Credit Suisse and Goldman
ECB & securitization 4-6% 13-15% Sachs respectively)
• Securitization- Expected to see significant uptick 15-20%
for NBFCs with long tenor loans/ products (esp.
post regulations becoming more conducive)

Other (incl. CDs) <1% 2-5%

Note: (1) Fund sources taken as a weighted average of peers (FY22 data for PortCos unavailable in the documents/ MCA filings) (2) Source of funds excludes provisions, payables, etc. (3) Other debt instruments include CD, deposits etc.. Mature NBFC
range includes indicative range for marque NBFCs like Bajaj, HDFC Ltd, L&T Finance, Mahindra Finance, ABF etc.; Source: Market participant interviews, Bain analysis

NDL 220810_Ribbit Capital FinTech ... 23

3 Different potential scenarios for fintech growth are possible for 2027 basis regulatory
environment, extent of partnership by banks/ NBFCs and growth of in-house NBFC
2027
Historical/
Current
Base Case Conservative Case Pessimistic Case

• FLDG expected to continue with no cap (for
regulated entities)
What we need to believe • Healthy capital supply from banks/ NBFCs
and via NCDs, along with additional supply
via securitisation, ECBs etc.
• Cap on FLDG arrangement; banks/ NBFCs
expected to share part of risk
• Adequate capital supply from existing capital
market sources; Limited traction for ECBs,
securitisation etc.
• Complete curb on FLDG arrangements (only
platform model or co-lending allowed)
• Capital supply constrained for banks/ NBFCs,
in turn affecting their willingness to partner
with Fintechs

Regulatory Environment NA Regulatory environment is favourable for RBI issues notices to restrict share of FLDG Fintech operations are highly regulated and RBI
fintechs and RBI accepts all forms of FLDG arrangements and starts to closely monitor fintech doesn’t allow FLDG arrangements to exist in any
arrangements (within regulated entities) operations form, ensuring underwriting responsibilities also
taken up by banks/ NBFCs through risk exposure

NBFC Partners Overall growth 54-58% 29-31% 14-16%

# of NBFC co-lending 10-12 20-25 12-15 10-12
partners (FY22) (In addition to existing partners, many new NBFCs start to (Only few additional NBFCs partner with fintechs) (Only existing set of partners continue having a sizeable
engage- most Fintech’s in active conversations with newer relationship with fintechs)
partners)

Growth for AUM of NBFC ~20%1 20-25% ~20% 15-17%

co-lending partners (FY17-20) (Partner NBFCs witness strong growth - high appetite for (NBFCs witness growth in line with historical growth) (NBFCs witness growth slower than historical growth due to
unsecured lending, with adequate supply planning) capital supply limitations)

Share of Fintech lending ~14% 23-25% 17-19% 13-14%

(as % of NBFC partner (FY22) (NBFCs deepen relationship with fintechs through (Limited uptick in fintech co-lending for NBFCs due to FLDG (Lending through fintechs in-line with historical levels for the
sophisticated integrations – corroborated via NBFC cap) current partners)
book) conversations)

Bank Partners
Growth for bank AUM of
co-lending with fintechs
~21%2 23-25% ~15% 8-10%
(FY19-22) (Banks gain confidence in fintech business models and (Banks grow fintech partnerships steadily with caution, with (Only select banks have capability to u/w customer
increase fintech partnerships- in-line with increasing scrutiny on capital adequacy/ liquidity of fintechs) segments fintechs cater to; few banks continue to partner
interest from banks like ICICI in recent times) without FLDG)

In-house NBFC
Growth for in-house 40-50% 35-40%
NBFCs AUM: (FY19-22) (Growth expected to be slightly slower than historical growth; Historical in-house NBFC AUM growth higher than overall fintech lending growth owing to low base; expected to mirror
past growth of overall fintech lending)
Note: 1. Loan book growth for key NBFC partners (Fullerton, IIFL DMI, and Northern Arc) from FY17-20, 2. Bank unsecured lending growth taken as proxy forNDL fintech partner growth owing to limited presence with
220810_Ribbit Capital FinTech ... 24
Fintechs before FY21 Source: Market participant interviews; Bain analysis
3 Base Case: Banks / NBFCs raise adequate capital & continue co-lending-> Fintechs
can grow 6-7x, needing moderate in-house NBFC growth & capital infusion
Fintech lending grows 6-7x by FY27, with AUM diversified across …with limited growth
Market Parameters in-house & NBFC/ Bank partners… pressure on in-house NBFCs

# of key NBFC co- Growth in FinTech

20-25 lending partners (newer
6-7x lending…
scaled partners joining in)
NBFC partners

Growth for NBFC Co-

20-25% lending partners …with moderate
35-40% growth required for in-
house NBFC…
Lending through
23-25% fintech for key NBFC
NBFC capital growth rate driven
co-lending partners
by a) 20-25% growth for NBFC
partners, b) increase in share of …with moderate equity
lending through fintechs to 23- $2.5-3B capital infusion…
Bank partners

25% from 14% for existing co-

Growth for bank AUM lending NBFCs and c) increasing
23-25% of co-lending with interest from other scaled NBFCs
Equity infusion needed for incremental
(e.g., Chola) for Fintech
Fintechs partnerships AUM in in-house NBFC.
- Incremental o/s for inhouse book at $8-
10B (from FY22 to FY27)
In-house NBFC

- Assuming 85% o/s to liability ratio (as per

current avg.) $10-12B of incremental
Growth for in-house
35-40% NBFC AUM
balance sheet build/ liability needed
- With D/E ratio of 3 (in-line with NBFC
industry), equity needed is 1/4th of
incremental balance sheet (1/4th of $10-
12B)

Source: Market participant interviews, Bain analysis

NDL 220810_Ribbit Capital FinTech ... 25

3 Base Case: The overall retail unsecured market can reach $360-380B (outstanding)
at 23% CAGR, with Fintechs accounting for 7-8% share

Retail unsecured market can reach $360-380B …& accounting for ~10% share in incremental o/s, via in-
(outstanding) at 23% CAGR, with 7-8% Fintech share… house NBFC, partnerships with banks & NBFC partners
Fintechs continue to grow books with a
balanced mix of in-house NBFC (~40%),
NBFC partners (45-50%) & Banks (10-12%)

21% 23%

NBFCs continue to raise

capital at a healthy 16% via
bank borrowing (reaching 8-
9% of outstanding),
debentures (with renewed
Banks continue to
interest from debt MFs,
raise adequate
Insurance cos), quasi-debt &
capital at a healthy
alternate avenues for capital
10-12% via deposits,
(incl ECB, securitization) &
institutional debt &
equity
equity (share capital,
reserves/ retained
earnings)

This translates to 65-70% penetration in FY27 ($540 TAM for credit demand), with unsecured retail
credit to GDP ratio reaching 13-15% (vs. ~5% today). Evolution of credit penetration in global markets
offers a compelling analog for future demand potential in India. Retail unsecured credit to GDP is 13-
15% for mature markets like US/ UK, and India can potentially reach there in 5-7 yr time frame

Source: RBI, Market participant interviews, Secondary research, Bain analysis

NDL 220810_Ribbit Capital FinTech ... 26

3 Conservative Case: Banks/ NBFCs grow moderately, and only limited players
continue co-lending-> Fintechs will need higher capital infusion to grow at similar rate
Fintechs grow ~4x by FY27 (30-35%), $8-10B deficit vs. base ..with 2 potential paths
Market Parameters case scenario forward for Fintechs

Path a: Slower growth

# of key NBFC co-lending
12-15 partners (only current Growth in FinTech
partners continue) ~4x lending…
NBFC partners

Growth for NBFC Co-

~20% lending partners 35-40%
…with moderate growth
required for in-house
NBFC…
Lending through
17-19% fintech for key NBFC $18-20B $2.5-3B
…with moderate equity
co-lending partners capital infusion…
Bank partners

NBFC capital growth rate driven

Path b: Infuse Equity capital
Growth for bank AUM
~15% of co-lending with
by a) ~20% growth for NBFC
partners, b) increase in share of Growth in FinTech
Fintechs lending through fintechs to 17- 6-7x lending…
19% from 14% for existing co-
lending NBFCs and c) interest
from few new NBFCs to partner
In-house NBFC

…with high pressure on

55-60% in-house NBFC…
Growth for in-house
35-40% NBFC AUM

…with significant equity

$5-5.5B capital infusion needed
Source: Market participant interviews, Bain analysis …
NDL 220810_Ribbit Capital FinTech ... 27
3 Pessimistic Case: Banks/ NBFCs lending to Fintechs to grow even slower, and only
select players continue co-lending-> Fintechs will need even higher capital infusion
Fintechs grow ~3x by FY27 (25-30%), $12-13B deficit vs. base ..with 2 potential paths
Market Parameters case scenario forward for Fintechs

Path a: Slower growth

# of key NBFC co-
10-12 lending partners (same Growth in FinTech
as FY22) ~3x lending…
NBFC partners

Growth for NBFC Co-

15-17% lending partners 35-40%
…with moderate growth
required for in-house
NBFC…
Lending through
13-14% fintech for key NBFC $2.5-3B
…with moderate equity
co-lending partners capital infusion…
$15-16B
Bank partners

Path b: Infuse Equity capital

Growth for bank AUM
8-10% of co-lending with NBFC capital growth rate Growth in FinTech
Fintechs
driven by a) 15-17% growth for 6-7x lending…
NBFC partners and b) 13-14%
lending through fintechs by 10-
12 key NBFCs, in line with
In-house NBFC

historical trend …with high pressure on

Growth for in-house
60-65% in-house NBFC…
35-40% NBFC AUM

In case of tighter regulatory constraints on FLDG, only few …with significant equity
banks and NBFCs may be keen on partnering with fintechs- $6-6.5B capital infusion needed
translating to increase in salience of in-house NBFC …
Source: Market participant interviews, Bain analysis

NDL 220810_Ribbit Capital FinTech ... 28

AGENDA

Capital supply/ demand for unsecured retail loans

Business model, capital planning & key risks

 Unsecured PL is a competitive space served by multiple archetypes; Pure-play lenders
need to build acquisition hooks, breadth of FS products & lower cost of funds to win
Banks & NBFCs PSPs (UPI/QR players) Fintech players
P2P lenders Aggregators/ Fintech lenders
(PL/ LOC/ BNPL/ Neo-cards)

Examples

Operating model • Typically underwrite customers
based on traditional models (require
access to a credit history and a
relatively higher credit score)
• Benefit from high brand recall,
especially for credit products
• Offers personal loans as cross-sell
product to customers within platform
and earns commissions via
partnerships with lending companies
• Brand recognition with high
customer engagement and payment
infrastructure acts as advantage
• Lenders choose which borrowers to
fund based on risk profile and
interest rate
• Manage acquisition as well as risk
profiling of borrower
• Offer loans via direct digital
marketing or via tie-ups (corporates,
etc.)
• Manage cust. sourcing, underwriting
& loan servicing

Key parameters ->

Typical GTM play • ETB customers with 750+ cc • In-platform customers with steady • Millennials (25-35 years) with low/ no credit history wherein credit-worthiness
transaction history (650+ cc) is assessed by alternate data points (600-750 cc)

Existing customer base

Acquisition partnerships/
hooks
- - -

Underwriting & collection

capabilities

Interest rate/ cost of funds

advantage

Source: Market Participant Interviews; Secondary research, Bain analysis

NDL 220810_Ribbit Capital FinTech ... 30

Business models within lending: The degree of involvement risk-sharing by Loan
aggregators/ Fintechs ranges along a spectrum of models

Loan aggregators Fintech Lenders

Distribution only Distribution+ Operational Distribution+ Ops.+ Distribution+ Ops.+

support Risk sharing 100% risk
Risk sharing model with end-to end
Pure-play distributor Distributor with light ownership Financing on
1 (lead generation only) 2 operational support 3 (incl.FLDG/ co-lending) 4 own books (100% risk)

Role of platform Pre-qualification+ Pre-qualification+ Pre-qualification+ Offer display & End-to-end loan origination, financing &
Offer display & selection+ digital Offer display & selection+ selection+ collection
fulfilment digital fulfilment+ operational support Loan application+ Underwriting+
Physical interaction+ Loan sanction

Origination

Operational support

Underwriting

Disbursal

Collections

Description • Simple lead generation channel, and
provides a list of offers for users to
choose from (cataloging), along with
facilitating basic digital fulfilment (form
filling, document upload)
• Operational fulfilment, underwriting,
disbursal & collections done by
financiers
• Lead generation (cataloging), with
operational support on with digital
fulfilment (form filling, document
upload), appointment fixing, customer
support & possible offline support
• Loan underwriting, disbursal &
collections done by financiers
• End-to end ownership of loan
origination, fulfilment, underwriting;
Fintech’s take part/ whole risk on the
portfolio via FLDG/ co-lending;
• RBI circulars indicate need for a
regulated entity for FLDG/ co-lending,
implying need for in-house NBFC arm,
for participation in risk sharing
• End-to-end ownership of origination,
financing & collection
Most Fintechs are exploring a hybrid
approach, between models 3 & 4-
financing partly on own book & partly via a
partner financier (Kredit Bee, Kissht, etc.)

Key players (Personal

loans providers)

Note: *Customer preferences to be further tested through research NDL 220810_Ribbit Capital FinTech ... 31
 Key risks across regulations, capital supply, asset quality exists for Fintechs, but can
be mitigated to some extent

Description Potential mitigation avenues

A Regulatory Risks – Scrutiny on FLDG cover to NBFCs/ Banks: RBI has been closely monitoring increasing – Co-lending arrangements; Capital
level for FLDG arrangements between Fintech & Banks/ NBFCs. Going forward, there may margins/ collateral commitments
be more scrutiny in case FLDG reaches high levels commensurate to risk-sharing,
involving the end-financier in u/w
> Select instances of RBI explicitly disallowing financiers from participation in FLDG
arrangements with Fintechs
– PPI card loading via credit lines: Recently, RBI circular to non-bank PPI issuers, – Need for bank account creation for
impacting PPI loading, potentially impacting Neocard/ BNPL players PostPe, Slice, Uni, etc.- all users
details on subsequent pages
> Could lead to user drop-offs,
> Extension to Bank-PPI issuers (e.g. SBM) likely going forward increase in # of funds transfers,
increased complexity in loan
reporting with Bureaus
Capital supply – Potential capital constraint from NBFC partners: NBFCs are investing in own tech – Diversification of partner base
B constraint capabilities and may captive fintech NBFCs as competitors, potentially to an overall across NBFCs & potentially banks
reduction in capital flow from NBFCs, in an extreme scenario (given banks being selective in
getting in co-lending partnerships)
– Equity capital infusion in in-house
– Capital constraint on in-house NBFC: Potential issues in raising capital for in-house
NBFCs
NBFC from larger NBFCs and other debters

Asset quality- – High credit risk/ NPAs: Potential credits risks & higher than expected NPA in newer – Investments in u/w & collections
C NPAs/ credit risk segments (NTC customers, blue collar/ gig economy workers, T2/ T3 cities), less diversified capabilities; leverage existing base
than a typical bank/ NBFC (tested) for cross-selling
– Cautious approach balancing
growth with asset quality

Source: RBI, Market participant interviews, secondary research, Bain analysis NDL 220810_Ribbit Capital FinTech ... 32
A The new circular could have implications for Fintechs that are sourcing credit-line via
NBFCs to load the pre-paid instrument
RBI CIRCULAR
20th June – RBI notification to non-bank PPI issuers
“PPIs shall be permitted to be loaded/ reloaded by cash, debit to a bank
account, credit and debit cards, PPIs (as permitted from time to time) and
other payment instruments issued by regulated entities in India and shall be in
INR only”
“PPI-Master Direction (MD) does not permit loading of PPIs from credit
lines. Such practice, if followed, should be stopped immediately.”
Applicability
• The notification impacts:
– Fintech players (neo-card players such as Slice, Uni etc.) that are sourcing credit line
from non-banks (i.e., NBFCs)
– NBFCs who fund credit lines for fintech players
– Banks who lend PPI licenses to fintech players (e.g., SBM, Federal Bank)
The notification is recent with limited insight into exact guardrails/exceptions and implementation roadmap - to become clearer over the next few weeks
Source: RBI, secondary research
PRELIMINARY
Potential Implications
• Fintech players: Consumer lending fintech players (BNPL, neocards, etc.)
may not be able to offer credit line via PPIs; Potential pivots include
– Banking partner can open bank accounts for all users post due KYC and transfer
money in PPI through these accounts
– Partnering with traditional banks for co-branded card issuance
– Acquiring an NBFC-license and credit card license
– Offer other lending products such as personal loans, BNPL (non-card based)
• NBFCs: Might see impact on interest income earned on funds routed
through ‘rented’ PPIs
• Banks that lend PPI licenses might lose out on transaction fees earned
from fintech partners
• Traditional banks: New regulation could potentially reduce competition for
traditional banks in the consumer lending, credit card and BNPL spaces
NDL 220810_Ribbit Capital FinTech ... 33
1

Case study- Bajaj (1/6): Key success factors/ learnings from Bajaj model

Wide cross-category play • Wide range of product offerings for customers, incl. consumer B2C finance (e.g., personal loans) and customer B2B2C
finance (e.g., in-store financing and web-based point-of-sale)
– Driving scalability by enabling funneling of customers acquired through small ticket size products (e.g., consumer durables) into larger ticket size
loans, (e.g., personal loans)

Robust Execution • Strong geography, department and employee-level incentives driving robust execution to achieve company-wide targets
– Quarterly and annual targets assigned to each vertical/ department, driving strong department-level incentives to perform
– Monthly variable pay for 90%+ employees, with bonuses up to $7 per case, incentivizing strong employee performance on key metrics (e.g., with
significant scope for promotion based on performance;
– Regular check-ins of low performing departments with the leadership team to enable performance turnaround

• Collection network & efficiency: ~98% collection efficiency achieved via large collection teams driving pan-India reach,
with strong incentives depending on customer credit score and penalties allotted for low collection rates

Strong offline presence

• Large sales teams driving strong offline presence, enabling Bajaj Finance to tap into markets with limited online presence,
significantly increasing the overall TAM

Differentiated underwriting • Deep experience in lending driving strong understanding of default risk based on customer buying habits, enabling lending
at scale despite limited data (e.g., by predicting riskiness based on purchases from select retailers)
– Also enables higher approval rates vs traditional banking peers such as HDFC bank, incentivizing retailer onboarding

Diverse sources of capital • High resilience due to diverse sources of capital, driving lower risk to capital supply during a crisis
– Sources of capital include borrowings from Banks and related parties (~30%), Debt securities (~29%), Equity (23%), Public deposits (~16%),
Subordinated debt (~3%)

Source: Industry participant interviews, annual reports, investor presentations, secondary research, Bain analysis

NDL 220810_Ribbit Capital FinTech ... 34

1 Case study – Bajaj (2/6): Diversified NBFC, with $4-5B loan book for unsecured
retail; leveraging partnerships to accelerate growth
CONSUMER B2C
Overview Company Scale(1) Customer Base
• Founded: 1988 (as Bajaj Auto Finance Ltd., Bajaj
Finserv Carved out in 2018) ~40K ~58M ~60% Metro/ T1 65-70% salaried
FTEs (2022) Customers (FY22)
• Ownership: Public (50%+ Bajaj Finance owned by 2000+ 65-70% repeat 630+ credit 20-30%
Bajaj Finserv) ~29% City presence customers score NTC
YoY AUM growth pan-India (2022)
– Bajaj Finance Market Cap: ~$45B as of Jun’22
(FY22)
~$25B
AUM (FY22)
Unsecured consumer
Underwriting Disb. & Collection
• NBFC registered with RBI loans $4-5B Underwriting
Product offering Channel Partners • Business Rule Engine (BRE) based underwriting
using traditional parameters (in-house scorecards)
PL LoC BNPL
• 90%+ Consumer Durable acquisition through • Team size: 350+ analysts
partner retailers (e.g., Croma) Disbursal
• Consumer durables • Immediate disbursal for
• 20-25% partner-led acquisition for PL through Bajaj consider best in
– Digital EMI for consumer durables at no interest consumer durables class by peer NBFCs
aggregators
• 1-2 days for personal loan on underwriting and
– Subvention of interest rate by brands/ merchants – 30+ channel partners engaged collection
Collection
– Key gateway category for other lending products
• Differentiated collection teams with strong
• Personal Loan performance-linked incentives
– 2.5k core employees (team managers, regional/zonal
– Ticket size typically >1L, at 13-23% interest rate heads, collection agents),
– 5-10k collection agents from external agencies, incl. 30+ key
agents
• Line of credit
– EMI card enabling single-swipe financing
90+ Best in
Note: (1) Consolidated for Bajaj Finance (includes housing) (2) For consumer lending business DPD2 class
Source: Investor presentations; Annual Reports; Industry Participant Interviews
NDL 220810_Ribbit Capital FinTech ... 35
1 Case study – Bajaj (3/6): Diversified book by building scale in new segments-
creates a portfolio of credit-tested customers for cross-sell
Bajaj Finance’s AUM of ~$27 Bn in FY22; growth of ~24% CAGR FY18-FY22

Retail SME Wholesale

1• Well diversified portfolio: Each
individual product segment
accounts for less than ~20% of
overall portfolio

2• Scaling of new business: Bajaj

Finance has launched and scaled
multiple consumer centric
products in the past few years

– E.g., Housing, rural finance

3• Cross-sell: developed strong

engine with ~65% of new loans to
existing customers

Note: (1) Consumer B2B sales finance: CD, digital lifecare, e-commerce spends etc., Auto Finance: 2W & 3W, Consumer B2C: personal loans, Commercial lending: WC & term loans to small & mid-corporates, IPO financing; Rural lending: Rural B2B sales finance
& Rural B2C finance, Mortgage includes - (i) Real estate: developer finance & lease rental finance, (ii) Home loans: home loans & rural housing; (*) Break-up across Home loans, LAP and Real-estate done as per FY21, (2) Conversion rate used: 1$ = 75 INR
Source: Annual report, Investor presentations

NDL 220810_Ribbit Capital FinTech ... 36

1 Case study – Bajaj (4/6): Differentiation driven via strong product portfolio,
technology, distribution & underwriting capabilities
CONSUMER B2C

Consumer • Consumer B2C finance: Personal loans (and cross-sell) targeted via a) Outbound call center, b) Via aggregators (e.g., Paisabazaar) and c)
products FOS targeting salaried professionals
– <5 mins. for loan approval/ rejection
• Consumer B2B2C finance: Provides in-store loan financing/ EMIs at checkout via a) web-based PoS (linked to billing systems of retailer)
and b) FoS in-store assisting customers to avail credit
– EMI cards enabling financing through a simple swipe; cards supplemented with mobile wallet for loan balance, credit limits

Tech. & data • Significant investment in technology helping deliver a superior customer experience (technology expenditure: Bajaj Fin: 0.22% of total
access assets, Capital First: 0.07%, HDFC: 0.05%)
• Real-time decisions through risk scorecards and fraud analytics using proprietary data; maintains data warehouse of customers with pre-
approved loans/ offers per their credit history

Increased • Vast distribution network: ~50K CD product stores, ~30K lifestyle and digital stores, 75K+ active distribution PoS; BAF’s EMI network has
reach and 23M+ issued cards and operations in 1200+ cities
– Growing rural network (11K channels vs. 1.5K in ’15); Rural CD ticket sizes 10% lower than urban branches however, yields 100-150bp higher
cross-selling
capabilities • Strategic partnerships: Acquired stake in MobiKwik for India’s first debit & credit wallet; launched co-branded credit cards with banks (e.g.
RBL, Standard Chartered) and co-branded EMI cards with Future Group, Flipkart, GlobalDesi, etc.
– Tie-ups with leading OEMs such as LG, Samsung, Haier, etc. to provide no cost EMIs
• Focus on cross sell: Base of ~20M customers providing edge amidst intensifying competition

Underwriting • Underwriting: Selective underwriting process driven by evaluation of credit score, income, current borrowings, borrowing history, etc.
and – Loan approval from Bajaj Finance typically results in approvals from other fintech firms. Leverage data from consumer loans to cross sell PLs
collection
• Collections: Large collection teams driving pan-India reach, with strong incentives for both in-house as well as outsourced collection agents
– Incentives depend on credit rating of the customer, efficiency of collection, varying from $7 to $1 per case, penalties allotted for low collection rates driving ~98%
collection efficiency
Source: Secondary research, Analyst reports

NDL 220810_Ribbit Capital FinTech ... 37

Case study – Bajaj (5/6): Low NPA of ~1% (Mar’22, Consumer B2C business),
driven by strong collection & underwriting capabilities

Strong collection and underwriting capabilities driving low NPAs for consumer B2C business

Increase in GNPA in Dec’20, Jun

Increase in GNPA in Q3FY21, Q1FY22
’21 driven by different waves of
driven by impact of COVID waves in India
covid

Note: (1) Excludes Bajaj Housing Finance, conversion used 1$ = INR 75

Source: Investor presentation, annual reports

NDL 220810_Ribbit Capital FinTech ... 38

1 Case study – Bajaj (6/6): Bajaj Finance Pre-Tax ROA at 6-7%, driven by low credit
costs, cost of funds vs fintech players

Differentiated underwriting, strong collection teams and robust execution driving low credit cost, high ROA

Low cost of funds vs fintech players (typically

ranges from 8-12%), driven by strong market
reputation and performance, use of 100%
own NBFC model
Low provisioning vs Fintech peers incl.
MoneyTap, Paysense, Kissht (typical
provisioning of 5-8%), however high vs
Banks (typical provisioning of 0.5-1%)

Note: (1) Excluding Bajaj Housing finance, average closing AUM for FY22, FY21 taken as the denominator (2) Direct cost includes CAC, collection costs, excludes NPA provisioning (3) Indirect costs include employee cost, admin cost, tech cost
Source: Q4FY22 Investor presentation, FY22 annual report

NDL 220810_Ribbit Capital FinTech ... 39

A Slice card transaction flow: NBFC’s credit line loads pre-paid instrument with SBM
acting as the issuer bank
SLICE CARD OVERVIEW
Slice card transaction flow
Transaction flow affected by RBI’s 20th June
circular (if applicable)
Legend
Part of transaction flow impacted 9
Flow of No flow of due to 20th June circular, if
funds funds End of day settlement
applicable between issuer bank and
lending NBFC through
transfers to a common
settlement A/C
1 2 3 4 5
Lending NBFC Recent RBI
User swipes/ taps Card details and Payment processor Acquirer bank sends Card network circular prohibits
Slice card at POS or transaction amount checks risk and shares authorization request sends
enters details on shared with payment transaction details with to card network (e.g authorization loading of the PPI
online merchant processor acquirer bank (e.g. Visa) via payment request to issuer instrument
websites (e.g. Razorpay) HDFC Bank) gateway bank (e.g. SBM) through credit line
obtained from
User Merchant Payment Acquirer bank Network Pool of Funds/ NBFC
processor processor Settlement
A/C
Slice pays NBFC as per
11 defined arrangement

Slice assesses credit

limit for each user per Issuer/partner Slice
its underwriting model bank
Acquirer bank transfers funds to merchant;
Interchange fees is earned by Slice post MDR split
(SBM)
8 between parties (partner bank. NBFC, M2P, card Issuer bank pays acquirer bank post
network, payment processor, etc.)
7 payment authorization from user

Upgrade Example (US)

1) RBI (acc. to Transfer of Loan Exposures
Issuer bank checks in its own database for user’s approved credit limit and utilized credit limit;
6 1) Offers credit line on card where each transaction is treated Master Direction in 2021) mandates
Issuer bank sends OTP for verification and payment authorization from user
has a repayment tenure of 2-5 years minimum holding period (MHP) of 3
months for loan tenor of <2 years and 6
2) Loans are issued by partner bank (e.g. – Cross River months for tenor of >2 years
Bank) which are then sold to pre-agreed investors (e.g. – 2) Tenor constraints on securitization likely
10 Slice collects payment from customer at billing cycle end Goldman Sachs) within 15-30 days of loan origination; loans in the near future, to minimum residual
are securitized and sold within the next 6-8 months (investors tenure to be 1 yr (post securitization)
Source: Market participant interviews hold the loans on their books until loans are securitized)
NDL 220810_Ribbit Capital FinTech ... 41
2 Set 2 (Navi Overview): PL-anchored financial services provider, reached
~$210M loan book in 3 years
OUTSIDE IN
Oviewew Company Scale(1) Customer Base
• Founded: 2018 ~$23M for personal loans
~1000 ~$26M • 85% of customers at 725+, 50% at 750+
FTEs (Dec. ‘21) Monthly loan disbursals (low risk high quality customer profile)
• Ownership: 95%+ owned by Sachin Bansal
3k+
• NBFC registered with RBI ~3M ~$210M Locations, incl. • ~4.55% NTC, ~30% first-time PL users
Monthly active users Loan book (2) 84% of all pin
• Funding: ~$582M (Dec. ‘21) (Dec ‘21) codes
– Key Investors:Gaja Capital, Sachin Bansal Seven Leaves,
White Shrub ~$190M for
personal loans Underwriting Disb. & Collection

Product offering User interface

Underwriting
PL LoC BNPL • 100% Automated, using AI-based underwriting
– Model on dataset of 2.64M repayments (as of Dec’21)
incorporating 400 variables

• Personal loan: Disbursal

– Loans upto $26k provided, with $650 avg. ticket size
• Instant disbursal through the NAVI app to the
– 9% - 45% interest rate p.a., depending on size and tenor
registered bank account, generally <5 minutes
– Typically 22 months avg. repayment tenure
Collection
• Home loan:
• Cohort-based collection model: Digital reminder &
– Loans upto $1.3M available at interest rate starting ~7% p.a.
interest, and a flexible EMI with a tenor of ~30 years follow-ups, tele-calling and on-ground collection
– Typically serve independent houses as well as management (96.63% collection efficiency)(3)
apartments – ~130 in-house tele-callers, with a specialized agency for
non-contactable cases
• Other financial products include General – Field recovery outsourced to 70+ agencies for follow-ups &
outstanding due recovery
Insurance, Microfinance (via subsidiary Chaitanya
Microfinance), Mutual Funds

Note: (1) Excludes subsidiaries, includes PL ,home loans, mutual funds (2) Excludes AUM under the AMC (3) For loans disbursed after April21 (constituting 70% disbursals; | Source: Investor presentations; Annual Reports; Industry Participant Interviews
NDL 220810_Ribbit Capital FinTech ... 42
2 Set 2 (Economics): Aggressive expansion plans for NAVI driving negative ROA due
to low GII, high direct costs
As % of avg. AUM

Comments NAVI ROA tree

Low interest rates vs peers (starting at ~9%) as a part of NAVI’s aggressive expansion plan driving low
Gross Interest Income (GII) 17%
gross interest income as a share of AUM
(-) Cost of Fund 4% Funding from NAVI Finserv driving low cost of funds

Net Interest Margin (NIM) 13%

Fee Income <1% Includes collection fee, no additional service fee charged on the assigned loans

Total Income 13%

(-) Overall Costs 29%

Provision High provisioning due to expected focus on unsecured lending inherent in NAVI’s expansion plans,
8%
(Credit Cost) expected to drive up the NPA
Direct Costs
(Excluding Credit Costs)

(-) Cost of Acquisition / Marketing

21% Significant CaC (advertising expenses) driving overall losses, contributing to ~75% of total direct cost
(-) Cost of Collection and Processing

(-) Other Opex

Contribution Margin -16%

(-) Indirect Costs 3% Indirect costs largely driven by employee salaries, wages and bonus
(Employees, Tech, Admin, Others)

Pre-tax ROA -19% (1)

Note: (1) NAVI ROA tree excludes net gain on fair value changes (~10% of average annualized AUM) NDL 220810_Ribbit Capital FinTech ... 43
Source: Market participant inputs, Secondary research, Analyst reports, Company website, MCA filings, Bain analysis