Star Housing Finance Ltd

ASHISH JAIN

MANAGING DIRECTOR

Dear Shareholders,

Greetings and best wishes to all of you as we step into FY2023-24 with the dream of home ownership being an overarching aspiration for every Indian today, we are serving and facilitating customers realise their inherent dreams. We have defined our goals with the strong pace of our strategic delivery and improved performance. FY'2022-23 shall be the beginning of the growth journey for Star HFL and we are happy to have walked the talk registering 100%+ y-o-y growth across key business areas, notably record disbursements during the year and resultant AUM growth. This growth is backed by robust processes and guidelines across operational areas and is governed by strong review mechanism at the level of senior management and the Board. Through liability program and capital raise, we have been able to mobilize funds to fuel the growth. Strong connect and follow up with customers has rationale PAR to lower single digits and this has provided us further con dence to grow our book.

One feels that rural India story in housing courtesy rise in income levels, nuclearization, and physical/digital infrastructure development is set to unfold in coming years. Local level drivers in these geographies for growth in residential mortgages shall aid growth of rural focused housing companies like Star HFL. We as a team look forward to the exciting next few years for quality growth and create value for all stakeholders" Your company initiated engagement with India Ratings and Care rating for its long-term credit facilities as rated CARE BBB-, Positive as of March 31, 2023. Star HFL is now rated as IND BBB/ Stable by India Rating allows us to raise debt at competitive rates in the future, if needed.

Talking about business performance for FY2022-23, as of Mar 31, 2023 the AUM stands at Rs. 24599.06 Lakhs with 2550 live accounts. Your company incrementally disbursed Rs. 18679.81 Lakhs during the year. The net-worth is at Rs. 10641.88 Lakhs and borrowing outstanding is Rs. 16249.99 Lakhs. The leverage levels remain modest at 1.53. The CRAR is 77.88%. Your company reported GNPA at 1.68 % and NNPA at 1.25%. On the funding front in FY2022-23, your company has raised Rs. 118.95 crs of fresh credit lines from the National Housing Bank (Rs. 10 crs), Hinduja Housing Finance (Rs. 10 crs), Sundaram Home Finance Limited (Rs. 5 crs), Maanaveeya Development & Finance Private Limited (Rs. 18 crs), ICICI Bank Limited (Rs. 10 crs), MAS Financial Services Limited (Rs 7.5 Crs), MAS Rural Housing & Mortgage Finance Limited (Rs 7.5 Crs), Cholamandalam Investment and Finance Company Limited (Rs 6.2 Crs), LIC Housing Finance Limited (Rs 5 Crs) Capital India Finance Limited (Rs 5 Crs), State Bank of India (Rs 34.75 Crs).

Your company also has been able to strengthen the net-worth by infusion of capital (Rs. 32.78 crs) through preferential allotment. The liquidity levels remain robust and we have several proposals with banks (public and private) and financial institutions in pipeline. Your company has Sub-division/split of 1 (one) existing equity share of face value of Rs 10/-(Rupees Ten only) into Two (2) equity shares of face value of Rs 5 (Rupees Five Only) fully paid up capital and also issued 1 (one) Bonus equity share for every (1) fully paid up equity share.

"Delivering Growth and Value in Housing Finance"

FY'2022-23 saw exercise of first tranche of ESOP I scheme ensuring participation of eligible employees as owners of the Company stock options to employees to foster a spirit of ownership and an entrepreneurial mindset, because of their nature, stock options help to build a holistic, long-term view of the business and a sustainability focus in the management team. Stock options are granted to tenured employees in managerial and leadership positions upon achieving defined thresholds of performance and leadership behaviour. Star HFL is governed by strong and an independent board comprising of reputed professionals from BFSI space viz. Mr. Amlendra Prasad Saxena, (Ex GM, NHB); Mr. Ajith Lakshmanan (Ex ED of LIC of India), Mr. Pradip Kumar Das (ex-ED IDBI Bank) and Ms. Neelam Tater (Professional CA & CS) With an objective to augment AUM growth, your company has entered into co-lending arrangements with Family Home Finance Private Limited. The AUM is build across the states of Maharashtra (Extended Mumbai Region: 25%, Extended Pune Region: 26%, Vidarbha Region: 11%), Madhya Pradesh (10%), Gujarat (5%), Rajasthan (18%) and Tamil Nadu (5%) During the year Star HFL has doubled its physical presence to now 14 branches. Coupled with digital PoPs, the Company is now present at 30+ locations across operational geographies with a staff count of 150+ employees, more than 40% of which are in underwriting and collection functions at branches your company to register growth across business and operational areas. Star HFL sees itself as a housing nance company that would enable credit for deserving homebuyers in WES / LIG segment on fair terms. Our staff has requisite domain and know-how to scale up the book in line with extant polices, processes and guidelines. We look forward to be a meaningful player in retail low cost housing nance space and realize home-owning aspirations for our borrowers. I hereby thank Star HFL Board for mentoring and guiding the leadership team to achieve business objectives backed by strong principle of corporate governance. I am grateful to all members of the Star HFL family for their team spirit and to all stakeholders for their trust, integrity and accountability. I also wish to thank the regulator, the Reserve Bank of India and the National Housing Bank for guidance and support; and I am happy to share that your Company continues to be in absolute compliance with the guidelines issued by them.

Therefore, I am optimistic of your Company's growth, and of its ability to deliver superior performance and greater shareholder value.

NATESH NARAYANAN

CHIEF FINANCIAL OFFICER

Dear Shareholders,

Financial Year 2023, was the year we started to reap the benefits of our transformation strategy and began to move the needle in every single benchmark we set for ourselves. This has been a record year for us and the same is reflected in the financial performance. We started the year with a loan book of 104.09 crores and happy to submit to you all that we ended the year with a gross loan book inching towards Rs.250 crores marking a growth of 140% year-on-year. The total revenue for FY'23 is at INR37.24 crores as against INR 19.37 in FY'22, again a near 100% year-on-year growth. The interest income and the net interest income in FY'23 stood at INR 32.35 crores and INR 21.06 crores as against INR 17.97 crores and INR 11.8 crores respectively last year.

Incremental lending happened at 15.5% while the incremental borrowing cost stood at 10.5% per annum. GNPA as of March 23 is at 1.68% as against 2.99% in March ‘22. And the NNPA as of March ‘23 is at 1.25% as against 2.40% in March 2022. Investment in quality, manpower to augment our growth plan and related expansion in operational geographies has resulted in employee expenses increasing by 28% year-on-year. Total operating expense has increased by 51%, primarily attributable to capacity creation for future AUM buildup and the scale up that is expected to, and the scale up that has happened in the FY'23. For the last 12 months period ending March ‘23, the PBT increased by ve times year-on-year. Adjusting for the exceptional non-cash expense related to ESOP, PBT has increased by 220% year-on-year.

Star HFL has successfully raised capital in two rounds in FY'2022-23 which saw participation from reputed professionals from capital markets and BFSI space. The shareholding pro le is augmented with participation from individual investors, institutional entities, a family office and an FPI. Star HFL now has an eco-system of more than 6500 shareholders. Courtesy these rounds, the net worth has crossed Rs.100 crs and stands at Rs.106.42 crs as of Mar 31, 2023.

Taking a note of the company's growth, quality of loan book, established processes and risk framework, and the management team, the overall corporate governance, Care ratings have upgraded our outlook of the company to positive from stable in the fourth quarter of FY23. The company is very well capitalized and shall subject to all approvals in place, should look to strengthen the capital levels further to enable a INR500 crores scale up in the next four to six quarters, thereby becoming a systemically important housing nance company.

Star HFL has relationship with public sector banks, private sector banks, financial institutions and the National Housing Bank. During the year the Company has raised fresh term loans from 10 banks and FIs with current outstanding of Rs.107.30 crs. Total borrowings outstanding as of March 31, 2023 is Rs.162.5 crs. Through the year, Star HFL has developed robust pipeline and shall continue to expand the engagement with other institutions in banking space.

Our on ground effort of staying connected with our customers yielded us rich dividends and was well appreciated by our borrowers too. Consequently we have written off 0.56 crores of retail loans and also provided 0.06 crores towards Impairment of Loan Assets as part of IND AS requirements.

Investment in building capacities in our branches, write off of 0.56 crores and the additional provisioning resulted in our PAT 6.98 crores in March 2023 as against 0.62 crores in March 2022. Total Revenue for the year was at a historic high 37.24 crores in March 2023 as against 19.37 crores in March 2022. Our liquidity position is extremely comfortable at 28.10 crores. The Yield on our Loan portfolio stood at 18.66 % and NIIM at 11.90 % as on March 2023 vis a vis 16.47 % and 10.36 % respectively in March 2021. The moderation in the Portfolio Yield and NIIM is primarily driven by our focus on increasing Retain Individual Home Loan and reduction in the Project Loan during the entire FY.

Thank You, Regards,

Natesh Narayanan.

ChiefFinancial