-OR PRIN./me CIRCULATION ONLY 0(o IM 15.06... · 1 his Information Meinorandum/ Disclosure Document...

-OR PRIN./me CIRCULATION ONLY 0(o Private and Confident:

' "

TH S DISCLOSURE DOCUMENT IS NEITHER A PROSPECTUS NOR A STATEMENT IN LIEU OF PROSPECTUS). THIS DI CLOSURE DOCUMENT PREPARED IN CONFORMFTY WITH SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE AND LISTING OF DEBT SECURITIES) REGULATIONS, 2008 ISSUED VIDE CIRCULAR NO. LAD-NRO/GN/2008/1 3/127878 DATED JUNE 06, 2008, AS AMENDED FROM TIME TO TIME, THE SECURITIES AND EX:HANGE BOARD OF INDIA (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2075 ISth.IED VIDE CIRCULAR NO. SEBI/L4D-NRO/GN/2015-16/013 DATED SEPTEMBER 02, 2075, AS AMENDED FROM TIME TO TIME, RBI CIRCULAR ON BASEL III CAPITAL REGULATIONS VIDE MASTER CIRCULAR NO. RBI/2015 -16/ 58 PBR.NO.BP.BC3/21.06.201/2075-76 DATED JULY 01, 2015 AND CLARIFICATION ISSUED BY R81 VIDE MASTER CIRCULAR RBI/2015-16/285 DBR.NO.BP.8C71/ 21.06.201/ 2015-76 DATED JANUARY 14, 2016, AS AMENDED FROM TI41F. TO TIME AND SECTION 42 OF THE COMPANIES ACT, 2013 AND THE COMPANIES (PROSPECTUS AND

AL .0TMENT OF SECIMITIES) RULES, 2014, AS AMENDED FROM TIME TO TIME.

OFFER LETTER/ DISCLOSURE DOCUMENT/ INFORMATION MEMORANDUM

++ ESAF

ESAF SHALL FINANCE BANK

Joy of Banking

ESAF SMALL FINANCE BANK LIMITED A public limited company incorporated under the Companies Act, 2013

Date of Incorporation: May 05, 2016 Registered Office: Hepzibah Complex, Second Floor, No.X/109/ M4, Ma nnu thy,

Thrissur, Kerala, India 680651 Telephone No.: 0487 2373813

Webs itt: https://www.esafbank.com/

INFORMATION MEMORANDUM FOR PRIVATE PLACEMENT OF 400 RATED LISTED, REDEEMABLE, UNSECURED, BASEL III COMPLIANT TIER II BONDS TN THE FORM OF NON-CONVERTIBLE

DEBENTURES OF A FACE VALUE OF RS. 10,00,000/- EACH, OF THE AGGREGATE NOMINAL VALUE OF UP TO RS. 40,00,00,000/- (RUPEES FORTY CRORE ONLY) ("DEBENTURES")

BACKGROUND

This Information Memorandum/ Disclosure Document is related to the Debentures to be issued by ESAF Small Finance Bank Limited (the "Issuer" or "Company" or "Bank") on a private placement basis and contains

relevant information and disclosures required for the purpose of issuing of the Debentures.

GENERAL RISKS

Investment in debt and debt related securities involve a degree of risk and investors should not invest any funds in the debt instruments, unless they can afford to take the risks attached to such investments. Investors are ad' ised to read the risk factors carefully before taking an investment decision in relation to this Issue. For taking an investment decision, the investors must rely on their own examination of the Bank, this Information Memorandum/ Disclosure Document issued in pursuance hereof and the Issue including the risks involved, Specifjc attention of investors is invited to statement of Risk Factors contained under SECTION 3: of this Information Memorandum/ Disclosure Document. These risks are not, and are not intended to be, a complete list of all risks and considerations relevant to the Debentures or investor's decision to purchase the Debentures.

CREDIT RATING

The Debentures proposed to be issued by the Issuer have been rated by CARE Ratings Limited ("Rating Agency"). Rating Agency has, vide its Rating letter dated November 30, 2017 and the rating confirmation letter dated May 28, 2018 assigned a rating of 'CARE A-; negative' in respect of the Debentures. Please refer to Annexure IV of this Information Memorandum/ Disclosure Document for the letter from the Rating Agency assigning the credit rating abovementioned and the rating rationale adopted by the RMing Agency for the

aforesaid rating.

ISSUE SCHEDULE

Issue Opening Date June 01.2018 I ,,ref He

Issue Closing Date June 01, 2018 a

tictbah Complex 0" St 'DJ Floor •• •;114

ISSUE SCHEDULE

Issue Opening Date June 01. 2018 t. t i ,c2: He Issue Closing Date June 01, 2018 i *

k ..„..--cs\ty FINANCE BAN '

pzibah Complex s•B SL rnti Floor

EC It VATS CIRCULATION ONLY Private and Confident!

THIS DISCLOSURE DOCUMENT IS NEITHER A PROSPECTUS NOR A STATEMENT IN LIEU OF PROSPECTUS). THIS DISC -0SURE DOCUMENT PREPARED IN CONFORMITY WITH SECURITIES AND EXCHANGE BOARD OF INDIA (155 E AND LISTING. OF DEBT SECURITIES) REGULATIONS, 2008 ISSUED VIDE CIRCULAR NO. LAD-NRO GN/2008/13/127878 DATED JUNE 06, 2008, AS AMENDED FROM TIME TO TIME, THE SECURITIES AND EXC ANGE BOARD OF INDIA (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015 ISSU D VIDE CIRCULAR NO. SEWLAD-NRO/GN/2015-16/013 DATED SEPTEMBER 02, 2015, AS AMENDED FROM TIM TO TIME, RBI CIRCULAR ON BASEL III CAPITAL REGULATIONS VIDE MASTER CIRCULAR NO. RBI/2015 -16/ 58 D R.NO.BP.BC.1/21.66.201/2015-16 DATED JULY 01, 2015 AND CLARIFICATION ISSUED BY RBI VIDE MASTER CIRC LAR RBI/2015-16/285 DBR.NO.BP.BC.71/ 21.06.201/ 2015-16 DATED JANUARY 14, 2016, AS AMENDED FROM TIM: 7 0 TIME AND SECTION 42 OF THE COMPANIES ACT, 2013 AND THE COMPANIES (PROSPECTUS AND /.LL. TMENT OF SECURITIES) RULES, 2014, AS AMENDED FROM TIME TO TIME.

OFFER LETTER / DISCLOSURE DOCUMENT/ INFORMATION MEMORANDUM

ESAF ESAF SMALL FINANCE BANK

Joy of Banking •


Date of Incorporation: May 05, 2016 Registered Office: Hepzibah Complex, Second Floor, No.X/109/M4, Mannuthy,


Website: https://www.esafbank.com/

INFORMATION MEMORANDUM FOR PRIVATE PLACEMENT OF 400 RATED LISTED, REDEEMABLE, UNSECURED, BASEL III COMPLIANT TIER II BONDS IN THE FORM OF NON-CONVERTIBLE

EBENTURES OF A FACE VALUE OF RS. 10,00,000/- EACH, OF THE AGGREGATE NOMINAL VALUE OF UP TO RS. 40,00,00,000/- (RUPEES FORTY CRORE ONLY) ("DEBENTURES")

BACKGROUND

1 his Information Meinorandum/ Disclosure Document is related to the Debentures to be issued by ESAF Small inance Bank Limited (the "Issuer" or "Company" or "Bank") on a private placement basis and contains

relevant information and disclosures required for the purpose of issuing of the Debentures.

GENERAL RISKS

Investment in debt and debt related securities involve a degree of risk and investors should not invest any funds in the debt instruments, unless they can afford to take the risks attached to such investments. Investors are ecivised to read the risk factors carefully before taking an investment decision in relation to this Issue. For taking an investment decision, the investors must rely on their own examination of the Bank, this Information Memorandum/ Disclosure Document issued in pursuance hereof and the Issue including the risks involved. Specific attention of investors is invited to statement of Risk Factors contained under SECTION 3: of this nforntation Memorndum/ Disclosure Document. These risks are not, and are not intended to be, a complete ist of all risks and considerations relevant to the Debentures or investor's decision to purchase the Debentures.

CREDIT RATING

the Debentures proposed to be issued by the Issuer have been rated by .CARE Ratings Limited ("Rating kgency"). Rating Agency has, vide its Rating letter dated November 30, 2017 and the rating confirmation letter Jated May 28, 2018' assigned a rating of 'CARE A-; negative' in respect of the Debentures. Please refer to knnexure IV of this Information Memorandum/ Disclosure Document for the letter froth the Rating Agency assigning the credit •rating abovementioned and the rating rationale adopted by the Rating Agency for the

aforesaid rating.

Hepzibah Complex Second Floor No:X/105/M4

R PRIVATE CIRCULATION ONLY Private and ConJIdenii

ttIVI7Tmrrl

Deemed Date of Allotment June 01. 2018

TI e Bank reserves the right to change the Issue Schedule including the Deemed Date of Allotment (as defined h reinafter) at its sole discretion. In the event of any change in the Issue Schedule including the Deemed Date of Allotment, the Bank shall notify the Stock Exchange about such change.

LISTING

; e Debentures are proposed to be listed on the wholesale debt market segment of BSE Limited ("BSE"). The uer has obtained an "in-principle" approval from BSE dated May 22, 2018. Please refer to Annexure IX of this ormation Memorandum/ Disclosure Document for a copy of the afore-mentioned in-principle approval letter ued by BSE.

OTHER KEY PARTIES TO THE ISSUE

Inale.DEBENTURETRUSTEE - IrSREGISTRARTO THE ISSUEM

Catalyst TrusteeShip Limited GDA House, Plot No. 85, Bhusari

Colony (Right), Paud Road, Pune - 411 038

Link Intime India Pvt Limited C-13; Pannalal Silk Mills

Compound L.B.S. Marg, Bhandup (West)

Mumbai 400 078

Is Ir

TABLE OF CONTENTS

SECTION I: NOTICE TO INVESTORS AND DISCLAIMERS 4 SECTION 2: DEFINITIONS AND ABBREVIATIONS 7 SECTION 3: RISK FACTORS 19 SECTION 4: DISCLOSURES AS PER SEBI REGULATIONS 13 SECTION 5: DISCLOSURES PERTAINING TO WILFUL DEFAULT 38 SECTION 6: DISCLOSURES AS PER THE ACT 1 39

1"StTION 7: OTHER INFORMATION AND APPLICATION PROCESS 44 kCTION 8: DECLARATION 53 ANNEXURE I: CONSENT LETTER FROM THE DEBENTURE TRUSTEE 54 ANNEXURE IT: APPLICATION FORM 55 ANNEXURE III: DISCLOSURE OF RELATED PARTY TRANSACTIONS 59 ANNEXURE IV: RATING LETTERS AND RATIONALES 61 ANNEXURE V: ILLUSTRATION OF CASHFLOWS* 69 ANNEXURE VI: CONDITIONS PRECEDENT 70 ANNEXURE VII: CONDITIONS SUBSEQUENT 71 ANNEXURE VIII: SHARE CAPITAL HISTORY 72 ANNEXURE IX: COPY OF LISTING IN-PRINCIPLE APPROVAL 74

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FOR PRIVATE CIRCULATION ONLY Private and Confidential

SECTION 1: NOTICE TO INVESTORS AND DISCLAIMERS

DISCLAIMER CLAUSE OF ISSUER

T is Offer Letter/ Disclosure Document/ Information Memorandum is neither a prospectus nor a statement in lieu of rospectus under the Act. This Disclosure Document has not been submitted to or approved by the Securities and Ex hange Board of India ("SERI") and has been prepared by the Bank in conformity with the extant SEBI Regulations an the Act. This Issue of Debentures, which is to be listed on the WDM segment of the BSE, is being made strictly on a pr ate placement baSis. This Disclosure Document is being circulated to identified eligible investors only, not ex ceding 49 (Forty-Nine) in number. Multiple copies hereof given to the same entity shall be deemed to be given to •th same person and shall be treated as such. This Disclosure Document does not constitute and shall not be deemed to co saute an offer or an invitation to the public to subscribe to the Debentures. Neither this Disclosure Document nor an other information supplied in connection with the Debentures is intended to provide the basis of any credit or otl er evaluation and a recipient of this Disclosure Document should not consider such receipt a recommendation to purchase any Debentures. Each potential investor contemplating the purchase of any Debentures should make its own in ependent investigation of the financial condition and affairs of the Bank and its own appraisal of the cr ditworthiness of the Bank as well as the structure of the Issue. Potential investors should consult their own financial, le al, tax and other professional advisors as to the risks and investment considerations arising from an investment in the Debentures and should possess the appropriate resources to analyze such investment and the suitability of an in estment to the investor's particular circumstances. No person has been authorized to give any information or to m ke any representation not contained in or incorporated by reference in this Disclosure Document or in any material m de available by the Bank to any potential investor pursuant hereto and, if given or made, such information or re resentation must not be relied upon as having been authorized by the Bank. By subscribing to the Debentures, eh ible investors shall be deemed to have acknowledged that the Bank does not owe them a duty of care in this re pect Accordingly, none of the Bank's officers or employees shall be held responsible for any direct or consequential loses suffered or incurred by any recipient of this Disclosure Document as a result of or arising from anything ex oressly or implicitly contained in or referred to in this Disclosure Document or any information received by the re ipient in connection with issuance of Debentures.

T is Disclosure DocuMent and the contents hereof are addressed only to the intended recipients who have been a dressed directly and specifically through a communication by the Bank. Each copy of this Disclosure Document is se ially numbered and the person to whom a copy of the Disclosure Document is sent, is aloneuntitied to apply for the

bentures. All potential investors are required to comply with the relevant regulations/guidelines applicable to them investing in this Issue. The contents of this Disclosure Document are intended to be used only by those potential estors to whom it is distributed. It is not intended for distribution to any other person and should not be roduced by the recipient or made public or its contents disclosed to a third person. No inVitation is being made to

a y person other than the investor to whom this Disclosure Document has been sent. Any application by a person to W min this Disclosure Document has not been sent by the Bank may be rejected without assigning any reason.

A art from this Disclosure Document, no offer document or prospectus has been preparethin connection with the is uance of Debenture's or in relation to the Bank nor is such offer document or prospectus required to be registered u der applicable laws or regulations. Accordingly, this Disclosure Document has neither been delivered for

gistration nor is it intended to be registered with any authority. The Bank accepts no responsibility for statements ade other than in this Disclosure Document (and any relevant pricing or other supplements) or any other material pressly stated to be issued by or at the instance of the Bank in connection with the issue of the Debentures and that yone placing reliance on any other source of information would be doing so at their own risk.

You shall not and are not authorised to: (1) deliver this Disclosure Document to any other persbn; or (2) reproduce this .sclosure Document,: in any manner whatsoever. Any distribution or reproduction or copying of this Disclosure ocument in whole or in part or any public announcement or any announcement to third parties regarding the

contents of this Disclosure Document is unauthorised. Failure to comply with this instruction may result in a violation applicable laws of India and/or other jurisdictions. The views contained in this Disclosure Document do not essarily reflect the views of its directors, officers, employees or affiliates. This Disclosure Document does not rport to contain all the information that any eligible investor may require. This Disclosure Document has been epared by the Bank for providing information in connection with the proposed Issue. The Bank does not undertake update this Disclosure Document to reflect subsequent events after the date of this Disclosure Document and thus it ould not be relied upon with respect to such subsequent events without first confirming its accuracy with the Bank.

fo in re

0

Hepzibah Complex Second Floor No:X/I091M4


N ither the delivery of this Disclosure Document nor the issue of any Debentures made hereunder shall, under any cir umstances, constitute a representation or create any implication that there has been no change in the affairs of the Ba ik since the date thereof.

This Disclosure Document is not intended for distribution to, or use by, any person or entity in any jurisdiction or co ntry where distribution or use of such information would be contrary to law or regulation. Persons into whose po session this Disclosure Document comes are required to inform themselves about and to observe any such re trictions. This Disclosure Document is made available to potential investors in the Issue on the strict understanding th t it is confidential ahd may not be transmitted to others, whether in electronic form or otherVdse.

It S the responsibility of allottees of these Debentures to also ensure that they/it will transfer these Debentures in strict ac ordance with this Disclosure Document and other applicable laws.

DISCLAIMER CLAUSE OF SEBI

A per the provisions of SEBI (Issue and Listing of Debt securities) Regulations, 2008, as amended from time to time, a co y of this Disclosure Document has not been filed with or submitted to SEBI. It is distinctly understood that this - Di closure Document should not in any way be deemed or construed to be approved or vetted by SEW. 5E131 does not ta e any responsibility either for the financial soundness of the Bank or for the correctness of the statements made or -

inions expressed in this Disclosure Document.

DISCLAIMER CLAUSE OF THE STOCK EXCHANGE

A reduired, a copy of this Disclosure Document has been filed with BSE in terms of SEBI (Issue and Listing of Debt Se unties) Regulations, 2008, as amended from time to time. It is to be distinctly understood that submission of this Di closure Document to 135E should not in any way be deemed or construed to mean that this Disclosure Document ha been reviewed, cleared or approved by BSE, nor does BSE in any manner warrant,: certify or endorse the co rectness or completeness of any of the contents of this Disclosure Document. BSE does not warrant that the D bentures will be listed or will continue to be listed on BSE nor does BSE take any responsibility for the soundness of th financial and other conditions of the Bank, its promoter, its management or any scheme or project of the Bank.

DISCLAIMER IN RESPECT OF JURISDICTION

Is ue of these Debenhires have been/will be made in India to investors as specified under clause "Eligible Investors" in this Disclosure Document, who have been/shall be specifically approached by the Bank. This Disclosure Document is ot to be construed Or constituted as an offer to sell or an invitation to subscribe to Debentures offered hereby to any p rson to whom it is not specifically addressed. Any disputes arising out of this Issue will be subject to the jurisdiction of the courts and tribunals at Mumbai, Maharashtra, India or Thrissur, Kerala, India. This Disclosure Document does

t constitute an offer to sell or an invitation to subscribe to the Debentures herein, in any other jurisdiction to any p rson to whom it is unlawful to make an offer or invitation in such jurisdiction.

FORCE MAJEURE

TI e Bank reserves the right to withdraw the Issue at any time prior to the closing date .thereof in the event of any ui foreseen development, adversely affecting the economic and/or regulatory environment or otherwise. In such an

ent, the Bank will refund the application money, if any, collected from the potential investors/ applicants in respect the Issue without asSigning any reason.

DISCLAIMER IN RESPECT OF RATING AGENCY

R tings are opinions . on credit quality and are not recommendations to sanction, renew,: disburse or recall the c ncerned bank facilities or to buy, sell or hold any security. The Rating Agency has based its ratings on information

tamed from sources believed by it to be accurate and reliable. The Rating Agency does not,:however, guarantee the a curacy, adequacy or completeness of any information and is not responsible for any errors. or omissions or for the

sults obtained from the use of such information. Most entities whose bank facilities/instruments are rated by the R ting Agency have paid a credit rating fee, based on the amount and type of bank facilities/ instruments.

,INANCE 'JANC/

A. , A,

asto..4.4.° Hepzibah Complex Second Floor No:X110911A 4

/7111/41 P. O., hrissu


DISCLAIMER OF THE DEBENTURE TRUSTEE

Debenture Trustee ipso facto does not have the obligations of a borrower or a principal debtor or a guarantor as to tlir monies paid/invested by investors for the Debentures. Each prospective investor :should make its own in ependent assessment of the merit of the investment in the Debentures and the Issuer. Piospective investors are re uireci to make their own independent evaluation and judgment before making the investMent and are believed to

- be experienced in inveking in debt markets and are able to bear the economic risk of investing in such instruments.

, ISSUE OF DEBENTURES IN DEMATERIALISED FORM Im

T e Debentures will be issued in dematerialised form. The Issuer has made arrangements With National Securities positories Limited and/or Central Depository Services (India) Limited for the issue: of the Debentures in

ci naterialised form. The investor will have to hold the Debentures in dematerialised form as per the provisions of Di positories Act. The: Issuer shall take necessary steps to credit the Debentures allotted to the beneficiary account m intained by the investor with its depositary participant. The Issuer will make the Allotment to Investors on the

enied Date of Allotment after verification of the Application Form, the accompanying documents and on realisation of the application money.

DISCLAIMER CLAUSE OF RBI

A license authorizing the Bank to carry on banking business has been obtained by ESAF Small Finance Bank Limited ft m the Reserve Bank of India in terms of Section 22 of the Banking Regulation Act, 1949. It must be distinctly ui derstood, however, that in issuing the license, the Reserve Bank of India does hot undertake any responsibility for th financial soundness of the Bank ot for the correctness of any of the statements made or opinion expressed in this c inection.

Page 6


SECTION 2: DEFINITIONS AND ABBREVIATIONS

Ui less the context otherwise indicates or requires, the following terms shall have the meanings given below in this Disclosure Document.

neral terms

— — - Term • Description

tl e Company/ I3 nk / ESAF Sli13

the Issuer/ the ESAF Small Finance Bank Limited

ffer Letter I ocument / Memorandum

/ Disclosure Information

This document, as amended from time to time

mpany related terms

Term , Description

Auditor S. R. Batliboi & Associates LLP

oard of Directors/ Bhard The board of directors of the Bank or any committee thereof 11)

I irector(s) Director(s) of the Bank, as may change from time to time, unless othenvise specified

Memorandum and Articles The Memorandum & Articles of Association of the Bank, as amended from time to time

Is ue related terms

I Term . _ • Description

ct The Companies Act, 2013 including the rules framed thereunder, and the extant applicable provisions of the Companies Act, 1956

llotment/ Allot The allotment of the Bonds or Debentures

Olielition Form The form in which an investor can apply for subscription to the Debentures, format of which is set out in Annexure II herein ‘`

' BASEL III Guidelines" or "RBI uidelines"

The Term Basel III Guidelines in the Disclosure Document & Term Sheet and notes to Term Sheet refers to RBI circular on Basel III Capital Regulations vide Master Circular No. RBI/2015 -16/ 58 DI3R.No.13P.13C.1/21.06.201/2015-16 dated July 01, 2015 and Clarification issued by RF31 vide Master Circular RBI/2015-16/285 DBR.No.BP.BC.71/ 21.06.201/ 2015-16 dated January 19, 2016, and amendments made thereto from time to time

eneficial Owner(s)/Debenture lolders

Holder(s) of the Debentures in dematerialized form as defined under Section 2 of the Depositories Act.

usiness Day / Working Day Shall be any day of the week on which money markets are functioning in the city of Mumbai, Maharashtra excluding Sundays and any day which is a public holiday for the purpose of Section 25 of the Negotiable Instruments Act, 1881 (26 of 1881) in Murnbai, Maharashtra and any other day on which banks are closed for customer business in Mumbai, Maharashtra, India.

SE BSE Limited

DSL Central Depository Services (India) Limited

Equity Tier 1 Capital/ As per Clause 4.2.3 of the RBI circular on Basel III Guidelines, elements of Common Equity component of Tier 1 capital will comprise the following:

(i) Common shares (paid-up equity capital) issued by the bank which meet the criteria for classification as common shares for regulato , izoses given the Basel

Guidelines; toNANcE &AA*.

La GE1 1 Capital

'

Hepzibah Comple Second Floor

4-0° No:X11091M4

SeicisYPO Thrlsekl

,



Term : ._ _.

Description

•

•

Stock surplus (share premium) resulting from the issue of common shares; Statutory reserves; 1 Capital reserves representing surplus arising out of sale proceeds of assets;

Other disclosed free reserves, if any; , Balance in Profit & Loss Account at the end of the previous financial year; Banks may reckon the profits in current financial year for CRAR calculation on a

quarterly basis provided the incremental provisions made for non-performing assets at the end of any of the four quarters of the previous financial year have not deviated more than 25% from the average of the four quarters. The amount which can be reckoned would be arrived at by using the following formula:

EPt= (NPt - 0.25*D`t)

Where; 1EPt = Eligible profit up to the quarter 't' of the current financial year; t varies from 1 to 4 INPt = Net profit up to the quarter 't' D= average annual dividend paid during last three years

While calcUlating capital adequacy at the consolidated level, common shares issued by consolidated subsidiaries of the bank and held by third parties (i.e. minority interest) which meet the criteria for inclusion in Common Equity Tier 1 capital; and

Less: Regulatory adjustments / deductions applied in the calculation of Common Equity Tier 1 capital [i.e. to be deducted from the sum of items (i) to (viii)].

Debentures Means the Rated Listed Unsecured Redeemable Basel III:compliant Tier 11 Bonds in the form of non-convertible debentures each having a face value of Rs. 10,00,000/- (Rupees Ten Laths only) of the aggregate nominal value of Rs. 40,00,00,000/- (Rupees Forty Crore Only) issued by the Bank in terms of this Information Memorandum and the Transaction Documents, to the Debenture Holder(s) in dematerialised form

Debenture Trustee Agreement Trustee agreement executed or to be executed by and between the Debenture Trustee and the Bank for the purposes of appointment of the Debenture Trustee to act as debenture trustee in connection with the issuance of the Debentures

D pository(ies) A depository registered with the SEBI under the Securities and Exchange Board of India (Depositories and Participant) Regulations, 1996, as amended from time to time, in this case being NISDL and CDSL

Depositories Act The Depositories Act, 1996, as amended from time to time

depository Participant/DP A depository participant as defined under the Depositories Act

Dtte DIte a hi, f l'

Any date on which the Debenture Flolder(s) are entitled Jo any payments in relation to the Debentures, whether for repayment of the Principal Amount or towards payment of Coupon

I; PAD Depository Participant Identification Number

ERR/ Reserve

Debenture Redemption Debenture Redemption Reserve in accordance with the provisions of the Act

Electronic Clearing System IECS

F nancial Year/ FY Twelve months period commencing from April 1 of a.' particular calendar year and ending on March 31 of the subsequent calendar year .

C AAP Generally Accepted Accounting Principles

Issue Private placement of the Debentures

NI utual Fund A mutual fund registered with SEB1 under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996

isIA Not Applicable I.- —

14BFC Non-banking financial company

Hepzibah Complex Second Floor No:X/1091M4


Term ' Description

is. EFT National Electronic Fund Transfer Service

1\ SDL National Securities Depository Limited

PAN Permanent Account Number

Pincipal Amount The aggregate face value of the issued and outstanding Debentures

RTGS Real Time Gross Settlement

RBI Reserve Bank of India

Itl Act The Reserve Bank of India Act, 1934, as amended from tithe to time

R ting Agency CARE Ratings Limited

Record Date •

The date which will be used for determining the Debenture Holders who shall be entitled to receive the amounts due on any Due Date, as the case may be,'which shall be the date falling 15 (Fifteen) days prior to such Due Date

S1,131 The Securities and Exchange Board of India constituted under the SEBI Act, 1992

Silll Act The Securities and Exchange Board of India Act, 1992, as amended from time to time

S1131 Regulations •

The Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 issued by SEI3I, as amended from time to time and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 issued xiide circular no. 5E131/ LAD-NRO/GN/2015-16/013 dated September 02, 2015, as amended from time to time.

Stock Exchange BSE Limited (BSE)

WDM Wholesale Debt Market

Page 9

FOR PRIVATE CIRCULATION ONLY

Private and Confidential

SECTION 3: RISK FACTORS

TI e following are thErisks envisaged by the management of the Bank relating to the Bank, the Debentures and the rket in general. Potential investors should carefully consider all the risk factors in this Disclosure Document for

ev bating the Bank and its business and the Debentures before making any investment decision relating to the bentures. The Bank:believes that the factors described below represent the principal risks inherent in investing in the bentures but does not represent that the statements below regarding the risks of holding the Debentures are

ex iaustive. The order, of the risk factors is intended to facilitate ease of reading and reference and does not in any nner indicate the importance of one risk factor over another. Investors should also read the detailed information set t elsewhere in this Disclosure Document and reach their own views prior to making any investment decision.

If any one of the following stated risks actually occurs, the Bank's business, financial conditions and results of ot erations could. suffer and, therefore, the value of the Bank's Debentures could decline and/or the Bank's ability to m .et its obligations in. respect of the Debentures could be affected. More than one risk factor may have simultaneous ef ect with regard to the Debentures such that the effect of a particular risk factor may not be predictable. In addition,

. m re than one risk factor may have a compounding effect which may not be predictable. No prediction can be made as to the effect that any combination of risk factors may have on the value of the Debentures and/or the Bank's ability to met its obligations in respect of the Debentures: Potential investors should perform their own independent in estigation of the financial condition and affairs of the Bank, and their own appraisal of the creditworthiness of the

nk. Potential investors should consult their own financial, legal, tax and other professional, advisors as to the risks a d investment considerations with respect to the Debentures. Potential investors should thereafter reach their own

ws prior to making-any investment decision.

TI ese risks and uncertainties are not the only issues that the Bank faces. Additional risks and uncertainties not p esently known to the Bank or that the Bank currently believes to be immaterial may also have a material adverse el ect on its financial condition or business. Unless specified or quantified in the relevant risk factors, the Bank is not in a osition to quantify the financial or other implications of any risk mentioned herein below.

Tie Bank believes thaf the factors described below represent the principal risks inherent in investing in the Debentures, b t the inability of the Bank, as the case may be, to pay principal or other amounts on or in connection with any

bentures may occur for other reasons and the Bank does not represent that the statements below regarding the risks holding any Debentures are exhaustive. •

Pease note that unless specified or quantified in the relevant risk factors, the Bank is not in a position to quantify the fi ancial or other implications of any risk mentioned herein below:

I ternal Risk Factors

a. Operational and System Risk

The Bank is faced with operational risk and system risk as a result of risk from failed systems, processes, people or external factors. For example, ineffective internal controls, employee turnover, defective organization structure, incorrect product positioning or pricing, political conditions, fraud, data security and IT risk, are aspects of operational risk which the Bank is exposed to due to the nature and size of its

operations.

Contingent liabilities of the Bank

As of March M, 2018, contingent liabilities appearing in the financial statements of the Bank aggregated to Rs. 61,71,98,285.

ernal Risk Factors

Repayment of principal is subject to the credit risk of the Bank.

Potential investors should be aware that receipt of the principal amount along with coupon payable thereon and any other amounts that may be due in respect of the Debentures is shbject to th • . the Bank'''.

...•••••"' BBI • : ftit and the potential investors assume the risk that the Bank may not be able to satis • • • the

Lu

<.< 're to

a

Hepzibah Complex Second Floor No:X/109IM4

0., Thrtssoc


Debentures. In the event that bankruptcy proceedings or composition, scheme of arrangement or similar proceedings to avert bankruptcy are instituted by or against the Bank, the payment of sums due on the Debentures may be substantially reduced or delayed.

Debentures May be illiquid in the secondary market.

The Bank intends to list the Debentures on the WDM segment of BSE. The Bank cannot provide any guarantee that the Debentures will be frequently traded on the Stock Exchange and that there Would be any market for the Debentures. The current trading of the Bank's existing listed non-convertible debentures, if any, may not

Ireflect the liquidity of the Debentures being offered through the Issue. It is not posSible to predict if and to what extent a secondary market may develop for the Debentures or at what price the Debentures will trade in the secondary market or whether such market will be liquid or illiquid. The fact that the Debentures may be so listed or quoted or admitted to trading does not necessarily lead to greater liquidity than if they were not so listed or quoted or admitted to trading. Further, the Bank may not be able to issue any further Debentures, in case of any disruptions in the securities market.

Rating Downgrade Risk

The Rating Agency. has assigned the credit ratings to the Debentures. In the event of deterioration in the financial health of the Bank, there is a possibility that the rating agency May downgrade the rating of the Debentures. In such cases, potential investors may incur losses mi re-valuation of their investment or make provisions toWards sub-standard/ non-performing investment as per their usual norms. The rating is not a recommendation to purchase, hold or sell the Debentures in as much as the ratings do not comment on the market price of the Debentures or its suitability to a particular investor. There is no assurance either that the rating will remain at the same level for any given period of time or that the rating will not be lowered or withdrawn entirely by the Rating Agency. In the event of deterioration of the rating of the Debentures, the investors may have to take loss on revaluation of their investment.

Tax Considerations and Legal Considerations

Special tax considerations and legal considerations may apply to certain types of potential investors. Potential investors are urged to consult with their own financial, legal, tax and other professional advisors to determine any financial, legal, tax and other implications of this investment_

Accounting Considerations

SpeCial accounting considerations may apply to certain types of taxpayers. Potential investors are urged to consult with their own accounting advisors to determine implications of this investment.

Material changes in regulations to which the Bank are subject could impair the Bank's ability to meet payments or other obligations.

The Bank is subject generally to changes in Indian law, as well as to changes in government regulations and policies and accounting principles. Any changes in the regulatory framework could adversely affect the profitability of the Bank or its future financial performance, by requiring a restructuring of its activities, increasing costs or otherwise.

Change in key Management Personnel and inabilityto retain talented professional

Attracting and retaining key managerial personnel and talented professionals is a key element of the Bank's strategy and . significant for -gaining competitive advantage. Turnover of key managerial personnel and talented professionals may have an impact on day-to-day working of the Bank.

Investment is more akin to equity than to debt

The monies being raised pursuant to the terms set out herein is for the purposes Capital of the Bank and accordingly is more in the nature of equity rather than ranking of the claims of the investors will be subordinate to all creditors of the Ba and the sectiOns of the Disclosure Document referred to therein throw more light ti

of augmenting the Tier II debt and accordingly the nk. below

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Non-Payment due to Bank's weak capital position

Potential investors should be aware that in certain circumstances, the RBI shall be entitled to determine write down of the principal value of the Debentures. Such risks may arise due to the Bankls weak capital position or loan delinquencies (for More details please refer to "Loss Absorbency" in Section 4.23 of the Disclosure Document).

Order of priority at the time of winding up of the Bank

In case the Bank goes into liquidation and is being wound up, then the order of priority of holders of Debentures shall be:

Senihr to the claims of Investors in Instruments eligible for inclusion in Tier : Capital; Subordinate to the claims of all depositors, general creditors of the Bank.

For more deOils regarding the treatment of Debentures in the event of winding up, please refer to Section 4.23 of the Disclosure Document

1531F .,1hcis-,u

Page 12

F 'NANCE SAA,n,



SECTION 4: DISCLOSURES AS PER SERI REGULATIONS

TI is Disclosure Document is prepared in accordance with the provisions of SEBI Regulations; and the Act and in this se ion, the Issuer has set out the details required as per Schedule I of the SEBI Regulations •

4.1 Documents Submitted to the Exchanges

The following doniments have been / shall be submitted to BSE:

Memorandum and Articles of Association of the Issuer and necessary resolution(s) for the allotment of the Debentures; Copy of last 3 (Three) years audited Annual Reports; Statement containing particulars of, dates of, and parties to all material contracts and agreements; Copy of the Board Resolution authorizing the borrowing and list of authorized signatories; Copy of the resolution passed by the shareholders of the Bank on March 28, 2018, authorizing the Board of Directors to borrow, for the purpose of the Bank, upon such terms as the Board may think fit, up to an aggregate limit of Rs. 3000,00,00,000/- (Rupees Three Thousand Crores only);

E. Copy of the resolution passed by the shareholders of the Bank on May 22, 2018 authorising the Board of Directors to issue non-convertible debentures on a private placement basis for a period of 1 (one) year, up to an aggregate limit of Rs. 350 crores (Rupees Three Hundred and Fifty crores only);

G. Any other particulars or documents that the BSE may call for as it deems fit.

Documents Submitted to Debenture Trustee

TI e following documents have been! shall be submitted to the Debenture Trustee:

Memorandum and Articles of Association of the Issuer and necessary resolution(s) for the allotment of the Debentures; . Copy of last 3 (Three) years audited Annual Reports; Statement containing particulars of, dates of, and parties to all material contracts and agreements; Latest audited / limited review half yearly consolidated (wherever available) and standalone financial information (profit & loss statement, balance sheet and cash flow statement-) and auditor qualifications, if any; An undertaking to the effect that the Issuer would, until the redemption of the debt securities, submit the details mentioned in point (D) above to the Trustee within the timelines as mentioned in Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 issued by SEBI vide circular No. 5E131/ LAD-NRO/GN/2015-16/013 dated September 2,2015, as amended from time to time, for furnishing / publishing its half yearly/ annual result Further, the Issuer shall within 180 (One Hundred and Eighty) days from the end of the financial year, submit a copy of the latest annual report to the Trustee and the Trustee shall be obliged to share the details submitted under this section with all Debenture Holders within 2 (Two) Business Days of their specific request

3 Name and Address of Registered Office of the Issuer

Name: Registered Office of Issuer:

Corporate Office of Issuer: Compliance Officer of Issuer: Email: CFO of the Issuer: Corporate Identification Number: Phone No.: Fax No.: Website of IsSuer Auditors of the Issuer:

ESAF Small Finance Bank Limited Hepzibah Complex, Second Floor, No.X/109/ M4, Mannuthy, Thrissur, Kerala, India 680651 ESAF Centre, Mannuthy P.0, Thrissur 680 651 M Mathews [email protected] Padmakumar K U65990KL2016PLC045669 0487 2373813 NA https://www.esafbank.com/ SR Batliboi & Associates LLP

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13.1 Corporate Structure

SeC•Ctil 6C Ottre•P baY Stretary

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Brief Profile of the Board of Directors

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Experience

The Founder and Managing Director Of ESAF, holds a Masters Degree in Business Adthinistration. He is the pioneer of Microfinance in Kerala . He has over 26 years of experience, of which more than 16 years is in the Microfinance sector. He is a-Board-IvIember of Sa Dhan

FitIANCF 84

Age *ante

54

Designation

MD&CE0 Paul Thomas

Qualification

MBA


Trustee to the Issue: Address:

Tel: Fax:

Registrar to the Issue: Address:

Phone No.: Fax No.: Email:

Credit Rating Agency of the Issue: Address:

Contact Person: Telephone No: Fax:

Catalyst Trusteeship Limited Office No. 83 - 87, 8th floor, 'Mittal Tower', '13' Wing, Nariman Point, Mumbai -400021 022-49220507/09819663209 +91(022)49220505 [email protected]

Link Intime India Pvt Limited C-13, Pannalal Silk Mills Compound, L.B.S.: Marg. Bhandup (West), Mumbai 400 078 022-41986000 02249186060 [email protected]

CARE Ratings Limited 4thr Floor, Godrej Coliseum, Somaiya Hospital, Off Eastern Express highway, Sion-east, Mumbai-400022 Ravi Shankar R +91-22-67543456 +91-22-67543457

A brief sumrnary of business/ activities of the Issuer and its line of busineis

AJ Overview

ESAF Small* Finance Bank Ltd (the "Bank") is a public limited company with the main objective of undertaking various banking activities as a small finance bank, as defined under the Banking Regulation Act, 1949 and the Guidelines issued by the Reserve Bank of India for licensing of "Small Finance Banks" in the Private Sector dated November 27, 2014 and such other regulations applicable for a banking company. The Company is promoted by ESAF Microfinance and Investments Pvt Ltd and Mr. Kadambelil Paul Thomas. The Bank has obtained the final license as on 18th November 2016 and has commenced the operations on 10th

March 2017..

4


and . Chairman of KAMFI (Kerala Association of Microfinance Institutions).

Prabha Laveendranathan

Part Time Chairman •

69 PG in Agriculture He is a former General Manager of Canara bank, having more than. 3 decades of experience in banking and financial sectors. He is also a consultant to Sa - Dhan and is in the Boards of various MF1 forums and bodies. He was the Chairman of South Malabar Grameen Bank and also holds a master's degree in agriculture.

ssan Khan Akbar .

• •

Non-• Executive Director

70 MSc. Agriculture He has 40 years of experience in all facets of modern banking, beginning the career as a direct officer in Union Bank of India and risen to the level-of senior most General Manager in Federal Bank Ltd, then as CEO of a new generation Bank - Kabul Bank in Afghanistan. 6 years of experience in Microfinancing. In depth knowledge encompassing all areas and aspects of Banking, including International Banking.

Asha Morley- Independent Director

58 Fellow Member of ICAI, B Corn

She has practice/Consultancy experience of more than 24. years. She has Conducted Statutory, Tax and Internal Audits of Banks, Companies, Finance, and Investment consultancy, Co-ordination in preparation of Software Packages, Project Financing and Reporting to Parent companies with clients in India and abroad.

Alex Parackal George Independent Director

62 BTech ET, Madras PGDM, IIM, Kolkatta

He is an entrepreneur, started 'Alco Fasteners' in 1983 and the organization became a zero-debt company by 1992. He is also a guide and mentor to the KHADI & Village Industries Commission (KVIC), with • special focus on fresh entrOpreneurs. He has been President of the FIC Industries Association and a member of the Athani Development Plot Manufacturers Association and Kerala Small Industries Association. He is also a resource person for TIE çrhe Indus Entrepreneurs):

Saneesh Singh Non- Executive Director

49 PG in Social Work, University of Lucknow. Banking and Finance, London School of Economics

Currently Managing Director of Dia Vikas Capital Pvt. Ltd. (Dia), the leading social investor in the micorfinance space in India and a subsidiary of Opportunity

'International Australia(01A) - a member of the Opportunity International Netwiork, a multi country Social/ Impact Investor Network. Driving and promoting innovatigns like a) creation and growth of a community health facilitator (Cl-IF) cadre at the grass roots, who promote healthy living (preventative health interventions) and .use of safe water and sanitation facilities, b) funding for clean energy and clean water interventions at the community level, c) micro pensions, savings & financial inclusion innovations d) micro finance education loans e) community owned enterprises viz. , water stations,. modern dairy plants etc. and f) strategic support for ultra poor projects.

George Joseph Independent Director

68 B Com, CAIIB, AlB(London)

He has more than 40 years of banking experience. He has worked in various roles in Canara Bank for 37 years and then joined in Syndicate Bank as Executive Director. He has retired from Syndicate Bank in the year 2009 as Chairman and Managing Director. He has focussed in increasing the business of Syndicate Bank without affecting the asset quality of bank's portfolio. Hands-on experience in all facets of banking viz., credit, foreign exchange, NRI business, inspection, operations, administration, priority sector lending etc. Worked in Corporate Office, Circle Office, specialized branches,

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Private and Confidential FOR PRIVATE CIRCULATION ONLY

general branches including rural branch.

oseph Vadakkekara Independent 66 M Corn, Msc. Antony Director Project

Management, Batchelor of Law

lie has more than 90 years' experience in banking sector. He started his career as an Officer in Syndicate Bank in 1972 and had worked in various profiles including branch banking, He joined South Indian Bank in 2003 as Executive Director and retired as MD&CE0 of SIB in 2014.

- Brief Profile of the Senior Management

Name Designation Qualifications Past job & Experience

‘ ir. K. Paul Thomas . MD and CEO MBA The Founder and Managing Director of FSAF, holds a Masters Degree in Business Administration, lie is the pioneer of Microfinance in Kerala. lie has over 26 years of experience, of which more than 16 years is in the Microfinance sector. He is a Board Member of Sa. - Dhan and Chairman of MAME! (Kerala Association of Microfinance Institutions).

Mr. George Thomas Executive Vice President

Master's in Env and Eco Worked as Assistant Director in Agriculture department, Government of Kerala for 13 years and had also worked in Indian Social Institute, Delhi as program officer for 4 years.

Mr. AC Varghese Executive Vice President

MBA, CAIIB, FI113 Mr A G Varughese Joined ESAF on 1st Jan 2016 as ExecutiVe Vice President. He has over 39 years of banking experience with South Indian Bank, headed varicius departments and regions of the bank and retired as Senior Vice President on November 30th; 2015.

Mr. Ajith Choudhary Executive Vice President

MBA Mr. Ajith Choudhary has got 24+ years in the field of Banking & Information Technology, has served large global organizations including INC. Barclays, Deutsche, ICICI, Hewlett Packard, etc. in senior executive roles. •

Mr. Padmakumar K

t y

Chief Finance Officer

MBA/ EPGP (IIM), MI31., (National Law School), ACS (ICSI), B Corn (Kerala University)

Mr. Padmakuniar K, is an Alumna of Indian Institute Management (I1N4-Calicut) and National Law School (NLS-Bangalore) is also a Member of Institute of Company 4 Secretaries of India (ICSI) and a Commerce( Graduate from: Kerala University has an: overall experience of 15 years, apart from crore finance he had also handled almost all Governance Risk and Compliance functions, Internal Audit and Legal and worked with both government and private sectors. Joined MAI' in 2008 'a n d closely associated with organization in its different stages growth by handling many •core portfolios and handling important transformation projects.

Mr. Paul Joy Head-Retail Assets MBA Mr. Joy has rich experience in banking and fund-raising space. Previously he has worked

i with South Indian Bank, Suzlon and MuthriOt Fincorp in tile_and• ienioLIllaykrnent

a Heonbah Complex

8- one Floor t1,1 109/r \I

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cadre. '

Mt. Bosco Joseph Head Ad in in LLB Bosco Joseph is a seasoned Human Resources Management & Administration professional and Healthcare Administrator. He has over 20 years' experience in various capacities in Human Resources Management, Administration, Industrial Relations and Healthcare Administration in diverse industries.

Mr. George K John ' Head Microbanking

B Corn, MSW Mr. George K.. John is a post graduate in social works and started working in ESAF in 1993 as a field bfficer and as the manager operations, Kerala before relocating to Nagpur in 2004 to head the Central Zone Operations. He has 15 years of experience in community development and grass root level operations of microfinance. Currently, He is working as Head of Micro Banking Department of the Bank

r. Ranjith Raj Company Secretary

3.00111, ACS Company Secretary with more than 4 years of experience working in NBFC-MFL working with ESAF for the last 4 years

r. ohanachanciran R

Chief Risk officer M A, CAIIB Former Chief General manager and Chief Risk, Federal Bank. Banker with 37+ years of experience, of •which 8 + years in Risk Management and Compliance, 9 years in HR, 20years in other areas of Commercial banking such as credit, Business development, Loan collection, Stressed Asset management and NPA recovery. ,

r. P. P. Pathrose Head Risk Management

B. Corn, CAIIB Mr. PT. Pathrose has more than 40 years of banking experience with Federal Bank. He has worked in various segments like Credit, Risk management and branch banking. He was head of credit risk management in Federal Bank. .

r. Murali N A

• ,

Head Treasury M Com, JAIII3 Mr. Murali. N. A has more than 36 years of experience in banking with two major private sector Banks (Federal Bank and South Indian Bank). He has more than 14 years of experience in Treasury and International Banking. Worked as Senior General Manager and Head of Treasury and International Banking in South Indian Bank, Head of Treasury Front Office Operations, Head of Treasury Back. Office Operations, Senior Treasury Dealer and Treasury Marketing Team Leader with Federal Bank

Mr. Mathews M Chief Compliance Officer

MSc, Diploma in Administrative Management

Mr. Mathews M has worked as Dy. General Manager and Chief Compliance officer of FederAl Bank. He has more than 36 yearscof

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banking and human resources management.

Key Operational and Financial Parameters for the last 3 audited years on a consolidated basis (wherever available) else on a standalone basis.

STANDALONE

C.

1.

(Rs. in Crore)

No. Parameters

FY 2017-2018 FY 201.6-2017 FY 2015-2016

(Audited) (Audited) (Audited)

1 Share Capital • 311.94 301.56 NA

/ Reserves & Surplus 31.40 4.20 NA

1 Net worth 343.34 305.76 NA

4

J

Deposits 2523.09 409.34

NA

Borrowings" ' 1674.65 2052.85 NA

f Total Debt 4197.74 2462.19 NA

Advances 3155.09 1481.72 NA

E Investments 731.86 579.20 NA

c Net Fixed Assets 68.70 32.90 NA

10 Interest Income. 596.84 • 1 29.39 NA

1 Interest Expense 314.82 16.11 NA

12 Total Income , 698.69 . 48.21 NA

13 Total Expenditure (interest expenses + operating expenses) 671.71 47.45 NA

14 Operating Profit 79.40 ; 8.68 NA

5 Provisioning & Write-offs 52.40 i 7.92 -

NA

6 Profit After Taxation ("PAT') 27.01 0.76 NA

7 Gross NPA to Gross Advances (%) 3.79% 0.52% NA

8 Net NPA to Net Advances (%) 2.69% , 0.25% NA

19 Capital Adequacy Ratio (%)* 16.92% 16.27% NA

20 Tier I Capital Adequacy Ratio (%) 12.40% 13.39% NA

21 Tier II Capital Adequacy Ratio (%) 4.52% 2.88% NA

22 Return on Assets (%) (average) 0.72% . 0.03% NA

3 Earnings Per Share (Basic) (in Rs.) 0.89 . 0.07 NA

4 Non-Current Assets 68.70 1033.66 NA

5 Cash 8-. Cash Equivalents 697.79 556.18 NA

'6 Current Investments 731.86. 432.46 NA

7 Current Assets, 'a 70.69 1319.91 NA

8 I Current Liabilities 183.04. 1313.71 NA

k9 Assets under Management 4088.74.

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30

Off Balance Sheet Assets

*Capital Adequacy Ratio is as per Basel III Guidelines

"Maturity Profile of Borrowings:

oss Debt: Equity Ratio of the Bank:

(Its. in crore)

Par iculars Pre-Issue of Bonds 1 Post Issue of Bonds

Borloritips

(as on March 31, 2018) ' (as on March 31, 2018)

- Strif Term Borrowing 750.11 75011 - Ldng Term Borrowing 924.54 969.59 Totkl Borrowing (A)

1674.65 1714.65

Shareholders' Funds- 0.0

Share Capital 311.95 311.95

Resierves 31.40 31.90

Toll Shareholders' Funds (B) 343.35 343.35

Lorg Term Debt/ Equity Ratio 2.69 2.80

Calculations

Before the issue, debt-to-equity ratio is calculated as follows:-

Debt - INR Crore 1679.65

Equity - INR Crore 343.35

Debt/Equity 2.69

Subsequent to the issue, debt-to-equity ratio shall be calculated as follows:-

Debt - 1NR Crore 1714.65

Equity - INR Crore 343.35

DebVE.uit 2.80

Project cost and means of financing, in case of funding new projects:

Not Applicable

.5 Brief history of Issuer since its incorporation giving details of its following activities:

Details of Share Capital as on March 31, 2018:

Share Capital _ _ Rs./Crs.

Aljthorised

4uiW

Share Capital:

(Face Value - Rs.10/-

350.00

Iued, 311845181

Subscribed and Fully Paid- up: equity shares of Rs.10/- each

311.95

897.41

677.59

NA

L,:j Set ond F 00

1.• • '

C


Changes in its capital structure as on March 31, 2018, for the last 5 years:

Date of.Change/ Allotment

Its. ' (Issued, subscribed and paid

up Equity)

_ Particulars -

.

05/05/2016 1000000 Subscription of shares as per memorandum of Association 20/05/2016 1099000000 Private Placement

09/03/2017 788177330 Private Placement



30/03/2017 49019600

Discharge of consideration for purchase of business undertaking from M/s ESAII Microfinance and investments

Pvt Ltd


Equity Share Capital History of the Bank as on last quarter end i.e. March 31, 2018 for the last 5 years:

, Ie f Change/Allotment Il O

Its. (Issued, subscribed and paid

up Equity) _ _ ,

_ Particulars

— 1

—1 Il 1 05/05/2016 1000000 Subscription of shares as per memorandum of Association





30/03/2017 49019600

Discharge of consideration for purchase of business undertaking from ESAII Midrofinance and investments Pvt

Ltd

31/01/2018 . 10382352 Private Placement

Details of any Acquisi ion or Amalgamation in the last 1 year: NA

Details of any Reorganization or Reconstruction in the last 1 year: NA

Details of the shareholding of the Bank as on the latest quarter end, i.e. March 31, 2018

Shareholding pattern of the Bank as on quarter ended March 31, 2018: As set out in Annezure VIII

List of top 10 holders of equity shares of the Bank as on quarter ended March 31, 2018:

S. ko. Nirriii Of shareholder(s) No. of Shares —.. .NO-. Of shares in demat form I

To tO 6)61 Ta—pitil

March 31, 2018 March 31, 2018 March 31, 2018

ESAF Microfinance and -Investments Private Limited

28,07,58,391 90.00%

Mr. Kadambelil Paul Thomas 3,11,86,785 9.99%

3. Mrs. Mereena Paul 1 0.00%

Ms. Emy Acha Paul 1 0.00%

i

. Mr. Alok Thomas Paul 1 0.00%

Mr. George K John 1 0.00%

17 Mrs. Beena George 1 0.00%

1.7 Following details regarding the directors of the Bank:

A. Details of current directors of the Bank:

141 r. o.

on nd Name, Designatia DIN

Age Residential Address DireCtor of _the Bank gcJr:"

, — etails of other OfiecialTs ips

as on dale"\c1;\

B.

I)

E.

.6

A

13

Hepzitall C.riplex Second Floor Page

Nt J9/M4 •


' :41Since —in _ Saazsi Kac1ambellil Paul

Thomas 54 TC 14/750, Ka dambelil House,

Mannu thy P.O. Trichur-680651, Kerala,

05/05/2016 PRACHODHAN DEVELOPMENT SERVICES

2. Prablia Raveendrana than

69 18/1065,Thinkal, P.O.Aramada, Trivandrum - 695032, Kerala,

05/05/2016 k_.,ARAMEENI KOOTA FINANCIAL SERVICES LIMITED

3. Assail Khan Akbar 70 Lulu, 19/514, FBOA Road, Aluva, Ernakulam, Kerala - 680101

05/05/2016 NIL

4. Asha Morley 58 154, Avon Classic, Opp Tata Ssl, Mumbai, Borivali East, Maharashtra, 400066

13/12/2016 NIL

5. Alex Pa rackal George 62 78, Green Park, Thiruvambadi Po, Thrissur, Kerala; 680022

13/12/2016 : NIL

6. Saneesh Singh

•

49 D6/8, Exclusive Floors (FirstI Floor), Dlf Phase V, Gurgaon -

122002, Haryana, India

LIMITED•

.

3/12/2016 1. ESAF MICROFINANCE AND INVESTMENTS PRIVATE LIMITED 2.CASHPOR MICRO CREDIT 3. MI INDIA CAPITAL & INVESTMENT PRIVATE LIMITED 4.13WDA FINANCE LIMITED

MARGDARSHAK FINANCIAL SERVICES LIMITED

GROWING OPPORTUNITY FINANCE (INDIA)PRIVATE LIMITED 7.M1 INDIA CAPITAL CONSULTANTS PRIVATE LIMITED 8.SATYA MICROCAPITAL

9.SAMHITA COMMUNITY DEVELOPMENT SERVICES 10.DIA VIKAS CAPITAL PRIVATE LIMITED

George Joseph 68 Melazhakath,Arakkulam,Idukki- 685591, Kerala, India

10/03/2017 1. WONDERLA HOLIDAYS LIMITED

2.. MUTHOOT FINANCE LIMITED

3: GRAMEEN KOOTA FINANCIAL SERVICES LIMITED

Joseph Vadakkekara Antony

66 Flat No. 1a, Chakolas Marina Apartments, Ferry Road, Thevara, Kochi- 682 013

17/08/2017 ET MARLABS PRIVATE LIMITED

N te: None of the directors are appearing on RBI's defaulter list or the ECGC default list

Hepzibah Complex Second Floor


Details of change in directors since last 3 years:

, I No ,Name, Design-a-Boil &DIN i I,:.,„„„ „, , : ,,,,,,.„..1„,,, ...i,„„ ,„

: Date of ,i r, -,t apIi6iiiimenf

tiDirectorpf the Bank-iince I -a.(iii case ofre4igii-itiOri), r.

Remarks

KADAMBELIL PAUL THOMAS

CEO & MANAGING DIRETOR 00199925

05/05/2016 NA NIL

GEORGE JOSEPH

INDEPENDENT DIRECTOR 00253754

10/03/2017 NA NIL

ASSAN KHAN AKBAR NON - EXECUTIVE

DIRECTOR 00679740

05/05/2016 NA NIL

PRABEIA , RAVEENDRANATHAN


05/05/2016 NA NIL

ASHA MORLEY

13/12/2016 NA NIL INDEPENDENT DIRECTOR 02012799 ,

SANEESH SINGH NON -EXECUTIVE

DIREC54868

TOR 022

13/12/2016 NA NIL

‘ / .,

'

ALEX PARACKAL GEORGE INDEPENDENT DIRECTOR

07491420 13/12/2016 NA NIL

8.

JOSEPH VADAKKEKARA ANTONY


17/08/2017 NA . NIL

Following details regarding the auditors of the Bank:

Details of the auditor of the Bank:

Name r' ó[r - _ Auditor since rntEyWfl

S. R. Batliboi & Associates LLP 14th floor,The Ruby,29 Senapati Bapat Marg,Dadar West, Mumbai-400 028

2017

• B.

Details of change in auditors since last 3 years: No Changes

.9 Details of borrowings of the Bank, as on March 31, 2018:

Details of Secured Loan Facilities:

FOR PRIVATE CIRCULATION ONLY, Private and Confidential

1

i Lenders Name

Type of Facility

Amount sanctioned

Principal amount

outstanding

l

Security

AXIS Bank Ltd Term Loan 150 60.00 Secured by way of bookdebts/receivables

BNP Paribas Term Loan 25 3.13 Secured by way of . bookdebts/receivables

Fefieral Bank Ltd Term Loan 20 1.67.

Smiled by way of bookdebts/receivables

Elm -al Bank Ltd Term Loan 20 1.67 Secured by way of bookdebts/receivables

FeLeral Bank Ltd Term Loan 15 13.75 Secured by way of bookdebts/receivables

ElbFC Bank Term Loan 85 44.52 Secured by way of bookdebts/ receivables

Hero .

Fincorp Limited Term Loan 15 1.58 Secured by way of bookdebts/receivables

H ro Fincorp Limited , iSecuyed

Tenn Loan _15 6.60 by way of

bookdebts/receivables

ID ,C Bank Limited Term Loan 100 30.21 Sectred by way of

i

boadebts/ receivables

Indusind Bank Limited Term Loan 200 45.45 Secured by way of bookdebts/ receivables

KOTAK MAHINDRA PRIME LTD Vehicle Loan

1.46 0.92 Vechicle

M R

cro Units Development and finance Agency Limited

...,

Term Loan , 40 9.94 Secdred by way of bookdebts/receivables

M R R1

Ill

finance Agency Limited finance crO Units Development and Secured

Term Loan 115 80.2

. by way of

bookdebts/ receivables

SI nhan Bank Term Loan 25 5.56 by way of

bookdebts/receivables

Si of

all Industries Development Bank India

Term Loan 50 20.12 Secured by way of bookdebts/ receivables

Sorth :

Indian Bank Ltd Term Loan 10 1.67 Secured by way of bookdebts/receivables

SoL .

Indian Bank Ltd Term Loan 20 0.55 Secured by way of bookdebts/receivables

South Indian Bank Ltd Term Loan 50 41.64 Secured by way of bookdebts/receivables

3

l'OR PRIVATE CIRCULATION ONLY Private and Confidential

Scjuth Indian Bank Ltd ) Term Loan 50 45.82 Secured by way of bookdebts/receivables

St e Bank of India Term Loan 50 15.32 .

Secured by way of bookdebts/receivables

St te Bank of India Term Loan 75 43.75 Secured by way of bookdebts/receivables

U ited Bank of India : Term Loan 20 9.09 Secured by way of bookdebts/receivables

B. Details of Refinance Facilities:

I

Lenders Nanie Type of Facility

Amount sanctioned

Principal amount

outstanding Rs in Crs

r

! Security

____ --

National RLral

Bank For Agriculture & Development ;

Refinance 15 8.25 Secured by way of bookdebts/receivables

National Rdral

Bank For Agriculture & Development


N Rt.

tional Bank For Agriculture & rat Development

Refinance 50 16.67 Secured by way of bookdebts/ receivables

N RLral

tional Bank For Agriculture & Development :


1

Ne RLral

tional Bank For Agticulture & Development

Refinance 70 49 Secuted by way of bookdebts/receivables

Nz RL

A f

tional Bank For Agriculture & ral Development

Refinance 100 70 Secured by way of bookdebts/ receivables

Nt Rdral

tional Bank For Agriculture & Development

Refinance 500 450 Secured by way of bookdebts/receivables

tFINANCE 8.4

14J Hepzibali C Nnplex Second Floor No xt nA4

'v p• 0 Sr_ cut

Vic /4, 24


iSi Bank

all Industries Development of ndia

Refinance 150 115 Secured by way of• bookdebts/receivables

Si Rank

all Industries Development of In

Refinance 150 100 Scented by way of bookdebts/receivables

Details of Unsecured Loan Facilities:

Lender's Name Type of Facility

Amount Sanctioned

Principal Outstanding Rs I, in Crs

AXIS Bank Ltd Term Loan 50 28.57

iC tholic Syrian Bank : Term Loan 50 50.00

iK rnataka Bank Limited Term Loan 20 12.50

M hindra and Mahindra Financials Term Loan 60 36.59

N 13KISAN Finance Limtcd Term Loan 10 3.33

NCI) (Unsecured Debenture) Sub Debt 25 25

NCD (Unsecured Debenture) Sameena Sub Debt 25 25

Small Industries Development Bank of India (Sub Debt) Sub Debt 15 15

Vi.aya Bank Limited : Term Loan 5 1.56

Vijaya Bank Limited Term Loan 15 8.44

Vi aya Bank Limited Tenn Loan 10 0.63

Vi aya Bank Limited . Term Loan 10 3.13

Deocnture No. I Perpectual debt Esco Sub Debt 48 i 48

Delbenture No. 2 Eseo Sub Debt 25 25

Debencl ture No. 3 Esco Sub Debt 20 20

Ti r II Bond Sub Debt . 20 20

TiJr II Bond Sub Debt 20 20

Details of Non-Convertible debentures (As on March 31, 2018)

lss ed in Indian Currency

1

I

1 Coupon

1

1Y0

4

l'enor Amount

Outstanding as on March 31, 2018 _

Allotment Date

-- -- — Redempti on

Date Rating

Rating at time

_of issue

' Current

• .

---- -

Secured /Unsecured

17.23 6 ' years

25,00,00,000 December 22,2015

December 22,2021

I3WR A -

BWR A -

Unsecured

16.83 6 years

25,00,00,000 December 28,2015

December . 28,2021

BWR(2,....1.1.1.tM77--Unsecured No.

11- -/-,•\,

Hepziball C:analex Secori ; Floor Ni- • M.:


25,00,00,000 Unrated Unrated Unsecured

20,00,00,000 Unrated Unrated Unsecured

10.5 7 Years

20,00,00,000 December 31, 2017

December 30,2024

CARE A-

CARE ' A-

Unsecured

11.50 7 Years,

20,00,00,000 March 31, 2018 March 28,2025

CARE A-

CARE Unsecured

Is ued in Foregn Currency: NIL ,

List of Top 19 Debenture Holders (as on quarter ended December 31, 2017)1

- Sr. No. - Mane of 11-W Debenture HISIder ----- — No. of Debentures (Amount Rs. In Crores)

1 ESAFSWASRAYA MULTI sTATE AGRO CREDIT CO-OPERATIVE SOCIETY 1 45 2 THE FEDERAL BANK LIMITED 20

3 SAMENA INDIA CREDIT (SINGAPORE) PRIVATE LIMITED 12 4 A. K. CAPITAL SERVICES LTD. 9.4

5 CASPIAN IMPACT INVESTMENTS PRIVATE LIMITED 8

6 : GREEN MALABAR FINANCE VENTURES LIMITED 5 7 A. K. CAPITAL SERVICES 4 8 SHIVANGIN1 PROPERTIES PVT LTD 2.5

9 2.3 VIRATECH SOFTWARE AND DATA SYSTEMS PVT LTD 10 VIRATECH SOFTWARE AND COMMUNICATIONS LIMITED 1.2

The amount of corporate guarantee issued by the Issuer along with name of the counterparty (like name of the subsidiary, JV entity, Group Company, etc.) on behalf of whom it has been issued (if any): NIL

Details of Commercial Paper as on March 31, 2018: NIL

Details of Certificate of Deposits as on March 31, 2018: NIL

H. Details of rest of the borrowing (if any including hybrid debt like FCCB, Optionally Convertible Debentures/ Preference Shares) as on March 31, 2018: NA

Details of all default/s and/or delay in payments of interest and principal of any kind of term loans, debt securities and other financial indebtedness including corporate guarantee issued by the company, in the past 5 years: NA

Details of arty outstanding borrowings taken / debt securities issued where taken / issued (i) for consideration other than cash, whether in whole or part, (ii) at a premium or discount, or (iii) in pursuance of an option: NA

4.10 Details of Promoter Group of the Bank:

Details of Promoter and Promoter Group's holding in the Bank as on quarter ended March 31, 2018:

S. No. Names of shareholder(s)—

No. of Shares i % to total capital . _ .._

1 ESAF Microfinance and Investments Private Limited

28,07,58,391 90.00%

I ijie Company shall circulate the updated information as of March 31, 2018 to the investors and the stock exchange, as and when it i4 available, within the stipulated timelines.

.oss_9111 04 A-ionfr

4V1116011X:9N pJ

• i/4../ 7 toold. pu 03 as ni c),)) xa,aidtuo0 tieq!zdatt

"7'vtfa 30NVNIA1

UI age 26


2 Mr. Kadambelil Paul Thomas , 3,11,86,785 9.99%

3 Mrs. Meieena Paul 1 0.00%

4 Ms. EmylAcha Paul 1 0.00%

5 Mr. Alok Thomas Paul 1 0.00%

6 Mr. George K John 1 0.00%

7 Mrs. 13eena George 1 0.00%

Abridged version of the Audited Consolidated and Standalone Financial Information (like l'rofit and Loss statement, Balance Sheet and Cash Flow statement) for at least last three years and auditor qualifications, if any.

Note: Financial Information submitted MS, be in line with the timelines specified in the Simplified Listing Agreement, issued vide Grader no. SEBVIMD/BOND/1/2009/11/05, dated May 17, 2009

tk N atbridged consolidated financials have been prepared by the Company.

I •

ANDALONE

P fit & Loss statement (!NR in Crores)

For FY For FY For FY

Mar-18 Mar-17 Mar-16

I INCOME (Audited)

a Merest Earned 596.84 29.39 NA

b Other Income 101.86 18.82 NA

Total Income 698.70 48.21 NA

II EXPENDITURE NA

a Merest Expended 314.82 16.11 NA

b kperating Expenses 304.48 23.41 NA

c Provisions and Contingencies 52.41 7.93 NA

d Faxes 0.00 0.00 NA

Total 671.71 47.45 NA

11 PROFIT AND LOSS

Profit After Tax 27.01 0.76 NA

Er tra items 0 0 NA

P r fit brought forward 0 0 NA

A justments to PAT , 0 0 NA

Total Profit & Loss 27.01 0.76 NA

Equity Dividend % 0 0 0

Er rnings Per Share (Annualized) 0.89 0.07 NA

Bilance Sheet (INR in Crores)

D6CRIPTION For FY ! For FY For FY

Mar-18 : Mar-17 Mar-16

SOURCES OF FUNDS: ,j.„..../H„..-17,FINANCE 27

Hepzibah Comdex Second Flo No:X/109 LIN P Tlit phr

111

ro IJj

Mar-18 Mar-17

in Crs in Crs rticulars Pr

The CompanY shall circulate the updated information as of March 31, 2018 to the investors and the st it f available, within the.stipulated timelines. s‘,Npt1. FINANCE EAA/k

4/41

and when

eta Hepzibah Complex / 1144, 000ll7yS pe .:0: TdhFloor le No:X/1091

Car


SI are Capital. 311.94 301.56 NA

R serves & Surplus 31.40 4.20 NA

D posits 2523.09 : 409.34 NA

B rrowings 1674.65 2052.85 NA

0 her Liabilities & Prdyisions 183.04 226.51 NA

T tal Liabilities 4724.12 2938.47 NA

A PL1CATION OF FUNDS:

Chit and balance with Reserve Bank of India 438.46 106.86 NA

B lances with banks and money at call 259.33 . 449.32 NA

In testments 731.86 579.20 NA

A vances 3155.09 1481.72 NA

G oss block 0.00 0.00 NA

L sk/Xscumulated Depredation 0.00 0.00 NA

N t block 68.70 32.90 NA

0 her Assets 70.70 ' 344.46 NA

Tctal Assets 4724.14 2994.46 NA

Contingent Liabilities 61.72 67.61 NA

I3i Is for collection

Bcok Value

Cash Flow statement (INIt in Crores)2

Mar-17

C sh flow from operating activities -1392.56

0 sh flow used in investing activities -473.45

0 sh now from financing activities 2357.85

Net (decrease) /increase in cash and cash equivalent 491.85

0 sh and cash equivalents at the beginning of the period 0.00

0 sh and cash equivalents at the end of the period 491.85

TI ere have been no auditor qualifications set out in the said audited information

Profits of the Company, before and after making provision for tax, for the 3 (three) financial years immediately preceding the date of circulation of this Disclosure Document:

Hepzibah Comple Second Floor No•X/1091M4

Thuss

FOR PRI vATE CIRCULATION ONLY Private and Confidential

P .ofit before taxes and provisioning 79.42 8.69 Plait After taxes I 27.01 0.76

D'vidends declared by the Company in respect of the said 3 (three) financial years; interest coverage ratio for last t ree years (cash profit after tax plus interest paid/interest paid):

NIL

A summary of the financial position of the Company as in the 3 (three) audited balance sheets immediately p eceding the date of circulation of this Disclosure Document:

A annexed separately with this Disclosure Document.

2 Abridged version of Latest AuditeW Limited Review Half Yearly Consolidated and Standalone Financial Information and auditor's qualifications, if any.

P Jo

. ,

fit and Loss Statement (INR Crores)

i

. As on March'18

:

In crest Income 596.84

L ss: Interest Expenses 314.82

N t Interest Income 282.02

0 her Income 101.86

T talilecome 698.70

0 erlating Expenses 304.48

Prhvisions & Write Offs 52.40

Olaerating Profit 79.40

D6reciation 19.43

Prkit Before Tax 43.86

Prhvisions for tax 16.85

Priofit After Tax 27.01

BIlance Sheet (INR Gores)

Ecluity capital 311.94

R serve & Surplus 31.40'

N t worth 343.34

T tal Debt 1674.66

C rrent Liabilities+ Provisions 183.04

T tal Deposit 2523.09

T tal Liabilities 4724.13

Fixed assets (Net) 68.70

Inrestments 731.85

doss Advances 3155.09

Liss: Loan Loss Reserve

N t Loan Outstanding 3155.09

Cish/ Liquid Investments 697.79

Am -Current assets k.FINANCE B,Th"....,_

dividend declared for the said years

FOR PRIVATE ciRcuLATIoN ONLY Private and Confidential

her current assets 70.70

(erred Tax Assets

I tangible Assets

her Long-Term Assets

Total Assets 4724.13

.13 Any material event/ development or change having implications on the financials/credit quality (e.g. any material regulatory proceedings against the Issuer/promoter tax litigations resulting in material liabilities, corporate restructuring event, etc.) at the time of Issue which may affect the issue or the investor's decision to invest/ continue to invest in the debt securities.

None

.14 Names of the Debentures Trustees and Consents thereof:

The debenture trustee of the proposed Debentures is Catalyst Trusteeship Limite:d has given its written consent for its appointment as debenture trustee to the Issue and inclusion of its name in the form and context in which it appears in this Disclosure Document. The consent letter from the Debenture Trustee is provided in Annexure I of this Disclosure Document.

.15

Rating and Rating Rationale:

Please refer to Annexure IV.

.16 If the security is backed by a guarantee or letter of comfort or any other document/ letter with similar intent, a copy of the same shall be disclosed. In case such document does not contain detailed payment structure (procedure of invocation of guarantee and receipt of payment by the investor along with timelines), the same shall be disclosed in the offer document.

NA

Names of all the recognized stock exchanges where the debt securities are proposed to be listed:

BSE Limited

Other details:

DRR Creation:

In accordance with Rule 18(7) of the Companies (Share Capital and Debenture) Rules, 2014, banks are not required to create a Debenture Redemption Reserve.

Issue/ instrument specific regulations:

The present issue of Debentures is being made in conformity with the applicable provisions of the Companies Act, 2013, the SEBI Regulations, RBI Guidelines for Licensing of "Small Finance Banks" in the Private Sector (November 27, 2014), Clarifications to the queries to the Guidelines for Licensing of Small Finance Banks and Payments Banks (January 01, 2015), Operating Guidelines for Small Finance Banks (October 06, 2016) and in pursuance of Basel Ill Guidelines, covering Prudential Guidelines on Implementation of Basel III Capital Regulations in India covering Criteria for inclusion of Debt Capital Instruments as Tier II Capital under Annex 5 thereof and minimum requirements to ensure loss absorbency of all non-equity regulatory capital instruments at the Point of Non-Viability under Annex 16 thereof.

The Bank can issue the Debentures proposed by it in view of the present approvals and no further internal or external permission/ approval(s) is/are required by it to undertake the proposed activity.

t.FINANCE FSOkt "iff/A R-

Hepzibah Comple)eaz Second Floor

o:X/109IM4 °Out,

0.,Thriss

Listed, Redeemable, Unsecured, Basel III compliant Tier II Bonds in the nature of non- convertible debentures for augmenting Tier 11 capital of the Issuer w' lue of

Rs.10,00,000/- each (Bond). '- FINANCE

G2 Hepzibah Cornfiter0 Second Floor

t. No:X/1091M4

p.0., T ul

a•by


Application process:

The application process for the Issue is as provided in SECTION 7: of this Disclosure Document

.19 A statement containing particulars of the dates of, and parties to all material contracts, agreements:

The contracts and documents referred to hereunder are material to the Issue, may be inspected at the Registered Office of the Bank between 10.00 am to 4.00 pm on wOrking days.

S. No. Nature of Contract 1 Certified true copy of the Memorandum & Articles of Association of the Bank.

2 Board Resolution and Audit Committee Resolution dated May 22, 2018 authorizing issue of Debentures Offered under the terms of this Disclosure Document •

3 Shareholder Resolution dated March 28, 2018 a utharizing the borrowing by the Bank.

4 Shareholder Resolution dated May 22, 2018 authorizing the issue of non-convertible debentures by the Bank.

5 Copies of Annual Reports of the Bank for the last three financial years. 6 Credit rating leiter from the Rating Agency. 7 Letter from Catalyst Trusteeshi • Limited iv in its consent to act as Debenture Trustee. 8 Letter for Registrar and Transfer Agent. 9 Certified true copy of the certificate of incorporation of the Bank.

10 Certified true copy of the tripartite agreement between the Bank, the Registrar & Transfer Agent and NSDL/CDSI„.

11 Copy of application made to I35E for grant of in-principle approval for listing of Debentures.

20 Details of Debt Securities Sought to be Issued

Under the purview of the current document, the Issuer intends to raise an amount of Rs. 40,00,00,000/-(Rupees Forty Crores Only) by issue of Unsecured, Rated, Listed, Redeemable, Basel Ill Compliant Tier-II Bonds in the nature of Non-Convertible Debentures, on a private placement basis. •

For further details of the Debentures, please refer to the terms and conditions of the debentures set out in Section 4.23 of this Information Memorandum.

21 Issue Size

The aggregate issue size for the Debentures is of Rs. 40,00,00,000/- (Rupees Forty Crore Only).

22 , Utilization of the Issue Proceeds

The proceeds of the issue are being raised to augment Tier II Capital under 13asel III Capital Regulations as laid out by RBI. The proceeds of issue shall be utilized for regular business activities. of the Bank. No part of the proceeds of the Debentures would be utilized by the Issuer directly/ indirectly towards capital markets. Therefore, the subscription to the Issue would not be considered as capital market exposure.

.23 Issue Details

Security Name 11.50% ESAFS1113 Tier II Bonds June 2025

Issue ESAF Small Finance Bank Limited ('the Hanle/the Issuer

Type of Instrument

age Second Floor N • X/109/M4


- Nat tire of Initrument — •

I

Unsecured . The bonds are neither secured nor covered by a guarantee of the Bank nor related entity or other arrangements that legally or economically enhances the seniority of the claim vis-à-vis other creditors of the Bank.

. Bondholders will not be entitled to receive notice of or attend or vote at any meeting of shareholders of issuer or participate in management of issuer. .

Seniority Claims of the Investors in the Instruments shall be: . . Senior to the claims of investors in instruments eligible for indlusion in Tier 1 Capital; Subordinate to the claims of all depositors, general creditors of the Bank; and neither secured nor covered by a guarantee of the Bank or its related entity or other

arrangement that legally or economically enhances the seniority of the claim vis A-vis creditors of the Bank.

rank poi passu without preference amongst themselves.

The claims of the bondholders shall be subject to the provisions mentioned in the point Special Features, "Point of Non-Viability" (PONV) in the term sheet.

Mode of Issue Private placement

Eligible Investors I '

! , i

f

i 7. 1 ! ! i

I

The investor to whom this Disclosure Document is specifically addressed, is eligible to apply for this private placement of Debentures subject to fulfilling its respective investment norms/rules and compliance with laws applicable to it by submitting all the relevant documents along with the Application Form. The persons to whom the Disclosure Document has been circulated to, may include but not Itmited to:

Financial Institutions: registered under the applicable laws in India which are duly authorized to invest in Bonds;

Insurance companies Provident, Gratuity, Pension & Superannuation Funds Regional Rural Banks Mutual Funds Companies, Bodies Corporate authorized to Invest in bonds . Trusts, Association of Persons, Societies registered under the applicable laws in India

which are duly authorized to invest in bonds FPIs Individuals

10 Scheduled Commercial Banks

1 Co-operative Bank

12 Partnership Firms

13 HUF through Kerte

14. Any other person authorised and eligible to invest in the issue as per regulatory

guidelines. Prohibition s on i Purchase/Funding I in Bonds 1

Neither the Bank nor any related party over which the Bank exercises control or significant influence (as defined under relevant Accounting Standards) shall purchase the Bonds, nor would the Bank directly or indirectly fund the purchase of the Bonds, The Bank shall not grant advances against the security of the Bonds issued by it.

Listing

I i t I

t '

I

i

This issue of Debentures will be listed on Wholesale Debt Market (WDM) Segment the Bombay Stock Exchange (13SE).

1 The Issue will be listed within 15 (Fifteen) days from the deemed date of allotment. In case of delay in listing. Bank will pay penal interest of 1% p.a. over the coupon rate from the

I expiry of 30 (Thirty) days from the deemed date of allotment till the listing of such debt

securities to the Investor.

Rating of Instrutnent

!the !

CARE A-; negative

' Issue Size Rs. 40,00,00,000/- (Rupees Forty Crores Only) t FINANCE BANK

/1.

Hepzibah Complepage Second Floor No- 1109/M4


'Objeas—ef the Is-sue Augmenting Tier II Capital (as defined in the Basel III Guidelines issued by RBI) of the Issuer for strengthening its capital adequacy and for enhancing its long-term resources.

Details of ' the uti lipt ion of the t ,

Proceeds

The proceeds of issue shall be utilized for regular business activities of the Bank.

I Coupon Rate ,

11.50% Semi Annual

Step Up/ Step Down Coupon Rate

NA

Coupon Payment Frequency .

Semi Annual (semi-annually from 30 Jun 2018 onwards until 01 June 2025)

Coupon Payment Dates

30-Jun-18, 31-Dec-18, 30-Jun-19, 31-Dec-19, 30-Jun-20, 31-Dec-20, 30-Jun-21, 31-Dec-21, 30-Jun-22, 31-Dec-22, 30-Jun-23, 31-Dec-23, 30-Jun-24, 31-Dec-24, 01-Jti n-25, The aforementioned dates are subject to "Special Features", "PONV" mentioned below.

Coupon Type Fixed

Coupon Reset Process NA

Day Count Basis Interest for each of the interest periods shall be computed as per Actual/ Actual day count conversion on the face value/principal outstanding at the Coupon rate rounded off to the nearest rupee.

Interest Period means each period beginning on (and including) the Deemed Date of Allotment (s) or any Coupon Payment Date and ending on (but excluding) the next Coupon Payment Date.

Interest ion Application Money

,

I .

Interest on application money will be the same as the Coupon rate (subject to deduction of Tax at Source at the rate prevailing from time to time under the provisions of the Income Tax Act, 1961 or any other statutory modifications or re-enactment thereof) and will be paid on application money to the applicants from the date of transfer of funds in the Issuer's bank account upto 1 (One) day prior to the date of allotment of Debentures.

Provided that, notwithstanding anything contained herein above, Bank shall not be liable to pay any interest on monies liable to be refunded in case of invalid Applications or Applications liable to be rejected including Applications made by persons ineligible to apply for and/or hold the Bonds.

.

Default Interest Rate i

I

In relation to the principal amount and coupon payable in respect of the Debentures, in case the same is not paid on the respective Due Dates, the defaulted amounts shall carry further interest at the rate of 2% (Two Percent) per annum over and above the Coupon Rate, from the date of occurrence of such default up to the dation which the defaulted amounts together with default interest is paid, and subject to "Special Features", "PONV" mentioned below.

Furthermore, in the event that the Debentures are not listed on the WDM segment of the BSE within a period of 15 (Fifteen) days from the Deemed Date of Allotment, the Issuer shall pay a default interest at the rate of 1% (One Percent) per annum over and above the Coupon Rate for the period commencing from 30 (Thirty) days from the Deemed Date of Allotment till the date the Debentures are listed on the WDN4 of the BSE.

Tenure 7 (Seven) Years front the Deemed Date of Allotment

I Redemption Date i June 01, 2025

Redemption Amotint , .. i Subject to the provisions mentioned in "Special Features', "PONV" in the Term Sheet, the Redemption Amount would be Rs. 10,00,000/- (Rupees Ten La khSonly) per bond.

Redemption Premium Not Applicable



Issue Pike At par (Rs.10,00,000/- per Bond)

Discount at which security is issued and the effective yield as a result of] such discount ,

NA

Put Option Not Applicable

Put option date ' Not Applicable

Put option price Not Applicable

Put notification tithe Not Applicable

Gtarption : Not Applicable

Call option date Not Applicable

Call option price ' Not Applicable

Call notification tithe ; Not Applicable

Face Value

I

Rs. 10,00,000/- (Rupees Ten Laklis) per Bond as adjusted for the provisions mentioned in "Special Features", "PONV" in the Term Sheet

Minimum Application size '

The minimum application size for the Issue shall be 50 (Fifty) Bonds and in multiples of 10 (Fen) Bonds thereafter

Issue Opening Datie June 01, 2018

Issue Closing Date': I

June 01, 2018

Pay-in Date: June 01, 2018

Deemed Date ! of Allotment: i

June 01, 2018

Issuance mode of ;the Instrument t

Demat only

Trading mode of !the Instrument

Demat only

Settlement mode of the Instrument. ; i I

Cheques, demand drafts, interest/ redemption warrants, pay order, direct credit, ECS, NEFF, RTGS, other online payment mechanism as are permitted.by the Reserve Bank of

India . Depositories NSDI1CDSL

Business Pay i Convention/Effect; of Holidays I

!

:

i

:

If any of the Coupon Payment Date(s) (other than on Redemption Date(s)) falls on a day which is not a Business Day, or any day on which Real Time Gross Settlement (RTGS) or high value clearing does not take place in Thrissur, Kerala, or Mumbai, Maharashtra for any reason whatsoever, the payment due on such date may be made on the immediately succeeding Business Day however: (i) the dates of the future coupon payments would be as per the schedule originally stipulated at the time of issuing the Debentures. In other words, the subsequent coupon schedule would not be disturbed merely because the payment date in respect of one particular coupon payment has been postponed earlier because of it having fallen on a day which is not a Business Day; and (ii) the amount of interest to be paid would be computed as per the schedule originally stipulated at the time of issuing the security.

lithe Redemption Date falls on a day which is not a Business Day, payment in respect of that Redemption Amount (along with interest accrued on the Debentures until but excluding the date of such payment) shall be made one Business Day prior to the Redemption Date.

--, ----- Hepzibah CompW34 '

* Second Floor - 1


Record Date The date falling 15 (Fifteen) days prior to any Due Date in relation to the Debentures

Transaction Documents

1 Information memorandum Trustee consent letter Rating Letter from CARE Debenture Trust Deed Debenture Trustee Agreement In principle approval from the stock exchange Issue subscription application form

Conditions Precedent to Pay-In

As set out in Annexure VI hereto

Conditions Subsequent to the Date Deemed of Allotment

As set out in Annexure VII hereto

Events of Default ,

jt I

I I

If any order is passed by any statutory authority against the Company for its winding up or liquidation or declaring the Company to be bankrupt, all amounts due and payable in relation to the Debentures shall stand accelerated and immediately due and payable.

It is hereby clarified that apart from the event specified above, the Debenture Holder shall have no rights to accelerate the repayment of future scheduled payments (whether Coupon or principal) in relation to the Debentures.

I Provisions related to i I Cross Default Claqse : i

Not applicable

Role and Responsibilities j of Debenture Trustee;

To oversee and monitor the overall transaction for and on behalf of the Debenture Holder(s).

Governing Law and Jurisdiction

I

The Debentures and documentation will be governed by and construed in accordance with the laws of India and the Courts in Mumbai, Maharashtra, India or Thrissur, Kerala,

India shall have jurisdiction to determine any dispute arising in relation to the

Debentures.

Loss Absorbency ; I

' !

I

The bonds shall be subjected to loss absorbency features applicable for non-equity capital instruments vide Basel III Guidelines, as amended from time to time, which Basel III Guidelines cover criteria for inclusion of debt capital instruments as Tier II capital and minimum requirements to ensure loss absorbency of additional Tier 1 instruments at pre-specified trigger and of all non-equity regulator), capital instruments at the Point of Non-viability ("PONV"). Accordingly, the Bonds may, at the option of RBI, either be permanently written off or temporarily written off, on the occurrence of the trigger event called the Point of Non-Viability (PONT). PONV trigger event shall be as defined in the aforesaid Basel III Guidelines and as amended/ supplemented by the RBI from time to

time.

Point of , Non- Viability (PONV) and special features :

I

I

The present issue of Bonds is being made in pursuance of Basel III Guidelines as amended from time to time. As per the extant instructions issued by 1213I, these Bonds, at the option of the Reserve Bank of India, shall be written off upon the occurrence of the trigger event, called the 'Point of Non-Viability (PONV) Trigger' stipulated below:

The PONV Trigger event is the decision that write-off without which the firm would become non-viable, is necessary, as determined by the Reserve,Bank of India; and the

decision to make a public-sector injection of capital, or equivalent support, without which the firm would have become non-viable, as determined by the relevant authority. The write-off of any Common Equity Tier 1 capital shall not be required before the write-off of any Non-Equity (Additional Tier-I and Tier II) regulatory capital instrument

Such a decision would invariably imply that the write-off conse. uent • a.... ....g :,: r

-

F l' ' ' BANK so

No.

(< a&

co Hepzibah Complex u./ * Second Floor S o:X/109/M4 ,

"le Um O., Thriss1/411"

---


event must occur prior to any public-sector injection of capital so that the capital provided by the public sector is not diluted. As such, the contractual terms and conditions of these instruments shall not provide for any residual claims on the issuer which are senior to ordinary shares of the bank (or banking group entity where applicable), following a trigger-event and when write-off is undertaken.

For the purpose of the above, a non-viable bank will be: A bank which, owing to its financial and other difficulties, may no longer remain a going concern on its own in the opinion of the Reserve Bank of India unless appropriate measures are taken to revive its operations and thus, enable it to continue as a going concern. The difficulties faced by a bank should be such that these are likely to result in financial losses and raising the Common Equity Tier 1 capital of the bank should be considered as the most appropriate way to prevent the bank from turning nonviable. Such measures would include write-off with or without other measures as considered appropriate by the Reserve Bank of India.

In the event that the Basel Ill Guidelines are modified by the RBI, then all such modifications, in so far as they are applicable to the Debentures, including in relation to the Point of Non-Viability (I'ONV) Trigger or in relation to the consequences of such Point of Non-Viability (I'ONV) Trigger, shall, ipso facto be applicable to the Debentures and the Company shall undertake such actions, deeds or things as deemed necessary to give effect to such modifications.

Treatment in Bankruptcy/Liquidation

The holders of Bonds shall have no rights to accelerate the repayment of future scheduled payments (coupon or principal) except in bankruptcy and liquidation of the Issuer.

If a bank goes into liquidation before these instruments have been written-down, these instruments will absorb losses in accordance with the order of seniority indicated in the offer document and as per usual legal provisions governing priority of charges. If a bank goes into liquidation after these instruments have been written-down, the holders of these instruments will have no claim on the proceeds of liquidation.

Amalgamation of a banking company

Subject to the provisions Banking Regulation Act, 1949 as amended from time to time: If a bank is amalgamated with any other bank before these instruments have been

written-down, these instruments will become part of the corresponding categories of regulatory capital of the new bank emerging after the merger.

If a bank is amalgamated with any other bank after the non-equity regulatory capital instruments have been written-down permanently, these calm& be written-up by the

Amalgamated entity. If the relevant authorities decide to reconstitute the Company or amalgamate the

Company with any other bank, under the Section 45 of Banking Regulation Act, 1949, such a bank will be deemed as non-viable or approaching non-viability and the Point of Non-Viability (PONV) Trigger for write-down of these Debentures will be activated. Accordingly, these Debentures will be fully written-down permanently before amalgamation/ reconstitution in accordance with the Basel III Guidelines.

Order of write-down of various types of capital instruments:

The capital instrumenth shall be written-off in order in which they would absorb losses in a gone concern situation. Currently, the capital instruments whiCh may be issued by the Bank comprise of the following: • 1. Common shares (paid-up equity capital) issued by the bank which meet the criteria for classification as common shares for regulatory purposes as giveitin Annex 1 of the Basel

III Guidelines; 2. Perpetual Non-Cumulative Preference Shares (PNCPS), which regulatory requirements as specified in Annex 3 of the Basel III Gui :4

• NANCEBAN

Hepzibah ebagil6ex Second Floor N :X/109/M4

onst.t

, Thrissu

FOR PRIVATP CIRCULATION ONLY Private and Confidential

- I

3. Debt capital instruments eligible for inclusion in Additional Tier 1 capital, which comply with the regulatory requirements as specified in Annex 4 of the Basel III Guidelines. 9. Debt Capital Instruments eligible for inclusion in Tier 11 capital, which comply with the regulatory requirements as specified in Annex 5 of the Basel III Guidelines; 5. Preference Share Capital Instruments [Perpetual Cumulative Preference Shares (PCPS) / Redeemable Non-Cumulative Preference Shares (RNCPS) / Redeemable Cumulative

J Preference Shares (RCPS)] which comply with the regulatory requirements as specified in Annex 6 of the Basel Ill Guidelines; The order to be following in writing off the said capital instruments, would be as follows:

Debt Capital Instruments eligible for inclusion in Tier II capital; which comply with the regulatory requirements as specified in Annex 5 of the Basel III Guidelines;

Preference Share Capital Instruments (Perpetual Cumulative Preference Shares (PCPS) / Redeemable Non-Cumulative Preference Shares (RNCPS) / Redeemable Cumulative Preference Shares (RCPS)] which comply with the regulatory requirements as specified in Annex 6 of the Basel Ill Guidelines;

1 Debt capital instruments eligible for inclusion in Additional Tier 1 capital, which comply with the regulatory requirements as specified in Annex 9 of the Basel III Guidelines. .

Perpetual Non-Cumulative Preference Shares (PNCPS), which comply with the regulatory requirements as specified in Annex 3 of the Basel III Guidelines;

Common shares (paid-up equity capital) issued by the bank which meet the criteria for classification as common shares for regulatory purposes as given in Annex 1 of the Basel III Guidelines;

Applicable RBI The present issue of Bonds is being made in pursuance of Master Circular Guidelines 1 DBR.No.BP.BC.1/21.06.201/2015-16 dated July 1, 2015 issued by the RBI, covering

I i •t i

Prudential Guidelines on Implementation of Basel III Capital Regulations in India and Criteria for Inclusion of Debt Capital Instruments, Clarification issued by RBI vide Master Circular RBI/2015-16/285 DBR.No.1313.BC.71/ 21.06.201/ 2015-16'clated January 19, 2016, and amendments made thereto from time to time, RBI Guidelines for Licensing of "Small

I Finance Banks" in the Private Sector (November 27, 2014), ClarifiCations to the queries to the Guidelines for Licensing of Small Finance Banks and Payments Banks (January 01, 2015) and the Operating Guidelines for Small Finance Banks (October 06, 2016).

I

VI o The Bank reserves its sole and absolute right to modify (pre-pone/ postpone) the Issue schedule specified herein without

wing any reasons or p. nor notice. The Bank also reserves its sole and absolute right to change the Deemed Date of Allotment of he above Issue, prior to closure of the said Issue, without giving any reasons or prior notice. Consequent to change in Deemed Pate of Allotment, the Coupon Payment Dates if any may also be changed at the sole and absolute discretion of the Bank. The tank reserves the right to close the Issue earlier than the stipulated issue closing date and it is flirt her clarified that the Bank need wt wait for any minimum subscription amount to the Debentures before closing the Issue. In the event of any change in the ssue Schedule including the Deemed Date of Allotment, the Bank shall, however notify the Stock Exchange about such change.

24 Cash Flows

sow. F I N ANCE BAN

co't Hepzibah Complex‘

* r Second Floor

to

• No:X/I 09/M4 a

<P oo u/th, , 7 ttO., ThriSS

Page 37

efer Annexure V

„ku, FINANCE BAN, F Z/

„Lc? Hepzibah Complex <1., Second Floor - No:X/109/M4

hrissut


SECTION 5: DISCLOSURES PERTAINING TO WILFUL DEFAULT

Ii case of listing of debt securities made on private placement, the following disclosures are required to be made vide

S BI (Issue and Listing of Debt Securities) (Amendment) Regulations, 2016 mel 25-05-16:

Name of the Bank declaring the entity as a Wilful Defaulter: Nil

The year in which the entity is declared as a Wilful Defaulter: Nil

Outstanding amount when the entity is declared as a Wilful Defaulter: Nil

Name of the entity declared as a Wilful Defaulter: Nil

Steps taken, if any, for the removal from the list of wilful defaulters: Nil

Other disclosures, as deemed fit by the Issuer in order to enable investors to take informed decisions: Nil

Any other disclosure as specified by the Board: Nil

Page 38 .

Date of passing of the Board Resolution and Audit Committee

Resolution: May 22, 2018.

1. Shareholders' Resolution,twill'attStett- the Act

Nt- ----- ti,l/kAt‘

F

Hepzibah Complex l',- \A Second Floor .C.,

o:X/109/M4

Date of passing of Board Resolution

Date of ,paSsing of resolution tin general


SECTION 6: DISCLOSURES AS PER THE ACT

General Information:

Name, address, website and other contact details of the Bank, indicating both registered office and the Corporate:

Name: Registered Office of Issuer:

Corporate Office of Issuer: , Phone No.: •

ESAll Small Finance Bank Limited Hepzibah Complex, Mannuthy P.0, Thrissur, Kerala, India 680651 ESAI7 Centre, Mannuthy P.0, Thrissur 680 651 0487 2373813

Fax No.: NA Website of Issuer: https://www.esafbank.com/ Compliance Officer of Issuer: M Mathews Email: [email protected]

Date of Incorporation of the Bank:

May 05, 2016.

Business carried on by the Bank and its subsidiaries with the details of branches or units, if any;

Refer Section 4.4A of this Disclosure Document.

Brief particulars of the management of the Bank, names, addresses, DIN and occupations of the directors

Refer Section 44B of this Disclosure Document.

Management perception of Risk Factors:

Please refer to SECTION 3: of this Disclosure Document.

Details of defaults, if any, including the amounts involved, duration of default, and present status, in repayment of:

Statutory Dues: None Debenture and interest thereon: None Deposits and interest thereon: None Loans from banks and financial institutions and interest thereon: None

Name, designation, address and phone number, email ID of the nodal / compliance officer of the Bank, if

any, for the Issue:

Name: M Mathews Designation: Chief Compliance Officer Address: PM0 Office, Sree Bhadra Complex, Near Sreebhadra Temple, Mannuthy, Trichur

Phone No: 8589022842 Fax No: NA E-mail: [email protected]

Particulars of the Offer:

Hepzibah Comitei 40 Second Floor g No:X/109/M4

- FOR PRIVATE CIRCULATION ONLY Private and Confidential

Meeting, inthOrizing the offer of securities dated May 22, 2018; and

2. Shareholders' Resolution passed under Section 180(1)(c) of the Act dated March 28, 2018. ,

Kinds of securities offered (i.e. whether share or debenture) and class of security

Rated Listed Unsecured Redeemable Basel III compliant Tier II

Bonds in the form of Non-Convertible Debentures.

Price at which the security is being offered,

including Premium if any, along with

justification of the price

The Debentures are being offered at par.

Name and; address of the valuer who I I performed : valuation of the security

offered

No valuation has been done with respect to the Debentures as the Debentures represent debt obligations of the Bank, which will be

repaid in full along with the applicable coupon in relation thereto.

Amount, which the Company intends to raise by way of securities

Upto Rs. 40,00,00,000/- (Rupees Forty Crore Only).

Terms of raising of securities: Refer to Section 4.23 of this Disclosure Document.

Proposed time schedule for which the 1

Issue is valid i

The Issue will open on June 01, 2018 and close on June 01, 2018

Purpose and objects of the Issue Refer to Section 4.23 of this Disclosure Document.

Contribution being made by the Promoter 1 or directors: either as part of the offer or

separately in furtherance of the object

Nil

Principal ferms of assets charged as

security, if applicable

NA

Disclosure with regard to interest of directors litigation, etc.:

. Any fininCiel or other material interest -Of I

, the directmis, promoter or key managerial 1 i

i personnel in the Issue and the effect of i such intere4t in so far as it is different from

the interests of other persons ,

None of the Promoters, Directors, Key Managerial Personnel have

any financial or other material interest in the present offer.

I Details of any litigation or legal action Based on the information available with the Bank, there are no

I pending or taken by any Ministry or litigation or legal action pending or taken by any Ministry or

; Departmeni of the Government or a Department of the Government or a Statutory authority against any

statutory atithority against any Promoter of the Company during the last 3 (three) years

Promoter of the Bank during the last 3 (three) years immediatelit,

preceding the year of the circulation of this Disclosure Document

immediately preceding the year of the and any direction issued by such Ministry or Department or circulation ;of this Disclosure Document statutory authority upon conclusion of such litigation or legal and any direction issued by such Ministry or Department or statutory authority upon conclusion Of such litigation or legal action

action.

a

6

H e Sp ez ictihoand CFol Floor

I ex

pa

No:X/I09/M4


' shall lie. diidos-e-d --- .. - 1 .

• Remuneration of directors (during the ! current year and last 3 (three) financial

years) i

31-03-2017: Rs. 7,00,000/-

31-03-2018: Rs 1,20,00,000.

Related party transactions entered during ' the last :3 (three) financial years

• :

immediateli preceding the year of : circulation :of this Disclosure Document 1

, including With regard to loans. made .or,

guarantees given or securities provided 1

Refer Annexure 1113

t

Summary of reservations or qualifications

:or adverse remarks of auditors in the last 5 (five). financial years immediately

preceding the year of circulation of this Disclosure Document and of their impact on the financial statements and financial position of the Company and the corrective

steps taken', and proposed to be taken by

the Company for each of the said

reservationi or qualifications or adverse

remark i I ..

NA

Details of 1 any inquiry, inspections or 1

investigatioIns initiated or conducted under I

. the Act or 'any previous company law in : i

the last 3 (three) years immediately : !

I preceding the year of circulation of offer ' letter in thelcase of the Company and all of

I its subsidiaries. , Also if there were any

i were any i prosecutions filed (whether

pending :or not) fines imposed,

compounding of offences in the •last 3 i i I(three) years immediately preceding the. . , :year of this Disclosure Document and if so,

. section-wise details thereof for the

: Company anid all of its subsidiaries

1

NA

. Details of acts of material frauds

i committed 4gainst the Company in the last I 3 (three) years, if any, and if so, the action

1 taken V the company

' NA

6.9 Financial Poition of the Bank:

The capital sttructure of the Bank in the following manner in a tabular form:

I c Company shall cireulatc the updated information as of March 31, 2018 to the investors and the stock.e.xc,ha as and when it i available. within the:stipulated timelines.

FOR PRIVATE, CIRCULATION ONLY Private and Confidential

[Tice- auihoriiedTissued,—s—ubscribed and 1 paid up capital (number of securities,

I description and aggregate nominal value) I .

Refer to Section 4.513 of this Disclosure Document.

. Size of the Present Issue 1

a i

Up to 900 (Four Hundred) Rated, Listed, Redeemable, Unsecured, Basel 111 compliant Tier 11 Bonds in. the nature of non-convertible

debentures, of a face value of Rs. 19,00,000/- (Rupees Ten Lakhs

Only) each, aggregating upto Rs. 40,00,00,000/- (Rupees Forty Crores

Only).

Paid-up Capital: I I

After the offer:

After the conversion of

Convertible Instruments (if applicable):

This issuance of Debentures will not alter the paid-up capital of the Issuer.

(

Share Premium Account: , , a. Before the offer:

b. Affer the offer:

This issuance of Debentures will not alter the reserves in the share premium account of the Issuer.

Details of the existing share capital of the Issuer ,

As set out in Annexure VIII herein.

Details ofi allotments made by the Company iti the last one year preceding the date Of the Disclosure Document separately ibdicating the allotments made for consideration other than cash and details of the consideration in each case


Profits of the Company, before and after : making prilyision for tax, for the 3 (three) '

financial years immediately preceding i

the date of kirculation of this Disclosure

Document


Dividends declared by the Company in

respect of !the said 3 (three) financial

years; interest coverage ratio for last three years (cash profit after tax plus interest

paid/interest paid)

i • I •

,

. Refer to Section 4.11 of this Disclosure Document

A summaq, of the financial position of the Company as in the 3 (three) audited

balance shetets immediately preceding the

date of citculation of this Disclosure

Document 1

I

Refer to Section 411 of this Disclosure Document.

; Audited C4h Flow Statement for the 3

I Refer to Section 4.11 of this Disclosure Document4

4 The Cot ipany shall circulate the updated information as of March 31. 2018 to the investors and-thr-spx,oblinalc-cas and %viva

it i avail blc. within thctstipulated timelines. cAPA 0,„vnto

‘e ce kico Hepzibah Complex 5 42 Second Floor No:X/1091M4

:

SCLurul

No:k1091M4 co'

P .0., Thrissut•


[(three) year's—immediately- —preceding` the-

! date of ciiculation of this Disclosure I Document l I Any change' in accounting policies during No changes

! the last 3 (three) years and their effect on ! the profits and the reserves of the

1i Company !

Page 43


FOR PRIVATE CIRCULATION UNIX Private and-Confidential

SECTION 7: OTHER INFORMATION AND APPLICATION PROCESS

T le Debentures being offered as part of the Issue are subject to the provisions of the Act, the Memorandum and tides of Association of the Issuer, the terms' of this Disclosure Document, Application Form and other terms and

c.nditions as may be incorporated in the Transaction Documents,

Undertaking by the Issuer

The Issuer undertakes that: (0' the complaints received in respect of the Issue shall be attended to by the Bank expeditiously

and satisfactorily; 00 the Bank shall take all steps for completion of formalities for listing and commencement of

trading at the BSE Limited within the specified time; the funds required for dispatch of refund orders shall be made available to the Registrar to the Issue by the Issuer; no further issue of securities shall be made till the securities offered through this Disclosure Document are listed or till the application monies are refunded on account of non-listing, under-subscription, etc; necessary co-operation to the credit rating agency(ies) shall be extended in providing true and adequate information till the debt obligations in respect of the instrument are outstanding.

Mode of Transfer/Transmission of Debentures

T e Debentures shall be transferable freely. The Debenture(s) shall be transferred and/or transmitted in accordance w th the applicable provisions of the Act and other applicable laws. The Debentures held in dematerialized form shall be transferred subject to and in accordance with the rules/procedures as prescribed by NSDL/CDSL and the relevant

s of the transferor or transferee and any other applicable laws and rules notified in respect thereof. The transferee(s) sh uld ensure that the. transfer formalities are completed prior to the Record Date. In the absence of the same, amounts d e will be paid/redemption will be made to the person, whose name appears in the register of debenture holders m intamed by the Registrar and Transfer Agent ("R&T Agent") as on the Record Date, under all circumstances. In ca W'here the transfer formalities have not been completed by the transferor, claims, if any, by the transferees would ne d to be settled with the transferor(s) and not with the Issuer. The normal procedure followed for transfer of se unities held in dematerialized form shall be followed for transfer of these Debentures held in dematerialised form. TI e seller should give delivery instructions containing details of the buyer's DP account to his DP.

73 Utilization of Issue Proceeds

proceeds realized from the Issue shall be utilized as per the Objects of the Issue. The proceeds of the issue are be ng raised to augment Tier II Capital under Basel HI Capital Regulations as laid out by RBI and overall capital of the Ba k for strengthening its capital adequacy and for enhancing its long-term resources.

7. Minimum Subscription

As the current Issue is being made on private placement basis, the requirement of minimum subscription shall not be ap licable and therefore the Bank shall not be liable to refund the issue subscription(s)/ proceed(s) in the event of the tot I issue collection falling short of issue size or certain percentage of issue size.

Market Lot

72

Tl

market lot will be one Bond (Market Lot"). Since the bonds are being issued only in dematerialised form, the odd will not arise either at the time of issuance or at the time of transfer of bonds.

Debentures held in Dematerialised Form

Th Debentures shall be held in dematerialised form and no action is required on the part of the Debenture Holder(s) for redemption purposes and the redemption proceeds will be paid by cheques, demand drafts, interest/ redemption wa rants, pay order, direct credit ECS, NUT, RTGS, other online payment mechanism as are permitted by the Reserve , Bat k of India to those Debenture Holder(s) whose names appear on the list of benefic Mee e R&T

Th lo

7.


A•ent. The names would be as per the R&T Agent's records on the Record Date fixed for the purpose of redemption. A I such Debentures will be simultaneously redeemed through appropriate debit corporate action.

TI e list of beneficiaries as of the Record Date setting out the relevant beneficiaries' name and account number, address, nk details and DP's identification number will be given by the R&T Agent to the Issuer. If permitted, the Issuer may nsfer payments required to be made in any relation by cheques, deniand drafts, interest/ redemption warrants, pay er, direct credit, ECS, NETT, RTGS, other online payment mechanism as are permitted by the Reserve Bank of India.

7 Trustees for the Bondholders

TI e Bank has appointed Catalyst Trusteeship Limited to act as Trustees for the Debenture Holders, The Bank and the T ustees have entered/ will enter into a Trustee Agreement, inter alia, specifying the powers, authorities and

ligations of the Trustees and the Bank. The Debenture Holders shall, without further act or deed, be deemed to have evocably given their consent to the Trustees or any of their agents or authorized officials to do all such acts, deeds, tters and things in 'respect of or •relating to the Debentures as the Trustees may in their absolute discretion deem

cessary or require to be done in the interest of the Debenture Holder(s). Any payment made by the Bank to the T ustees on behalf of the Debenture Holder(s) shall discharge the Bank pro (ante to the Debenture Holder(s).

I e Trustees will protect the interest of the Debenture Holders with regard to timely payment of interest and e myment of principal and they will take necessary action at the costof the Bank.

8 Sharing of Information

T e Issuer may, at its option, but subject to applicable laws, use on its own, as well as exchange, share or part with any fi ancial or other information about the Debenture Holder(s) available with the Issuer, with its subsidiaries and a iliates and other banks, financial institutions, credit bureaus, agencies, statutory bodies, as may be required and

ither the Issuer nor its subsidiaries and affiliates nor their agents shall be liable for use of the aforesaid information.

9 Debenture Holder not a Shareholder

Tie Debenture Holder(s) shall not be entitled to any right and privileges of shareholders other than those available to Ii ern under the Act The Debentures shall not confer upon the Debenture Holders the right to receive notice(s) or to a end and to vote at any general meeting(s) of the shareholders of the Issuer.

10 Rights of Bondholders

Tie)Bonds shall not, except as provided in the Companies Act, 2013, confer upon the holders thereof, any rights or p ivileges available to the members of the Bank including the right to receive Notices or Annual Reports of, or to a end and/or vote, ati the General Meeting of the Bank. However, if any resolution affecting the rights attached to the Binds is to be placed before the shareholders, the said resolution will first be placed before the concerned registered

ndholders for their consideration.

e rights, privileges and conditions attached to the Bonds may be varied, modified and/or abrogated with the c nsent in writing of the holders of at least three-fourths of the outstanding amount of the Bonds or with the sanction

Special Resolution •passed at a meeting of the concerned Bondholders, provided that nothing in such consent or solution shall be operative against the Bank, where such consent or resolution modifies or varies the terms and

c nditions governing the Bonds, if the same are not acceptable to the Bank.

T e registered Bondholder or in case of joint-holders, the one whose name stands first in the Register of Bondholders sl all be entitled to vote in respect of such Bonds, either in person or by proxy, at any meeting of the concerned 13 ndholders'and every such holder shall be entitled to one vote on a Show of hands and on a Poll, his/her/if s voting

hts shall be in proportion to the outstanding nominal value of Bonds held by him/her/it on every resolution placed b fore such meeting of the Bondholders.

• T le quorum for such meetings shall be at least five Bondholders present in person eras may be prescribed by law from tine to time or all the members if the total number of members is less than 5.

T w Bonds are subject to the provisions of the Companies Act 2013, the Memorandu_m,andrAliticles-okAssociation, the rms of this Disclosure Document and Application Form. Over and above such .eirand lLidittlifid'al3onds shall

L Page 45cy Hepzibah Complex c;;;

Second Floor No- X/109IM4

Thrissu


o be subject to other terms and conditions as may be incorporated in the Trustee Agreement/ Letters of Allotment/ nd Certificates, guidelines, notifications and regulations relating to the issue of capital and listing of securities issued m time to time by the Government of India and/or other authorities and other documents that may be executed in pect of the Bonds,

e as otherwise proVided in this Disclosure Document the provisions contained in the Companies Act, 2013 and the es thereunder as prevailing and to the extent applicable, will apply to any meeting of the Bondholders, in relation to

m tters not otherwise Provided for in terms of the Issue of the Bonds.

A register of Bondholders will be maintained in accordance with provisions of the Act and ALI interest and principal s ins becoming due and payable in respect of the Bonds will be paid to the registered holder thereof for the time being or in the case of joint-holders, to the person whose name stands first in the Register of Bondholders. The Bondholders w 11 be entitled to their Bonds free from equities and/or cross claims by the Bank against the original or any in ermediate holders thereof.

II Joint Holders

W Iere two or more persons are holders of any Bond(s), they shall be deemed to hold the same as joint tenants with be efits of survivorship subject to other provisions contained in the Articles.

712 Modification of Bonds

TI e Debenture Trustee and the Issuer will agree to make any modifications in the Disclosure Document which in their inion is of a formal, minor or technical nature or is to correct a manifest error. Any other change or modification to

th terms of the Debentures shall require approval by the Majority Debenture Holders.

713 Right to acceptor reject Applications

T1 e Bank reserves the right at its sole and absolute discretion to accept subscription amount(s). The Board of Di ectors/Committee of Directors reserves its full, unqualified and absolute right to acceptor reject any application for su scription to the Debentures, in part or in full, without assigning any reason thereof.

T e rejected applicants will be intimated along with the refund warrant, if applicable, to be sent. The Application F rms that are not complete in all respects are liable to be rejected and would not be paid any interest on the a plication money. Application would be liable to be rejected on one or more technical grounds, including but not

re tricted to:

Number of bonds applied for is less than the minimum application size;

Applications exceeding the issue size; Bank account details not given; Details for issue of bonds in electronic/ dematerialised form not given;

- • PAN/Gig and IT Circle/Ward/District not given; In case of applications under Power of Attorney by limited companies, corporate bodies, trusts, etc. relevant documents not submitted;

In the event, if any Debenture(s) applied for is/ are not allotted in full, the excess application monies of such D bentures will be refunded, as may be permitted.

7 14 Issue Procedure

Oi ly Eligible Investors as given hereunder may apply for the Debentures by completing the Application Form in the pr scribed format in block letters in English as per the instructions contained therein. The minimum number of D bentures that can be applied for and the multiples thereof shall be as set out herein. No application can be made for a raction of a Debenture. Application .forms should be duly completed in all respects and applications not completed - n the said manner are liable to be rejected. The name of the applicant's bank, type of account and account number,

in st be duly completed by the applicant. This is required for the applicant's 6W11 safety ancShes tails will be

pr nted on the refund orders and /or redemptions warrants. ‘,01‘ \...‘.. ONANCE BAN,

<61f

Hepzibah Complex 11" Second Floor tio:X11091M4

bY P.0 htisSO



TI e itapplicant should transfer payments required to be made in relation to subscription for the Debentures by N 11.IIT/RTGS, to the bank account of the Issuer as per the details mentioned in the Application Form.

Application Procedure

P. tential investors will be invited to subscribe by way of the Application Form prescribed in the Disclosure Document d ring the period between the Issue Opening Date and the Issue Closing Date (both dates inclusive). The Issuer re erves the right to change the issue schedule including the Deemed Date of Allotment at ifs sole discretion. In the e ent of any change in the Issue Schedule including the Deemed Date of Allotment, the Bank shall notify the Stock E change about such dhange. The Issue will be open for subscription during the banking hours on each day during the p riod covered by the Issue Schedule. .

3 Fictitious Application

Al fictitious applications will be rejected.

1 4 Basis of Allotment

N twithstanding anything stated elsewhere, Issuer reserves the right to accept or reject any application, in part or in fu 1, without assigning any reason. Subject to the aforesaid, in case of over subscription, priority will be given to In estors on a first come first serve basis. The investors will be required to remit the funds as well as submit the duly co npleted Application Form along with other necessary documents to Issuer by the Issue Closing Date.

I 5 Payment Instructions

TI e Application Form. should be submitted directly. The entire amount of Rs. 10,00,000/- (Rupees Ten Lakhs only) per D tienture is payable along with the making of an application. Applicants can remit the application amount through N 'FT/RTGS on Pay-in Date. Applicants are requested to mention purpose/details of payment as "Investment in E AF Small Finance Bank Bonds". The RTGS / NEFT details of the Issue Proceeds Account are as under:

Account Name ESAF Small Finance Bank Ltd.

Account No. 10140200016691

Bank Federal Bank Limited

Branch and Address Trichur Main Branch

Branch IFSC Code FDRL0001014

TI e funds in the Issue Proceeds Account will only be released to the Issuer upon allotment of the Debentures to all the su cessful applicants, in accordance with the terms of the Transaction Documents.

7 15 Eligible Investors

A Eligible Investors (as identified under Section 4.23 herein) are required to comply with the relevant re ulations/ guidelines applicable to them for investing in this issue of Debentures.

Note: Participation by potential investors in the issue may be subject to statutory and/or iegulatory requirements a plicable to them in connection with subscription to' Indian securities by such categories of persons or entities.

A plicavnts are advised to ensure that they comply with all regulatory requirements applicable to them, including ex flange controls and other requirements. Applicants ought to seek independent legal and regulatory advice in

re ation to the laws applicable to them.

Procedure for Applying for Dematerialised Facility

The applicant must have at least one beneficiary account with any of the'DPs of NSI C-12,51,L prior to making

the application.


The applicant must necessarily fill in the details (including the beneficiary account number and DP - ID) appearing in the Application Form under tbe heading "Details for Issue of Debentures in Electron ic/ Dema teria Used Form".

Debentures allotted to an applicant will be credited to the applicant's respective beneficiary account(s) with the DR

For subscribing to the Debentures, names in the Application Form should be identical to those appearing in the details in the Depository. In case of joint holders, the names should necessarily be in the same sequence as they appear in the account details maintained with the DP.

Non-transferable allotment advice/refund orders will be directly sent to the applicant by the R&T Agent to the Issue.

If incomplete/incorrect details are given under the heading "Details for Issue of Debentures in Electronic/ Dematerialised Form" in the Application Form, it will be deemed to be an incomplete application and the same may be held liable for rejection at the sole discretion of the Issuer.

For allotment of Debentures, the address, nomination details and other details of the applicant as registered with his/her DI' shall be used for all correspondence with the applicant. The applicant is therefore responsible for the correctness of his/her demographic details given in the Application Form vis-a-vis those with his/her DP. In case the information is incorrect or insufficient, the Issuer would not be liable for the losses, if any.

H. The redemption amount or other benefits would be paid to those Debenture Holders whose names appear on the list of beneficial owners maintained by the R&T Agent as on the Record Date. In case of those Debentures for which the beneficial owner is not identified in the records of the R&T Agent as on the Record Date, the Issuer would keep in abeyance the payment of the redemption amount or other benefits, until such time that the beneficial owner is identified by the R&T Agent and conveyed to the Issuer, whereupon the redemption amount and benefits will be paid to the beneficiaries, as identified.

17 Depository Arrangements

TI e Issuer shall make necessary arrangement with CDSL and NSDL for issue and holding of Debenture in d materialised form.

.18 List of Beneficiaries

TI e Issuer shall request the R&T Agent to provide a list of beneficiaries as at the end of each Record Date. This shall be th list, which will be Used for payment or repayment of redemption monies.

.19 Application under Power of Attorney

certified hue copy of the power of attorney or the relevant authority as the case may be along with the names and ecimen signature(s) of all the authorized signatories of the Investor and the tax exemption certificate/document of

Investor, if any, must be lodged along with the submission of the completed Application Form. Further difications/additions in the power of attorney or authority should be notified to the Issuer or to its agentS or to such

o er person(s) at such other address(es) as may be specified by the Issuer from time to time through a suitable co innunication.

In case of an applicatien made by companies under a power of attorney or resolution or authority, a certified true copy th•reof along with memorandum and articles of association and/or bye-laws along with other constitutional d cuments must be attached to the Application Form at the time of making the application, failing which, the Issuer e nrves the full, unqualified and absolute right to accept or reject any application in whole or in part and in either case

w thout assigning any reason thereto. Names and specimen signatures of all the authorizedrgi.awst also be

gedfaiLong with the submission of the completed Application Form. IBANtt BANif

v tr- Hepzlbah Complex Second Floor

48 yNpO: 1T0h9TIlsMs40

FOR PRIVATE ORCULATION ONLY Private and Confidential

20 Procedure for application by Mutual Funds and Multiple Applications

In case of applications by mutual funds and venture capital funds, a separate application must be made in respect of ea h scheme of an Indian mutual fund/venture capital fund registered with the SEBI and such applications will not be tr ated as multiple application, provided that the application made by the asset management co npany/trustee/custodian clearly indicated their intention as to the scheme for which tlie application has been m de.

T e application forms .duly filled shall clearly indicate the name of the concerned scheme for which application is being de and must be accompanied by certified true copies of:

SEEM registration certificate

Resolution authorizing investment and containing operating instructions

Specimen signature of authorized signatories

112 Applications by Provident Funds, Superannuation Funds and Gratuity Funds

TI e Government of India has permitted Provident, Superannuation and Gratuity Funds, subject to their assessment of th risk-return prospects, to invest up to 10 per cent in the Bonds and securities issued by private sector organisation in hiding Banks provided that the bonds or securities have an investment grade rating from at least two credit rating ag ncies. Accordingly, provident, superannuation and gratuity funds can invest up to 10 per cent of their corpus in th se bonds.

Future Borrowings

Th Bank shall be entitled to borrow/ raise loans or avail of financial assistance in whatever form as also issue Bonds/ De entures/ Notes other securities in any manner with ranking as pari-passu basis or otherwise and to change its ca ital structure, including issue of shares of any class or redemption or reduction of any class of paid up capital, on su h terms and conditions as the Bank may think appropriate, without the consent of, or intimation to, the Bo dholder(s) or the trustees in this connection.

7. 1 Prohibition on Purchase/ Funding of Instruments

Nether the Bank nor a related party oVer which the bank exercises control or significant influence (as defined under rel want Accounting Standards) shall purchase the instrument, nor can the Bank directly or indirectly fund the pu chase of the instrument. Banks shall also not grant advances against the security of the debt instruments issued by

th • n.

7.2 Documents to be provided by Investors

In estors need to submit the following documents, as applicable:

Memorandum and Articles of Association or other constitutional documents

Resolution authorising divestment Power of Attorney to custodian Specimen signatures of the authorised signatories SEBI registration certificate (for Mutual Funds)

Copy of PAN. card

Application Form (including RTGS/ NEFT details)

7. 3 Applicationsio be accompanied with Bank Account Details

liv ry application shall be required to be accompanied by the bank account details of the applicant and the magnetic ink character reader code of the bank for the purpose of availing direct credit of redemption amount and all other am unts payable to the Debenture Holder(s) through NEFT/RTGS.

24 Succession

h the event of winding-up of the holder of the Debenture(s), the Issuer will recognize the executor or administrator of di; concerned Debenture Holder(s), or the other legal representative as having title to the Debenture(s). The Issuer sl all not . be bound to recognize such executor or administrator or other legal representative as having title to the D• benture(s), unless such executor or administrator obtains probate or letter of administration or other legal re resentation, as the case may be, from a court in India having jurisdiction over the matter.

• T e Issuer may, in its absolute discretion,. where it thinks fit, dispense with production . of probate or letter • of a ministration or other legal representation, in order to recognize such holder as being entitled to the Debenture(s) st.nding in the name of the concerned Debenture Holder on production of sufficient documentary proof and/or an n enmity.

7 25 Mode of Payment

Al payments must be made through NEFT/RTGS as set out in the Application Form.

7 26 Effect of Holidays

If ny of the Coupon Payment Date(s) (other than on Redemption Date(s)) fall(s) on a day which is not a Business Day or any day on which Real Time Gross Settlement (RTGS) or high value clearing does not take place in Thrissur, Kerala or MuMbai, Maharashtra for any reason whatsoever, the payment due on such date may be made on the immediately su ceding Business Day however (i) the dates of the future coupon payments would be as per the schedule originally sti ulated at the time of issuing the Debentures. In other words, the subsequent coupon schedule would not be di turbed merely because the payment date in respect of one particular coupon payment has been postponed earlier be ause of it having fallen on a day which is not a Business Day.; and (ii) the amount of interest to be paid would be co tputed as per the schedule originally stipulated at the time of issuing the security •

'B siness Day' Shall be any day of the week on which money markets are functioning in the city of Mumbai, M harashtra excluding Sundays and any day which is a public holiday for the purpose of Section 25 of the Negotiable In truments Act, 1881 (26 of 1881) in Mumbai and any other day on which bank 5 are closed for customer business in

mbai, Maharashtra, India.

If ie Redemption Date falls on a day which is not a Business Day, payment in respect of that Redemption Amount (al ng with interest accrued on the Debentures until but excluding the date of such payment) shall be 'made one

Bu Mess Day prior to the Redemption Date.

In he event that any of the Record Dates does not fall on a Business Day, the immediately succeeding Business Day sh II be considered as the Record Day for the purposes of the Transaction Documents.

7.7 Tax Deduction at Source

Ta as applicable under the Income Tax Act, 1961, or any other statutory modification or re-enactment thereof will be de ucted at sourCe. For seeking TDS exemption/lower rate of TDS, relevant certificate/document must be lodged by the debenture holders' at least 30 days before the coupon date or 31st March whichever is eatlier, each financial year wit1 the Chief Financial Officer, 2nd Floor, Hepzibah Complex, Mannuthy Po, Thrissur, Kerala - 680651, or to such oil er person(s) at such other address(es) as the Bank may specify from time to time through 5uitable communication. Ta exemption certificate/ declaration of non-deduction of tax at source on interest on application money, should be su nutted along with the Application Form. Where any deduction of Income Tax is made at source, the Bank shall send to the 13onciliolder(s) a Certificate of Tax Deduction at Source. Bondholder(s) should also consult their own tax ad isers on the tax implications of the acquisition, ownership and sale of Bonds, and income arising thereon

If a ty payments under this issuance is subject to any tax deduction other than such amounts as are required as per cur unt regulations and laws existing as on the date of the Debentures, including if the Bank shall be required legally to

ma -e any payment for Tax from the sums payable in relation to the Debenture ("Tax Deduction"), the Bank shall ma e such Tax Deduction, and shall simultaneously pay to the Debenture Holders such additional amounts as may be

ne ssary in order that the net amounts received by the Debenture Holders after the Tax Deduction shall equal, the res ective amounts which would have been receivable by the Debenture Holders .0.- Ss of such Tax

‘.\. FINANCE BAN De uction SON

Hepzibah Complex S ond Flo r

/109/M

50



A ly tax deduction at snorted made by the Bank shall be in accordance with the terms of the Transaction Documents.

28

Letters of Allotment

E ch of the Debenture Holders shall be issued proof of allotment of Debentures by way of a physical letter of allotment w -Itch shall be issued by the Issuer to the said Debenture Holders on the Date of Allotment. On the completion of all st tutory formalities and in no event later than 2 (Two) Business Days from the Date of Allotment, such letter of al °Uncut will be substituted and the depository account- of each of the Debenture Holders maintained with its co responding depository participant shall be credited with such number of Debentures as Will be allotted to such D benture Holders in terms of the letter of allotment issued to it

7 29 Deemed Date of Allotment

Al the benefits under the Debentures, will accrue to the Investor from the specified Deemed Date of Allotment.

7 30 Record Date

TI Record Date will be 15 (Fifteen) Days prior to date of any payment in relation to the Debentures, as the case may

be

7. 1 Refunds

In ase the Issuer has received money from applicants for Debentures in excess of the aggregate of the application ney relating to the Debentures in respect of which allotments have been made, the Registrar shall upon receiving

. ins ructions in relation to the same from the Issuer repay the moneys to the extent of such excess, if any.

7,12 Pan Number

Ev ry applicant should mention its Permanent Account Number ("PAN") allotted under Income Tax Act, 1961, on the Ap lication Form and attach a self-attested copy as evidence. Application forms without PAN will be considered

inc mplete and are liable to be rejected. •

7. 3 Servicing behaviour on existing debt securities, payment of due interest on due dates on term loans and

debt securities

As on date of this Disclosure Document, no payment of principal has fallen due on any debt securities issued by the Bai k in the past. The Bank has a consistent record of paying interest on its existing debt securities on respective due da ts and no default has been committed by the Bank in servicing of its debt liabilities.

7.4 Alterations to the Issue

Th Bank reserves its sole and absolute right to modify the Issue Opening Date, Issue Closing Date, Pay-In Date and Dci med Date of Allotment. In the event of any change in the Issue Schedule including the Deemed Date of Allotment, the Bank shall notify the Stock Exchange about such change. In such a case, recipients of this Disclosure Document shall be intimated the revised time schedule by the Bank. In case the issue Closing Date/ Pay-In Date is/ are changed, the!Deemed Date of Allotment and the dates on which the Debentures are to be redeemed i.e. the Redemption Scledule may also be changes by the Bank in accordance with the tenure of the Debentures at its sole and absolute

dis retion.

Di claimer: Please note that only those persons to whom this memorandum has been specifically addressed are eligible to apply. However, an application, even if complete in all respects, is liable to be rejected without

assigning any reason for the same. The list of documents provided above is only indicative, and an investor is req ired to provide all those documents / authorizations! information, which are likely to be required by the Iss er. The Issuer may but is not bound to revert to any investor for any additional documents! information and car accept or reject an application as it deems fit. Investment by investors falling in the categories mentioned above arel merely indicative and the Issuer does not warrant that they are permitted to invest as per . extant laws,

reg lations, etc. Each of the above categories of investors is required to ch j aIcrnpl with extant

rul s/regulations/ guidelines, etc. Governing or regulating their investments as ap • "

i`MarE suer is

Hepzibah Complex 0.r. 5 I

Second Floor No:X/109IM4

P o Thriseei

FOR PRIVATE CIRCULATION ONLY • Private and Confidential

n t, in any way, directly or indirectly, responsible for any statutory or regulatory breaches by any investor, neither is the Issuer required to check or confirm the same.

gipi.. f I ...-/,CE

S Z/ F co cc' Hepzibah Complex

c) Second Floor -4,-? No:X/109/M4

bY P.D., Thtissu

Page 52

Thrissu A thorised Signatory N me:'KaCiainbelit Paul Thomas DI :00199925 Ti le: Managing Director & CEO Date: June 01, 2018

s‘4:PtIlof: Xi I: AI N° 9C/E 47: M4

Hepzibah CompIe Second Floor

1153t P


SECTIONS: DECLARATION

1 le Issuer declares that all the relevant provisions in the regulations/guideline issued by SEBI and other applicable I ws have been complied with and no statement made in this Information Memorandum is contrary to the provisions o the regulations/guidelines issued by SEBI and other applicable laws, as the case may be. The information contained ii this Information Memorandum is as applicable to privately placed debt securities and subject. to the information a a ilable with the Issuer. The extent of disclosures made in the information Memorandum is consistent with d sclosures permitted by regulatory authorities to the issue of securities made by the companies in the past.

r ESAE Small Finance Bank Ltd

ESAF Small Finance Bank Limited C ta st Trusteeship


ANNEXURE I: CONSENT LETTER FROM THE DEBENTURE TRUSTEE

CATALYST Believe In yourself.. Trust us!

CUMUM/18-19/0E13/41

May 18,2018

ESAF Small Finance Bank Limited Man mit hy,Thrissur, Kerala - 680651

Kind Attn: Mr.Mahadevan CR

Dear Sir,

Subject: Consent to act as Debenture/Bond Trustee for Unsecured, Listed, Rated Redeemable, Non-Convertible Debentures Bonds Issue on private placement basis aggregating up to Rs. 40 crores

This is with reference to the discussions we had regarding appointment of Catalyst Trusteeship Limited as Debenture/Bond Trustee for the captioned Bond Issue on private placement basis.

In this connection, we are agreeable to act as Trustee on the terms and conditions as mutually agreed between the Trustee and the Company.

The Company and the Trustee shall enter into relevant trustee agreements and other necessary Bonds issue documents for the aforesaid issue of Bonds and term loans and also agrees & undertakes to comply with the provisions of the SEB1 (Debenture Trustees) Regulations, 1993, the RBI Circular No. RBI/201 2-13/560 dated June 27, 2013, the Companies Act, 2013, Companies (Share Capital & Debentures) Rules,2014 and any other applicable statutes, regulations and provisions as amended from time to time.

We are also agreeable for inclusion of our name as trustees in the Company's offer document/disclosure document /any other document to be filed with the statutory authority or any other authority as required..

Yours faithfully,

E

ko.f MANCE BA El

Authorize Antilmited Signatory

an ISOVIO1 Company

CATALYST TRUSTEESHIP LIMITED T.T,Avc°^T'umr”."Ag".T

mumbei Office Office No. 05 - 87. MO FlOOF, a WIng. Mittel Tows,. Nadi-nen P0181, Munrilial 400021 1,1 +0110221 4922 0555 Fee 491 0221 4922 0505

Office GOA HMSO, PDX No. OS, Abused Colony IR191111. Paid Rood. Pose 411 010 Tel .91(020) 25280051 ea 485020)28250570

Delhi Office Officio No. 211. 2nd l floneNEIVI/Ing Noises. 21 Keeled. c4dnsllii Marg. Now Dell+ 110001. Tel. 011 45020101.

CIN No. 0e749998N1997PLC11026.2 Email 'Midi(' usleeneri Webillewww.celtalysttrustee.com

Pun, I Mumbei I fiengaluru Deihl I Chennal

co Hepzibah Complex

Second Floor No:X/109/M4 $24

YPO eoti flP

Page 54


ANNEXURE II: APPLICATION FORM

ESAF ESAF SMALL FINANCE BANK

Joy of Banking


Date of Incorporation: May 05, 2016 Registered Office: Hepzibah Complex, Second Floor, No.X/109/M4, Mannuthy,


Website: https://www.esafbank.com/ •

Application Form Sr. No.

Ao dressed to:

te: , 2018

ar Sirs,

ving read and understood the contents of the Disclosure Document on Private Placement dated June 01, 2018, we aptly for allotment to us of Listed, Redeemable, Unsecured, Basel III compliant Tier II Bonds in the nature of non-co Ivertible debentures. The amount payable on application as shown below is remitted herewith. On allotment, please pl cc our name on the Register of Bond holders. We bind ourselves to the terms and conditions as contained in the Di closure Document dated June 01, 2018. We note that the Bank is entitled in its absolute discretion to accept or reject thi application whole:or in part without assigning any reason whatsoever.

W understand that these investments are being counted towards Tier H Capital of the Bank, and that a su ordinated bond is different from a fixed deposit, particularly that it is not covered by deposit insurance. We fu 'ther understand that in certain circumstances, as are more particularly identified in the Disclosure Document, R II shall be entitled to determine write-down of the principal value of the Debentures as per the RBI Basel III

idelines.

(PI EASE READ THE INSTRUCTIONS CAREFULLY BEFORE FILLING THIS FORM) W understand that in case of allotment of Bonds to us/ our Beneficiary Account as mentioned above would be cre sited to the extent of Bonds allotted.

Th application shall be for a minimum of 50 (Fifty) Debentures and in Multiples of I (One) Debentures thereafter:

No of Bonds (in word)

No of Bonds (in figures)

An ount (Rs.) (in words)

An bunt (Rs.) (in figures) # if

Pay cnent. Details

Date Cheque/Demand Draft drawn on (Name of the Bank &Branch)

Cheque/Demand Draft No.

Hepztah Complex Second Floor No:X/1 091M4

Tit

ge 55


LilbY P. O., Thr1 /2 se

age 56



C eque should be drawn in favour of "ESAF SMALL FINANCE BANK LIMITED"

A ternatively, Applicant can remit the application amount through RTGS/NEFT on account of "Investment in ESAF

S iall Finance Bank Bonds". The details of the Issue Proceeds Account are as under.

A count No - 10140200016691

A count Name - ESAF SMALL FINANCE BANK LTD

IF .0 Code: FDRL0001014

B anckTrichur Main Branch

1 ' Financial Institution 2 Insurance Company 3 Provident, Gratuity, Pension &

Superannuation Fund*

4 Regional Rural Bank 5 Mutual Fund 6 Companies, Body Corporate

7 Trusts, Association of persons,

Societies

8 FPIs 9 Individuals

10 Scheduled Commercial Banks or

Co-operative Banks

* h case of Provident/Superannuation/Gratuity Funds claiming exemption from tax deduction at source it is hereby de lared that as on the date of application we continue to be exempted under Section 10 of the Income Tax Act, 1961 an comply with the provisions of Circular No. 4/2002 of the Government of India, Ministry of Finance, Department of

Re enue, Central Board of Direct Taxes.

Ap lication Details

Fir Ap licant's Name in Full (Block le ters)

Mailin Address in Full (Do lot repeat name. Pos Box No. alone is not sufficient.

Ph 680651 Tel: +91 4872373813 Fax: NA

Tax Details PAN or GIR No, IT Circle / Ward / District Not Allotted

AAECE2619Q

De ails of Bank Account

Bank Name & Branch

Account No.

Nature of Account

IFSC Code ...oe'e-t-MtAt:CE: Bi:- . . ...

sow,FINANCE BAN

Hepzibah Complex Second floor No:X/1 091M4

P.0 T rissU


neficiary Account Details for Demat Credit

D:Tository Name _ D Tositorv Panic ants Name D' - ID C ient - ID 13cneficiary Account No N In -le of the Account Holder

x Deduction Status: (Please tick one)

Fully Exempt (Please furnish exemption certificate): ts

Tax to be deducted at Source:

By making this application, 1/We acknowledge that 1/We have understood the terms and conditions of the Issue of SECURED LISTED RATED REDEEMABLE BASEL III COMPLIANT TIER II BONDS IN THE NATURE OF N-CONVERTIBLE DEBENTURES OF ESAF SMALL FINANCE BANK LIMITED AS disclosed in the Disclosure

cument dated June 01, 2018.

Specimen Signature

Name of the Authorised Signatory Designation Signature

- Page 57


INSTRUCTIONS

1 Application Forms must be completed in BLOCK LETTERS IN ENGLISH.

2 The applications should be submitted between 9.30 a.m. to 6.30 p.m on working 'days at the designated collecting branches of ESAF Small Finance Bank Limited.

3 All payments should be through Cheque/Demand Draft or through RTGS/ NEFT. Cash, Stockinvest, Money Orders or Postal Orders will NOT be accepted.

4 Please menticin the PAN/GIR No. and IT Circle/Ward/District.

5 Income-tax as applicable will be deducted at source at the time of payment of interest on application money and on the regular payments. Those desirous of claiming exemptions of tax are required to submit relevant certificate issued by the Income-Tax Officer and/or submit Form 15AA / 151-1 in duplicate as prescribed in the

Income-Tax Rules, 1962 along with the Application Form.

6. The application form must be accompanied by a copy of PAN card, a certified copy of the Memorandum & Articles of Association, Certified true copy of the Board Resolution/Power of Attorney and List of authorized

,r rti Signatories, in case of the Applicant being a Company. In case of the Applicant being a

Provident/Stiperannuation/Gratuity Fund, Port Trust or any other Trust, a Certified true copy of the Trust 1 Deed, Resolution of Trustees / Power of Attorney and List of authorized Signatories.

As a matter of precaution against possible fraudulent encashment of interest warrants due to loss/misplacement, applicants are requested to mention the full particulars to their bank account, as specified in the Application Form. Interest warrants will then be made out in favour of the bank for credit to the applicant's account. In case the full particulars are not given, cheques will be issued in the name of the

applicant at his/ her risk.

8 The Bank is entitled, at its sole and absolute discretion, to accept or reject any application, in part or in full, without assigning any reason. An application form which is not complete in any respect is liable to be

rejected.

9. All future communication should be addressed to (unless otherwise intimated):

Name: Mr. Ranjith Raj AddreSs: 2nd Floor Hepzibah Complex, Mannuthy PO, Thrissur, Kerala, 680651

Phone: +91-8589975504 Fax: NA Email: [email protected]

opal FINANCE 8,14,


Page 58

Second Floor No:X/1091M4

e 59


ANNEXURE III: DISCLOSURE OF RELATED PARTY TRANSACTIONS

Related Party Disclosures

Related Party ! Nature of Relationship

ESAF Microfinance and Investments Pvt. Ltd. Holding Company

ESAF Retail Pvt. Ltd. Entities in which MM!' is a member

ESAF biomes and Infrastructure Pvt. Ltd. Entities in whicILKMP is a member

K Paul Thomas Key Managerial Person (MD and CEO)

Padmakumar K Key Managerial Person CFO :

RaMith Raj Key Managerial Person CS :

ESAF Swasraya Multi State Agro

Co-operative Society Ltd.

Enterprises over which KMP Has significant influence

Rupees in crores

Transaction Related Party 31 March-2017

Fixed Deposit

ESAF Swasraya Multi State Agro Co-operative Society Ltd.

50.00 :

ESAF Microfinance and Investments (P) Ltd. 280.00

Fixed Deposit Matured ESAF Microfinance and Investments (P) Ltd. 50.00

I Deposit Transfer

ESAF Swasraya Multi State Agro Co-operative

Society Ltd 87.76

Demand Deposit


0.31


Savings Deposit (Rupees in INR)

K. Paul Thomas 11,091.00

Interest Accrued and due Deposit

ESAF Swasraya Multi State Agra Co-operative

Society Ltd. 0.34


Payable ESAF Swasraya Multi State Agro Co-operative

Society Ltd 7.01

Issue of Equity Shares

ESA!? Microfinance and Investments (P) Ltd. and its

nominees 280.75

K. Paul Thomas 20.80

Securities Premium

ESAF Microfinance and Investments (P) Ltd. and its

nominees 3.15

K. Paul Thomas 030

Agency agreement Payment of Collections as per

Loi ESA', Retail Pvt. Ltd.

ANCE 894,/Q1 0.45

e< 51.1k

E BAN

Hepzibah Complex Second Floor Ho:X/109IM4


Assignment of Loans ESAF Swasraya Multi State Agro Co-operative

1 Society Ltd.

30.99

Receivables


0.40

ESAF Microfinance and Investments (P) Ltd 208.36

Rent Deposit ESAF Homes and Infrastructure Pvt. Ltd. 1.52

Consideration for slump sale-Issue of Equity Shares


Consideration for slump sale-Securities Premium


Consideration for slump sale-Cash/Bank

ESAF Microfinance and. Investments (P) Ltd. 2.00 ,

Rent paid ESAF Homes and Infrastructure .Pv Ltd. 0.15

Interest


0.34

ESAF Microfinance and Investments (11 Ltd 2.26

BC Servicer Fee ESAF Swasraya Multi State Agro Co-operative Society Ltd.

6.37

Commission for client acquisition ,

ESAF Swasraya Multi State Agro Co-operative Society Ltd.5.26

526

Remuneration nd Sitting Fees K. Paul Thomas 0.07

Salary (Rupees in INR)

Padmakumar K 88,661.00

Ranjith Raj _........--

. 73,812:00

—

Page 60

that lie.0-5K/C-Sancy Oitn.%flan trio.ni,AnaCtrisai-

let .1141-11,1111111 n I nn. NV is wit-WWII 7111

!Mittel fit Caltnt: it FismOrAqtern...-, Senif.141,0.0 elltaymootrtrerstrerr.1kodtrearbel•ralOrt sek•mas.fiS43r54 • Fie 41-1161513157 tnet onetftwinvimp trim inn nrerari ,nuin

CIN-tor titvaiirdetall

tnr. .ras


ANNEXURE IV:

RATING LETTERS AND RATIONALES

eSEI" RatingsSe Ea*.

er(Ouslrull Ala OPIT6OO *pen

CAKE/020/111/101K4 ACM

K Pit? Thom% .heanating Oluergor CEO ESAF 511103111911131.013s A14

Compiny, Monnutery P.O lhriasur DIG...U.6M 651

Confident al


May 211, 7018

DiaarSir,

Cretslitotlietag

Memo refer to ow teet dated November 3CK 7317 AI your regunst for revalidation of

the rating osstned tel the lite Iltscmtl Issuedf your bank, for a emit& Ili.125 (lore.

2. The following rating here been reviewed:

rTto: II bend issue . la.s.One hundred end

,(2s. amyl 125'

(5bulle A MMus: (Stain& CASK A..; Ntgathu

1 Flatt—e Rel AECAn I

'earn:4d

r Reline irmitynont . AfteUnt 1

Itwenty are tram cert.') trepelye)

. •Unutilted tillWent of Fis.145 trove as on May23,201g

: 3. Pleast a mange to get the ratty tesall&led. In case the oreposcri issue Is not made

within sir months from the dete add: tone].

O. ;lease iillOrM vs the lasierctO.Yellerletl details of issue Immediately, but rot later than

7 &hit from the dote at plat rtg the InStruenenr;

I resrumtnt woe

osur

ii

tour Sim 03-1 rr)

Cemp:in Rate

organ,' ficrnent

oats

Tense R&Crirt. I7R

A Satinet n ewe

rtme tot al ritatt darer of

Debengtre Tryst.°

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.

5. CARE I eSerces thc, right it, undertake a saryeillinCejnIVIOW of tie rating frarn tittie:t0

time, bated on circerostficsrut warranting sues 'Sow, subject to at least one Seth

revieWiruryellIneee &eery year.

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Page 62


6 CARL (ospreys the OW. to teviSeireaffirmforhhdraor the fIlthis nostrta ac alto reirlso

the trurlaok, at e rOSOIr pi periodic review/surveillances bawd On aori eimrit Or

istormatkjn vrlilch in the opinIon af GARP IMStfants Such arl Wan. In the anent al

faun on the pa CIR She entity to rut Mtn such ii(Offtlatrinn„ material or cfnrificptIons

ZS now In engulfed ay CARE so as la enable II to carry 0111 contirmhis• rocinitafing

the rjJLjre of ihe4ctt Infaturre Ms, CARE :hall na ref out the levieui on the Omit. of hut;

nygiletie InbarMallon, Gununinout the h.% 11141n ccSucn InstturnenIS in such haSca the

_credit f DOI symbol Ova ha nonopnennind by '1551.1H1 NOT COOPERATING", CARE

,shati Woo be entilltyti CapaNiCiZeidistallandte all the fofe-renticneg raring ixticris

or mann er- con rick red appropriate tar It. without teVireaeto yUU

7, Users of Ns rating may kind if Why our webau erene.emeppl Inp,s coin for hIatt

update nn the 0te,S1Parling zatrOG,

A CARL rating10M Oat recorrenUrniatlanolo buy., sell, or hold any toorrales.

il you need an clarificOtion.Vou ant welognse to acuroach us in this fagged,

1VsnkigyC&i, Venn faithfully,

if rvafth flo

Manager

ParthiSS

4-ril-es' Anti Sho rtkor It

Deputy Opens,' ,

Wai,n5hra MONO=

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pia,actelh fpasefon brveann am On:1We all nottoi :Ark ISCIlidestmoarinoro.

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CP4LI.110)A001:y,111C?1

COO As 'thaw

Professional Risk Opinion

CARE/CRO/RR/2017-18/1256

R Ratings .1451 onik•

Hepzibah Complex

Second Floor

No:X/109/M4

End: As above

CARE Ratings Limited (Formerly known as Credlt Analysli & Research Limited)

CORPORATE OFFICE e Flu, Godrei Colissem, Sao.i, H114111.10 Read,

011Etnwn bran HIghway.Sion (E). Womb& .405011. TEL .9E42.6754 3456 • Foe 41.22.6754 3457 Ewa [email protected] • rowe.carerwings.com

CIN-167190MH1993PLC071691

Unit Na. 0-509/C, Sopron AREA 5th Flew. Na. 769. Anna 56161..Ownni -600002.

let +01-44.21149 OBI 212/76 TEL/ Fro +91.44.2849 7812

Page 63


Mr. K Paul Thomas

Managing Director & CEO

ESAF Small Finance Bank Limited

Hepzibah Complex, Mannuthy P.O

Thrissur

Kerala-680 651

November 30, 2017

Dear Sir,

Credit rating of Proposed Tier II Bond Issue of Rs.125 crore

Please refer to our letter dated November 30, 2017 on the aboVe subject.

The rationale for the rating is attached as an Annexure - I.

We request you to peruse the annexed documents and offer your comments,

if any. We are doing this as a matter of courtesy to our clients and with a

view to ensure that no factual inaccuracies have inadvertently crept in. Kindly

revert as early as possible.

If you have anYfurther clarifications, you are welcome to approach us.

Thanking you,

Yours faithfully,

Rfr;egdjfi' Ravi Shank& R

Deputy Manager


FOR PRIVATE CIRCULATION ONLY. Private and Confidential

Annexure-I

Rating Rationale

ESAF Small Finance Bank Limited

Ratings

Instruments Amount

(Rs. crate) Rating' Rating Action

Tier II Bond issue (Proposed)

125 (Rupees One Hundred and Twenty Five crore only)

CARE A-; Negative (Single A Minus;

Outlook: Negative) Assigned

Details of instruments/facilities in Annexure-1

Rating Rationale

The rating assigned to the proposed Tier II Bond issue of ESAF Small Finance Bank Ltd (ESAF SFS)

factors in the experience of the promoter & management team in the lending business, the group's

significant experience in microfinance loons, access to diversified and low cost resource profile and

increase in scale of operations. The rating is, however, constrained by moderation in asset quality

post demonetization in trend with industry, geographically concentrated loan portfolio and limited

diversification in loan portfolio which mainly consists of micro finance loans. The rating also takes

note of adequate capitalization levels of ESAF SFB and relatively high net NPA to networth. The

rating also factors in the inherent risks associated with the microfinance, industry including socio-

political and regulatory risks.

In view of significant increase in apex arising from commencement of banking operations, ability of

ESAF SFB to grow its loan book and timely mobilization of core equity capital is critical to credit

prospects of the bank. Ability of the SFB to diversify its loan portfolio across products and

geographies, improve its asset quality and capital adequacy while increasing its scale of operations

are the key rating sensitivities.

Outlook: Negative

In trend with MFI industry, the asset quality of MFI loan portfolio has witnessed significant

moderaticin. 90+dpd has increased from 0.17% of AUM as on March 31, 2016 to 4.35% of AUM as

on March 31, 2017. Though it has witnessed further moderation in Q1FY18 to 5.67%, with

significant growth in portfolio, it has improved to 5.53% as on September 30, 2017. While current

month collection efficiency (current month demand vs. collection) continue to improve in the past

six month ended September 2017 to 95.0% from the level of 91.8% in April 2017, collection

efficiency (including cumulative overdues) stood at 64.10% in the month of September 2017. This is

on account of lower recoveries in delinquent accounts especially in the state of Maharashtra and ;

'Complete definition of the ratings assigned are available at www.careratinqs.Cam and other CARE publications

• 1

Page 64

Hepzibah Complex Second Floor No:X/1090v14


Madhya Pradesh which were impacted post demonetisation. Same has resulted in significant

increase in net NPA to networth from 1.06% in March 2017 to 42.06% in June 2017 and further to

45.33% in September 2017. Extent of under recovery in these delinquent accounts is likely to result

in need for additional provisions during next few quarters.

Background

ESAF Small Finance Bank Limited (ESAF SFB) commenced its banking operations from March 10,

2017. ESAF SFB is a subsidiary of ESAF Microfinance and Investments Private Limited (EMEIL) which

holds 93.10% stake and rest is held by Mr. K. Paul Thomas, Founder and Chairman of EMFIL. Based

on the direction of RBI to fold the financial and lending business of EMFIL to ESAF SFB, the Board of

Directors and shareholders of EMFIL had decided on 27th January 2017 and 27th February 2017

respectively, to transfer its financial business including assets, liabilities (excluding NCDs) and

employees on a going concern basis to ESFB for a lump sum consideration of Rs.7 crore which is to

be discharged on mutual agreement.

ESAF SFB's board consists of 7 directors including 4 Independent Directors. As on March 31, 2017,

the SFB was operating in 93 districts across 10 states with loan portfolio of Rs.1,483 crore.

Credit Risk Assessment

Experience of promoter and management team

ESAF SFB was promoted by ESAF Microfinance and Investments Private Limited (EMFIL) Which holds

93.10% stake and Mr. K Paul Thomas, who holds 6.90% stake in the SFB as on March 31, 2017. Mr.

K Paul Thomas is the Managing Director and CEO of the bank. Earlier, he was the chairman of

EMFIL. He holds Masters' Degree in Business Administration and has over 31 years:of industry

experience, of which more than 21 years are in the microfinance sector. He has also worked with

IFFCO, world's largest cooperative owned fertilizer company before starting ESAF. He is one of the

Directors in Microfinance Institutions Network (MFIN) and Chairman of KAMP' (Kerala Association

of Microfinance Institutions). He is supported by well experienced team which has rich experience

in the financial services and microfinance sector. The Board of ESAF SFB consists of 7 Directors

including 4 Independent directors who have rich experience in microfinance and banking industry.

Adequate capitalization levels; However, capital Infusion is critical to bank's growth and credit

prospects As on March 31, 2017, networth of ESAF SFB stood at Rs.306 crore. CAR and Tier I CAR of ESAF SFB

stood at 16.27% and 13.39% as on March 31, 2017 against regulatory requirement of 15.00% and

7.50% respectively. The bank has raised PDI of Rs.48 crore in June 2017 and Tier II bond of Rs.25

crore in September 2017. CM and Tier I CAR stood at 16.96% and 12.73% respectively as on

2

Page 65

Hepzibah Complex Second Floor No:X/1091M 4


September 30, 2017. The bank expects to mobilise fresh equity of around Rs.200 crore during

H2FY18. Timely infusion of capital is critical for the growth and credit prospects of the bank.

Increase in scale of operations

Effective from February 22, 2017 as per BTA entered between EMFIL and ESAF SFB, entire loan

book of EMFIL stands transferred to ESAF SFB. During FY17, total disbursements amounted to

Rs.2,706 crore (PY: Rs.2,388 crore) resulting in increase in loan portfolio from Rs.1,317 crore as on

March 31, 2016 to Rs.1,483 crore as on March 31, 2017. During FY17, EMFIL reported.cobsolidated

PAT of Rs.42 crore on a total income of Rs.431 crore as against PAT of Rs.34 crore on a total income

of Rs.318 crore in FY16.

The bank made disbursement of Rs.1,818 crore during H1FY18. Subsequently, loan portfolio

increased by 55% to Rs.2,292 crore as on September 30, 2017. AUM stood at Rs.2,890 crore as on

September 30, 2017 against Rs.2,327 crore a son March 31, 2017. As on September 30, 2017, total

deposits stood at Rs.1,043 crore (Rs.409 crore as on March 31, 2017). During H1FY18, ESAF SIB

reported total income of Rs.275 crore. On account of higher operating expenses due to

commencement of small banking operations and higher provisions for NPAs (Rs.35 crore), the bank

reported before tax loss of Rs.12 crore in Q1FY18. With significant growth in disburserMents and

loan portfolio, the bank reported PAT of Rs.5 crorein 02FY18. During H1FY18, the bank reported

loss of Rs.49 crore. NIM decreased from 7.64% in FY16 to 5.13% in FY17 on account of increase in

total assets which includes investments of Rs.579 crore (majorly towards SLR requirement). ROTA

also decreased from 2.49% in FY16 to 1.81% in FY17.

Access to diversified resource Profile

During FY17, the bank mobilized deposits to the tune of Rs.409 [rare. Of the total deposits, CASA

proportion stood at 18.17%. As on September 30, 2017, total deposits increased to Rs.1,043 crore.

CASA proportion stood at 13.11% as on September 30, 2017. With the conversion into SFB, apart

from mobilizing deposits, ESAF SFB has various funding options available in the form of money

market borrowings (on inclusion in the Second Schedule to RBI Act, 1934), IBPC, bank lines of

credit, certificate of deposits etc. The bank has issued IBPC amounting to Rs.195 crore during

CL2FY18. With diversified funding sources available and access to deposits, the cost of funds is

expected to come down. Deposits are mobilized at around 8-9%. Total borrowings stood at

Rs.3,283 crore as on September 30, 2017 which includes deposits of Rs.1,043 crore and refinance

loans of Rs.982 crore from Fls such as NABARD, SIDBI, etc.

Moderation in asset quality post demonetization in trend with the industry; however

improvement witnessed in collection efficiency in the past few months

Post demonetization, the bank has witnessed deterioration in asset quality. GNPA and NNPA stood

3

Page 66



at 0.53% (Rs.7.85 crore) and 0.25% (Rs.3.60 crore) as on March 31,2017. The company has availed

RBI dispensation for classification of NPAs. Without considering RBI dispensation, 90+ DPD Istood'at

Rs.101 crore (4.35% of AUM) as on March 31, 2017. As on June 30, 2017, GNPA and NNPA (on AUM

basis) stood L at 5.67% and 4.34% respectively. Supported by growth in portfolio, asset quality

witnessed marginal improvement and GNPA and NNPA (on AUM basis) stood at 5.53% and 4.12%

respectively as on September 30, 2017. In absolute terms, GNPA and Net NPA stood at Rs.159.83

crore and Rs,116.39 crore respectively as on September 30, 2012.

Out of total GNPA of around Rs.160 crore, the bank has provided Rs.43 crore until September 2017

and the incremental provisioning requirement will have an impact on the profitability in FY19.

Collection efficiency for the current month (excluding overdue of earlier months) has declined from

99.5% in Oct 2016 to 91.25% in Feb 2017. Subsequently, it has shown improvement to 95.0% in Sep

2017. Further, incremental overdue of the total portfolio has declined from the range of Rs.10-12

crore per month during Jan 2017 to June 2017 to around Rs.6-8 crore per month in Q2FY18

indicating improvement in recovery from delinquent accounts. However, Net NPA in relation to

networth stood relatively high at 45.33% as on September 30, 2017.

Geographical concentration of loan portfolio

ESAF SFB has presence in 93 districts across 10 states with 296 branches as on March 31, 2017.

Kerala continues to constitute the major portion with 67% share of AUM as on March 31, 2017 (P.Y

67%), followed by Tamil Nadu at 17% (P.Y 15%) and Maharashtra at 8% (P.Y 9%). Other states

namely Chhattisgarh, Madhya Pradesh, Bihar, Puducherry, Karnataka, West Bengal and Jharkhand

constitute the rest. As on March 31, 2017, top 5 Districts are Thrissur (15%), Palakkad (14%),

Trivandrum (7%), Alappuzha (5%) and Malappuram (5%). Although strong presence in a Particular

region helps the bank to understand the dynamics of the region, it is exposed to geographical

concentration risk. ESAF SFB has also recently ventured into gold loans, LAP, micro housing loans

and business loans.

Prospects

Transformation from NBFC to SFB offers various benefits including ability to offer wider range of

products both on assets and liability side, access to diversified funding sources, access tolow cost

funds, increased regulatory supervision and support. On commencement of SFS operations and

consequent increase in operating expenses resulted in moderation in pre-provision profit of ESAF

SFB in 141FY18. In view of the same, ability of ESAF SFB to grow its loan book and reduce cost of

funds by increasing share of low cost funds is critical to improve operating profits. Timely

mobilization of core equity capital is critical to growth & credit prospects of ESAF SFB. Ability of the

ktk. F NANCE I AA"H.,

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S" Hepzieah Coniplex .‘Z

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Page 67


SFB to diversify its loan portfolio across products and geographies, improve, its asset quality and

gib improve its capital adequacy while increasing its Scale of operations are the key rating sensitivities.

FtNANcF RA:

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QUIFF 0 Thriss0

5

Page 68



ANNEXURE V: ILLUSTRATION OF CASHFLOWS*

n

I sh Flow

_

' Scheduled Date of 1 Payment

Actual Date of Payment

' IP

No of days in . coupon period

1

I , Amount

lit Coupon 30-Jun-18 30-Jun-18 29 ' 36,54,794.52

2nd Coupon 31-Dec-18 31-Dec-18 184 2,31,89,041.10

3 d Coupon 30-Jun-19 01-Jul-19 181 : 2,28,10,958.90

4th Coupon 31-Dec-19 31-Dec-19 184 2,31,89,041.10

5th Coupon 30-3un-20 30-Jun-20 182 1 2,29,36,986.30

6t.11 Coupon 31-Dec-20 31-Dec-20 184 2,31,89,041.10

7 1 Coupon 30-Jun-21 30-Jun-21 181 2,28,10,958.90

8 1 Coupon 31-Dec-21 31-Dec-21 184 2,31,89,041.10

9h Coupon 30-Jun-22 30-Jun-22 181 2,28,10,958.90

1 th Coupon 31-Dec-22 31-Dec-22 184 131,89,041.10

Tith Coupon 30-Jun-23 30-Jun-23 . 181 2,28,10,958.90

i

th Coupon 31-Dec-23 01-Jan-24 184 2,31,89,041.10

th Coupon 30-Jun-24 01-Jul-24 182 2,29,36,986.30

1 th Coupon 31-Dec-24 31-Dec-24 184 2,31,89,041.10

1 th Coupon 01-Jun-25 31-May-25 152 ' 1,91,56,164.38

1' tincipal 01-Jun-25 31-May-25 : 40,00,00,000.00

love illustrative casl flows are for bonds totalling for face value of Rs. 4000,00,000/-

4-1

Page 69


ANNEXURE VI: CONDITIONS PRECEDENT

(a)

A certified copy of a resolution of the shareholders of the Bank should have been submitted to the Debenture Trustee:

Authorising the Board of Directors of the Bank to borrow monies; and

Setting out the authorisation under Section 42 of the Companies Act, 2013 read with the applicable rules in relation to the private placement of Debentures.

(b) A certified copy of a resolution of the Board of Directors of the Bank should have been submitted to the Debenture Trustee. •

(c) Compliance with applicable provisions of the listing agreement(s) entered into with the Stock Exchange, including but not limited to the requirement of obtaining the prior approval of the Stock Exchange in the event of any material modification to the structure of the Debentures.

(d) the Bank shall have obtained an in-principle approval from BSE for listing of the Debentures.

(e) The Bank shall have received a letter from the Debenture Trustee that it has acknowledged and has agreed / consented to act as the Debenture Trustee.

(0 Rating Letter from CARE.

(R) Issuance of this Disclosure Document.

U.FINANCEBANk SOk - it (<

cd Hepzibah Complex e Lu c Second Floor No:X/10 9IM4

120 MYRO., Thris tic"

Page 70

Hepzibah Complex Second Floor No:X1109/M4


ANNEXURE VII: CONDITIONS SUBSEQUENT

The Bank shall ensure that the Debentures are listed and traded on the BSE within 15 (Fifteen) calendar days from the Deemed Date of Allotment of the Debentures;

The Bank shall execute the Debenture Trust Deed within 30 (Thirty) days front the Deemed Date of Allotment;

The Bank shall ensure that upon issuance of the Debentures, the allotment and the dematerialised credit of the same occurs not later than 2 (Two) days from the Deemed Date Of Allotment;

The :Bank shall ensure that it files PAS-4 and PAS-3 with the registrar of companies, within the time limit set out under the Companies Act, 2013.

The Bank shall submit a report to Department of Banking Supervision (DBS), Reserve Bank of India giving details of the Debentures issued, such as amount raised, maturity of the instrument, rate of interest, soon after the Deemed Date of Allotment.

Neither the Bank nor any related party over which the Bank exercises control or significant influence (as defined under

relevant Accounting Standards) shall purchase the Bonds, nor would the Bank directly or indirectly fund the purchase

of the Bonds. The Bank shall not grant advances against the security of the Bonds issued by it.

Page 71


ANNEXURE VIII: SHARE CAPITAL HISTORY

Equity Share Capital History of the Bank as on March 31, 2018, for the last 5 years

Date-of allotment

.., . •

No f of

Shares EquityY

,

Face I Value

Issue Price

Consideration

Nature of Alit/1111CM

0

Cumdimly° (Cash / Other

Than cash)

Ils I2s No of Equity

Shares Equiti Share Omit?! (12s)

Equity Share Premium

411,

05-05-20 I. 6„ 10.00

f loom 10 Cash

Subscription of shares as per memorandum

of Association 1,00,000.00 10,00,000.00 0.00

20-05-20 6 I 1109900000 . 10 10.00 Cash Private Placement 11,00,00,000.00 1,10,00,00.000.00 0.00

09-03-20 7!, 78817733 10 10.15 Cash Private Placement 18,88,17333.00 1,88,81,77,330.00 1,18,22,659.95

10-03-20 7 58823529 10 10.20 Cash Private Placement 24,76,41,262.00 2,47,64,12,620.00 2,35,87,365.75

29-03-20 7 49019607 10 10.20 Cash Private Placement 29,66,60,869.00 2,96,66,08,690.00 3,33,91,287.15

30-03-2017 4901960 10 10.20 Cash

Discharge of consideration for

purchase of business undertaking from M/s ESA!: Microfinance and investments Pvt

Ltd

30,15,62,829.00 3,01,56,28,290.00 3,43,71,679.15

31-01-201 10382352 10 10.20 Cash Private Placement 31,19,45,181.00 3,11,84,51,810.00 3,64,48,149.55

sow_ FINANCE RANk

g< ?- Hepiibah Complex

Second Floor NO:X/109/M4

0 hrissut•

":"

•

Page 72

COMPANY SEC ETARY MOM NO : 30388

L INANCE 8A

enibah Complex Second Floor No:X1109111y

a P. 0.

Hepzibatt Complex Second Floor No:X/1091M4


ESAF ESAF SHALL MANCE BANK :

Joy of Banking:

LIST OF SHAREHOLDERS AS ON 31.03.2018

Name of the shareholder No/dIng as on 31.01.2018

Percentage to total share capital

ESAF Microfifiance and

Investments Pig Ltd 28,07,58391 90.00296

Kadambelli Paul Thomas 3,11,88785 9.998%

Mereena Paul Negligible

Alok Thomas Paul 1 Negligible

Ems:Ache Paul 1 Negligible

Deena Geeme 1 Negligible

George K John Negligible Total

31,19,45,181 100.00%

For ESAF SMALL FINANCE BANK LIMITED

ESAF SMALL FINANCE BANK UNITED L16599D1,701619L1041666

- Corporate office: ESAF Centre, Mannuthy P.O. ThrIssur. Kerala 680 AM. India. Ph: .91 487 2373813 Pegistered Office: KepzlhaK Complex Mannuthy P.O. ThrissJr. Kerala 680 651 ETA eusta,nreoaroeoo,albark.,em wn,w.esamaoh,on

Page 73

Yours faithfully, For BSE Limited

RuarRhandelwat nrcn Manager

1 H miata Agarwal Associate Manager


ANNEXURE IX: IN PRINCIPLE LISTING APPROVAL

sse EXPERONC.:E THE New

DCS/COMP/VM/IP-PPD1/39/18-19 May22, 2018

The Company Secretary ESAF Small Finance Bank Limited Hepzibah Complex, Second Floor, No. X/109/M4, Mannuthy, Thrissur, Kerala, India 680651

Dear Sir/ Madam,

Re: Private Placement of 400 Rated, Listed Redeemable Unsecured, Basel 111 Compliant Tier II Bonds in the form of Non-Convertible Debentures of a face value of Rs. 10 00 000/- each, of the aggregate nominal value of up to Rs. 40 Crores

We acknowledge receipt of your application on the online portal on May 21, 2018 seeking In-principle approval for issue of captioned security. In this regard, the Exchange is pleased to grant in-principle approval for listing subject to fulfilling the following conditions:

I. Filing of listing application.

Payment of fees as may be prescribed from. time to time.

Compliance with Securities and Exchange Board of India (Issue and Listing of Debt . Securities) Regulations, 2008 as amended 2012, and submission of Disclosures and

Documents as per Regulations 21, in the format specified in Schedule I of the said Regulations and also Compliance with provisions of Companies Act 2013.

Receipt of Statutory & other approvals & compliance Of guidelines issued by the statutory authorities including SEBI, RBI, DCA etc. as may be applicable.

Compliance with change in the guidelines, regulations directions of the Exchange or any statutory authorities, documentary requirements from time to time

This In Principle Approval is valid for a period of 1 year from the date of issue of this letter. The Exchange reserves its right to withdraw its in-principle approval at any later stage if the information submitted to the Exchange is found to be incomplete/ incorrect/misleading/false or for any contravention of Rules, Bye-laws and Regulations of the Exchange, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Guidelines/Regulations issued by the statutory authorities etc. Further, it is subject to payment of all applicable charges levied by the Exchange for usage of any system, software or similar such facilities provided by BSE which the Company shall avail to process the application of securities for . which approval is given vide this letter.

S&Pc›BSE BReS2E.517iernrelrdedoLocinreloilay,1327iphaly Towe

sCtk rs,

Eoxcalriaalpeel td.) mumbai lop

T' /91 D 2272 1234/331 F_ con) romme.bseincla.com I woth

SEN SEX Copporaic Identity Number,: L671201H2005.p,LC-Ile

Hepaah Complex Second Floor No:X/1091M4

r.Y., Thrissu

J15.

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