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Au Small Finance Bank Ltd. - Quarterly/Annual Result Disclosures and Notes dated 31 Dec 2018

Auditor and Management Disclosures and Notes for the quarterly results dated 31 Dec 2018

1 The above results have been reviewed by the Audit Committee and approved by the Board of Directors of AU Small Finance Bank Limited (the "Bank") at their respective meetings held on January 17, 2019, in accordance with the requirement of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The results have been subjected to a limited review by the statutory auditors of the Bank.



2 These unaudited financial results of the Bank have been prepared in accordance with the Banking Regulations Act, 1949, generally accepted accounting principles in India, including Accounting Standards as prescribed under Section 133 of the Companies Act 2013, Regulation 33 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), 2015 and the guidelines issued by the Reserve Bank of India (RBI).



3 During the nine months ended December 31, 2018, the Bank has raised additional equity capital through a preferential allotment of 4,330,441 equity shares of Rs.10 each at an issue price of Rs.692.77 per share. Accordingly, the paid-up share capital of the Bank has increased by Rs.433 lacs and the reserves of the Bank have increased by Rs.29,567 lacs.

Further, the Bank also allotted 10,104,364 convertible warrants, each convertible into one equity share of the Bank of face value Rs.10 each, at an issue price of Rs.692.77 per share aggregating to Rs.70,000 lacs out of which Rs.17,500 lacs (the "Upfront Consideration") has been received during the current period against allotment of warrant and the balance of Rs.52,500 lacs (the "Balance Consideration") shall be received upon allotment of equity shares against such warrants pursuant to exercise of option by the warrant holder.

The warrants are exercisable within 18 months from the date of allotment of warrants upon payment of the Balance Consideration.



4 The mark-to-market ("MTM") depreciation on securities held in available-for-sale ("AFS") and held-for-trading ("HFT") investment categories is Rs.107 lacs for the quarter ended June 30, 2018. Pursuant to the RBI circular no. DBR.No.BP.BC.113 /21.04.048/2017-18 dated June 15, 2018, the Bank has elected to recognise such provision for MTM depreciation equally over four quarters and has accordingly charged Rs.27 lacs each to the financial results for quarters ended June 30, 2018 and September 30, 2018. However, during the quarter ended December 31, 2018, the brought forward unamortised depreciation balance of Rs.53 lacs has been fully offset against the appreciation in the AFS/HFT investments.



5 During the nine months ended December 31, 2018, the Bank has received Rs.4,667 lacs from sale of Priority Sector Lending Certificates (“PSLC”). Out of aforesaid amount, Rs. 3,441 lacs has been recognised as income during the nine months ended December 31, 2018. The balance of Rs. 1,226 lacs will be recognised over the subsequent quarter.

During the quarter ended December 31, 2018, the Bank has paid Rs. 869 lacs for buying of Priority Sector Lending Certificates (“PSLC”). Out of aforesaid amount, Rs. 435 lacs has been amortised as expense during quarter ended December 31, 2018. The balance of Rs. 434 lacs will be amortised over the subsequent quarter.



6 Other income includes processing fee and other charges including marketing support fees, profit on sale of investments, recovery from loans written off, income from dealing in PSLC, etc



7 The Capital adequacy ratio ("CAR") has been computed as per operating guidelines for Small Finance Banks in accordance with RBI Circular No. RBI/2016-17/81 DBR.NBD.No.26/16.13.218/2016-17 dated October 6, 2016.

The Bank has followed Basel II standardized approach for credit risk in accordance with the operating guidelines issued by the Reserve Bank of India for Small Finance Banks. Further, the RBI vide its circular No. DBR.NBD.No.4502/16.13.218/2017-18 dated November 8, 2017 has provided an exemption to all Small Finance Banks whereby no separate capital charge is prescribed for market risk and operational risk.

The Bank has considered the Upfront Consideration (as described in note 3 above) received for share warrants during the quarter ended June 30, 2018 issued and the funds raised from the issuance of share capital as part of Tier I Capital for the purposes of computation of the Capital Adequacy Ratio.



8 Previous periods / year figures have been regrouped where necessary to confirm to current period presentation.



9. Ratios:





Qtr ended Nine months ended Qtr ended Year ended

31.12.2018 31.12.2018 31.12.2017 31.03.2018



Capital Adequacy Ratio 19.02% 19.02% 20.96% 19.31%

(Basel II)



% of Gross NPA to Gross 2.09% 2.09% 2.83% 2.01%

Advance



% of Net NPA to Net 1.31% 1.31% 1.87% 1.27%

Advance



Return on assets (average) 0.36% 1.13% 0.60% 2.04%

- not annualized