2021. For Fiscal 2020, increase in credit costs was offset by the benefit of corporate tax rate cut and thus, RoA is estimated
to be in the range of approximately 1.2% to 1.5% for Fiscal 2020. However, with deterioration in asset quality and thus
increase in credit costs, RoA for LAP segment is further expected to decline to approximately 1% to 1.2% in Fiscal 2021.

COMMERCIAL VEHICLE FINANCE

Commercial vehicles (CV) sales down in Fiscal 2020 owing to introduction of new axle norms

CV sales volume witnessed a slowdown in growth in Fiscal 2019. Sales volumes grew by 18.6% as against 25.3% in the
previous fiscal. In July 2018, the central government revised axle norms, wherein the gross vehicle weight for 2-axle and
3-axle vehicles was increased from 16.2 tonnes to 18.5 tonnes and from 25.0 tonnes to 28.5 tonnes, respectively. This
aided an increase in the freight carrying capacity of existing CVs, thereby reducing the demand for purchase of additional
CVs, impacting sales. In Fiscal 2020, sales reduced by approximately 29% due to dual impact of increasing freight
capacity and limited support from freight demand. Within the segment, sales of medium and heavy commercial vehicles
(MHCVs) declined by approximately 48% whereas the sales of light commercial vehicles (LCVs) declined by
approximately 21% due to slower private consumption and weak financing availability via lower LTVs due to NBFC
liquidity constraints.

CV sales in Fiscal 2021 expected to be lowest in the past decade
Domestic commercial vehicle sales are expected to fall by 26% to 28% in Fiscal 2021 due to:

* COVID-19 related turbulence: The initial lockdown compelled closing of all commercial vehicle manufacturing and
dealership units, leading to near-zero sales in wholesale offtake in April 2020. While certain manufacturers and
dealerships are expected to commence operations, many tier 2 and tier 3 auto-component makers across the country
are expected to be unable to supply to tier 1 manufacturers due to lack of availability of labour, thereby disrupting
the automotive supply chain. On the demand side, due to the lockdown income generation for ‘non-essential’
industries and service providers and those in construction has been impacted. This is likely to subsequently manifest
as lower demand for goods and services. Private consumption is also expected to be impacted. As a result, the first
quarter of Fiscal 2021 is expected to be significantly impacted by the shutdowns as well as subsequent lower demand
as a result of the pandemic. A slow recovery is expected from the second half of Fiscal 2021.

* CV sales may be hindered due to some transporters surrendering their vehicles to financiers: Transporters’
profitability has been affected by reduced freight demand. However, three-month moratorium on CV loan payments
has prevented delinquencies in the first quarter of Fiscal 2021. However, delinquencies are expected to rise post the
moratorium. In such a situation, CV sales carried out in the second half of Fiscal 2020, are at the risk of being
surrendered to financiers which might lead to fairly new lower priced BS-IV vehicles coming to secondary markets
for sale.

* Inability of the government to push infrastructure: With the finances of the government deployed in dealing with the
pandemic, the government's ability to push infrastructure is not expected to be significant, posing a significant
downside risk to CV sales growth.

* Demand for buses was impacted due to safety regulations in Fiscal 2020, on account of increase in cost of ownership
by approximately = 50,000. Bus demand is expected to be driven by school, state transport undertakings (STUs) and
route permit buses. However, with state budgets being dedicated to the pandemic, STU purchases will be limited.
However, school bus demand is expected to be resilient in Fiscal 2021.

Disbursements to remain subdued over the coming two fiscals

New CV loan disbursement amounted to = 820 billion over the five Fiscals ending 2019, recording a CAGR of 18%. The
overall disbursements of the CVs is estimated to have de-grown by 35% to 40% in Fiscal 2020, with MHCV
disbursements declining further as compared to LCV.

In Fiscal 2021, the demand challenges are expected to continue as a result of the macroeconomic challenges in view of
the pandemic. In addition, the weakened financial profile of the fleet operators and price rise resulting from transition to
BS-VI will further impact revenue of CV OEMs, thereby affecting disbursements. Over the fiscal, loan-to-value offered
by the financiers is expected to reduce by 4% to 5%, further impacting overall disbursements. As a result of these
developments, disbursements are expected to decrease by 38% to 40% over the fiscal, the sharpest decline in the past five
fiscals. Any recovery in this segment will depend on construction activity which is expected to drive CV financing growth
in Fiscals 2022 and 2023 to a limited extent.

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