Formality

A tenancy for years greater than 1 year must be in writing in order to satisfy the Statute of Frauds.

[edit] Term
The term of the lease may be fixed, periodic or of indefinite duration. If it is for a 'tenancy for years', the term ends automatically when the period expires, and no notice needs to be given, in the absence of legal requirements. The term's duration may be conditional, in which case it lasts until some specified event occurs, such as the death of a specified individual. A periodic tenancy is one which is renewed automatically, usually on a monthly or weekly basis. A tenancy at will lasts only as long as the parties wish it to, and may be terminated without penalty by either party. It is common for a lease to be extended on a "holding over" basis, which normally converts the tenancy to a periodic tenancy on a month by month basis.

[edit] Rent
Rent is a requirement of leases in common law jurisdiction, but not in civil law jurisdiction. There is no requirement for the rent to be a commercial amount. "Pepper corn" rent or rent of some nominal amount is adequate for this requirement.

[edit] Real estate

See also: Rental agreement and Leasehold estate

There are different types of ownership for land but, in common law states, the most common form is the 'fee simple absolute', where the legal term fee has the old meaning of real property, i.e. real estate. An owner of the 'fee simple' holds all the rights and privileges to that property and, subject to the laws, codes, rules and regulations of the local law, can sell or by contract or grant, permit another to have possession and control of the property through a lease or tenancy agreement. For this purpose, the owner is called the lessor or landlord, and the other person is called the lessee or tenant, and the rights to possess and control the land are exchanged for some payment (called 'consideration' in legal English), usually a monthly rent. The acceptance of rent by the landowner from a tenant creates (or extends) most of the rights of tenancy even without a written lease (or beyond the time limit of an expiring lease). Although leases can be oral agreements that are periodic, i.e. extended indefinitely and automatically, written leases should always define the period of time covered by the lease. In the 1930s, the British government introduced infinite leases, only to remove the power to create these in the early 1990s. A lease may be:

a fixed-term agreement, in other words one of these two: o for a specified period of time (the "term"), and end when the term expires; o conditional, i.e. last until some specified event occurs, such as the death of a specified individual; or a periodic agreement, in other words renewed automatically o usually on a monthly or weekly basis o at will, i.e. last only as long as the parties wish it to, and be terminated without penalty by either party.

Because ownership is retained by the lessor, he or she always has the better right to enforce all the contractual terms and conditions affecting the use of the land. Normally, the contract will be express (i.e. set out in full and, hopefully, plain language), but where a contract is silent or ambiguous, terms can be implied by a court where this would make commercial sense of the transaction between the parties. One important right that may or may not be allowed the lessee, is the ability to create a sublease or to assign the lease, i.e. to transfer control to a third party. Hence, the builder of an office block may create a lease of the whole in favour of a management company that then finds tenants for the individual units and gives them control. Under common law, a lease should have three essential characteristics:[clarification needed]
1. A definite term (whether fixed or periodic) 2. At a rent 3. Confer exclusive possession

[edit] Tangible personal property

An owner can allow another the use of a vehicle (such as vehicle leasing of a car, a truck or an airliner) or a computer either for a fixed period of time or at will. This can be a simple leasing transaction, or it can be a transaction intended to allow the user the right to buy the item at some future time.

In a simple lease (rental) of a car, the lessee pays the lessor a rental for the use of the car during the agreed period which may be a few days (e.g. for a holiday trip) or longer where it is more economic to pay for use rather than pay for the ownership of an asset of depreciating value. Normally, only the lessee will be allowed to use the vehicle and, in such a case, the lessee has possession and control. But, the lessor could be an employer who allows a third person the use of the car to visit clients. In a lease with the possibility of purchase, O could allow P to lease the car for a specified period of time. If all the rental payments are made in full, P will then be allowed to buy the car at the contractual purchase option price. In a consumer lease subject to the federal Consumer Leasing Act and the Truth in Lending Act, the purchase option price can not be a "bargain" purchase, that is, it cannot be less than the originally estimated fair market value. A "bargain" purchase creates an installment sale, to which the Truth in Lending Act (TILA) applies including the standardized disclosures, most importantly the Annual Percentage Rate (APR). Typically, the vehicle dealer or other personal property seller offers the leasing terms and contract of a third party finance company. Hence, O leases the vehicle to P, and upon execution of the contract simultaneously sells ownership of the car to F and assigns the lease contract to F. It is standard for the contractual terms to prohibit P from parting with

possession or control of the car to another (if P does part with possession, this can be a theft of the car from F).

There are two principal types of leasing, depending upon the party taking the risk of the value of the vehicle (or other leased property) at lease end. In the U.S. this is called Closed-end leasing. In other jurisdictions, it is called hire purchase, lease purchase or finance leasing. These transactions are complicated. The most common problem arises when O makes specific representations as to the quality and reliability of the car to P during the initial negotiations. If what is said induces P to buy the car from O, those representations would usually be enforceable against O. But, in this transaction, O first sells the car to F who makes no representations to P. The laws vary from state to state on the extent to which P might be allowed a remedy if the car proves to be of poor quality. To clarify the concept, the owner of tangible movables has the power to keep possession and only to transfer control. This may be for:

short- or long-term storage (e.g. leaving a passport with hotel staff or depositing valuable property in a bank vault a hotel or bank holding property is a bailee); or for delivery purposes (e.g. using a carrier to transport goods to a specific destination); or it may be a form of mortgage a pawnshop holds a pledge over the goods deposited until the money lent is repaid.

Leasing is a common method by which airlines acquire their aircraft, usually from companies that specialize in the field of Commercial Aircraft Sales and Leasing. Aircraft leasing transactions are typically divided into finance leasing and operating leasing. Leasing is also used for ships, in which case the agreement is structured as a bareboat charter. Businesses often choose to lease rather than buy office equipment, including computers. Since office equipment depreciates rapidly, leasing can be more cost-efficient than ownership. In addition, more and more unconventional items are becoming available for lease, such as handbags and luxury watches.

[edit] Real property

Whether it is better to lease or buy land will be determined by each state's legal and economic systems. In those countries where acquiring title is complicated, the state imposes high taxes on owners, transaction costs are high, and finance is difficult to obtain, leasing will be the norm. But, freely available credit at low interest rates with minimal tax disadvantages and low transaction costs will encourage land ownership. Whatever the system, most adult consumers have, at some point in their lives, been party to a real estate lease which can be as short as a week, as long as 999 years, or perpetual (only a few states permit ownership to be alienated indefinitely). For commercial property, whether there is a depreciation allowance depends on the local state taxation system. If a lease is created for a term of, say, ten years, the monthly or quarterly rent is a fixed cost during the term. The term of years may have an asset value for balance sheet purposes and, as the term expires, that value depreciates. However, the apportionment of relief as between business expense and depreciating asset is for each state to make (all that is certain is that the lessee cannot have a double allowance).

[edit] Private property

Rental, tenancy, and lease agreements are formal and informal contracts between an identified landlord and tenant giving rights to both parties, e.g. the tenant's right to occupy the accommodation for an agreed term and the landlords right to receive an agreed rent. If one of these elements is missing, only a tenancy at will or bare licence comes into being. In some legal systems, this has unfortunate consequences. When a formal tenancy is created, the law usually implies obligations for the lessor, e.g. that the property meets certain minimum standards of habitability. With a bare licence, some states do not imply any significant lessee protections A tenancy agreement can be made up of:

express terms. These include what is in the written agreement (if there is one), in the rent book, and/or what was agreed orally (if there is clear evidence of what was said). implied terms. These are the standard terms established by custom and practice or the minimum rights and duties formally implied by law.

[edit] Commercial property

Generally speaking in the modern US legal framework, commercial real property leases fall into one of just a few categories: Office, Retail, Warehouse, Ground, and a catch-all hybrid often referred to as "Mixed Use". Each has certain typical characteristics, although Ground leases may differ somewhat, taking on some characteristics of Retail leasing when associated with a retail project, like a shopping center; and although Mixed Use projects can vary greatly depending upon the various inclusions and the size of the overall project, among other things. It is widely appreciated by those who specialize in commercial leasing, including the business side and the legal side, that, other than hybrids such as Mixed Use project leasing, Retail leasing can have the most complexity. Mixed Use projects often have elements of most or all of the other categories, not infrequently including a hotel, office building, ground floor retail with residential condominium above and a parking garage. The interplay of all these different components with each other and the underlying property documents which describe, define, and control their interactions, operation and management, as well as the division of costs for the operation of the site, are typically very complex. Retail leasing often requires the parties to address issues typically not addressed at all in other types of commercial leasing which have no retail component. These additional challenges include such topics as exclusives and restrictive covenants, radius restrictions on near-by selfcompetition, co-tenancy, no-build areas and visibility corridors, parking ratio assurances, signage concerns (including pylons, monuments, and criteria), CAM and CAM caps and controls (including the "cumulative" and "non-cumulative" concepts), continuous operating covenants, and much more.

[edit] Comparison of buying and leasing

There are many distinct differences between buying and leasing, regardless if such a transaction or agreement applies to property, machinery, equipment or other assets.

The difference lies in that a lease is conceptually very similar to the principle of borrowing. The ownership of the leased property (be it land, equipment, merchandise, or etc.) is not transferred under the terms of the lease agreement. The lease gives the lessee the right to use the assets covered under the agreement for the duration of the contracted term, however, upon the completion of said term the lessee is required to return the assets in question to the lessor, thereby completing the terms of the agreement. In a general example having to do with an automobile lease, the vehicle is due back to the dealership at the conclusion of the lease term. Once the vehicle is returned, the automobile lease agreement is completed and the parties (lessor and lessee) separate with no further obligations to each other (assuming there is no damage on the vehicle entitling the dealer to some further compensation). The lessee has no further claim or right to use the vehicle and the lessor, or car dealer no longer collects any payment from the former lessee the previous driver. Many lease agreements contain clauses and addendums that outline additional rights, or options for the lessee, to be exercised at will upon the conclusion of the lease (there are numerous equipment lease types[2] with individual features). In automobile leases[3] as a general example, a lessee may have an option to purchase the vehicle, thereby restructuring the agreement and ultimately obtain the ownership of the asset previously leased. In the example of a property lease, the renter (or lessee) may have the option to extend the lease, under pre-determined terms. Such scenarios are numerous and are typically pre-set during the initial creation and negotiation of the agreement between the parties. Purchasing, on the other hand, involves an agreement that outlines the terms under which the purchaser acquires ownership of the desired item, property or asset. The purchase agreement delineates the purchase price and the terms under which it is to be paid for by the buyer. The overall purchase price can be amortized over a period of time as in the case of financing, or it can be paid in full, resulting in the instant transfer of ownership to the purchaser. In the event that the purchase is financed over a period of time, the ultimate price paid for the item or asset can be greater than the original price due to interest. For an individual deciding between buying or leasing, it is crucial to understand the pros and cons of each.

Responsibility: In a scenario involving business entities that typically rely on functional equipment for ongoing operations and to stay ahead of competitors, responsibility is a key factor. In a purchase, the responsibility for the equipment falls solely on the shoulders of the business owner. While there are various insurance plans and warranties available to protect the owners, in case of damage or faulty manufacturing, the ultimate responsibility for the life of the equipment, after a purchase is complete, falls on the buyer. In a lease scenario, a lessee is only responsible for the equipment for the duration of the lease and while he or she remains in possession. Resale value: In case of a purchase, the full value of the asset is transferred to the purchaser, as the new owner. This means that in case of resale at a subsequent time, the full price for which the asset is resold can be collected by the new owner. In case of an automobile purchase, for example, an individual can, at a later date freely resell the vehicle and collect its value, albeit a depreciated amount from the original purchase price. In a lease, the lessor has no claim to the asset upon the conclusion of a lease, thereby the monies that were paid in the course of the lease cannot be, in part or in whole be recouped through a resale of the asset. Depreciation: Depreciation is a major consideration for individuals deciding between buying and leasing. For assets that suffer from significant depreciation, either as a result of regular wear and tear or through becoming obsolete upon the release of newer versions of the same materials (particularly applicable in the case of technology) leasing can prevent a

significant loss of value. In business, there exists a basic rule of thumb: If it appreciates, buy it. If it depreciates, lease it. Leasing could permit the use of the equipment while it is new and upon the completion of the lease, it can be simple to upgrade by virtue of a new lease. In case of a purchase, however, an individual may be stuck with an obsolete asset with no means of recouping the cost of its acquisition. Maintenance: Because in the instance of a lease the ultimate ownership is retained by the lessor, it is in the lessors best interest to maintain the asset in its best working order. Therefore, lessees can often benefit from comprehensive maintenance programs offered by lessors while still paying a discounted premium due to the fact that the asset is being leased, not purchased. Cost: In the event of a purchase, the full value of the asset must be paid to the seller. In the event of a lease, however, only a portion of the full value is assessed, typically around 50%, however the figure varies based on the duration and type of lease. As a consequence, a lessor can gain the use of a much needed asset for a fraction of the full price of ownership. In many instances, this can better serve the lessee that an outright purchase would. As a corollary, a lessor could be granted the use of an asset that could otherwise be cost prohibitive.

[edit] Advantages
For businesses, leasing property may have significant financial benefits:

Leasing is less capital-intensive than purchasing, so if a business has constraints on its capital, it can grow more rapidly by leasing property than by purchasing property. Capital assets may fluctuate in value. Leasing shifts risks to the lessor, but if the property market has shown steady growth over time, a business that depends on leased property is sacrificing capital gains. Depreciation of capital assets has different tax and financial reporting treatment from ordinary business expenses. Lease payments are considered expenses rather than assets, which can be set off against revenue when calculating taxable profit at the end of the relevant tax accounting period.[4] In some cases a lease may be the only practical option; for example, a small business may wish to open a location in a large office building within tight locational parameters. Leasing may provide more flexibility to a business which expects to grow or move in the relatively short term, because a lessee is not usually obliged to renew a lease at the end of its term.

[edit] Disadvantages
For businesses, leasing property may have significant drawbacks:

A net lease may shift some or all of the maintenance costs onto the tenant. If circumstances dictate that a business must change its operations significantly, it may be expensive or otherwise difficult to terminate a lease before the end of the term. In some cases, a business may be able to sublet property no longer required, but this may not recoup the costs of the original lease, and, in any event, usually requires the consent of the original lessor. Tactical legal considerations usually make it expedient for lessees to default on their leases. The loss of book value is small and any litigation can usually be settled on advantageous terms. This is an improvement on the position for those companies owning their own property. Although it can be easier for a business to sell property if it has the time, forced sales frequently realise lower prices and can seriously affect book value.

If the business is successful, lessors may demand higher rental payments when leases come up for renewal. If the value of the business is tied to the use of that particular property, the lessor has a significant advantage over the lessee in negotiations.

[edit] International usage

The practice of leasing is well established in most countries of the world. However the benefits (in particular the tax benefits) to the lessee and lessor will vary widely depending on national accounting standards and tax regulations. These largely divide into countries observing:

Legal form: the lessor's legal ownership of the property Substance: the leasee's legal right to use the property

National accounting standards vary in the tests that decide if the lease is a:

Capital or finance lease, which is considered a financing transaction - as the lessor has less of the risks of ownership, such as the value of the equipment in future years. Operating lease, whose term is short compared to the useful life of the asset, where the lessee does not have to show the lease on their balance sheet.

[edit] References
1. ^ "If you want it, rent it ... from a 'must have' handbag to an Aston Martin", The Observer, 2009-01-04. Retrieved on 2009-09-09. 2. ^ "Equipment Lease Types", SelectBusinessCredit.com. Retrieved on 2011-08-17. 3. ^ "Automobile Leases", LeaseGuide.com. Retrieved on 2011-08-17. 4. ^ "Business Leasing". Community Loan Center. http://www.communityloancenter.com/business-loans/business-leasing/. Retrieved 11 March 2012

Leasing is a process by which a firm can obtain the use of a certain fixed assets for which it must pay a series of contractual, periodic, tax deductible payments. The lessee is the receiver of the services or the assets under the lease contract and the lessor is the owner of the assets. The relationship between the tenant and the landlord is called a tenancy, and can be for a fixed or an indefinite period of time (called the term of the lease). The consideration for the lease is called rent. A gross lease is when the tenant pays a flat rental amount and the landlord pays for all property charges regularly incurred by the ownership from lawnmowers and washing machines to handbags and jewellry.[1] Under normal circumstances, a freehold owner of property is at liberty to do what they want with their property, including destroy it or hand over possession of the property to a tenant. However, if the owner has surrendered possession to another (the tenant) then any interference with the quiet enjoyment of the property by the tenant in lawful possession is unlawful. Similar principles apply to real property as well as to personal property, though the terminology would be different. Similar principles apply to sub-leasing, that is the leasing by a tenant in possession to a sub-tenant. The right to sub-lease can be expressly prohibited by the main lease.

Company Name Shriram TransFi M&M Financial Bajaj Finance Cholamandalam Manappuram Fin Sundaram Fin Shriram City SREI Infra First Leasing Sakthi Finance Magma Fincorp VLS Finance Motor and Gen F Hb Stockhol Times Guaranty Guj Lease Fin Lloyds Finance

Last Price 654.35 895.00 1,175.95 224.55 40.55 837.45 789.10 26.35 53.60 11.25 64.95 13.75 41.00 12.70 19.70 2.70 0.70

% Chg 1.21 0.55 -1.70 -3.17 1.38 -0.58 0.49 -3.48 -1.11 1.35 0.31 -3.51 -1.56 -0.39 -1.99 1.89 0.00

Gross Net CWIP Block Block 108.25 39.73 0.68 159.50 97.09 2.85 197.15 138.79 0.56 79.55 53.17 3.65 302.71 224.03 14.40 567.62 294.40 0.00 79.84 52.55 0.00 487.20 435.93 62.78 30.63 16.83 4.42 87.26 67.84 0.00 396.61 178.47 0.33 131.40 7.48 0.00 28.44 28.44 0.00 1.65 0.63 0.00 0.02 0.01 0.00 0.91 0.57 0.00 0.23 0.17 0.00

Total Assets 23,719.39 13,690.89 11,235.99 10,007.62 9,615.03 9,179.79 8,770.50 5,519.54 1,525.45 681.55 281.64 200.32 118.36 112.96 20.96 4.21 -53.27

The Indian economy performed very well in 2010-11 (FY2011). GDP grew by an estimated8.6%. All three major sectors grew substantially. After years of lacklustre performance,agriculture did well, as did manufacturing and this played a major role in increasingdisposable income throughout most parts of rural and up-country India. It is worthmentioning that among the major economies, Indias growth in FY2011 is the secondhighest in the world, second only to China. Despite such growth, there have been signs of disquiet. During the year, India alsofaced severe inflationary pressures coming across the entire spectrum of goods foodstuff, hydrocarbons, commodities and manufacture. To combat this, the Reserve Bank ofIndia (RBI) has raised interest rates. FY2011 saw seven such hikes of 25 basis points(bps) each. In May 2011, the rate hike was 50 bps, with the RBI clearly indicating thatits hitherto soft approach to inflation is coming to an end. If bothsupply-side inflation and interest rate hikes were to continue throughout FY2012, Indiamay see a slowing down of GDP growth as well as the rate of growth of consumer demand. Itis however, too early to hazard a forecast. Having said this, there is little doubt that FY2011 was a good year for the retailfinance industry. After three years of competing in a milieu of single-digit nominalgrowth that was not much higher than inflation, business for the industry is estimated tohave grown by over 29% in FY2011. Moreover, with several retail finance players having tomake major provisions in 2007-2009 on account of non-performing loan assets, thecompetitive environment was benign. Those who had been careful in the past and hadrelatively strong balance sheets could leverage up to lend more in FY2011. Going forward,while retail finance should grow at a healthy pace, so too would the forces ofcompetition. Non-Banking Financial Companies (NBFCs) are increasingly playing a critical role inmaking financial services accessible to wider set of Indias population and, thus,emerging as significant players in the retail finance space. Going forward, one can expectNBFCs to strengthen their presence in retail finance and grow at a healthy pace. With assets under management of over Rs. 7,571 Crores, Bajaj Finance Limited(BFL or the Company), earlier Bajaj Auto Finance Limited, is aleading, diversified NBFC in the country. A listed entity, the Company delivered superiorresults in FY2011. Given below are the highlights of BFLs performance for the yearunder review. BFLs Performance, FY2011 Total income for FY2011 was up by 53% to Rs. 1,406 Crores l Profitafter tax rose by 178% to Rs. 247 Crores l Loan deployment increased by 106% to Rs. 9,435 Crores l Assets under management stood at Rs. 7,571 Crores as on 31 March2011 l Receivables under financing activity rose by 80% to Rs. 7,270 Crores lLoan losses and provisions for the year reduced by 21% to Rs. 205 Crores l Capitaladequacy as on 31 March 2011 stood at 20%, which was well above RBI norms A Snapshot of BFLs Loan Deployment Table 1 gives the mix of loan deployment for FY2011 (compared to FY2010), while Chart Aplots BFLs loan deployment over the last five years. Table 1: BFLs Mix of Loan Deployment Loan Deployment Two and Three Wheelers Consumer Durables Mortgages Vendor Financing Other assets Construction Equipment Small Business Loans and Personal Loan Cross sell (PLCS) Total Receivables Under Finance Table 2 gives the data of BFLs receivables under finance. Table 2: BFLs Receivables under Finance Receivables under Finance Two and Three Wheelers Consumer Durables Mortgages Vendor Financing Other assets Construction Equipment 2010-11 1,953 893 1,996 324 321 591 2009-10 1,393 427 1,061 139 170 ( Rs. in Crores) Change 40% 109% 88% 133% 89% 2010-11 2,034 2,262 1,672 1,346 389 694 1,038 9,435 2009-10 1,364 1,037 1,067 149 165 803 4,585 ( Rs. in Crores) Change 49% 118% 57% 803% 136% 29% 106%

Small Business Loans and PLCS Total

1,192 7,270

842 4,032

42% 80%

The quality of BFLs loan book continued to improve in the current fiscal. Itfurther strengthened its provisioning standards, and now ranks among the most prudent inthe NBFC space. Its net non-performing assets stood at 0.8% in FY2011, demonstratingstrong credit quality. Business Segment Update Two and Three Wheeler Financing Riding on the back of robust Two Wheeler sales growth,loan deployment in this segment grew by 49% to Rs. 2,034 Crores. The Company acquired over5,22,000 customers during the year representing 38% growth over the previous year.BFLs Two Wheeler financing was made available across 351 Bajaj Auto dealer locationsand 1,170 sub-dealers across the country. BFL had launched a Direct Cash Collection model in FY2010 to attract financiallyresponsible customers with no banking habits and history in the semi-urban and ruralmarkets. In FY2011, the Company acquired over 1,57,000 such customers. The competitive environment had remained benign for most part of the year. However, itbegan seeing the entry of competitors in the last quarter of FY2011. Consumer Durables Financing This business is present in 71 cities across India. Loans disbursed under this segmentgrew by 118% to Rs. 2,262 Crores in FY2011, which was higher than an estimated industrygrowth of 31%. Competition was benign due to the high up-front investments required indistribution, technology and processes to compete in this relatively low ticket size, highvolume business. The Company acquired around 9,69,000 new customers, and is present atover 2,000 points of sale across the country. BFLs strategy of focusing on relatively affluent customers and major dealershipshas yielded significant benefits through lower operating costs and improved riskperformance. At present, the Company is financing one out of every five LCD and plasma TVsin the country, and finances products of all leading consumer durable manufacturers. Itcontinues to invest in technology to improve its operating leverage, risk performance andoffer better customer experience. Personal Loan Cross-Sell Present across 81 cities of India, this business targets customers with good repaymenthistory of their Two Wheeler and/or consumer durable loans to cross-sell a personal loan.BFL continued to grow this business in a cautious manner in FY2011, with an eye tooptimising the risk-reward equation and hence profitability. During the year, loandeployment in this segment grew by 66% to Rs. 375 Crores. BFL financed around 67,000 newcustomers in the year under review. Personal and Small Business Loans This business operates in top 23 cities across India. Small Business Loan deploymentsgrew by 51% to Rs. 663 Crores in FY2011. The Companys strategy of focusing onaffluent small businessmen coupled with its cautious approach has helped it to grow thisbusiness in a steady manner. BFLs relationship model of lending, where knowing theclient is paramount for relatively big ticket items, has significantly helped in improvedrisk performance. Vendor Financing The Company started to grow this new line of business in the year under review. Itfocuses on short and medium term lending needs of vendors of large auto manufacturers. BFLdeployed short term loans of Rs. 1,255 Crores and medium term loans of Rs. 91 Croresduring FY2011. Mortgages This business is present across 23 cities of India. It targets affluent and high networth small business customers, and offers loans against the mortgage of retail,residential and commercial premises. Aided by a strong revival in the mortgage business inthe second half of FY2011, the portfolio increased in line with the industrysgrowth. Loan against property deployments grew by 35% to Rs. 1,440 Crores. The Companyalso launched home loans for affluent and high net worth self-employed customers, anddeployments stood at Rs. 232 Crores in its first half year of launch of this line ofbusiness. It hopes to grow this business in the coming years. Construction Equipment Finance The Company launched its construction equipment finance business in FY2011. It focuseson financing small, mid and strategic contractors for their construction equipmentfinancing needs. This is asset backed lending, collateralised by construction equipmentassets. During the first year of operation, BFL deployed Rs. 694 Crores and added some2,900 customers. Infrastructure Finance The Company has started its foray in infrastructure finance business towards the end ofthe fiscal year. The results will be there to report in FY2012. New Initiatives During the year, the Company and Central Bank of India have entered into a Tie-uparrangement for financing. This partnership model is amongst the first of its kind in theindustry. Under this arrangement, the Company partially assigns loan receivables of someof its portfolios in a predetermined sharing ratio to Central Bank of India. Thisinitiative is mutually beneficial since it enhances returns for Central Bank of India

at arelationship level and for the Company it provided another avenue for funding andimprovement in Return on Equity. Financial Performance Table 3 gives BFLs financial performance for FY2011 compared with FY2010. ChartsB and C plot the Companys profit after tax and net owned funds over the last fiveyears respectively. Table 3: BFLs Financial Performance Particulars Total Income Interest and Finance Charges Net Interest Income Salary Cost Marketing and Other Commissions Recovery Commission Loan losses and Provisions Depreciation Other Expenses Profit Before Tax (PBT) Profit After Tax (PAT) Earnings Per Share (EPS) Basic (Rs.) Earnings Per Share (EPS) Diluted (Rs.) Book Value Per Share (Rs.) 2010-11 1,406 378 1,028 145 103 49 205 12 144 370 247 67.47 67.47 370.76 2009-10 916 202 714 99 54 56 261 7 103 134 89 24.43 24.43 314.93 ( Rs. in Crores) Change 53% 87% 44% 46% 91% -13% -21% 71% 40% 176% 178% 176% 176% 18%

Chart B shows that FY2011 has been a landmark year for BFL one in which theCompany has earned its highest ever PAT. Risk Management and Portfolio Quality As an NBFC, the Company is exposed to credit risk, liquidity risk and interest raterisk. BFL has invested in people, processes and technology to mitigate risks posed byexternal environment and by its borrowers. It has in place a strong risk management team,as well as an effective credit operations structure. The Company further strengthened itsrisk management by separating and segregating the functions of Chief Risk Officer andChief Credit Officer. Sustained efforts to strengthen the risk framework and portfolio quality have startedbearing results. The overall portfolio quality has improved significantly over the lastfinancial year. BFLs Assets-Liability Committee (ALCO), set-up in line with theguidelines issued by the RBI, monitors asset-liability mismatches, and ensures that thereare no material imbalances or excessive concentration on either side of the balance sheet. Internal Control Systems and Their Adequacy BFL has an independent internal management assurance function commensurate with thesize of the Company. It evaluates the adequacy of all internal controls and processes. Theassurance function helps in ensuring adherence to clearly laid down internal processes andprocedures as well as to the prescribed regulatory and legal framework. The Audit Committee of the Companys Board of Directors reviews the internal auditreports and the adequacy and effectiveness of internal controls. Fulfilment of The RBIs Norms and Standards BFL continues to fulfil or exceed all the norms and standards laid down by the RBIrelating to the recognition and provisioning of non-performing assets, capital adequacy,statutory liquidity ratio and the like. The Companys capital adequacy ratio is 20%,which is well above the RBI norm of 12%. Human Resources BFL continues to lay emphasis on its most valuable resource, its people. In anincreasingly competitive market for human resources, the Company puts great emphasis onattracting and retaining the right talent. It thrives on well-rewarded, performance drivenculture and encourages its people to excel in the areas that they operate. BFL providesequal opportunity to all employees to deliver results. During the year, the Company added 603 permanent employees taking the total employeestrength to 1657. Business Outlook As mentioned in the beginning of the chapter, the two macroeconomic concerns areinflation and interest rate increases both of which affect disposable income and consumerborrowing sentiments. These could dampen growth prospects for consumer-driven NBFCs. As ofnow, BFL nevertheless expects to maintain its current years performance in FY2012due to a strong momentum in its lines of businesses and robust portfolio quality. In FY2012, the Companys approach would be to maintain growth while maintaining astrong focus on the

risk-return matrix. It will launch new product lines such asinfrastructure finance and salaried loans business. It will continue to invest instrengthening risk management practices; and maintain investments in technology and humanresources to consolidate its position as a significant NBFC in India. Cautionary Statement Statements in this Management Discussion and Analysis describing the Companysobjectives, projections, estimates and expectation may be forward lookingwithin the meaning of applicable laws and regulations. Actual results might differmaterially from those expressed or implied.

India Infoline Research

Key Executives: Rahul Bajaj , Chairman Nanoo Pamnani , Vice Chairman Madhur Bajaj , Director Rajiv Bajaj , Director

Company Head Office / Quarters:

Mumbai-Pune Road, Akurdi, Pune, Maharashtra-411035 Phone : 91-20-30405060 Fax : 91-20-30405020/30 E-mail : investor.service@bajajfinserv.in Web : http://www.bajajfinservlending.in

Registrars:
Karvy Computershare Pvt Ltd Plot No 17-24 Vittal Rao Nagar Madhapur Hyderabad-500081

Bajaj Finance Ltd

BSE: 500034 | NSE: BAJFINANCE | ISIN: INE296A01016 Market Cap: [Rs.Cr.] 4,946 | Face Value: [Rs.] 10 Industry: Finance & Investments

Who We Are
Dreams need means. Bigger dreams need bigger means. And better the reality, the bigger the next dream. Success has always been the fuel for larger dreams. Though with access to money as a precondition. We understand this desire to create a bigger and better reality, your issues and pain points, and the fact that your pursuits are not limited to a few areas of your life only. Today, we are the most diversified non-bank in the country, financing the widest set of outcomes, supporting your biggest pursuits. Be it the desire for a bigger lifestyle to buying

your home, indulging in that much deserved family holiday to expanding your business or making that big acquisition, whatever be your plan, we have the capability to support it. You may wonder though that all banks and non-banks do it, so whats the big deal? There is. Its not just the width of our portfolio to support as many of your aspirations across all walks of your life, but also the fact that no one can do it faster. And thats not it. We put our skin in your game and extend the biggest ticket sizes across most of our portfolios so that your pursuits are not limited by limited access to finance. Through our deep investments in technology, processes and people, we have ensured we deliver what we promise. We partner with the best in the game across the world to cut process time and sift out unnecessary details. We put less bureaucracy in our day to day work and more result orientation. We keep as much focus on simplifying life for existing customers as we do for acquiring new ones. The net result - you get what you need in lesser time, a more transparent manner, giving you the control to create bigger outcomes.

About Bajaj Finserv

Mr. Sanjiv Bajaj (Managing Director of Bajaj Finserv) Bajaj Finserv Limited is the holding company for the financial services businesses of the Bajaj Group. Its insurance joint ventures with Allianz SE, Germany namely Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited are engaged in life and general insurance business respectively. Its subsidiary Bajaj Finance Limited is a Non Banking Finance Company engaged in consumer finance, SME finance and commercial lending. Bajaj Financial Solutions Limited, a wholly owned subsidiary of Bajaj Finserv Limited is engaged in wealth advisory business. Bajaj Finserv has a vision to become a full fledged financial services company and be the financial partner to the Indian consumer and help him across his financial needs, whether for finance, for investment management, for protection or for post retirement support, throughout his lifecycle. Bajaj Finserv is a consumer focused company with emphasis on profitable growth and operational efficiency to deliver best results to all its stakeholders.

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Bajaj Finance Limited Bajaj Allianz Life Insurance Company Limited Bajaj Allianz General Insurance Company Limited Bajaj Financial Solutions Limited

Bajaj Finance Limited

We are the most diversifed non-bank in the country, the largest financier of consumer durables in India and one of the most profitable firms in the category. Hereunder are summary details of our portfolio of businesses, with a brief description on each. Consumer Durables Finance Lifestyle Finance EMI Card Consumer Finance Personal Loans Cross Sell Co-branded Credit Cards Two and three wheeler Finance Salaried Personal Loans Mortgage SME Finance Business Loans Construction Equipment Finance Commercial Lending Infrastructure Finance Vendor Financing

Rajeev Jain
Chief Executive Officer
At Bajaj Finserv Lending, Rajeev has charted an ambitious growth path for the company. The company is at an inflexion point and owes its exponential growth from a captive finance company to a most diversified non-bank in India today. The cumulative experience at GE, American Express and AIG has helped him change the course of the company and put it on a high growth path. Rajeev was earlier with American International Group as a Deputy CEO of its Consumer Finance business. At AIG, he was responsible for building the strategic framework for AIG Consumer business entry in India, created a holding company and acquired two non-banking finance companies to establish a base for AIG in the Indian market. Before that, he was with American Express where he spent more than eight years. During this period he did various roles across various products like credit cards, personal and business loans etc. At the time of leaving American Express, he was the Head of Personal and Small Business Lending in India.

Rajeev is a Management graduate from T A Pai Management Institute, Manipal with a Bachelors Degree in Commerce.

Our Journey

Each milestone of our journey from a humble beginning to the most diversified non-bank is proof of value delivered to each of our stakeholders.

1987 - 1999
If you were to ask us what does a six excruciating month wait for your favourite 2 wheeler have to do with the most diversified non-bank bank in the country? We'd say "Everything". This simple consumer truth about India's license days helped us realise two things. One, that maybe it's not just two wheelers that consumers hate waiting for, but just about for everything else as well. Two, that just like always in the past, time will be the most precious commodity that consumers will be willing to pay a premium for, especially if it's got to do with their need for financing their dreams. Rest of our journey is just milestones we've set for ourselves to keep setting bigger milestones. Each of the two realisations we started our journey with helped shape us as a company that has carefully invested in understanding processes to cut time for consumers and as a company that has created the most diversified portfolio of finance products in India. Of course we cant share trade secrets, but here's a list of milestone dates of both big things and small. It was a Wednesday when we were incorporated as Bajaj Auto Finance Limited on 25 March 1987. In the same year on 20 October we became a deemed public company u/s 43A(1) of the Companies Act 1956. On 24 September 1988 we were registered as a Public Limited Company. On 5 March 1998 we were registered with RBI as a Non-Bank Company. In 1994-95 we had our initial Public issue of Equity shares and were listed on the BSE and NSE. With walking the talk in our DNA we crossed Rs. 10 crore Pre Tax Profit milestone in 1995. In 1996 we crossed the Rs. 100 crore landmark of Shareholders' Funds. Our first eleven years were focussed on providing Two and Three Wheeler finance and setting up our

pan-India network. Hard work and accumulated learning of our first decade has held us in good stead throughout our journey. Towards the end of 1900s liberalisation was paying off rich dividends and consumerism on the rise like never before in India. We believed we had a strong feel of India's pulse from the Himalayas to Kanyakumari. When we ventured into the then little known business of Consumer Durable Financing in 1998-99 little did we ourselves know that in less than a decade we will become integral to India's snowballing electronic devices dream. Little did anyone else expect us to chart a course of unique value through innovations in processes across the financing needs of India. It was in the 2000-10 decade that we came of age many times over.

2000 - 2010
Human aspirations need means to finance it into reality. There are as many needs as there are humans. In the 2000-10 decade we expanded our expertise to finance dreams beyond Two & Three wheelers and Durables to Business & Property and a whole host of other Personal needs. We tied up with the best companies to create robust back ends to manage processes. As our footprint expanded and as we financed more and more Indian dreams we expanded our means to generate the funds. Simultaneously we leveraged technology to crunch time to approval for consumers across our businesses. We proposed and persuaded banks and other non-banks to collaborate for exploring avenues for profit. And we ploughed profit back into society as well through our various CSR initiatives. Our belief in our approach was paying off just in line with our expectations. We crossed Rs. 500 crore of annual disbursement in 2000. We doubled it within six years to Rs. 1,000 crore. 2006 also saw our Assets Under Management crossing the Rs. 1,000 Crores milestone. Our Shareholders' Funds crossed the Rs. 1,000 crore milestone in 2008. In line with our fast diversifying finance portfolio it was natural that our name reflect the expanded sphere of our presence in customers' life. We changed our name from Bajaj Auto Finance to Bajaj Finance on 6 September 2010.

2011 - 2012
What does a leader do to keep the original spirit and belief alive and kicking? Innovate. Innovate and Innovate. Innovate products. We created the first 0% Interest EMI (Existing Member Identification) card and we created Flexisaver in 2012. Innovate in Process. We reduced the approval time for Durable and Lifestyle Financing from our own benchmarked time of 15 minutes to 5 seconds flat by 2011! Innovate in delivery. In the last two years we've delivered delight to consumers and partners through Experia and Galaxie, our feature loaded digital apps. We're in the second year of this decade and we've already crossed 2,000 crore milestone in Shareholeders' Funds. Our Assets Under Management are already beyond Rs. 10,000 crore. Our PBT for FY 2012 was 602 crore. Our roots teach us to be sensitive to sustainability. We are careful about growing soundly and we place a lot of emphasis therefore on governance. Bajaj Finance Ltd is one of the few NBFCs in the country to be awarded a rating of FAAA/Stable for fixed deposits, indicating a very strong degree of safety with regard to timely payment of interest and principal on the instrument by the Credit Rating and Information Services India Limited (CRISIL). In addition to this, we are also rated high (P1+ rating) for Short-Term Debt Programme and AA+/Stable for Long-Term Debt Programme by CRISIL

and LAA+ for Long-Term Debt Programme by ICRA. Today we have a network of over 81 branch offices throughout the country to finance a growing set of needs of our ever more impatient customers. Did we say we had a role to play in their becoming impatient? Well, the less said the better.