To,

The Shareholders,

AAVAS FINANCIERS LIMITED ("THE COMPANY")

The Board of Directors ("the Board") have pleasure in presenting the 13th Annual Report on the operational and financial performance of Aavas Financiers Limited ("the Company" or "Aavas") along with the Audited Standalone and Consolidated Financial Statements for the Financial Year ended March 31, 2023.

FINANCIAL PERFORMANCE

Your Company has witnessed growth and consistent performance during the Financial Year under review. Your Company is a leading affordable Housing Finance Company in India. The Company caters to the needs of customers belonging to low and middle income segment in semi-urban and rural areas and primarily in the un-served and un-reached markets. The standalone financial performance for the Financial Year ended March 31, 2023 and a comparison with the previous year is summarized below: ( H in crore)

Your Company has made a positive impact on the lives of countless customers in its 12 years of journey by providing housing finance to the customers and enabling them to own a home. Our distribution has been further strengthened to 346 branches across 13 States.

The key financial performance indicators for the Financial Year are as follows:

• Total Income for the Financial Year 2022-23 increased to H1,610.15 crore vis-?-vis H1,305.56 crore for the Financial Year 2021-22.

• Profit Before Tax for the Financial Year 2022-23 increased to H548.99 crore vis-?-vis H454.86 crore for the Financial Year 2021-22.

• Profit After Tax for the Financial Year 2022-23 increased to H430.07 crore vis-?-vis H356.80 crore for the Financial Year 2021-22.

• The Assets Under Management (AUM) as at March 31, 2023 amounted to H14,166.66 crore vis-?-vis H11,350.21 crore in the previous year; a year-on-year growth of 25%.

Further, during the Financial Year under review, there was no change in nature of business of the Company.

AAVAS 3.0 Building a Lasting Institution

Your Company started its journey as Au Housing Finance Private Limited in 2011 as a subsidiary of Au Financiers India Limited (now AU small Finance Bank). It was the first phase of the Company's journey where the proof of concept of affordable housing model was being tested (Aavas 1.0). Your Company was renamed as Aavas Financiers Limited in 2017 and since evolved into a standalone business under the ownership of Kedaara Capital and Partners Group with a professional management team and experienced Board that subsequently went public in 2018 (Aavas 2.0). Your Company is now continuing its evolution and has embarked on the journey to become India's most trusted affordable housing finance player led by people and technology and emerge victorious in a highly competitive market, while maintaining the entrepreneurial spirit. The aim is to leverage technology, digital and analytics to drive growth and operating leverage. The Company's investments in technology is expected to help the business deliver sustainable quality growth and superior customer experience (Aavas 3.0). The Company continues to build India's most trusted affordable housing finance business with proactive investments in people, processes and positions. The Company's investments in futuristic technologies and analytics is expected to help the business deliver sustainable growth and enriched customer outcomes.

Aavas 3.0 is driven by a combination of organic growth and desire to attain scale. Aavas has established competence in customer acquisition and performance and going ahead, intends to deepen market penetration by entering diverse markets and segments.

DIVIDEND

Considering the capital intensive nature of the Company, your Directors felt it prudent to retain the earnings for the Financial Year under review to be ploughed back in business, which shall result in further augmentation of the Company's growth and Shareholders' wealth. Accordingly, no dividend has been recommended for the Financial Year ended March 31, 2023. In terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, (‘SEBI LODR Regulations') and Master Direction – Non-Banking Financial Company

– Housing Finance Company (Reserve Bank) Directions, 2021 (‘RBI Master Directions') the Board of Directors of the Company (the ‘Board') formulated and adopted the Dividend Distribution Policy (‘Policy'). The Policy is available on the website of the Company at https://www.aavas.in/img/pdf/ dividend-distribution-policy.pdf and forms part of this Report as ‘Annexure-5'.

Authorized Capital:

There was no change in the Authorized Capital of the Company during the Financial Year under review. The Authorized Capital of the Company is H85,00,00,000/- (Rupees eighty five crore only) divided into 8,50,00,000 (Eight crore fifty lakh) Equity Shares of H10/-(Rupees ten only) each.

Issued, Subscribed & Paid up Capital:

The issued, subscribed and paid up Capital of the Company as on March 31, 2023 stood at H79,05,68,740 (Rupees seventy nine crore five lakh sixty eight thousand seven hundred and forty only) consisting of 7,90,56,874 (Seven crore ninety lakh fifty six thousand eight hundred and seventy four) Equity Shares of H10/- (Rupees ten only) each.

During the Financial Year under review, the paid-up Equity Share Capital of the Company has been increased on account of issuance and allotment of 1,20,423 Equity Shares of H10/-(Rupees ten only) each pursuant to the exercise of stock options by the eligible employees of the Company under Employee Stock Option Plans (ESOPs) of the Company.

SPECIAL RESERVE (UNDER SECTION 29C OF THE NHB ACT, 1987)

Your Company has transferred H85.66 crore i.e. 20% of net profits to Statutory Reserves during the Financial Year under review as required under the provisions of Section 29C of the NHB Act, 1987 read with Section 36 (1) (viii) of Income Tax Act, 1961.

REVIEW OF OPERATIONS

Your Company is engaged in carrying out the business of housing finance activities in India. The Company's lending operations remained strong with the growing demand for housing loans. Your Company adopted contiguous on-ground expansion across regions; as of March 31, 2023, the Company conducted operations through 346 branches in 13 states. The Company chose to serve the growing needs of housing finance customers in the low and middle income segments of sub-urban and rural India, going contrary to the industry's preference to serve the customers in the metro cities and urban regions of the country. The details with respect to operating and financial performance of your Company has been covered in the Management Discussion and Analysis Report (MDAR), which forms part of this Annual Report.

During the Financial Year under review, your Company delivered a resilient performance, which is reflected in the following financial snapshot.

Income & Profits

Total Income grew by 23% to H1,610.15 crore for the Financial Year ended March 31, 2023 as compared to H1,305.56 crore for the previous Financial Year. Profit Before Tax (PBT) was 21% higher at H548.99 crore as compared to H454.86 crore for the previous Financial Year.

Profit After Tax (PAT) was 21% higher at H430.07 crore as compared to H356.80 crore for the previous Financial Year.

Sanctions

During the Financial Year under review, your Company has sanctioned housing loans for H5,168.83 crore as compared to H3,762.09 crore in the previous Financial Year with an annual growth of 37%. The cumulative loan sanctions since inception of your Company stood at H23,390.06 crore as at March 31, 2023. Your Company has not granted any loan against the collateral of Gold Jewellery.

Disbursements

During the Financial Year under review, your Company disbursed housing loans for H5,024.54 crore as compared to H3,602.24 crore in the previous Financial Year registering an annual growth of 39%. The cumulative loan disbursement since inception as at March 31, 2023 was H22,381.55 crore.

Assets Under Management (AUM)

The AUM of your Company stood at H14,166.66 crore (including assignment of H2,757.23 crore) as at March 31, 2023 as against H11,350.21 crore (including assignment of H2,343.78 crore) in the previous Financial Year, with a growth of 25%.

As of March 31, 2023, the average size of loan sanctioned was H8.90 lakh and average tenure was 198.2 months in the AUM (on origination basis).

Pradhan Mantri Awas Yojna (PMAY) Scheme

The Company has received subsidy under PMAY-CLSS worth H284.57 crore towards 13,518 beneficiaries during the Financial Year and the same has been credited to the respective customers' loan accounts.

Non-Performing Assets (NPA)

Your Company is in adherence to the provisions of Indian Accounting Standards ("Ind AS") with respect to computation of Stage-3 Assets (NPA). Your Company's assets have been classified based on expected performance. Exposure at Default (EAD) is the total amount outstanding including accrued interest as on the reporting date. Using a pro-active collection and recovery management system supported by analytical decision making and consistent engagement with the customers during the period, the GNPA and NNPA as at March 31, 2023 were 0.92% and 0.68% respectively (against 0.99% and 0.77% respectively in the previous Financial Year).

CAPITAL ADEQUACY RATIO

Your Company's Capital Adequacy Ratio as at March 31, 2023 was 46.96% (previous Financial Year 51.93%) which is far above the minimum required level of 15% as per the provisions of the RBI Master Directions showing strong position of the Company.

CREDIT RATING

The Credit Rating represent the highest degree of safety regarding timely servicing of financial obligations.

Your Company's financial prudence is reflected in the strong credit rating assigned by rating agencies. The ratings also derive strength from adequate risk management and control systems put in place by the Company, pristine asset quality and strong corporate governance.

An upgrade in the credit rating signifies a significant improvement in the creditworthiness of the Company. Considering the steady growth, strong profitability and robust balance sheet, rating agencies upgraded the credit rating of the Company. During the Financial Year under review, the long-term credit rating of the Company has been upgraded from AA-/Positive to AA/Stable by both CARE Ratings and ICRA Limited. Outlook on both ratings is Stable. The Short-term credit rating is reafirmed to A1+ by ICRA, CARE and India Ratings.

For more details on credit ratings, kindly refer Corporate Governance Report forming part of this report.

REGULATORY & STATUTORY COMPLIANCES

A crucial element in business and corporate management is compliance of applicable statutory provisions and adherence of a business to regulations and laws. Keeping that in view the Company has complied with all the guidelines, circular, notification and directions issued by RBI and NHB from time to time. The Company also places before the Board of Directors at regular intervals all such circulars and notifications to keep the Board informed and report on actions initiated on the same. The Company also complies with the provisions of the Companies Act, 2013 including the Secretarial Standards issued by ICSI, SEBI LODR Regulations, SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, Income Tax Act 1961, and all other applicable statutory requirements.

Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs

The Reserve Bank of India in 2021 issued Scale Based Regulation (SBR) a revised regulatory framework for NBFC's which is applicable to your Company being a NBFC HFC-category falling under middle layer.

The SBR framework encompasses different facets of regulation of NBFCs covering capital requirements, governance standards, prudential regulation, etc., the RBI decided to first issue an integrated regulatory framework for NBFCs under SBR providing a holistic view of the SBR structure and set of fresh regulations being introduced in respective timelines. With respect to above, the RBI has issued various circulars/ guidelines in the Financial Year 2021-22 and 2022-23, which were duly implemented by the Company including formation of policies, implementing procedures and to review their outcome on periodic basis.

DEPOSITS

Your Company being a non-deposit taking Housing Finance Company has neither invited nor accepted nor renewed any fixed deposits from public within the meaning of Chapter V of the Act read with the Companies (Acceptance of Deposits) Rules, 2014. Therefore, the disclosure in terms of RBI Master Directions is not required.

AWARDS AND RECOGNITION

• Felicitated by Hon'ble Union Minister of Finance and Corporate Affairs, Smt. Nirmala Sitharaman for Best NBFC for the year 2020-21 in FE India's Best Banks Awards.

• Felicitated with the Economic Times Best BFSI Brands 2023.

• Pioneer in Self Built Green Housing-80 EDGE Certified Green Homes by Sintali, UK based certifier.

• Head Office of the Company certified with LEED Gold Certification.

RESOURCE MOBILIZATION

Your Company has in place a borrowing policy framework to cater its borrowings needs. The objective of the policy is to diversify the liability portfolio of the Company and to reduce risk of overdependence on any particular lenders and instrument. The Company has diverse set of lenders/investors that includes public sector bank, private sector bank, National Housing Bank and other financial institutions.

Your Company has vide Special Resolution passed on July 21, 2022, under Section 180 (1) (c) of the Companies Act, 2013, authorized the Board of Directors to borrow money upon such terms and conditions as the Board may think fit in excess of the aggregate of paid up share capital and free reserves of the Company up to an amount of H17,000 crore (Rupees seventeen thousand crore only) and the total amount so borrowed shall remain within the limits as prescribed by RBI.

The Weighted Average Borrowing Cost as at March 31, 2023 was 7.61% (including Securitization/ Assignment) as against 6.88% as at the end of the previous Financial Year. As at March 31, 2023, your Company's sources of funding were primarily in the form of Long Term Loans from Banks and Financial Institutions (45%), followed by Securitization/Direct assignment (22%), NHB Refinance (20.8%), Debt capital market (12.2%).

Your Company has a comfortable liquidity position as on March 31, 2023 with Rs. 1381.6 crore (including FD's). Further, the Liquidity Coverage Ratio (‘LCR') for the Financial Year ended March 31, 2023 was 212.16% as against the regulatory requirement of 60%.

Term Loans from Banks and Financial Institutions

The Company, during the Financial Year, received aggregate fresh loan sanctions amounting to H3,200 crore and has availed loans aggregating to H2,765 crore. The outstanding term loans from Banks and Financial Institutions as at March 31, 2023 were H5,627.34 crore (excluding PTC and CC) with average tenure of 9.23 years.

Securitization/Assignment of Loan Portfolio

Your Company has actively tapped Securitization/Direct Assignment market, which has enabled it to create liquidity, diversify liability profile and minimizing asset liability mismatches.

During the Financial Year under review, your Company received purchase consideration of H954 crore from assets assigned in pool buyout transactions.

The pool buyout transactions were carried out in line with RBI guidelines on Securitization of Standard Assets and securitized assets were de-recognized in the books of the Company.

Refinance from National Housing Bank (NHB)

NHB continued to extend its support to your Company through refinance assistance and during the Financial Year under review, your Company has received fresh sanction of refinance assistance of H900 crore under the NHB refinance scheme. Your Company availed funds of H1,044 crore under various Refinance Schemes such as for Affordable Housing Fund,

Regular Refinance Scheme and Special Refinance Facility. Total outstanding refinance at the end of the current Financial Year stood at H2,603 crore.

Non-Convertible Debentures (NCDs)

Details of Non-convertible debentures are as following:

I. Multilateral/Development Financial Institutions

As on March 31, 2023, the Company's outstanding NCDs stood at H683.14 crore as compared to H878.9 crore as on March 31, 2022.

II. Domestic Financial Institutions

As on March 31, 2023, the Company's outstanding NCDs from Domestic Financial Institutions stood at H123.9 crore (including subordinate debt of H24.9 crore) as compared to H123.9 crore (including subordinate debt of H 24.9 crore) as on March 31, 2022.

III. Banks

As on March 31, 2023, the Company's outstanding NCDs from Banks stood at H209.8 crore (including subordinate debt of H74.9 crore) as compared to H249.8 crore (including subordinate debt of H74.9 crore) as on March 31, 2022. Your Company has not issued any Commercial Paper & Short Term Instrument during the Financial Year 2022-23 and as on March 31, 2023, the Company's Commercial Paper outstanding is NIL.

Further, the Company has not issued any NCD during the Financial Year 2022-23.

Rupee Denominated External Commercial Borrowing

As on March 31, 2023 the outstanding balance of Rupee Denominated External Commercial Bond stood at H507.5 crore (including outstanding balance of social masala bond of H357.9 crore). Further, the interest on Non-Convertible Debentures and Masala Bonds issued on private placement basis were paid by the Company on their respective due dates and there was no instance of interest amount not claimed by the investors or not paid by the Company.

Your Company, being listed HFC, is exempted from the requirement of creating Debenture Redemption Reserve (DRR) on privately placed debentures. Therefore, your Company has not created DRR. Further the requirement to invest or deposit a sum of not less than 15% of the amount of debentures which are maturing during the Financial Year ending on March 31 of the next year as provided under Rule 18 of the Companies (Share Capital and Debentures) Rules, 2014 has been done away for listed companies vide notification of Ministry of Corporate Affairs (‘MCA') dated June 05, 2020.

DISCLOSURE UNDER CHAPTER XI-GUIDELINES ON PRIVATE PLACEMENT OF NON-CONVERTIBLE DEBENTURES (NCDs) OF RBI MASTER DIRECTIONS:

(i) The total number of NCDs which have not been claimed by the Investors or not paid by the Company after the date on which the non-convertible debentures became due for redemption: Nil (ii) The total amount in respect of such debentures remaining unclaimed or unpaid beyond the date referred to in Paragraph (i) as aforesaid: Nil

DEBENTURE TRUSTEE

The Company has appointed IDBI Trusteeship Services Limited as the Debenture Trustee for the benefit of the debenture holders. The details of Debenture Trustee are available on the Company's website i.e. https://www.aavas.in/ details-of-debenture-trustee-rta-and-grievance.

BRANCH EXPANSION

The Company reinforced its go-to-market by setting up branches across India. The Company engaged in contiguous on ground expansion across regions. As of March 31, 2023, the Company conducted operations through 346 branches covering 13 states, comprising Rajasthan, Maharashtra, Gujarat, Madhya Pradesh, Haryana, Uttar Pradesh, Chhattisgarh, Delhi, Punjab, Uttarakhand, Himachal Pradesh, Karnataka and Odisha. The Company added 32 branches in Financial Year 2022-23. Your Company has its Registered Office in Jaipur, Rajasthan and its branch network as on March 31, 2023 vis-?-vis the previous Financial Year is detailed hereunder:

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The composition of the Board is in accordance with Section 149 of the Act and Regulation 17 of SEBI LODR Regulations with an appropriate combination of Executive, Non-Executive and Independent Directors. The Board of Directors of the Company plays a crucial role in overseeing how the management serves the short and long-term interests of stakeholders. This belief is reflected in Aavas governance practices, under which the Company strives to maintain an effective, informed and independent Board.

The Members of the Company's Board of Directors are eminent persons of proven competence and integrity. Non-Executive Directors, including Independent Directors, play a critical role in imparting value to the Board processes by bringing an independent judgment in the areas of strategy, performance, resource management, financial reporting, the overall standard of Company's conducts etc.

The Board of the Company comprises of 9 (Nine) Directors, consisting of 3 (Three) Independent Directors (including 2 (Two) Women Directors), 5 (Five) Non-Executive Nominee Directors and 1 (One) Executive Director-Managing Director as on March 31, 2023 who bring in a wide range of skills and experience to the Board.

The composition of Board of the Company is as under:

*Resigned w.e.f. May 03, 2023

** appointed as CEO w.e.f February 02, 2023 and Managing Director w.e.f. May 03, 2023 (MD and CEO).

The Independent Directors have confirmed that they satisfy the criteria prescribed for Independent Directors as stipulated in the provisions of the Section 149(6) of the Act and Regulation 16(1)(b) & 25 of SEBI LODR Regulations. The names of all the Independent Directors of the Company have been included in the Independent Director's databank maintained by Indian Institute of Corporate Affairs ("IICA"). The Company has obtained declaration of independence from all the Independent Directors of the Company. None of the Directors have any pecuniary relationship or transactions with the Company. None of the Directors of the Company are related to each other and have confirmed that they are not disqualified from being appointed as Directors in terms of Section 164 of the Companies Act, 2013 and are not debarred from holding the office of Director by virtue of any SEBI order or any other such authority. Your Company has also obtained a certificate from a Company Secretary in practice confirming that none of the Directors on the Board of the Company have been debarred or disqualified from being appointed or continuing as Directors of companies by Securities Exchange Board of India ("SEBI")/Ministry of Corporate Affairs ("MCA") or any such statutory authority. The same forms part of this Annual Report as ‘Annexure-1'.

APPOINTMENT & RESIGNATION OF DIRECTORS AND KMP

DISCLOSURE UNDER SECTION 197(14) OF THE ACT

The Managing Director and CEO of the Company has not received any commission from the Company's subsidiary company.

BOARD MEETINGS

There were 4 (four) Board meetings held during the Financial Year 2022-23. The particulars of the meetings held and attendance of the Directors in the meetings are detailed in the Corporate Governance Report, which is annexed as an integral part of this Report.

The Notice and Agenda including all material information and minimum information required to be made available to the Board under Regulation 17 read with Schedule II Part-A of the SEBI LODR Regulations were circulated to all Directors, well within the prescribed time, before the Meeting or placed at the Meeting.

BOARD EVALUATION

The Board Evaluation is the most effective way to ensure that the Board understands its duties and to adopt effective corporate governance practices. The Board of Directors has carried out an annual evaluation of its own performance, Board Committees, and individual Directors pursuant to the provisions of the Act and SEBI LODR Regulations and as per the criteria defined in the said act and regulations.

The above criteria are broadly based on the Guidance Note on Board Evaluation issued by the SEBI on January 5, 2017, requirements of Section 178 read with Clause VII of Schedule IV of the Act and SEBI LODR Regulations.

The evaluation process is carried out through a platform called "Goveva" which is a web based platform, to ease the process of board evaluation, to increase the efficiency and to automate report generation.

The Board and the Nomination and Remuneration Committee reviewed the performance of individual Directors on the basis of criteria such as the contribution of the individual Director to the Board and Committee meetings, leadership scale, performance, value creation, governance & compliance.

MEETING OF INDEPENDENT DIRECTORS

During the Financial Year under review, a separate Meeting of the Independent Directors was held on March 29, 2023 without the attendance of Non-Independent Directors and the Management of the Company. The Independent Director had discussed and reviewed the performance of the Non-Independent Directors and the Board as a whole, and also assessed the quality, quantity and timeliness of flow of information between the Management and the Board which is necessary for the Board to effectively and reasonably perform its duties.

FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

Pursuant to Regulation 25(7) of SEBI LODR Regulations, Schedule IV to the Companies Act, 2013 (hereinafter referred as "Applicable laws"), the Company conducts familiarization programme for the Independent Directors, to familiarize the Independent Directors with their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company, etc., through various programmes.

The Board is also periodically briefed on the various changes, if any, in the regulations governing the conduct of Non – Executive Directors including independent directors.

The details of the familiarization programmes have been hosted on the website of the Company and can be accessed through following link: https://www.aavas.in/img/pdf/details-of-familiarization-programme-imparted-to-independent-directors.pdf.

POLICY ON DIRECTOR'S APPOINTMENT, REMUNERATION & OTHER DETAILS

The Company has in place a ‘Policy on Nomination & Remuneration for Directors, Key Managerial Personnel (KMP) and Senior Management', which, inter-alia, lays down the criteria for identifying the persons who are qualified to be appointed as Directors and/or Senior Management Personnel of the Company, along with the criteria for determination of remuneration of Directors, KMPs, Senior Management and their evaluation and includes other matters, as prescribed under the provisions of Section 178 of the Companies Act, 2013 and Regulation 19 of SEBI LODR Regulations. Further, the Compensation policy of the Company is in line with the compensation guidelines issued by the Reserve Bank of India (RBI) pursuant to Scale Based Regulations.

The Remuneration paid to the Directors is in line with the Remuneration Policy of the Company. Details of Remuneration paid to all the Directors during the Financial Year 2022-23 is more particularly defined in Annual Return in form ‘MGT-7' as available on the website of the Company and can be accessed at https://www.aavas.in/investor-relations/annual-reports. The Remuneration Policy is placed on the website of the Company and can be accessed at https://www.aavas.in/codes-and-policies.

COMMITTEES OF THE BOARD

The Company has the following Nine (9) Board level Committees, which have been constituted in compliance with the requirements of the business and relevant provisions of applicable laws and statutes:

1. Audit Committee (AC)

2. Nomination & Remuneration Committee (NRC)

3. Stakeholders Relationship Committee (SRC)

4. Corporate Social Responsibility Committee (CSR)

5. Risk Management Committee (RMC)

6. Asset Liability Management Committee (ALCO)

7. Information Technology (IT) Strategy Committee

8. Customer Service & Grievance Redressal Committee (CS&GR)

9. Executive Committee (EC)

During the Financial Year under review, all recommendations made by above Committees were accepted by the Board. The details with respect to the composition, terms of reference, number of Meetings held, etc. of these Committees are given in the Report on Corporate Governance, which forms part of this Report as ‘Annexure-2'.

EMPLOYEE STOCK OPTION (ESOP) SCHEMES

Employee Stock Options have been recognised as an effective instrument to attract talent and align the interest of employees with that of the Company, providing an opportunity to the employees to share in the growth of the Company and to create long term wealth in the hands of employees, thereby acting as a retention tool.

ESOP 2016

Pursuant to the approval accorded by the Shareholders on February 23, 2017 the Company has approved and adopted

Employee Stock Option Plan for Employees-2016 ("ESOP-2016-I").

During the Financial Year under review, the company made grant aggregating to 1,25,000 options on March 30, 2023 under ESOP-2016-I.

ESOP-2022

During the Financial Year under review, ‘Equity Stock Option Plan for Employees 2022' ("ESOP-2022") has been approved by Members in the 12th AGM of the Company held on July 21, 2022.

The ESOP-2022 empowers the Board and Nomination & Remuneration Committee to execute the scheme.

During the Financial Year under review, there have been no changes in the scheme.

All the ESOP plans of the Company are in compliance with the provisions of SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (‘SEBI SBEB and Sweat Equity Regulations') as amended from time to time.

The Nomination & Remuneration Committee monitors the ESOP Schemes in compliance with the Act, SEBI SBEB and Sweat Equity Regulations and SEBI LODR Regulations. A Certificate from Secretarial Auditors of the Company, confirming that the above ESOP Schemes have been implemented in accordance with the SEBI SBEB and Sweat Equity Regulations as amended from time to time and are as per the resolutions passed by the Members of the Company will be available for the inspection of the Members of the Company. Disclosure on various plans, details of options granted, shares allotted upon exercise, etc. as required under SEBI SBEB and Sweat Equity Regulations and Companies (Share Capital and Debentures) Rules, 2014 is available on the Company's website at https://www.aavas.in/investor-relations/annual-reports.

Statutory Auditors and Auditors' Report

As per Section 139 of the Companies Act, 2013, read with the Companies(AuditandAuditors)Rules,2014,theMembersofthe Company approved the appointment of M/s Walker Chandiok & Co LLP, Chartered Accountants (Firm's Registration No. 001076N/N500013) as the Statutory Auditors of the Company for a period of 3 (three) consecutive years to hold office with effect from December 02, 2021 until the conclusion of the 14th AGM of the Company to be held in the calendar year 2024. The Company has received certificate from the said auditors that they are not disqualified and are eligible to hold the office as Auditors of the Company.

The Statutory Auditors have not made any adverse comments or given any qualification, reservation or adverse remarks or disclaimer in their Audit Reports on the Financial Statements both standalone and consolidated for the Financial Year 2022-23 and the Reports are self-explanatory. The said Auditors'

Reports for the Financial Year ended March 31, 2023 on the Financial Statements of the Company forms part of this Annual Report.

Further, the Statutory Auditors have not reported any fraud in terms of Section 143(12) of the Act.

Secretarial Auditors and Secretarial Audit Report

In accordance with Section 204 of the Act and Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s. Chandrasekaran Associates, Practicing Company Secretaries (Firm Registration No: P1988DE002500) were appointed as Secretarial Auditors to conduct the Secretarial Audit of the Company for the Financial Year 2022-23. The Report of Secretarial Auditors in form MR-3 for the Financial Year 2022-23 is annexed to this Report as ‘Annexure-3'.

The Report of Secretarial Auditors is self-explanatory and there were no observations or qualifications or adverse remarks in their Report.

In addition to the above and pursuant to regulation 24A of SEBI LODR Regulations, a report on Annual Secretarial Compliance issued by M/s. Chandrasekaran Associates, Practicing Company Secretaries for the Financial Year 2022-23 has been submitted with the Stock Exchanges and forms part of this report as ‘Annexure-4'. There are no observations, or qualifications or adverse remarks in the report.

Information System Audit (IS Audit)

The objective of IS Audit is to provide an insight on the effectiveness of controls that are in place to ensure confidentiality, integrity and availability of System Application and Entity's IT infrastructure. IS Audit identify risks and methods to mitigate risk arising out of System Application and IT infrastructure such as server architecture, local and wide area networks, physical and information security, telecommunications etc.

INTERNAL AUDIT & INTERNAL FINANCIAL CONTROL AND ITS ADEQUACY

The Reserve Bank of India has stipulated that all deposit taking and non-deposit taking HFCs are mandated to have a RBIA framework in place by June 30, 2022. The Company being a Non-Deposit taking HFC, the circular of RBIA becomes applicable accordingly, the Company has put in place RBIA framework within the timeline and has developed an in house team and appointed a Head of Internal Audit (HIA) to conduct audit of functional areas and operations of the Company. The Internal Audit department is headed by the HIA who reports directly to the Audit Committee of the Board. The primary responsibility of the HIA is to effectively manage the Internal Audit department and to ensure that it adds value to the entity and its objectives. HIA ensures compliance with the internal audit principles and standards and the entity's independence of the Internal Audit department, its audit staff and its performance against key performance indicators, annually to the Audit Committee and the Board. The Audit Committee reviews and evaluates adequacy and effectiveness of the Company's internal control environment and monitors the implementation of audit recommendations. The Company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal financial control over financial reporting includes those policies and procedures that pertains to maintenance of records, provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY REGULATORS

During the year under review, there were no significant or material orders passed by the regulators or courts or tribunals against the Company nor any fine/penalty levied on the Company.

MATERIAL CHANGES/EVENTS AND COMMITMENTS, IF ANY

There are no material changes and commitments affecting the financial position of the Company, which have occurred after March 31, 2023 till the date of this report.

However, after the closure of the Financial Year 2022-23 and before the approval of this report, Mr. Sushil Kumar Agarwal resigned from the post of Managing Director w.e.f. May 03, 2023 and Mr. Sachinderpalsingh Jitendrasingh Bhinder has been appointed as the Managing Director and CEO of the Company w.e.f. May 03, 2023.

There has been no change in the nature of business of your Company.

MAINTENANCE OF COST RECORDS

The Company being a HFC is not required to maintain cost records as per sub-section (1) of Section 148 of the Act.

INFORMATION TECHNOLOGY

The Company has always been at the forefront in the housing finance industry in using technology to provide productivity tools to employees and field associates and to provide an integrated journey to customers for a smooth loan disbursal experience.

In the recent past, the Company charted out a roadmap for technology led business transformation to make the Company ready for the next 10-year growth journey based on the following 3 pillars – enable sustainable growth with operating leverage, enhance technology capabilities and create a superior customer experience. Your Company has made significant progress along with the defined roadmap.

The Company wants to build a modern, innovative, and future-ready digital ecosystem to provide a 360-degree view from transaction origination to reporting. Technology is at the heart of the business transformation which is being driven at Aavas. Loan Origination System has been upgraded with Salesforce and Loan Management and Financial systems are being upgraded with ORACLE Flexcube Core banking and ORACLE Fusion ERP Applications. Using these platforms, the entire customer journeys on web/app platforms have been reimagined to create a best-in-class platform for loan disbursements. Using multiple fintech integrations, processing of the loan applications has been speeded up and cloud-based data and analytical infrastructure provide insights for further optimizations. The Company has implemented robust cybersecurity measures and by working with IS Audit has complied with all regulations, external and internal audits and continues to monitor and update policies to remain compliant with evolving regulatory requirements.

HUMAN RESOURCE

The Company has always believed that its employees are its most valued resource and has always ensured their all-round development. Your Company's success depends largely upon the quality and competence of its human capital. Attracting and retaining talented professionals is therefore a key element of the Company's strategy and a significant source of competitive advantage. The Company invested in a technology-driven HR department workflow, supported by a well renowned HRMS software called People Strong.

Human Capital represents an aggregate statement of the competencies, knowledge and experience of the employees. Aavas provides a work culture that encourages creativity; it has a diverse workforce, which ensures integrated and sustainable growth.

The Company's HR culture is rooted in its ability to subvert age-old norms in a bid to enhance competitiveness. The Company always takes decisions in alignment with the professional and personal goals of employees, achieving an ideal work-life balance and enhancing pride in association. The Company's permanent employee count stood at 6,034 as of March 31, 2023.

RISK MANAGEMENT FRAMEWORK

Your Company has in place a Board constituted Risk Management Committee as per the Regulation 21 of SEBI LODR Regulations and in compliance with the RBI regulations and guidelines as amended from time to time which assists the Board to establish a risk culture and risk governance framework in the Company. The details of the Committee and its terms of reference are set out in the Corporate Governance Report forming part of this Report.

The Risk Management Committee meets at least twice in the year and at such other times as the Board or Chairperson of the Committee shall require. The Committee ensure that appropriate methodology, processes and systems are in place to monitor and evaluate risks associated with the business of the Company and monitor and oversee implementation of the risk management policy, including evaluating the adequacy of risk management systems.

The Company has in place a Board approved Risk Management Policy and a Policy on Internal Capital Adequacy Assessment Process (ICAAP) pursuant to guidelines issued by RBI. The key risks that Company is exposed to in the course of its business are Credit Risk, ALM Risk, Concentration Risk, Interest Rate Risk, Legal Risk, Reputation Risk, Technical Risk, Cybersecurity Risk, Fraud Risk, Regulatory Risk. These are measured and reported to the Risk Management Committee on a quarterly basis.

The Company has developed an institutional intelligence for underwriting methodology which is executed by qualified and experienced team hosting majority of Chartered Accountants. Legal, technical and operations risks have vendors as well as professionally qualified in-house team.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

Pursuant to Section 177(9) and (10) of the Companies Act, 2013, and Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 the Company has formulated a Whistle Blower Policy for vigil mechanism of Directors and employees to report to the management about unethical behavior, fraud or violation of Company's Code of Conduct. The mechanism provides for adequate safeguards against victimization of employees and Directors who use such mechanism and makes provision for direct access to the chairperson of the Audit Committee in exceptional cases. None of the personnel of the Company has been denied access to the Audit Committee. The whistle blower policy is placed on the website of the Company and can be accessed at https://www. aavas.in/img/pdf/Whistle-Blower-Policy.pdf.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

The Company has in place a policy for prevention of sexual harassment in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act). The Company has complied with the provisions relating to constitution of Internal Complaints Committee (ICC) under the POSH Act. ICC has been set up to redress complaints received regarding sexual harassment. All employees are covered under this policy. During the year, the Company conducted workshops for employees creating awareness about POSH Act.

The details of complaints received and disposed during the Financial Year are provided in Corporate Governance Report forming part of this report.

CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING IN COMPANY'S SECURITIES

In accordance with the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 as amended from time to time, the Company has complied and formulated a Code of Conduct for Prevention of Insider Trading Policy, which prohibits trading in shares of the Company by insiders while in possession of unpublished price sensitive information in relation to the Company. The objective of this Code is to protect the interest of Shareholders at large, to prevent misuse of any price sensitive information and to prevent any insider trading activity by way of dealing in securities of the Company by its Designated Persons. Mr. Sharad Pathak, Company Secretary and Compliance Officer of the Company is authorized to act as Compliance Officer under the Code. Further the Company has maintained a Structural Digital Database (SDD) pursuant to provisions of regulations 3 (5) and (6) of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.

PARTICULARS OF HOLDING/SUBSIDIARY/ ASSOCIATE COMPANIES

Your Company doesn't have any Holding Company or Joint Ventures.

The Shareholder having the substantial interest in the Company is Lake District Holdings Limited.

As on March 31, 2023, your Company has one unlisted wholly owned subsidiary named ‘Aavas Finserv Limited'. The subsidiary Company has not started any business operations as on the date of this Report.

Pursuant to the provisions of Section 129(3) of the Act, your Company has prepared Consolidated Financial Statements of the Company, which forms part of this Annual Report. Further, a Statement containing salient features of Financial Statement of the Subsidiary in the prescribed format AOC-1 pursuant to Section 129(3) of the Act read with the Companies (Accounts) Rules, 2014, is annexed as ‘Annexure-6' to this Report. In accordance with Section 136 (1) of the Act, the Annual Report of your Company containing inter alia, Financial Statements including Consolidated Financial Statements, has been placed on our website at https://www.aavas.in/investor-relations/annual-reports. Further, the Financial Statements of the subsidiary have also been placed on our website at https:// www.aavas.in/investor-relations/financial-subsidiary.

INVESTOR RELATIONS

Your Company always believes in leading from the front with emerging best practices in Investor Relations and building a relationship of mutual understanding and trust.

The Company communicates with its investors through meetings with analysts and discussions between Fund Managers and Management. The Company also participates at investor conferences from time to time. All interactions with institutional investors, fund managers and analysts are based on generally available information that is accessible to the public on a non-discriminatory basis. The presentations made to analysts and fund managers are placed on the Company's website and are also submitted to Stock Exchanges. The transcripts of such meetings as well as the audio/video recordings are uploaded on the website.

Quarterly and Annual Earnings calls are scheduled through structured conference calls/weblinks to keep various stakeholders informed about the past performance and outlook of the industry, especially those having a bearing on the Company.

The investor relation section on Company's website at www. aavas.in contains all important public domain information including Financial Results, various policies framed/approved by the Board, presentations made to the analysts and institutional investors, schedule and transcripts of earnings call with investors, matters concerning the shareholders, details of the contact persons, etc.

PARTICULAR OF EMPLOYEE REMUNERATION

The statement containing particulars of employees as required under Section 197 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 annexed as ‘Annexure-8' to the Directors' Report. In accordance with the provisions of Rule 5(2) of the abovementioned rules, the names and particulars of the top ten employees in terms of remuneration drawn are set out in the ‘Annexure-8' to this report. In terms of the provisions of Section 136(1) of the Act, the Directors' Report including the said annexure is being sent to all Shareholders of the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company's initiatives in society are focused on the realisation of the twin goals of Stakeholders‘ Value Enhancement and societal value creation in a mutually reinforcing and synergistic manner. The Company is mindful of the needs of the communities and strives to make a positive difference in the society. Your Company's commitment to the society is sincere and longstanding.

The Vision of Company is to enhance value creation in the society and in the community in which it operates, through its services, conduct and CSR initiatives, to promote sustained growth for the society and community, in fulfillment of its role as a socially responsible corporate, with environmental concern.

The Annual Report on CSR Activities, is annexed as ‘Annexure-9 ' to this report.

PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars of energy conservation, technology absorption and foreign exchange earnings and outgo is provided as under in terms of Section 134(3)(m) of the Act read with Rule 8 of the Companies (Accounts) Rules, 2014:

ENVIRONMENT HEALTH AND SAFETY (EHS) PROTECTION

Your Company is committed to high Environmental and Social (ES) Standards in its business and will continue to develop its investment decision making processes and procedures so as to reflect the requirements of Indian ES legislation, as well as relevant international standards (specifically IFC Performance Standards) as applicable to our housing finance and MSME business lines. The Company always ensures that healthy and safe working environment is provided to all employees of the Company.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORTING

As per Regulation 34(2)(f) of SEBI LODR Regulations, the top 1000 (one thousand) listed entities based on market capitalization, shall attach a Business Responsibility Report with the Annual report describing the initiatives taken by the listed entity from an environmental, social and governance perspective. Provided that the requirement of submitting a Business Responsibility Report shall be discontinued after the Financial Year 2021–22 and with effect from the Financial Year 2022–23, the top one thousand listed entities based on market capitalization shall submit a Business Responsibility and Sustainability Report.

Your Company, being a top thousand listed entity as per Market Capitalization and adhering to good Corporate Governance and for the amelioration of the society in which it operates the Business Responsibility and Sustainability Report (BRSR) describing the initiatives taken by the Company from an environmental, social and governance perspective, forms part of this Annual Report as ‘Annexure-11'.

ANNUAL RETURN

Pursuant to the provisions of Section 134(3) and Section 92(3) of the Act, read with Rule 12(1) of the Companies (Management and Administration) Rules, 2014 the Annual Return in form MGT-7 as on March 31, 2023 is available on the website of the Company and can be accessed at https://www.aavas.in/ investor-relations/annual-reports.

ADDITIONAL DISCLOSURES UNDER COMPANIES (ACCOUNTS) RULES, 2014

a. The details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year along with their status as at the end of the Financial Year:

During the Financial Year under review, the Company made neither any application nor any proceeding is pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016), therefore, it is not applicable to the Company. b. The details of difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.

During the Financial Year under review, it is not applicable to the Company.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Since the Company is an HFC, the disclosure regarding particulars of loans given, guarantees given and security provided in the ordinary course of business is exempted under the provisions of Section 186(11) of the Act.

However, the details of loans, guarantees, and investments made as required under the provisions of Section 186 of the Act and the rules made thereunder are set out in the Notes to the Standalone Financial Statements of the Company.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

In accordance with the provisions of Section 188 of the Act and rules made thereunder, all related party transactions entered during Financial Year 2022-23 were on arm's length basis and in the ordinary course of business under the Act and were not material under the SEBI Listing Regulations, the details of which are included in the notes forming part of the Financial Statements.

The details as required to be provided under Section 134(3)(Rs) of the Act are disclosed in Form AOC-2 as ‘Annexure-7' which forms part of this Report.

A list of all related party transactions is placed before the Audit Committee as well as the Board. The Audit Committee has granted omnibus approval for related party transactions as per the provisions of the Act and the SEBI LODR Regulations. Further as required by SEBI and RBI Master Directions, ‘Policy on transactions with Related Parties' is given as ‘Annexure-10' to this Report and can be accessed on the website of the Company at https://www.aavas.in/img/pdf/Policy-on-Materiality-of-related-party-transactions-and-on-dealing-with-related-party-transactions.pdf.

INTERNAL GUIDELINES ON CORPORATE GOVERNANCE

Your Company is committed towards achieving the highest standards of Corporate Governance right from its establishment by staying true to its core values of Customer first, transparency, fairness in action, accountability, integrity and equity in all its engagements. The Company's Corporate Governance framework ensures that it makes timely and appropriate disclosures and shares factual and accurate information to its stakeholders so as to make an informed decision.

The Company has approved and adopted the Internal Guidelines on Corporate Governance. The Internal Guidelines on Corporate Governance has been framed in accordance with The Companies Act, 2013, SEBI LODR Regulations, 2015 (SEBI LODR, Regulations), RBI Master Directions, 2021 and other applicable rules and regulations. The guideline is available on the website of the Company and can be accessed at https://www.aavas.in/img/pdf/internal-guidelines-on-corporate-governance.pdf.

DIRECTORS' RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134(3)(c) read with Section 134(5) of the Act and based on the information provided by the Management, the Board of Directors report that: a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent to give a true and fair view of the state of affairs of the Company at the end of the Financial Year and of the profit and loss of the Company for that period; c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; d) the Directors had prepared the annual accounts on a going concern basis; e) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively; and f) the Directors had laid down Internal Financial Controls to be followed by the Company and that such Internal Financial Controls are adequate and were operating effectively.

BUSINESS OVERVIEW & FUTURE OUTLOOK

A detailed business review & future outlook of the Company is appended in the Management Discussion and Analysis Section of Annual Report.

ACKNOWLEDGEMENTS AND APPRECIATION

The Board of Directors place on record their gratitude for valuable guidance and the support to all Stakeholders of the Company including the Reserve Bank of India, National Housing Bank, the Ministry of Corporate Affairs, Securities and Exchange Board of India, Insurance Regulatory and Development Authority of India, Stock Exchanges and other Regulatory Authorities, Bankers, Lenders, Financial Institutions, Members, Credit Rating agencies, National Securities Depository Limited, Central Depository Services (India) Limited, NSE IFSC Limited and Customers of the Company for their continued support and trust.

Your Directors further take this opportunity to appreciate and convey their thanks to the Kedaara Capital and Partners Group for their invaluable and continued support and guidance. Your Directors also wish to place on record their appreciation for the commitment displayed by all the executives, officers, staff and the Senior Management team of the Company, in recording an excellent performance by the Company during the Financial Year.