Corporate Presentation – Q1 FY16 - Capital First · Corporate Presentation – Q1 FY16....

Corporate Presentation – Q1 FY16

Disclaimer

2Corporate Presentation

This presentation has been prepared by and is the sole responsibility of Capital First Limited (together with its subsidiaries, referredto as the “Company”). By accessing this presentation, you are agreeing to be bound by the trailing restrictions.

This presentation does not constitute or form part of any offer or invitation or inducement to sell or issue, or any solicitation of anyoffer or recommendation to purchase or subscribe for, any securities of the Company, nor shall it or any part of it or the fact of itsdistribution form the basis of, or be relied on in connection with, any contractor commitment therefore. In particular, thispresentation is not intended to be a prospectus or offer document under the applicable laws of any jurisdiction, including India. Norepresentation or warranty, express or implied, is made as to, and no reliance should be placed on, thefairness, accuracy, completeness or correctness of the information or opinions contained in this presentation. Such informationand opinions are in all events not current after the date of this presentation. There is no obligation to update, modify or amendthis communication or to otherwise notify the recipient if information, opinion, projection, forecast or estimate set forthherein, changes or subsequently becomes inaccurate.

Certain statements contained in this presentation that are not statements of historical fact constitute “forward-lookingstatements.” You can generally identify forward-looking statements by terminology such as“aim”, “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “objective”, “goal”, “plan”, “potential”, “project”, “pursue”, “shall”, “should”, “will”, “would”, or other words or phrases of similar import. These forward-looking statementsinvolve known and unknown risks, uncertainties, assumptions and other factors that may cause the Company’s actualresults, performance or achievements to be materially different from any future results, performance or achievements expressedor implied by such forward-looking statements or other projections. Important factors that could cause actual results, performanceor achievements to differ materially include, among others: (a) material changes in the regulations governing our businesses; (b)the Company's inability to comply with the capital adequacy norms prescribed by the RBI; (c) decrease in the value of theCompany's collateral or delays in enforcing the Company's collateral upon default by borrowers on their obligations to theCompany; (d) the Company's inability to control the level of NPAs in the Company's portfolio effectively; (e) certainfailures, including internal or external fraud, operational errors, systems malfunctions, or cyber security incidents; (f) volatility ininterest rates and other market conditions; and(g) any adverse changes to the Indian economy.

This presentation is for general information purposes only, without regard to any specific objectives, financial situations orinformational needs of any particular person. The Company may alter, modify or otherwise change in any manner the content ofthis presentation, without obligation to notify any person of such change or changes.

Agenda

3

Overview of the Company

Changing Asset Composition

Product Offering

Credit Processes

Credit Rating and Capital Position

Board of Directors

Corporate Presentation

Shareholding Pattern

Financial Results

Company’s Vision

Corporate Presentation 4

To primarily provide Micro, Small and Medium Enterprises in India with debt capital to support the growth of the MSME sector.

To finance the growing aspirations of the Indian Consumers with favourable demographics.

To be a leading financial services provider- admired and respected for high corporate governance, ethics and values.

Overview

• Capital First is a Non-Banking Finance Company listed on NSE and BSE, with arecord of consistent growth & profitability.

• The company has consistently increased its MSME and Retail financing from 10% onMarch 31, 2010 to 85.15% as on June 30, 2015.

• CFL has loan Asset Under Management of Rs. 126.43 bn as on June 30, 2015.• CFL has a strong distribution setup across India covering customer at 222 towns

with an employee base of 1161 as on June 30, 2015.• The Capital Adequacy is 22.13% as on June 30, 2015.• The Company continues to maintain high Asset Quality. On a comparable basis, at

180-DPD NPA recognition, the Gross NPA of the Company reduced to 0.56% as onJune 30th, 2015, from 0.69% as on March 31st, 2015 while the Net NPA marginallyincreased to 0.19% as on June 30th, 2015, from 0.17% as on March 31st, 2015.According to the 150-DPD NPA recognition, the Gross NPA and Net NPA stood at0.83% and 0.46% respectively as on June 30th, 2015.

• The Company’s long term credit rating (Bank Facilities, NCD and Subordinated Debt)is rated highly at AA+ by rating agencies.


Agenda

6



Product Offering

Credit Processes


Board of Directors



Financial Results

Capital First – Transformation from Wholesale to Retail NBFC

126.43 bnWholesale Assets MSME and Retail Assets


10%

56%

44% 74

%

26% 81

%

19%

FY10 FY11 FY12 FY13 FY14

• Launched CD business with credit scoring

• Launched Gold Loan business

• Divested Forex business

• Long Term Credit Rating (Bank Credit, NCD & Sub-Debt) upgrade from A+ to AA-

• Merged subsidiary NBFC with parent*

• Capital First is founded by way of buyout of existing shareholders including 26% minority shareholders (through open offer) with investment of Rs. 810.00 billion from Warburg Pincus (Sep 12)*

• Long Term Credit Rating upgrade d from AA- to AA+

• Company raised Rs. 1.78 billion as fresh equity from Warburg Pincus (Rs. 1.28 bn) and HDFC Standard Life (Rs. 0.50 bn)*

• Company’s subsidiary acquired HFC license from NHB*

• Closed Broking Business*

9.35 bn

27.51 bn

61.86 bn

75.10 bn

28%

72%

• Wholesale NBFC + broking subsidiary

90%

96.79 bn

• Company’s Assets under Management reached Rs. ~120.00 billion.

• Number of customers financed since inception crossed 1.0 million.

• Capital First raised Rs. 3,000 million of primary equity capital through QIP*

• Total Capital (Tier1+Tier2) at Rs. 22.39 billion (post dividend) as of 31 March 2015

• Closed Gold Loan business

FY15

*Corporate actions

84%

16%85%

15%

• Company’s Assets under Management crossed Rs. 125.00 billion mark successfully.

• Number of customers financed since inception crossed 1.65 million.

• Total Capital (Tier1+Tier2) at Rs. 22.74 billion as of 30 June, 2015

• Capital First Housing Loan Book crossed Rs. 2.50 billion

Q1 FY16

119.75 bn

Agenda

8



Product Offering

Credit Processes


Board of Directors



Financial Results

MSME Segment in India

9


Largely Proprietorship, Partnerships

Proprietorships

Public / Private Limited Companies

Partnerships/ Proprietorships / Cooperatives

• Micro, Small and Medium enterprises form a large part of the Indian Economy. They generateemployment and act as a catalyst for socio-economic transformation in India

• There are more than 29 million MSME enterprises across India employing more than 69 millionpeople

• MSMEs account for 45% of the Indian Industrial output and 40% of the total exports.

% o

f tot

al n

umbe

r of M

SME

play

ersi

n In

dia

95.1%

4.7%

0.2%

Source: “Micro, Small and Medium Enterprise Finance in India – A Research Study on Needs, Gaps and Way Forward” by IFC, Nov 2012


Challenges faced by MSMEs in India• MSME sector, especially the unorganized micro and small enterprises, lack in support from the

existing ecosystem, owing to their small scale which in turn is an impediment to their growth.Some of the key challenges faced by MSMEs are mentioned below –


FINANCE• Absence of adequate and timely supply of finance for working capital

• High cost of credit

• Collateral Requirements

• Limited Access to Equity Capital

INFRASTRUCTURE & PEOPLE• Low Production Capacity and lack of Advanced Technology to cater to rise in demand

• Limited ability for expansion and modernization

• Lack of proper transportation and warehouse

• Lack of Skilled Manpower

LEGAL, TAX & COMPLIANCE• Limited knowledge of legal structuring

• Complexity of labour laws (PF, ESIC, Factories Act)

• Taxation issues related to export and import

• Limited resources to meet reporting requirements of large number of compliances like Income Tax returns, Service Tax returns, VAT returns, Central Excise returns, Cess Returns etc.

OPERATIONS• Local Disturbances (dealing with interested parties)

• Cost and quality of Power ( Fluctuations, consistent outages, self financed generators)

• Poor roads, efficient transportation of raw material

• Packaging, pricing and marketing of goods

• Squeezed by larger customers (principals) on delayed payment terms.

CFL – A Specialized Player in MSME Financing


Rs. 1 Mn -Rs. 20 Mn

Rs. 1,00,000 –Rs. 1 million

Rs. 30,000 – Rs. 1,00,000

Rs. 20,000 – Rs. 30,000

To Small and Medium Entrepreneurs financing based on customised cash flow analysis and

references from the SME’s customers, vendors, suppliers.

To Small Entrepreneurs/ partnership firms in need of immediate funds, for say, purchase of additional

inventory for an unexpected large order.

To Micro business owners and consumers for purchase of PC, printers, office

furniture, Tablets, Two-Wheeler, etc.

Typical Loan Ticket Size from CFL

• CFL is a MSME Financing player with specialised credit evaluation methodology for this segment.• Capital First offers different financing options to different categories of MSMEs catering to their

financing needs at different stages of the business lifecycle.

Note: The figures are for the period Jan-Sep, 2014

CFL MSME Financing Offerings


• Mortgages: Such loans are typically availed bysmall entrepreneurs. CFL extends these loansafter proper evaluation of cash flow of theMSME, and backed by collateral of property.The average LTV at origination is 42%.

• These are monthly amortising products withno moratorium for Interest or Principalrepayment. The actuarial tenor of the loans isusually about 5-6 years. SMEs usually prepaythese facilities before time based on their cashaccruals.

• Average ticket size is about Rs. 9.6 Mn

• Challenges: Evaluation of cash flow is a keychallenge in financing MSMEs under thisfinancing category.

Note: All the loan product related figures are for the period FY15

CFL Consumer Financing Offerings


• Two Wheeler loans: CFL Providesfinancing to salaried and self employedindividuals like small traders, suppliersand shop keepers for purchase of Two-Wheelers.

• These loans are relatively small ticket sizeof about Rs. 44,000.

• The tenor of the loan is about 24 months.

• The LTV is about 70% for the mentionedperiod.

• Challenges: This line of business requiressignificant effort in Collections of EMIs asthe EMIs are small, number of customersare large and run into lacs, and collectioncosts are high.

Note: All the loan product related figures are for the period FY15 1 lac= 1,00,000

CFL Consumer Financing Offerings


• Durable Financing: CFL providesfinancing to consumers for purchase ofLCD/LED Panels, Laptops, Furniture, AirConditioners and other such whitegoods. These are also availed by smallentrepreneurs for office purposes.

• The Average Ticket Size is about Rs.30,000.

• The Loan to Value ratio is about 76%.

• The tenor of this loan is about 9 months

• Challenges: This line of businessrequires effort in Collections of EMIs asthe EMIs are small, number ofcustomers are large and run intolacs, and collection costs are high.

Note: All the loan product related figures are for the period FY15, 1 lac= 1,00,000

Agenda

15



Product Offering

Credit Processes


Board of Directors



Financial Results

Credit Processes


Sales, credit, operations and collections are independent of each other, with independent reporting lines for checks and balances in the system.

Credit Policy(For defining

Lending Norms)

Business Origination

Team

Credit Underwriting

Team

Loan Booking and Operations

Team

Portfolio Monitoring &

Collections

100 98

59 56 4937

2 39

36

12

37

Application Logged in

CIBIL/Credit Bureau rejection

Rejection due to Insufficient Cashflow /

Documentation

Rejection after Personal Interview

Rejection due to legal & technical

reasons

Rejected for other reasons

Net Disbursals

Credit Underwriting ProcessMortgages


In the Mortgages business at Capital First, about 37% ofthe total applications are disbursed after passing throughseveral levels of scrutiny and checks, mainly centredaround cash flow evaluation, credit bureau and referencechecks

Rigorous and robust credit assessment processes in Capital First help in maintaining the highasset quality and low NPA levels

✘✘

✘

✘✘

Note: The data is for the period October, 2012 to September, 2014

Agenda

18



Product Offering

Credit Processes

Credit Rating & Capital Position

Board of Directors



Financial Results

Credit Rating


• The long term credit rating of the company is AA+ for Bank Facilities, NCD & Subordinated Debt, which recognizesits comfortable capitalization levels, strong business model, comfortable asset quality parameters, healthyliquidity position, experienced management team, strong promoters and reputed institutional shareholders.

Long term Credit Rating (Bank Facilities, NCD & Subordinated Debt)

A+ A+

AA-

AA+ AA+ AA+

FY10 FY11 FY12 FY13 FY14 Q2-FY15FY15

Capital


18.6% 23.5% 22.2%Capital Adequacy Ratio (%)

All figures are in Rs. Mn unless specified

Note: Capital includes Networth, Perpetual Debt and Sub-Debt

29.0% 23.5% 23.5% 22.1%

6,909 7,471

10,316

15,107

17,869

22,388 22,738

5,000

7,000

9,000

11,000

13,000

15,000

17,000

19,000

21,000

23,000

25,000

FY10 FY11 FY12 FY13 FY14 FY15 Q1-FY16

Agenda

21



Product Offering

Credit Processes


Board of Directors



Financial Results

22

Chairman, Capital First.


He joined ICICI Limited in early 2000 when it was still a Domestic Financial Institution (DFI) and the business he built helped the transition of ICICI from aDFI to a Universal Bank. He launched the Retail Banking Business for ICICI in 2000, and grew it to 1400 Bank branches in 800 cities, 25 millioncustomers, a vast CASA and retail deposit base, with branch, internet and digital banking, and built a retail loan book of over 1,35,000 Crores inMortgages, Auto loans, Commercial Vehicles, Credit Cards and Personal Loans. In addition, he also built the ICICI Bank’s SME business and managed theRural Banking Business. These businesses helped the conversion of the institution to a universal bank renowned for retail banking.

He was appointed as MD and CEO of ICICI Personal Financial Services at 32, Executive Director on the Board of ICICI Bank at the age of 38 and becamethe MD and CEO of ICICI Prudential Life Insurance Co at 41. He was also the Chairman of ICICI Home Finance Co. Ltd, and served on the Board of ICICILombard General Insurance Company, CIBIL- India’s first Credit Bureau, and SMERA- SIDBI’s Credit Rating Agency. He started his career with CitibankIndia in 1990 and worked there till 2000 in retail banking.

During his career, he and his organization have received a large number of domestic and international awards including “Best Retail bank in Asia2001”, “Excellence in Retail Banking Award” 2002, “Best Retail Bank in India 2003, 2004, and 2005 from the Asian Banker”, “Most Innovative Bank”2007, “Leaders under 40” from Business Today in 2009, “Greatest Corporate Leaders of India, 2014”, and was nominated “Retail Banker of the Year” byEFMA Europe for 2008. He is an alumnus of Birla Institute of Technology and Harvard Business School. He is a regular contributor on Financial andBanking matters in India and international forums.

He is a regular marathoner and has run 7 marathons and 13 half marathons. He lives in Mumbai with his family of father, wife and three children.

Mr. V. Vaidyanathan founded Capital First Limited by way of a Buyout of an existing NBFC with an Rs. 8.10Billion (USD 150 million) equity backing from Warburg Pincus, a reputed Private Equity with USD 45 billion infunds in 2012. The transaction involved buyout of existing majority and minority shareholders, infusion offresh capital of Rs. 100 Crores, change of business to retail, and creation of a new brand and company CapitalFirst Limited. Post the buyout, he holds shares and options totaling 13% of the equity of the company on afully diluted basis through personal holdings and related entities.

In March 2010, the company was a wholesale financing NBFC with a loan book of Rs. 9.35 Billion with capitalof Rs. 6.90 billion. He used this platform to start a retail finance NBFC and built it to a loan book of Rs. 126.44billion and capital of Rs. 22.74 billion (June 2015), established a footprint in 222 locations in India. During thisperiod, the NPA reduced from 5.36% to less than 1%. Under his leadership, the long term credit rating hasbeen re-rated thrice in 3 years from A+ to AA+. He believes that financing India’s 30 million MSMEs and India’semerging middle class, with a differentiated model based on new technology platforms, offers a uniqueopportunity in India.

Board of Directors


Vishal MahadeviaNon-Executive

Director

Mr. Vishal Mahadevia joined Warburg Pincus in 2006, is co-head of the firm's Mumbai office. Previously, he was a principal at Greenbriar Equity Group, a fund focused on private equity investments. Prior to that, Mr. Mahadevia worked at Three Cities Research, Inc., a New York-based PE fund, and with McKinsey & Company

N.C. SinghalIndependent Director

Mr. N. C. Singhal was a Banking Expert to the Industrial Development Bank of Afghanistan, for the World Bank project and a Consultant and Management Specialist with the ADB. He was the founder Chief Executive Officer of The Shipping Credit & Investment Corporation of India Limited (since merged with ICICI Ltd.) & has an experience of 55 years in corporate sector.

Hemang RajaIndependent Director

Mr. Hemang Raja had served on the executive committee of the Board of the National Stack Exchange of India Limited and also served as a member of the Corporate Governance Committee of the BSE Ltd. He was also the former Managing Director & CEO of IL&FS Investment Ltd.

M S Sundar RajanIndependent Director

Mr. Sundar Rajan was Chairman and Managing Director (CMD) of Indian Bank and has total experience of over 38 years in the Banking Industry. He has also earlier worked with Union Bank of India for over 33 years. During his Stewardship as CMD of Indian Bank, the Bank has won many accolades and awards

Dr. Brinda JagirdarIndependent Director

Dr Brinda Jagirdar is an independent consulting economist with specialization in areas relating to Indian economy and financial intermediation with more than 35 years of experience in Banking Industry. She retired as Chief Economist, State Bank of India.

Dinesh KanabarIndependent Director

Mr. Dinesh Kanabar is the CEO of Dhruva Tax Advisors LLP. He has over 25 years’ experience in advising some of the largest corporate houses. Earlier, he was the Deputy CEO of KPMG India and Chairman of its Tax Practice. He has handled some of the biggest tax controversies in India and has advised on complex structures for both inbound and outbound investments.

Narendra OstawalNon-Executive

Director

Mr. Narendra Ostawal is the Managing Director of Warburg Pincus India Private Limited. Earlier, he has worked with 3i India Private Limited (part of 3i Group PLC, UK) and McKinsey & Company. Mr. Ostawal has an experience of 13 years in consulting and private equity segment.

Agenda

24



Product Offering

Credit Processes


Board of Directors



Financial Results

Equity Shareholding Pattern – (as on 30 June 2015)


Promoters (Warburg Pincus-

Affiliated Companies)

, 65.3%

FII & FPI, 8.0%

Financial Institutions/Banks,

0.2%

Bodies Corporate, 7.0%

Individuals, 8.4%

Others, 11.1%

Agenda

26



Product Offering

Credit Processes


Board of Directors



Financial Results


Key FinancialsTrailing 9 quarters


731822

913 928

1,152

1,3061,424

1,481

1,603

0

200

400

600

800

1000

1200

1400

1600

1800

Q1-FY14 Q2-FY14 Q3-FY14 Q4-FY14 Q1-FY15 Q2-FY15 Q3-FY15 Q4-FY15 Q1-FY16

Net Interest Income (NII)

FY14 FY15 FY16




9431,024

1,098 1,157

1,4421,548

1,7551,843

1,997

0

500

1000

1500

2000

2500


Total Income & Opex

Total Income Opex

FY14 FY15 FY16




Consistent Increase in PBT over last 9 quarters

74115

169

232

324

417453 468

506

0

100

200

300

400

500

600


FY14 FY15 FY16

Consolidated Profit & LossCorresponding quarter (Q1-FY16 vs. Q1-FY15)



Particulars Q1-FY16 Q1-FY15 % Change

Interest Income 3,589 3,047 18%

Less: Interest Expense 1,986 1,895 5%

Net Interest Income (NII) 1,603 1,152 39%

Fee & Other Income 394 290 36%

Total Income 1,997 1,441 39%

Opex 983 905 9%

Provision 508* 212 140%

PBT 506 325 56%

Tax 175 116 51%

PAT 331 208 59%

* Includes additional provisioning of Rs. 86 Mn on a one-time basis due to change in the provisioning policy for Mortgage Loans. The Company has made a more stringent provisioning policy from Q1-FY16 where 100% provisioning is provided at 360 DPD compared to 720 DPD earlier.


Consolidated Profit & LossTrailing 9 quarters


Particulars Q1-FY14 Q2-FY14 Q3-FY14 Q4-FY14 Q1-FY15 Q2-FY15 Q3-FY15 Q4-FY15 Q1-FY16

Interest Income 2,212 2,408 2,581 2,660 3,047 3,234 3,470 3,489 3,589

Less: Interest Expense 1,481 1,587 1,668 1,732 1,895 1,928 2,046 2,008 1,986

Net Interest Income 731 794 913 928 1,152 1,306 1,424 1,481 1,603

Fee & Other income 212 203 184 229 290 242 331 362 394

Total Income 943 1,024 1,098 1,157 1,442 1,548 1,755 1,843 1,997

Opex 736 777 746 863 905 913 996 1,057 983

Provision 133 132 183 62 213 218 306 318 508*

PBT 74 115 169 232 324 417 453 468 506

Tax 19 43 68 (66) $ 116 146 154 103$ 175

PAT 55 72 101 298 208 270 299 365 331

$ Includes one-time tax credit of Rs. 173.2 in Q4-FY14 and Rs. 48.9 million in Q4-FY 15 on completion of Income Tax Assessment. Excluding these one time credits, the PAT in Q4-FY14 and Q4-FY15 would have been Rs. 153.1 million and Rs. 308.9 million respectively.

* Includes additional provisioning of Rs. 86 Mn on a one-time basis due to change in the provisioning policy for Mortgage Loans. The Company has made a more stringent provisioning policy from Q1-FY16 where 100% provisioning is provided at 360 DPD compared to 720 DPD earlier.

Consolidated Balance SheetAll figures are in Rs. Mn unless specified


Particulars As on June 30, 2015

As on March 31, 2015

SOURCES OF FUNDS

Net worth 16,088 15,738

Loan funds 88,300 84,374

Total 1,04,389 100,112

APPLICATION OF FUNDS

Fixed Assets 215 191

Deferred Tax Asset (net) 403 421

Investments 671 949

Current Assets, Loans & Advances

Loan Book 93,964 87,845

Other current assets and advances 16,884 17,414

Less: Current liabilities and provisions (7,748) (6,709)

Net current assets 1,03,100 98,551

Total 1,04,389 100,112

Investor ContactSAPTARSHI BAPARI+91 22 4042 3534, +91 99200 [email protected]

Capital First LimitedIndia Bulls Finance CentreTower II, 15th FloorSenapati Bapat MargElphinston (West)Mumbai 400 013

Websitewww.capfirst.com


Kindly provide feedback about the presentation at [email protected] or [email protected]

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http://www.capitalfirst.com/





Corporate Presentation – Q1 FY16 - Capital First · Corporate Presentation – Q1 FY16....

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