Investor Presentation - Grihashakti · 2019. 8. 21. · 15.7 2016 2020 2025 GDP in PPP^ (US$...

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Fullerton India Home Finance Co. Ltd.

Fullerton India Home Finance Co. Ltd.

Investor Presentation

AGENDA

Industry Landscape

About Grihashakti

Business Highlights

Risk Management

Liquidity Management

2

Industry Landscape

3

4

India Growth Story Buoyed by demographics, unmet credit demand

"We always over-estimate the Change that will occur in the next two years & underestimate the change that will

occur in the next ten.“ – Bill Gates

36%

48% 51%

64% 69%

2015 2019 2020 2025 2027

India's Millennial as % of Workforce**

Incremental demand

199

171 151 134

56

-

50

100

150

200

1980 1990 2000 2010 2015 2018

Credit-to-GDP ratio*

KR UK US MY IN

Underpenetrated Market

Source –** Morgan Stanley ^PwC – GDP at purchasing power parity (PPP) adjusts for price level differences providing a better measure of the volume of goods and services produced.

*BIS (KR: Korea UK: United Kingdom US: United States MY: Malaysia IN: India)

India's economy is poised to become third-largest by 2027 with $6 trillion GDP**

8.7

11.8

15.7

2016 2020 2025

GDP in PPP^ (US$ trillion)

Growth potential

5 Source: *Mirae Asset Management **McKinsey ~ORF ^CRISIL [Housing portfolio of HFC’s total outstanding] ~Morgan Stanley #Anarock

McKinsey Global Institute defines India’s middle class as households with real annual disposable incomes between 200,000 and 1 million rupees.

• Housing sector has impact on construction, cement, steel

sectors driving up employment and income levels

• Housing Finance Companies can capture the increasing demand for

credit buoyed by favourable demographics and urbanization

India’s 9% Mortgage-to-GDP ratio in 2016 estimated at ~17% by 2026 (Morgan Stanley)

Housing - Catalyst for India’s Development Large opportunity for HFCs

430 mio in 2015 600 mio by 2030 Rapid urbanization*

64 mio in 2018 114 mio by 2022 Housing shortage~

250 mio in 2015 583 mio by 2030 Growing middle class**

Key Drivers for Housing Sector Growth Housing Sector Multiplier Effect

INR 6.3 tn in 2018 INR 14.8 tn by 2023 HFC Housing Loans^

Household size# 4.85 in 2006 4.44 in 2016

Ho

us

ing

Secto

r*

Service Sector

Skilled Labour

Architects, Designers & Engineers

Banking & Finance

Primary Sector Raw Materials

Manufacturing Sector Construction Materials

Fiscal Impact

Higher Income

Increased Tax Revenue

• Housing for all (Pradhan Mantri Awas Yojana) scheme – deliver 20 million

houses by 2022

• Home buyers recognized as financial creditors

• CLSS scheme extended till March 2020

6

Government Impetus Co-ordinated policy measures to spur growth

Home Buyers

Real Estate

Developers

HFCs

• RERA regulation to enhance developer performance, improve buyer confidence

• GST rates slashed for under-construction flats to 5% and affordable homes to

1%, effective from April 1, 2019

• Smart City Project - plan to build 100 smart cities

• Relaxation in LTV norms and risk weight for HFC

• Grant of infrastructure status to affordable housing

• Better access to funds with revised ECB regulation

• Enhanced Home Loan limit under Priority Sector Lending (PSL)

About Us – The Group

7

8

Temasek Holdings (Private) Ltd.

Fullerton Financial Holdings Pte. Ltd.

Fullerton India Credit Company Ltd.

Fullerton India Home Finance Company Ltd.

Wholly owned subsidiary



Grihashakti Housing Finance arm of Fullerton India

Fullerton Financial Holdings, Singapore (FFH) is a

wholly owned subsidiary of Temasek Holdings

• Temasek is a global investment company,

headquartered in Singapore

• FFH invests in and operates financial institutions in

emerging markets

Fullerton India Credit Co. Ltd. (FICCL) is a wholly-

owned subsidiary of FFH

• Incorporated in 2005

• Pan-India presence established across 22 states and

3 union territories

• Retail finance products for urban and rural households

as well as SMEs

Grihashakti, Fullerton India Home Finance Co. Ltd. is

a wholly-owned subsidiary of FICCL

• Commenced operations in December 2015

Fullerton Financial Holdings (FFH), the parent, was

incorporated in January 2003 as a wholly owned

subsidiary by Temasek Holdings Pte Ltd

FFH has 7 operating financial services entities located

across 6 countries

Its vision is to develop unique business models that

bring financial services to the underserved in

emerging markets

DUBAI, UAE

INDIA

Central CHINA

CHINA

MYANMANR

CAMBODIA POST

MALAYSIA

Fullerton Financial Holdings 100% step-down subsidiary of Temasek Holdings, Singapore

9

10

Fullerton India Credit Company A wholly-owned subsidiary of Fullerton Financial Holdings

Multi-product offerings support a range of customer needs

Consumer

Urban MSME

Rural

Cross-Sell

Personal Loans, Loans Against Property

Commercial Vehicle Loans, Business Loans, Loans Against Property

Personal / Group Loans, Loans Against Property, Vehicle Loans

Life / General Insurance

Established Customer Connect across Urban and Rural India

21,542 Cr

AUM (INR)

28 Lakh

Customers

626

Branches

13,000

Employees

58,000

Villages

AAA

Rating*

Data as at FY19. *Rating CRISIL, ICRA, CARE. (Temasek rated 'AAA/Stable' by S&P Global)

The Foundation For our Strategy and Culture

Vision Be the Company of choice in financial services for our customers, employees, communities and

stakeholders, recognized for innovation and high ethical standards.

Values

Agility

Diversity

Collaboration

Integrity

Innovation

Excellence

11

Board & Management Team Strong Oversight and Guidance

12

Anindo Mukherjee

Chairman – Grihashakti,

Non-Executive Director - Fullerton

India Credit Co. Ltd

Rakesh Makkar

CEO - Grihashakti,

Whole-time Director

Milan Shuster Independent Director

Rajashree Nambiar

Non-Executive Director,

MD & CEO – Fullerton India

Credit Co. Ltd

Board of Directors

Management Team

Pankaj Malik Chief Financial Officer

Parag Shah Chief Risk Officer

Shyam Reddipalli GM – Head Business & Product

Rakesh Makkar

CEO - Grihashakti,

Whole-time Director

FFH has senior level representation on the Board and various committees of Board

Note - As at August 2019

About Us - Our Journey

13

14

Our Journey So Far Steady asset growth, geographical expansion

Jul-15

Dec-15

Nov-16

Sep-17

Mar-19

Jan-18

Rated AA+ by CARE

Received HFC license with equity infusion of

INR 1 Bio

Started operations with 20

branches

Sep-16 Crossed AUM of INR 10 Bio

Team size of 425

Nov-17

SARFAESI Approval

Crossed AUM of INR 15 Bio


Expanded – Added 20 more branches

Expanded network to 60 Branches

Jun-19


Enhanced network of 78 branches

Jul-19

Equity infusion of INR 2 Bio

Team size of 780+

Aug-19

CRISIL ‘AAA’ Rated

Closed securitization deal worth INR 1,756 Mio

Grihashakti is a wholly-owned subsidiary of FICCL

• Customer segment – Primarily salaried, self-employed

professionals, and MSME firms

• Product suite – loans for new/resale home, home

improvement & extension, home construction, loan

against property, loans for commercial property,

construction finance, Lease Rental Discounting

• Presence – 78 locations; leveraging parent infrastructure

• Geographies – Focus on Tier 2 and 3 cities with a strong

network of associates and direct selling agents

• Target loans in the range of 20 Lakhs

• Employee strength – 780+

• Pro-active and continuous monitoring based on

external environment, customer data, bureau trends

Established customer connect in 78 branches across India

RAJASTHAN

• Branches # – 6

GUJARAT


MUMBAI


REST OF

MAHARASHTRA


KARNATAKA


MADHYA PRADESH


AP & TELANGANA


UTTAR PRADESH


TAMIL NADU


PUNJAB


HARYANA


DELHI


WEST BENGAL


UTTARAKHAND


15

Where Are We Today Business Overview

16

Our USP Deepening customer relationships in underserved markets

Strong Parentage

Experienced Management Team

Strong footprint in Tier 2/3 towns

Established niche in self-employed segment

Expertise in handling new-to-credit/

borrowers from informal segment

Strong Risk Governance Framework

Comfortable Liquidity Position

AAA rated. Steady infusion of capital

Industry veterans form part of Board and Senior Leadership team

1

2

3

4

5

6

Geographically diversified, sizeable play basis network of 78

branches and ~600 active channel partners

Leverage parent’s understanding of credit and distribution in

underserved markets, product programs customized for SENP

Pro-active monitoring based on external environment, customer

data, bureau trends. Robust delinquency management – from

early warning signals to effective SARFAESI implementation

7 Diversified lender base, low reliance on short term funding,

well-managed ALM

Region specific specialty teams on board – underwriting, collateral

management, valuation policy. Sturdy portfolio across market cycles

- demonetization, RERA, GST, liquidity crisis

Business Highlights

17

18

Q1FY19 Q1FY20

AUM (INR Mio)

Building Strong Franchise Continued momentum - Q1FY20

Net Revenue (INR Mio)

Q1FY19 Q1FY20

Operating Profit (INR Mio)

Q1FY19 Q1FY20

NNPA (%)

Q1FY19 Q1FY20

301 469 56% 96 150 56% 1.4 1.5

No. of active accounts (#)

Q1FY19 Q1FY20 Q1FY19 Q1FY20

22,260 36,960 66%

11.8K

~18.9K 60% 68.0 68.1

Cost-to-Income (%)

...despite pressure on cost of funds and business coming to a 3-month halt in Q3FY19

0.1%

0.1%

19

Meeting Diverse Customer Needs Trusted partner for customers, DSA channels

Product Share Product Suite

Fulfil dream of

owning a home

• Home Loans (HL)

– Purchase of New

and Resale

• Home

Improvement

• Home

Construction

• Residential Plot

and Home

Construction

Loans

• Home Extension

Loans

Expand Business

/Working Capital

• Loan against

Property (LAP)

• Lease Rental

Discounting

• Loans for

commercial

property - New

and Resale

• Loans for

construction of

commercial

property

Access to

developers • Approved Project

Financing

• Construction

Finance (CF)

Programs

customized for

self-employed

segment

• Liquid Income

Program

• Gross Turnover

Program

• Income Multiplier

Program

• Banking Product

• High Equity

Program

• EMI Equalizer

Program

HL 58%

LAP 40%

CF 2%

Closing AUM (Jun-19)

20

Fit For Growth Focused on expansion, efficiency & customer centricity

Rural Urban

Digital Process

• Focus on salaried profile for balanced growth

• Low channel dependency with increased focus on

direct sourcing

• Go wide into newer regions and deepen presence

in current regions

• Build scale in Tier 2-3 locations

• Leveraging our network franchise in rural India

• Tie-up with Banks, MFIs for Priority Sector Lending

• Drive Government schemes – PMAY, CLSS

• Target: Periphery of Tier 2-3 locations

• Refinance under NHB schemes – Rural Housing

Fund

• More products per customer; cross-sell and up-sell

• Tech-enabled sourcing and credit appraisal

• Digitally-driven, simplified, scalable loan processing

• Rule based engine for FTR (First-Time-Right)

underwriting and better turnaround

• Lean, streamlined processes for enhanced

efficiency, faster customer response rate

• Investments into data & analytics for risk

monitoring, customer service and control

• Targeted collections process

21

Alliances with online loan aggregators and FinTechs Alliances with online loan aggregators and FinTechs

Tap existing customer base Tap existing customer base

Up-sell to quality FIHFC customers Up-sell to quality FIHFC customers

CIBIL watch, Bureau scrub for HL CIBIL watch, Bureau scrub for HL

Retention base selling Retention base selling

Staff Loans & Referrals Staff Loans & Referrals

Deriving Customer Lifetime Value for Retention Deriving Customer Lifetime Value for Retention

Strengthening the Alternate Channel Digital Platform

• Lead generation from third-

party online marketplaces

• Digital Marketing, advt. on

partner websites

• Explore risk-sharing model

with Fin-Techs

• API integration / CRM

access to partners

Paperless Processing Paperless Processing Mobile Sourcing Solution Mobile Sourcing Solution Growing the pie Growing the pie

• Perfios integration for

bank statements

• Finfort integration for

income tax returns

• Scorecard based

business rule engine

• Fully functional web-portal

• Interface enabled with digital

sanction capabilities

• Integrated lead management system

• Frontline sales can digitally source

cases and provide instant financial

sanction to salaried segment

• Online fraud checks

• No documents for sanction to salaried cases; minimal documentation for self-employed

• Reduce human error, improve overall TAT through automated underwriting

• Improve productivity and customer satisfaction

• Widen revenue streams with digital alliances and sourcing

Digital Capabilities Building integrated platform for business generation

Risk Management

22

23

Risk principles and standards

Definitions of roles and

responsibilities

Governance structure

Key Components

Establish common principles and standards for the

management and control of all risks across the

organization and entities

Provide a shared framework to improve awareness

of risk management processes

Provide clear accountability and responsibility for

risk management

Key Objectives Key Principles

Balancing risk and return

Responsibility and Accountability

Anticipation of Future Risks

Standards Ensuring Portfolio Quality

Management

Information System

Credit Bureau

Policy

Credit Exposure

Norms

Credit Assessment

and Eligibility

Norms

Provisioning and

Asset Classification

Stress Tests and

Periodic Reviews Portfolio on Bureau

Watch Triggers

Collections and

Recovery Norms

Data Analytics

Board of Directors

Risk Oversight

Committee

Chief Executive

Officer

Policy

Approvals

Portfolio Purchases &

Sell-Offs Risk Credit

FCU, Legal,

Technical

Chief Risk Officer

Collections Analytics

Risk Governance Framework Highly Experienced Senior Management Team

Policy

24

Robust Risk Management Initiatives to mitigate and monitor risks

Managing

Risk

Formation of Credit Committee

Improvised Credit Policy

Enhanced Credit Underwriting -

Geography specific collateral

management, city-specific limits

on ticket size

Framework to identify and track

delinquencies, followed by remedial action

Risk-based Analytics Scorecard,

Risk Segmentation of collections

SARFAESI initiated on

100% eligible cases

Strengthened

Collections team

with senior hiring

Strengthened Fraud Control Unit

and property appraisal process

Liquidity Management

25

26

Borrowing Profile

• Basel III oriented, Board approved policies guide liability management

• Rigorous monitoring via ALCO

• Compliance oversight by independent verticals

• Three pillars of conservative liquidity risk management:

i. Diversification (across instruments lender category)

ii. Matching asset-liability tenors

iii. Maintenance of adequate buffers

• New Sources to be added

i. NHB Refinance

ii. ECB/ Masala Bond

iii. Retail Bonds

Stable Funding profile

(INR bio)

CRISIL AAA/Stable

Long term stable and diversified funding base, with adequate liquidity cover

27 30

70% 74%

26% 23%

4% 3%

Mar-19 Jun-19

Bank Loans NCD CP

Disclaimer

This presentation has been prepared by Fullerton India Home Finance Company Limited (the “Company”) solely for your information. This presentation is for information purposes only and should not be

deemed to constitute or form part of any offer or invitation or inducement to sell or issue any securities, or any solicitation of any offer to purchase or subscribe for, any securities of the Company, nor shall

it or any part of it or the fact of its distribution form the basis of, or be relied upon in connection with, any contract or commitment therefor. The financial information in this presentation may have been re-

classified and reformatted for the purposes of this presentation. You may also refer to the financial statements of the Company available at https://www.grihashakti.com/home.aspx, before making any

decision on the basis of this information.

This presentation contains statements that may not be based on historical information or facts but that may constitute forward-looking statements. These forward looking statements include descriptions

regarding the intent, belief or current expectations of the Company or its directors and officers with respect to the results of operations and financial condition of the Company. Such forward-looking

statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in such forward-looking statements as a result of various factors and

assumptions which the Company presently believes to be reasonable in light of its operating experience in recent years but these assumptions may prove to be incorrect. Any opinion, estimate or

projection constitutes a judgment as of the date of this presentation, and there can be no assurance that future results or events will be consistent with any such opinion, estimate or projection. The

Company does not undertake to revise any forward-looking statement that may be made from time to time by or on behalf of the Company.

No representation, warranty, guarantee or undertaking, express or implied, is or will be made as to, and no reliance should be placed on, the accuracy, completeness, correctness or fairness of the

information, estimates, projections and opinions contained in this presentation. Potential investors must make their own assessment of the relevance, accuracy and adequacy of the information contained

in this presentation and must make such independent investigation as they may consider necessary or appropriate for such purpose. This presentation does not constitute and should not be considered as

a recommendation by the Company that any investor should subscribe for, purchase or sell any of Company's securities. By viewing this presentation you acknowledge that you will be solely responsible

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performance of the business of the Company. None of the Company, book running lead managers, their affiliates, agents or advisors, the placement agents, promoters or any other persons that may

participate in any offering of any securities of the Company shall have any responsibility or liability whatsoever for any loss howsoever arising from this presentation or its contents or otherwise arising in

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Investor Presentation - Grihashakti · 2019. 8. 21. · 15.7 2016 2020 2025 GDP in PPP^ (US$...

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