Nbfc v4.2 pub 18.8.12 09.37am

Non-Banking Financial Companies

Bhavesh Tanna-160

Aniket Tawde-161

Vishal Thadani-163

Sagar Thakkar-165

Aditya Vaidya-169

Kamlesh Varma-170

Introduction

What is NBFC ? Cannot accept demand deposits Cannot issue cheques to its customers. DICGC is not available for NBFC

Introduction

Financial Asset of Company > 50% of Total Asset Income from Financial assets > 50% Gross Income

…...then the company will be treated as NBFC

Classification

NBFC

NBFC-D NBFC-ND

NBFC

Asset Finance Company Loan Company Investment

company

Infrastructure Finance

Company

Core Investment Company

Activities

NBFC

Hire Purchase

Investment Activities

Mutual Fund

Finance

Insurance Business

Housing Finance

Loan Granting Activities

Equipment Leasing

Activities

Current Scenario

Source: Issues & Concerns in NBFC, Aug 2011, RBI

COMPANIESProminent NBFC companies in India.

Mahindra Financial Services Ltd

MMFSL subsidiary of M&M ltd Focused on Rural & Semi-Urban Sector Primarily in Auto & Utility Vehicle Loans CRISIL AA+/Stable

Growth Prospects

By 2015-16 19/1000 Vs 9/1000 (Today) Will Own Cars Long Term Growth Driven By Rising Household Income Positive Demand Drivers

Affordability, New Launches, Growth in Addressable Market, Infra Development

Business Strategies

Increasing Share in Auto Fin Sector Expanding National Network of Branches Diversification of Product Portfolio Leveraging Existing Customers Base Attract & Retain Talented Employees Effective use of Technology

Risks & Risk Mitigation

Risk Mitigation

Volatility in Interest Rates Matching Assets & Liabilities

Rising Competition Increasing Branch Network

Raising Funds at Competitive Rates Maintaining Credit Ratings & Improving Asset Quality

Dependence on M&M Increasing Non-M&M Portfolio

Adhering to Employee Retention Job Rotation/ESOP/Recovery Based Performance Initiatives

Physical Cash Management Insurance & Effective Internal Control

Muthoot Finance Ltd

India’s Biggest Gold Lending Company Gold Loans – Convert Economically Passive Asset Into Active Short Term Finance Solution To Borrowers 1000 Member Conduct Audits To Ensure Quality Of Gold Assets

Critical Factors For Gold Loan Companies

Success Factors

Reach & Strong

Network Distribution

Brand Recognition

Access to Low Cost

Funds

Expertise in Evaluating

Gold Ornaments

Security of Gold as

Collateral

Unique & Customized

Offering

Faster Turnaround

Time

Technology Systems & Procedure

Growth Prospects

Fund Availability Shift From Unorganized Gold Loan Sector To Organized Low Interest Rates Flexible Repayment Options Very Less Defaults In Case Of Gold Loans

Risks & Risk Mitigation

Risk Risk Mitigation

Decline in the value of gold collateral Around 40% buffer is kept on the value of jewellery for calculation of the loan amount

Any failure of the counterparty to abide by the terms and conditions

Constant audits to keep in check the NPAs

Any interest rate movement Company prefers to have loans, Borrowings at fixed rate of interest; No dependence on single source

A cyclical or seasonal nature of business of a borrower

borrower profile consists of people engaged in various income generation Activities

Bajaj Finance Ltd

Focused On Semi-urban & Rural Markets Largest Two Wheeler Lender In India Largest Consumer Electronics Lender In India Focused On High Net Worth SMEs 85% Of Business Secured By Mortgages & Marketable Sec

Growth Prospects

Reasonably well capitalized for next 3 quarters EMI cards for customer durable clients Increase in consumption of consumer durable goods Approval to raise 750 cr Launch of new product line called “Lifestyle financing”.

Risk Factors

Fluctuating Dollar rate Slowing Growth rate of the Auto sector Slowdown in economy could reduce credit off-take Default in payment from customers More slowdown in the construction equipment and

infrastructure business.

IndiaBulls Finance

One Of The Major Housing Fin Company Loans For Vehicle, SMEs, Business, Home Loan Mortgages Comprise 71% Of The Total Asset Books Avg Ticket Size Of Rs. 23 Lacs, Avg LTV Of 64% For Avg Term Of 14 Years

Growth Prospects

Massive growth in Housing Financing Rise in the no of vehicle loans Interest among the young youth in stock markets Rising Competition among peer companies Quick and efficient services

Risks

Management, Governance Structure Downgrading Of Credit Rating Public Opinion Housing Bubble (?)

FINANCIALSLets dig a little deeper …

Bank Term Loan48%

NCD22%

FD9%

CP, ICD9%

Assignment12%

MMFSL

Bank Term Loan41%

NCD7%

NCD - Muthooth

Gold Bonds33%

CP3%

Subordinated Debt8%

Assignment8%

MFL

Bank Term Loan58%MFs

21%

Insurance & PFs7%

Other Treasury

14%

BFS Lending

Bank Term Loan62%

NCD28%

CP10%

IBFSL

Funding

Auto/UV31%

Tractors19%

Cars27%

CV & CE11%

Pre-Owned12%

MMFSL

Consumer Finance

39%

SME45%

Commercial16%

BFS Lending

Mortgages71%

Corp Loan21%

CVs8%

IBFSL

Loans & Advances

FY 10 FY 11 FY 12 Q1 FY 13Rs.0

Rs.5,000

Rs.10,000

Rs.15,000

Rs.20,000

Rs.25,000

Rs.30,000

10%

15%

20%

25%

MMFSL

Revenues PAT PAT %age

FY 10 FY 11 FY 12 Q1 FY 13Rs.0

Rs.5,000

Rs.10,000

Rs.15,000

Rs.20,000

Rs.25,000

Rs.30,000

Rs.35,000

Rs.40,000

Rs.45,000

Rs.50,000

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

MFL


FY 10 FY 11 FY 12 Q1 FY 13Rs.0

Rs.5,000

Rs.10,000

Rs.15,000

Rs.20,000

Rs.25,000

0%

5%

10%

15%

20%

25%

BFS Lending


FY 10 FY 11 FY 12 Q1 FY 13Rs.0

Rs.5,000

Rs.10,000

Rs.15,000

Rs.20,000

Rs.25,000

Rs.30,000

Rs.35,000

0%

5%

10%

15%

20%

25%

30%

35%

IBFSL


Source: Compiled from Audited ARs

FY 10 FY 11 FY 12 Q1 FY 13Rs.0

Rs.5,000

Rs.10,000

Rs.15,000

Rs.20,000

Rs.25,000

MMFSL

AUM Moving average (AUM)

FY 10 FY 11 FY 12 Q1 FY 13Rs.0

Rs.5,000

Rs.10,000

Rs.15,000

Rs.20,000

Rs.25,000

Rs.30,000

MFL


FY 10 FY 11 FY 12 Q1 FY 13Rs.0

Rs.2,000

Rs.4,000

Rs.6,000

Rs.8,000

Rs.10,000

Rs.12,000

Rs.14,000

Rs.16,000

BFS Lending


FY 10 FY 11 FY 12 Q1 FY 13Rs.0

Rs.5,000

Rs.10,000

Rs.15,000

Rs.20,000

Rs.25,000

Rs.30,000

Rs.35,000

IBFSL


Source: Compiled from Audited ARs

MMFSL MFS BFS Lending IBFSL0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Capital Adequacy

Tier 1 Tier 2 Source: Compiled from Audited ARs

Mar '08 Mar '09 Mar '10 Mar '11 Mar '12

MMFSL 18.58 22.14 35.37 44.53 59.63

MFS 87.71 126.13 19.94 7.56 15.43

BFS Lending 5.5 9.27 24.43 67.42 98.37

IBFSL 14.71 6.88 8.27 19.57 23.21

10

30

50

70

90

110

130

EPSSource: Compiled from MoneyControl Data

1 2 3 4 5

MMFSL 137.93 151.62 178.39 239.23 283.74

MFS 318.59 444.72 75.75 19.42 41.67

BFS Lending 290.57 297.5 314.94 370.77 487

IBFSL 115.88 120.26 130.83 133.5 137.06

50

150

250

350

450

550

Book ValueSource: Compiled from MoneyControl Data

PEER to PEERA comparative look at similar NBFCs

M&M Financial Bajaj Finance Shriram TransFi Sundaram Fin17%

18%

19%

20%

21%

22%

23%

22%

19%

21%

21%

Net Profit Margin

M&M Financial Bajaj Finance Shriram TransFi Sundaram Fin0

100

200

300

400

500

600

283.74

487

264.79

321.84

Book Value


20

40

60

80

100

120

65.28

109.75

54.44

67.49

EPS

EPS


2

4

6

8

10

12

14

11.99

9.8310.91

12.31

2.762.22 2.24 2.58

P/E & P/B

P/E P/B

Source: Compiled from MoneyControl Data

Muthoot Finance Manapuram Finance0%

5%

10%

15%

20%

25%

11%

22%

Net Profit Margin

Muthoot Finance Manapuram Finance0

10

20

30

40

50

60

7061.28

28.31

Book Value


5

10

15

20

25

30

25.49

7.63

EPS

Series1


1

2

3

4

5

6

5.18

2.16

1.3

P/E & P/B

P/E P/B

Source: Compiled from MoneyControl Data

Indiabulls Fin Services LIC housing Finance Dewan Housing Finance0%

5%

10%

15%

20%

25%

30%

25%

15%

12%

Net Profit Margin

Indiabulls Fin Services LIC housing Finance Dewan Housing Finance0

5

10

15

20

25

30

23.6

17.55

27.2

EPS


20

40

60

80

100

120

140

160

180

200

136.98

112.59

173.64

Book Value


2

4

6

8

10

12

14

16

8.06

14.24

5.97

1.392.22

0.94

P/E & P/BSource: Compiled from MoneyControl Data

ANALYST OPINIONSA look at what the industry thinks ….

MMFSL

BUY Ratings Motilal Oswal, Emkay, Arihant CapMkt, Plilladher

Strong AUM Growth (38% YoY) Robust Disbursement Growth (35% FY12) Good Asset Quality (Inc. in GNPA is Seasonal)

“MMFS is well positioned to sustain its qualitative growth momentum on the back of its multiproduct strategy. This also augurs well for its asset quality.” – Motilal Oswal Research

MFS

BUY Ratings (Aggressive Investors) Hedge Equities, Nirmal Bang

Positive Outlook on Gold RBIs New Norms to Prevent Gold Bubble

BFS Lending

BUY Ratings Nirmal Bang, Motilal Oswal, IIFL

Net Profit Growth (52% YoY) Asset Quality Healthy, NPA Declined 6bp Disbursement Growth High (32% YoY) New Customers Growth (38% YoY)

IBFSL

SELL Veritas

Good Asset quality (.33% NPA) High Operating Profit Margins (87.5%) 1 Year Return Of 33%

Bad Practices Of Corporate Governance Credit Rating Downgraded

Nbfc v4.2 pub 18.8.12 09.37am

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Transcript of Nbfc v4.2 pub 18.8.12 09.37am