Corporate Presentation – Q1-FY15
Agenda Overview of the Company Changing Asset Composition Product Offering Credit Processes Credit Rating and Asset Liability Management Board of Directors Shareholding Pattern Financial Results Corporate Presentation 2
Company’s Vision To be a leading financial services provider, admired and respected for ethics, values and corporate governance. To provide Micro, Small and Medium Enterprises in India with debt capital and services to support the growth of the MSME sector. To finance the growing consumption needs of the Indian consumers, which is driven by increased affluence, growing aspirations and favourable demographics. Corporate Presentation 3
Overview • Capital First (CAPF) was formed in 2012 as a result of a Management Buyout of an existing NBFC, which was backed by Global Private Equity Warburg Pincus US. Capital First is listed on NSE and BSE, and has a record of consistent growth & profitability. • CAPF focuses on providing financial services to retail and Micro and Small Enterprises, and the company is growing between 25-30% per year. • The company has increased its retail financing (MSME + Consumer business) contribution from 10% in FY 10, to 28% in FY11 to 56% in FY12, 74% in FY13 and 81% in FY14 and 82% as on June 30, 2014. • CAPF has loan assets under management of Rs. 106.03 bn as on June 30, 2014. • CAPF has a strong distribution setup across India covering 40 cities with an employee base of 1090 as on June 30, 2014 • The Net Worth of CAPF is Rs. 12.03 bn as on June 30, 2014. The Capital Adequacy is 21.33% as on June 30, 2014. • The Gross and Net NPA of the Company stood at 0.54% and 0.09% respectively as on June 30, 2014. • The Company long term credit rating including NCD and Subordinated Debt is rated highly at AA+ by rating agencies. Corporate Presentation 4
Agenda Overview of the Company Changing Asset Composition Product Offering Credit Processes Credit Rating and Asset Liability Management Board of Directors Shareholding Pattern Financial Results Corporate Presentation 5
Milestones for the Company 106.03 bn Retail Assets Wholesale Assets 18% 96.79 bn Key Focus area of the company is Retail loan 19% 75.10 bn Businesses 82% 26 61.86 bn % 81% 44 • Company’s Assets under 27.51 bn % 74 Management crossed Rs. % 100.00 billion 56 • Company raised Rs. 1.78 9.35 bn 28 % • Number of customers billion as fresh equity % • Warburg Pincus financed since inception from WP and HDFC Life 10 acquired majority crossed 1 million this 72 % • Company acquired HFC stake quarter. % • Launched TW license • Infused Rs. 1.00 bn as • Capital (Tier1+Tier2) 90% Loans • Scaled up all retail primary equity crosses Rs. 18.00 billion • Launched credit • Long Term Credit businesses scoring for CD • Capital First is born Rating upgrade • Launched Gold from A+ to AA- • Long Term Credit Loan business • Amalgamated • Wholesale Rating upgrade from • Divested Forex NBFC subsidiary NBFC AA- to AA+ business with Parent FY10 FY11 FY12 FY13 FY14 Q1-FY15 Corporate Presentation 6
Agenda Overview of the Company Changing Asset Composition Product Offering Credit Processes Credit Rating and Asset Liability Management Board of Directors Shareholding Pattern Financial Results Corporate Presentation 7
Mortgage loans to SMEs SME Loan is the main line of business for the Company and contributes 81% of the retail assets. • Under this product, the Company provides long-term secured loans to SMEs, self-employed individuals • and professionals against collateral of Residential or Commercial property. SME Financing is a large and growing opportunity in India’s growing economy. The SME segment is • largely underserved in India, and hence shortfall of financing presents a significant business potential. The Loan to value (LTV) offered to customers is in the range of 50%-60%. • These are monthly amortising products with no moratorium for Interest or Principal repayment. The • actuarial tenor of the loans is usually between 4 - 5 years. SMEs usually prepay these facilities before time based on their cash accruals. The following “ Challenges and Risks ” are inherent in this business. The company takes measures as • necessary with regard to credit appraisal and portfolio monitoring to address the same. Challenges Evaluation of the cash flow of an SME is challenging considering the low transparency, large cash based • income, seasonality, low disclosures among SMEs etc. Risks The loans are primarily provided to the MSME players based on the cash flow analysis of their businesses, and • downturn during the economic cycles affect their cash flows and may hamper their repayment capabilities. The other risk associated is sudden crash in real estate prices. Corporate Presentation 8
Gold Loans The Company provides Loans against Gold Jewellery to customers for various personal uses like • medical emergency, down payment for home purchase or renovation of their home. Often, traders and small businesses avail gold loans to finance short-term business requirements. The Company provides Gold Loans through its extensive network of branches across 22 tier-1 and tier- • 2 cities in 10 states. Since inception in January 2011, Capital First has grown the Gold Jewellery financing business by reaching customers who reside in the neighbourhood of its branches, through local promotions , strong valuation processes, quick turnaround and efficient customer services. The ticket size is usually Rs. 1, 00,000 to Rs. 1, 20,000. The Loan to Value is 75% on the value of the • jewellery. The following “ Challenges and Risks ” are inherent in this business. The company takes measures as • necessary with regard to credit appraisal and portfolio monitoring to address the same. Challenges Gold loan is a branch led business through customer walk-ins which requires local branch set-ups. Achieving • critical mass in terms of AUM at each of these branches is a challenge. Further, correct assessment of the Gold quality of the collaterals is one of the key challenges in the business. • Risks The Gold Loans are subject to the Gold Price fluctuations in the market. Any sudden and significant drop in • the gold prices can trigger collateral value risk. Corporate Presentation 9
Two Wheeler Loans Capital First provides financing for Two-Wheelers through easy EMIs to self employed customers like small • traders, suppliers, shop keepers with good credit profiles, and to salaried employees, usually taking up their first job in the organised sector. From a distribution point of view, this is a highly fragmented market. The loans are originated through an • extensive network of Two-Wheeler Dealers. Since inception in October 2011, Capital First has grown the Two- Wheeler financing business with the help of extensive reach, robust credit processes, quick turnaround and efficient customer services. Two-Wheeler loans are relatively small ticket size loans of about Rs. 30,000 - Rs. 40,000. The Door to Door • tenure for the loan is around 2 years. The following “ Challenges and Risks ” are inherent in this business. The company takes measures as • necessary with regard to credit appraisal and portfolio monitoring to address the same. Challenges The Two-Wheeler business is challenging as the ticket size of loans is low, the tenor is short (average actuarial • tenor is 1 year), and has high operating and distribution costs due to dispersed distribution over distant geographies. It is a challenge to build the required critical mass for this business. Further, the collection effort and • collections cost involved for collecting the small EMIs from large number of customers distributed across the country is a key challenge. Risks A significant number of the Two-Wheeler loan customers are first time borrowers with low surplus income. • Any economic downturn may affect the repayment capabilities, as these borrowers are usually small entrepreneurs or entry level salaried employees. Corporate Presentation 10
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