Fullerton India Credit Company Ltd. Q3’ 18 Update 1
A 100% Step-down Subsidiary of Temasek Holdings Part of a global financial services firm, focused in the region CHINA 82Branches 3 Provinces, 1,262k Customers Central CHINA 32 Branches 16k Customers INDIA 527 Branches 1,695k Customers DUBAI, UAE 19 Branches MYANMAR 285k Customers 14 Branches 75k Customers CAMBODIA POST BANK 41 Branches 79k Customers MALAYSIA 106 Branches 60k SME Customers INDONESIA 1859Branches 4.2 M Customers FFH has 8 operating financial services entities located across 7 countries serving 7.5 million customers Its vision is to develop unique business models that bring financial services to the underserved in emerging markets 2
FICCL History – Key milestones 2009 2014 2016/17 2005 2011 FICCL is incorporated as Entry into rural business. Portfolio reshape Accelerated secured Digital deployment. Rural franchise expanded. a wholly-owned Managed economic and segmental shift to business, rural network Commercial Vehicles subsidiary of FFH downturn. mass affluent. Operations process revamp business accelerated. LAP, SME business Branches exceeded 520, AUM re-launched. crossed 13,800 cr. In-sourcing of critical functions 2003 2015 2007/08 2010 2012/13 FFH, parent entity of Commercial Launch of Commercial Vehicle Capital infused for growth Technology – core system FICCL is incorporated as a NBFC operations. business launched. Rural network expanded. revamped. wholly-owned subsidiary of Pan-India presence Network consolidated. Funding diversified. Capital Infused for growth. Temasek Holding (P) Ltd established. Home Finance business launched. 3 FICCL:- Fullerton India Credit Company Limited, FFH:- Fullerton Financial Holding
Strong pan-India distribution network Over 500 Branches covering 22 States and 3 UT …with strong presence in under banked geographies 4 Branch Coverage 4 237 by city population size 13 8 18 2 172 24 3 56 2 1 55 1 9 50 54 48 23 3 16 65 7 >5mio 1mio - 5mio 500k - 1mio 100k - 500k <100k 2 Customers (In ‘000) 36 66 42 107 94 401 912 40 3 73 � 45% of branches in cities with <100K population 3 � Deep experience in areas under the Regulator’s focus for furthering financial inclusion Urban – 223 Branches 22 States and 3 Union Territories 600Towns Rural – 304 Branches 51kVillages 4
Focused on a bankable, underserved segment Serving customers with limited access to formal banking channels Customer Segment Annual Household Income No. of Households Serviced By Affluent Foreign & Private 13 Mn (6%) > INR 1,100K Banks Servicing the segment Aspirers below the Foreign and 34 Mn (14%) FICC Urban INR 450K – 1,100K Private banks Addressable market of 75 Mn households – 50% is Next Billion 72 Mn (30%) FICC Rural underserved INR 200K – 450K Strugglers MFI Lenders 121 Mn ( 50%) < INR 200K Microfinance FICC targets underserved segment not covered by large banks and MFIs 1.6Mn live customers provide a large cross sell and upsell opportunity Source : Euro Monitor and BCG 5
A Well-diversified portfolio Multiple product, customer and geographic segments create durability Geographically diversified.. ..across multiple asset classes Rural Business East, 3.2% Loans, 13.4% Loans against Property, 29.5% West, 33.2% Rural Group Lending, 16.0% South, 35.5% Commercial Vehicle Finance, Business Loans, 6.8% 10.1% Salaried Personal North, 28.0% Loans, 24.2% Figures as of 31st Dec, 2017 6
Multi-product offerings support a range of customer needs Across Urban and Rural Consumer Urban MSME Rural Tenor Urban MSME Personal Loans - Commercial Personal / Group Salaried Vehicle Finance Loans High > 60 mth Consumer Product Loan Against Business Loans Rural Mortgages Properties Medium Rural 24-60 mth Loan Against Properties Vehicle Loans Low 12-24 mth Cross sell – Life/ General Insurance � Niche positioning, differentiated product offering Loan Against Mass Mortgages Properties, CV allow addressing customer needs across lifecycle Affluent Finance and income growth Two-Wheeler, Aspiring Personal Loans Personal/ � Deep market knowledge and customer Affluent Solidarity Loan outreach model retains margins while serving the under banked Loan Against Small Properties, Enterprises Commercial Vehicles � Established customer on-boarding and operational capabilities to serve very large numbers Urban MSME Rural Consumer 7
Including a strong multiproduct rural franchise Providing solutions across customer life cycle Comprehensive product suite with insurance throughout Catchment model enables customer the life cycle serves customer growth and aspiration intimacy and superior service quality � Mortgages � Consumer � Vehicle durables Loans � Loans against � General property Enterprise Loans � Two � Group wheeler Loans loans Micro- Consumption, Aspirational Livelihood enterprise, Small business Needs consumption 8
Well-diversified, conservative funding book Stable Funding profile � Basel III oriented, Board approved policies guide liability management (INR bio) � Rigorous monitoring via ALCO 118 106 108 6 � Compliance oversight by independent verticals 10 10 � Three pillars of conservative liquidity risk management: 64 52 56 � Diversification (across instruments lender category) � Matching asset-liability tenors 45 41 39 � Maintenance of adequate buffers Jun 17 Sep 17 Dec 17 Bank Loans Bonds CP Off Books Adequate liquidity buffer (a) Diversification Matching tenors (nos) Residual maturity in months (INR bio) 14 45 44 43 9 10 9 33 32 32 23 22 23 8 7 7 7 6 32 29 29 Jun 17 Sep 17 Dec 17 Jun 17 Sep 17 Dec 17 Jun 17 Sep 17 Dec 17 Customer Assets Borrowings Liquidity Buffer Outflow (1m) Banks Insurance Cos MFIs Long term stable and diversified funding base, with adequate liquidity cover (a) Regulatory requirement is to keep liquidity buffer for 85% of 1 month outflow 9
Enterprise wide, independent risk management Integrated approach covering entity wide risks Overarching principles � Risk Appetite Statement and Country Risk Assessment set the guardrails � Assessed for ‘through the cycle’ performance and ‘stress resilience’ governing Risk � Independent, integrated Operational risk and Fraud risk management Management strategy � Decisioning platforms based on application and behavior scorecards, fraud scoring, risk based pricing Underwriting strategies � Supported by an automated Business Rule Engine with connectivity to bureau and fraud systems addressing the product/ � Judicious mix of local and centralized decisioning with robust deviation controls customer segment / geographic nuances � Strong collateral management – independent legal/valuation with in-house technical oversight � Portfolio analytics evaluates portfolio optimisation Analytics led proactive � PD, LGD models and risk based pricing used to guide portfolio portfolio management � Quarterly bureau scrubs flowing into early warning processes. strategies � Robust ‘champion-challenger’ environment to test boundaries � In-house tele-calling set-up with recorded lines for quick reach out to early delinquencies Collections � Mix of in-house (for early buckets and secured portfolios) and agencies (for late bucket and management driven recoveries) � Propensity models, behavior scorecards and recovery scores for optimizing collection strategy scientifically � Mobility solutions enabled for field staff which improves control environment significantly Pro-active and continuous monitoring based on external environment, customer data and bureau trends 10
Operational risk management Strong Operational Risk management culture across all key verticals External ROC/ Board Oversight Regulators Auditors ORMC 1 st line of defense 2 nd line of defense 3 rd line of defense Operational and Business Operational Risk, Fraud Risk, InfoSec Independent Assurance Units (design and operational and Compliance by Internal Audit effectiveness) OR framework Implementation/ execution components � Regular Operational Risk Management Committee meetings to review OR issues Risk Governance � Quarterly Risk Oversight Committee meetings to assess OR profile framework � Robust Operational Risk policies and standards Policy/ Procedures � Internal Financial Controls (IFC) standards as mandated by Companies Act � Comprehensive Risk library Risk Identification � Regular process walkthroughs and reviews � Periodic Risk Assessments Risk Assessment & � Loss Data management Measurement � Periodic control assessment Control & Mitigation � Timely corrective actions � Key Risk Indicators monitoring Monitoring & � Regular reporting to ORMC and ROC Reporting 11
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