Information Memorandum Chaitanya India Fin Credit Pvt. Ltd. PRIVATE - PowerPoint PPT Presentation

Information Memorandum Chaitanya India Fin Credit Pvt. Ltd.

PRIVATE & CONFIDENTIAL Disclaimer  Chaitanya India Fin Credit Pvt. Ltd. (“CIFCPL” or “the Company”) is engaged in microfinance business across Karnataka, India. Chaitanya Rural Intermediation and Development Services Pvt Ltd (Chaitanya Rural IDSPL “or” the holding company”) is a holding company that is currently non operating and holds 100% equity in CIFCPL.  CIFCPL is a NBFC-MFI, and Chaitanya Rural IDS-PL is a holding Company  This Confidential Information Document (the “Memorandum”) is based on management estimates and is being provided to you (here inafter referred to as the “Recipient”) only for information purposes. The sole purpose of this Memorandum is to provide preliminary information on the background of the Company, an overview of the business and operations. This Memorandum does not purport to be all inclusive nor does it necessarily include all information that a prospective partner may desire in evaluating the Company. The Company expressly disclaim any and all liability for any errors and/ or omissions, representation or warranties, expressed or implied as contained in this document.  This Memorandum has been prepared for information purposes relating to the Company only and upon the express understanding that it will be used only for the purposes set forth above. This Memorandum may not be photocopied, reproduced or distributed to others at any time without the prior consent of the Company or the Advisors. Upon request, the Recipient will promptly return all material received from the Company and/or the Advisors without retaining any copies thereof.  Neither this Memorandum, nor its delivery to any prospective partner/ investor/ financier, nor any information contained in it or representations supplied or made in connection with any negotiation shall constitute an offer to subscribe or the solicitation of an offer to acquire any part of the business nor shall it form any basis or part of any agreement or arrangement of any kinds with the Company.  In furnishing this Memorandum, the Company, and the Advisors do not make any obligation to provide the Recipient with access to any additional information on CIFCPL or their affiliates. This Memorandum should not be deemed an indication of the state of affairs of CIFCPL nor shall it constitute an indication that there has been no change in the business or state of affairs of CIFCPL since the date of publication of this Memorandum.  Any clarifications/ queries on the proposal as well as any future communication regarding the proposal should be addressed to the Company. 1

PRIVATE & CONFIDENTIAL Index 1 Executive Summary 2 Chaitanya Profile 3 Chaitanya Strategy Overview 4 Business Plan 5 Appendix 2

PRIVATE & CONFIDENTIAL Executive Summary – A Rural Financial Inclusion Opportunity  Formal Players in rural finance are the PSBs, RRBs, Cooperatives and few NBFC, MFIs  Market Growth and Potential in rural finance is not limited by customer demand but by last Financial mile capabilities to distribute, deliver and manage risk at an effective cost. Services for  Migration from Informal sources to Formal Institutions accelerating growth in financial services Rural Low  Micro Finance Institutions have created a viable distribution architecture but have a single Income Families product focus (JLG)  Increasingly Supportive Regulatory Architecture has revitalized growth in Micro Credit Game Changing and “SMALL FINANCE BANKS” could over time be the significant game changer in Opportunity rural finance  Equity base of Rs 22 Cr with promoters and associates holding more than 97%  83% growth y-o-y since 2010 and Profitable since March 2011 Chaitanya -  Portfolio of Rs 75 cr with losses of less than 0.1% since inception. Total Cumulative loss of Rs A Sound track 4.5 Lakh on Rs 130 cr of repayments till March 2014. record of sustainable  Successfully executed viable models for 2 Wheeler Loans, Gold Loans and Micro Housing execution on a Loans in synergy with Micro Finance delivery structure high growth  Organization structure and processes designed to deliver multiple financial products and path services through the MFI set up  Professional Board, Committed and Competent Top Management A Business with a Strong Foundation in an attractive market with an opportunity to capitalize on unique regulatory circumstances 3

PRIVATE & CONFIDENTIAL Key Equity Capital Fund Raise Milestones and Current Offer Historical Fund Raise Public Market Peer Comparison Type of Total Fund No. of Share Price / S.No Fund Raise Year Raised (Rs cr) Shares Price (Rs) BV SKS Microfinance 1 Seed 2009-10 2.35 2,354,000 10 1.00 Market Cap 4,343 2 Seed Sep-10 2.92 2,920,000 10 1.00 (Rs cr) 3 Series A Apr-11 7.19 3,992,926 18 1.80 AUM 3,210 4 Rights Dec-14 6.75 2,700,000 25 1.55 (Rs cr) Current Offer – Series B Current 342.25 Price (Rs) Target Closed Date 15-Jan-15 P / BV 4.5 x Target Amount (Rs Cr) 18.00 (30-Sep- 2014) Offer Price (Rs) 28 Ticket Size Rs 5 Lakhs and above SKS Microfinance is the only listed microfinance Indicative Pre-Money P / BV 1.54 company and has been Indicative Post-Money P / BV 1.30 sighted only as a reference Significant head room to grow both Price to Book Multiple and the Book Value Note: SKS data sourced from SKS website and results for QE 30-Sep-2014 4

PRIVATE & CONFIDENTIAL Index 1 Executive Summary 2 Chaitanya Profile 3 Chaitanya Strategy Overview 4 Business Plan 5 Appendix 5

PRIVATE & CONFIDENTIAL Chaitanya’s Mission – Double Bottom Line  Focus on Sustainable Shareholder Ensuring sustainable returns, ensures long term viability of business and Shareholder Returns access to capital  Improvement in customers‟ lives is vital to secure quality portfolio performance and sustainable operations  Explicitly stated financial expectations, creates organizational discipline to ensure commercial Improving Lives of Low viability for product and customer choice Income Families through Financial  Employees are inducted into a culture of delivering Services both customer value and commercial value Chaitanya engages with customers only if it believes it can make a positive impact in the lives of the customers and only if it can profitably serve them on a sustainable basis Note: Double Bottom Line refers to emphasis on equity holders returns coupled with improving lives of low income families. 6

PRIVATE & CONFIDENTIAL Chaitanya Operational Highlights – Focus on Growth + Profitability + Product Scope Profitable from 2 nd Year of operation – Operating structure aligned and scaled with business size   83% AUM CAGR between 2011-14  Overall repayment rate has consistently been over 99.9% ‒ Total accumulated loan loss of Rs 4.5 Lakh from total cumulative repayments of Rs 130 cr  Incremental Cost / Incremental Portfolio (Incremental OCR) in 2013-14 is 7.82%  9 out of 14 middle management employees have been with the company for more than 4 years  Over Rs 70 cr of current borrowings from Banks and FIs  First Activity Based Lending - Live Stock Loans with Live Stock Insurance for 4,000 customers  Successful foray in multi-product lending (c. 11% of AUM in non-microfinance products) ‒ Vehicle Loan portfolio of Rs 5.0crs in 2 regions with 2 years of operational experience ‒ Gold loan portfolio of Rs 2.5crs in 2 branches with 2.5 years of experience in the product ‒ Pilots in Micro-Housing loans leading to collaboration with Two leading micro HFCs. 12% of current JLG loans are for housing A credible rural focused multi product NBFC-MFI scaled systematically with sound risk management and a process oriented business model 7

PRIVATE & CONFIDENTIAL Corporate Structure – Residents hold more than 65% in Chaitanya Rural IDS  The current corporate structure consists of two Other companies Promoters Shareholders ‒ (“Chaitanya Rural IDS”): Holding company which holds 100% of the microfinance company. ‒ Chaitanya India Fin Credit Pvt. Ltd. (“CIFCPL”) the Operating Hold Co. New NBFC-MFI providing loans in the Joint Liability (Chaitanya Rural IDS ) Share Group is 5 years old (Rs 22cr) holders ‒ Gold, Vehicle and other loans will be moved to the 100% Holding Co after obtaining a NBFC License  The structure has been designed so that the NBFC- Microfinance Entity MFI is complaint with RBI requirements for MFI Assets (CIFCPL) (Rs 21.5 cr) while the Holding Company can scale up the other financial services businesses  Present Shareholding Structure The holding company can start operations after it obtains a NBFC license from the RBI  Unique Shareholding Structure - Promoters and close Other associates (c..50 individuals) of promoters own 97% of shares Shareholders Promoters 51% 49%  Funds Raised through friends, family and colleagues of the promoters Fully Committed First Generation Entrepreneurs backed by High Quality Professionals as Investors 8