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TRANSCRIPT
Edge Consulting
Mahindra Finance Strategy 2020: Radical Thinking to drive Posi9ve Change
Memorial University of Newfoundland
Edge
Agenda
• Problem Statement Neal • Key Issues • Key Objec9ves • Analysis • Alterna9ves Lindsey • Recommenda9on • Implementa9on Plan Angela • Financials Ryan • Risks and Mi9ga9ons Angela • Conclusion
Edge
Problem Statement
What strategy should Mahindra Finance u9lize to meet it’s growth goals and become one of the 50
most admired global brands?
Edge
Key Issues
• Global Recogni9on • Growth • Innova9on • Company Values
Edge
Key Objec9ves
q Top 50 most admired global brands q Growth goals q Innova9on q Company Values
Edge
Assump9ons
• Indian government stability
• U9liza9on of exis9ng infrastructure (co-‐loca9on)
• Con9nued commitment to rural consumers
Edge
Analysis – External Analysis
• Industry in India • 13.1%-‐ 17.1% (2018-‐2019) growth in NBFCs • Bajaj Finance 4.4x net worth, 12x assets • Mahindra Finance 4x net worth, 5.6 x assets
• Lots of exis9ng compe99on • Fast growth
NBFCs are a very compe99ve sector
Edge
Analysis – External Analysis
• Public Sector Banks • Control 80% of the market • Well established rural presence
• Private Sector Banks • Aggressively entering semi-‐rural and rural areas • Technology focused
Rural climate becoming more compe99ve
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Opportuni9es s9ll exist in rural India
Analysis – External Analysis
SmartCi9es
Housing for All AMRUT
Housing For All: Rural Development
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Revenue versus Profit 2006-‐2015
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Revenues 6000 8000 12000 14000 16000 20000 29000 41000 53000 61000 Net Profit 1100 1300 1800 2200 3600 4900 6400 9300 9600 9100
6000 8000 12000 14000 16000
20000
29000
41000
53000
61000
1100 1300 1800 2200 3600 4900 6400 9300 9600 9100
0
10000
20000
30000
40000
50000
60000
70000
Revenues Net Profit
Market showing diminishing returns
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Analysis – Internal Analysis
• Mahindra Finance • Knowledge of rural market • 3% ROA compared to .5 in urban • Long standing rela9onships
Advantage provided by working history
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Return on Equity 2006-‐2015
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Return on Equity 0.149 0.167 0.136 0.148 0.205 0.193 0.211 0.203 0.181 0.153
14.90%
16.70%
13.60% 14.80%
20.50% 19.30%
21.10% 20.30%
18.10%
15.30%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Return on Equity
Market exhibits diminishing returns
Edge
Analysis – Internal Analysis
Empowered Companies
Group-‐wide synergies
Entrepreneurial Independance
Ability to enter and support promising markets
Edge
Ownership of Mahindra Finance
Mutual Funds and Domes9c Ins9tu9ons 4%
Non Ins9tu9ons 6%
ESOP Trust 1%
Mahindra and Mahindra 51%
Foreign Ins9tu9onal Investors 38%
Edge
Analysis – Internal Analysis
• Structural Support • Mahindra owns 48% of assets • Poten9al for financial safety • Support and exper9se for new rural markets
New market entry can be supported
Edge
Alterna9ves
Expand into urban India focusing on immigrants from rural
Expand reach in rural India by incorpora9ng payment banks
Expand into developing economies interna9onally
1
2
3
Edge Alterna9ve One: Expand into urban India focusing on immigrants from rural
-‐Large market -‐Familiarity with target
-‐Intense well-‐established compe99on -‐Low margins, high investment -‐Outside exper9se -‐No fit with global goal -‐Not innova9ve or radical -‐Not synergis9c
Edge
-‐Compe99ve forces -‐New area
Alterna9ve Two: Expand reach in rural India by incorpora9ng payment banks
-‐Innova9ve and radical -‐Organiza9on fit -‐Market familiarity and rela9onships -‐Immense opportunity -‐Low investment -‐Synergis9c
Edge Alterna9ve Three: Expand into developing economies interna9onally
-‐Radical and innova9ve -‐Synergis9c -‐Organiza9on fit -‐Proven formula -‐High margins -‐Low compe99on
-‐Lack of market familiarity -‐Risk
Edge
Decision Matrix
Urban India Expansion
Payment Bank Expansion
Developing Country Expansion
Value alignment
Innova9ve and Radical Global recogni9on Revenue and Growth
Edge
Recommenda9on
Expand within rural India using revised strategy, with the addi9on of payment banks
Expand in developing countries using current, successful model (focusing on Africa and
Southeast Asia)
Edge
Implementa9on Plan
• Introduc9on of Payment Banks • Global inves9ga9ons • India Rural Expansion
Short Term (0 months – 1 year)
• Con9nua9on of expansion plan • Global Inves9ga9on
Medium Term ( 1-‐2 years)
• Entry into Global Opportuni9es Long Term (2+ years)
Edge
Introduc9on of Payment Banks
• U9lize exis9ng infrastructure • Roll out upgrades to pymt bank (1 pymt. bank/550 villages) • Total of 550 upgrades to full service branches • Low cost technological advantage
One Year
• Infrastructure Development
• Staff training • Word of Mouth • Roll out to 225 Pymt. Banks
Two Years
• Cont. Roll out to 225 Pymt. Banks
• Total Pymt Bank upgraded: 550
• Total villages serviced: 302,500
3-‐4 Years
• Monitoring of balance
• Addi9onal infrastructure as needed
Edge
Expansion into Rural India
• 100,000 villages lej to service in India • Objec9ve – 20,000 villages (80/20 based on M&M sales)
One Year
• Infrastructure Development
• Staff training • Word of Mouth • Roll out to 45 full service
Two Years
• Cont. Roll out • Total full service: 91
• Total villages serviced: 20,000
3-‐4 Years
• Monitoring of balance
• Addi9onal infrastructure as needed
Edge
Selec9on Criteria for New Infrastructure
M&M Farm Sales
Compe9tor Sales
Real Estate Opportuni9es
Housing for All
involvement
Bank acct. balances
Edge
Global Rural Expansion
• South Africa, Bangladesh, Indonesia, Philippines Expansion • India office coordinators to manage • Marke9ng through work of mouth approach
One Year
• Infrastructure Development
• 10 offices per new country
• Service: 11,000 global villages
Two Years
• Cont. develop. • 10 more office/country
• Service: 22,000 global villages
• New country inves9ga9on: Kenya
3-‐4 Years
• Cont. develop. • Entry into new countries (Kenya)
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Global Considera9ons
Village popula9ons
Familiarity with M&M brand
Access to banking services
Debt to GDP ra9o
Technology services
On the ground exper9se
Edge
Implementa9on Overview Year One
40 new offices Ye
ar Two
80 total new offices
Year
Three
Further Explora9on
Year One
45 new Full service Year Two
90 total full service
Year
Three
Further Explora9on
Year One
225 Total Upgrades Ye
ar Two
550 Total Updates
Year
Three
Further Explora9on
Pymt. Bank Upgrades
New full service India Rural
Global Expansion.
Edge
Implementa9on Overview
Total Pymt. Banks updates: 550
Total new offices: 170
Total Villages reached (Globally): 283,000
Edge
Financials
Year One Year Two Year Three
Pymt. Banks Upgrades
1,350
2,450
1,100 New Full Service India Rural
270
900
360
Global Expansion
240
240
80
Total
1,860
3,590
1,540
In Million of rupees
Edge
Where does the money come from?
• Internal Funding from strong historical earnings • Partnership investments
Edge
Revenue versus Profit 2006-‐2015
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Revenues 14000 16000 20000 29000 41000 53000 61000 125000 133000 145000 Net Profit 2200 3600 4900 6400 9300 9600 9100 18500 24000 31000
14000 16000 20000 29000
41000 53000
61000
125000 133000
145000
2200 3600 4900 6400 9300 9600 9100 18500
24000 31000
0
20000
40000
60000
80000
100000
120000
140000
160000
Revenues Net Profit
Assump9ons: 1. 10% of housing under
Homes for All go to M&M Finance
2. Consistent costs of borrowing and lending money
3. Growth rate of 8% (Consistent b/w India and Foreign markets)
4. Maintenance of current product mix
5. 80/20 mix of Indian vs Foreign customers
Edge
Risks and Mi9ga9ons
Risk Level Mi9ga9on
Economic downturn Medium -‐Payment structure and clientele base
Company Reputa9on Low -‐ History -‐ Rela9onships
Government Regula9ons Low -‐Compliance
-‐Rela9onship-‐building
Edge
What Good Looks Like
Edge
Conclusion
q Top 50 most admired global brands q Growth goals q Innova9on q Company Values
Edge Consulting
Thank You Ques9ons?
Memorial University of Newfoundland
Edge
Con9ngency Plan
Expand in developing countries using current, successful model (focusing on Africa and
Southeast Asia)
Edge Alterna9ve Three: Expand into developing economies interna9onally
-‐Radical and innova9ve -‐Synergis9c -‐Organiza9on fit -‐Proven formula -‐High margins -‐Low compe99on
-‐Lack of market familiarity -‐Risk
Edge
Mahindra Finance Assets Under Management
Pre-‐Owned 15%
Commercial Vehicles and Construc9on
13%
Cars 23%
Auto/U9lity 18%
Tractors 31%