reaching new heights in retail finance of bajaj allianz general insurance ... customer...

1 1 Magma Fincorp Limited

Reaching New Heights in Retail Finance

2 2

No. of years in financing business Over 25 years

No. of customers serviced More than 1 million

No. of branches 275

Loan Assets (on 31 March ’14) Rs. 17,877 Cr

Net Worth (on 31 March ’14) Rs. 1,504 Cr

Disbursements (FY14) Rs. 9,081 Cr

Total Income (FY14) Rs. 2,117 Cr

PAT (FY14) Rs. 160 Cr

About the Company

5 year CAGR

20%

22%

32%

3 3

Journey thus far

Started financing business

Started retail

financing

Acquisition of Consortium Finance

Started implementation of vertical business

structure

Acquisition of Shrachi Infrastructure Finance

Launched tractor finance business via JV with

ITL (Magma ITL)

Signed JV with HDI Gerling for General

Insurance business (Magma HDI)

Acquired GE’s mortgage business

General insurance business becomes

operational (under Magma HDI JV)

Oracle appointed for technology

platform transformation

Started Used

Assets financing

Launched SME

Loans business

KKR and IFC, Washington invest Rs 439 crore for

27.8% stake

Accounting policies (including securitisation income

recognition policy) modified

Appointed KPMG as statutory auditors

Launched mortgage finance

business (Magma HFC)

4

With Building Blocks in Place, Company at the Cusp of a Significant Growth Play

Uptick in macro fundamentals – on ground scenario turning around

Organisational structure in place

Strong second line of management – professionals inducted and settled

Vertically aligned business model and asset-light / efficient coverage model

Best positioned to leverage massive potential in the retail / rural space and ally any concentration risk

– Diversified mix of product portfolio post organic and inorganic expansion

Insurance achieved break-even – no overhang of capital leakage

Balanced mix of high growth – high margin products and fund and non-fund based revenue

streams

4

5

With Building Blocks in Place, Company at the Cusp of a Significant Growth Play

Robust platform post significant investment in technology, BPR, HR, marketing among others

Allows ease in execution play and scalability

Operational efficiency will ensure low opex ratio and hence higher returns over a 3 year period

High thresholds of corporate governance

Conservative provisioning policies (120 day provisioning policy effective since 1 April 2012)

Deferred revenue recognition policy – no more adverse impact of accounting policy change

Marquee sponsors / investors (KKR, IFC, Chrys Capital)

Independent board members with sector specific expertise and high pedigree experience

Transformation behind, its an execution play

5

6

To become the largest retail finance company in India

6

Mission

Strategy

L&D : Learning & Development; TAT: Turn Around Time; NIM: Net Interest Margin

Customer

Focus on under-served prime

customers / first time borrowers

Increase share of wallet through

better customer engagement Coverage

Pan-India coverage

Focus on rural and semi rural

markets

Increase coverage using a hub

and spoke model

Product

Offer diversified product range to

manage risk

Customized products to address

local/regional requirements

Process

Apply surrogate methods to

appraise customer

Improve efficiency/reduce TAT

through process re-engineering

Profitability

Improve risk adjusted NIMs

Diversify liability profile

Drive down cost-to-serve

Reduce operating costs through

technology / business processes

People

Increase productivity through L&D

initiative and technology

Leadership planning and

opportunities for stability and

growth

Key Growth and Profitability Drivers

7

Customer Centric Approach with a Bouquet of Products

Scalable Execution Model…..backed by Efficient Operations

Vertically Aligned Business Model

Financials on Growth Trajectory

Pan-India Coverage

Diversified Liability Profile

Experienced Board and Professional Management

Driving

Execution

Excellence

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Unique Platform to Achieve Next Level of Growth

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Pan-India Coverage



Driving

Execution

Excellence

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9 9

Product-wise Verticals Collections Vertical

Asset Finance

Mortgage

Finance

(started in FY13)

General

Insurance

(started in FY13)

Based on Customer Behaviour

Sales Credit Operations

Product

Development

Channel

Management

UV/Cars

CV

CE

Used Assets

Tractors

SME Loans

Home Loan

LAP

General

Insurance

Product wise Functions

Integrators

Marketing Risk Management

Strategy People Management

Technology Operations

Finance / Treasury Audit

Identify areas of risk /

concerns - preventive

measures

Product

Geography

Customer segment

Branding

Channel development

Product innovation

Customer relations

Cross selling

Inorganic opportunities Leadership development

Succession planning

Training & retention

Supported by

Marketing


Retail

0 - 30 dpd

31 - 90 dpd

91 - 180 dpd

High ticket

0 dpd

1 - 180 dpd

Common

181 - 730 dpd

730+ dpd and S&S

Legal Recovery

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Pan-India Coverage



Driving

Execution

Excellence

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11 11

Board of Directors

Board of Directors

Professional Entrepreneur – MD

Mayank Poddar

Chairman

Supports policy formulation and

guidance to the Management/Board

Over 30 years of experience in the

financial sector.

Sanjay Chamria

VC and MD

Anchors strategic policy formulation

and execution.

Drives new business initiatives and

leads management team

Sanjay Nayar – Non

Executive Director

(Nominee of KKR)

CEO and Country Head of KKR,

India. Ex CEO of Citi India & South

Asia operations

Narayan K Seshadri

Entrepreneur consultant. Former

Country Head - KPMG Consulting &

Head of Business Consulting in

Arthur Andersen

Neil Graeme Brown

Co-Founder of Subito Partners (UK).

Ex-Partner of Coopers & Lybrand

(now PwC) and Ex-Director of Apax

Partners. Set up FIG practice in

Apax Partners

Nabankur Gupta

Founder - Nobby Brand Architects &

Strategic Marketing Consultants.

Pioneer of sub branding and multi

branding in India. Also served as Group

President in Raymond

Satya Brata Ganguly

Chairman Emeritus of Exide

Industries. On the board of Indian

Chamber of Commerce and Industry

and Bengal Chamber of Commerce

and Industry among others.

Promoter Directors Non Promoter Directors

Business

Heads Collections Marketing Risk Strategy

Human

Resource Technology

Treasury/

Finance/IR

Professional Management Team

Audit

12

Senior management with extensive experience both within Magma and in the industry

12

Ashutosh Shukla Experience of over 25 years in Magma and Consortium Finance. Setup North and West Zone business and

headed collections vertical in Magma earlier

V Lakshmi

Narasimhan

Experience of 23 years in Magma and Consortium Finance. Incubated SME Loans & Tractors business in Magma.

Served as National Credit and Risk Head.

Sachin

Khandelwal Experience of over 20 years in sales and marketing. Ex- MD of ICICI Home Finance.

Swaraj Krishnan Veteran in the general insurance industry. Ex-CEO of Bajaj Allianz General Insurance

Sandeep Walunj Experience of 20 years in consumer marketing in FMCG & Retail businesses. Worked as CMO–Big Bazaar &

Value Formats in Future Group

Kailash Baheti Ex-CEO of Century Extrusions. Extensive experience in finance, accounts, compliance and legal functions.

Chief- Risk, Credit &

Operations, Asset Finance

Chief Financial Officer

MD & CEO,

Magma HFC; Chief Sales

Officer – Asset Finance

CEO, Magma HDI General

Insurance

Chief Marketing Officer

Chief Strategy Officer

Sumit Mukherjee Served as National Sales Head for High Yield Products and Credit and Risk Head at Magma prior to current role.

Worked with Citi Corp as VP prior to joining Magma. Over 18 years of experience in sales.

Mahendar

Bagrodia

Served as National Risk and Credit Head prior to current role. Experience of over 18 years of which 12 years with

Magma Fincorp

Chief –Product & Program

Chief of Receivables

Management

Management Team

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Pan-India Coverage



Driving

Execution

Excellence

#1

#2

#3

#4

#5

#6

#7

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14

Scalable operating model ensures effective implementation of a multi product portfolio strategy

Scalable

platform

supported by

all critical

functions

Credit and Risk Sales and Collections

Marketing Human Resources

14

All-Round Initiatives for Efficient Operations

Remote connectivity for sales and collections with advanced

screens on Handheld devices

Cash deposit tie ups with banks in rural locations for better

efficiency and reduce risks

More upcountry executives & supervisors to align with lower

competition and more profitable customers in these markets

Improved profitability- state level strategies for manufacturers,

customer segments/product mix within each vertical

Customer centric initiatives for product and process

Automation of credit and operations process to achieve cost

effectiveness

Align credit processes to support sales in achieving profit

objectives

Branding targeted towards consumers, channel partners,

employees & investors

Develop and nurture channel and OEM relationships

Customised product development

Cross sell, Multi Product sourcing and CRM being put in place

for superior sourcing

Improve customer experience Eg: MDRDC

Learning and Development team setup focused on leadership,

soft skills and functional training

Succession Planning and Career progression initiatives Eg

UDAAN and PINNACLE

Cross functional opportunities for employees

15 15

Centralised risk management process

─ Allows to take a directional view and precautionary

measures on geography, customer segment or

product

Standardized and decentralised credit appraisal process

ensures checks at multiple levels – credit appraisal done

in 38 locations covering 235 AFC branches

Institutionalized system of checks and balances.

Eg. Risk Control Unit, Equipment Management Group,

Field Investigation Team, HO Audit

Sales Team Sourcing

Operations

Team

CIBIL check /

Customer history

evaluation

Collection

Team

Field investigation –

conduct soft checks

on customer

Operations Team

Risk Control Unit –

ensure proper

documentation

Credit Team Tele-verification,

Appraisal

Sales Team Post sanction

processing

Operation

Team

Payment

processing

Head Office Audit

Agreement

Execution

Robust Credit Appraisal Process

Key Differentiators

Consistently achieved average Turnaround Time (TAT) of 10 days from customer enquiry generation to disbursement

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Pan-India Coverage



Driving

Execution

Excellence

#1

#2

#3

#4

#5

#6

#7

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Customer focused structure

and processes

Invest early into customers

– 1st time / under banked

customers

Business structure aligned

to specialize in customer’s

specific business needs

Recovery systems based

on customer behavior

Feedback systems to

improve service – Sales

support

Design and product

development based on

customer feedback

17

Commercial Vehicles –

New & Used

Construction Equipment

– New & Used

UV/Cars – New & Used

Tractors

Mortgage

SME Loans

General Insurance

Customer

Diverse

financial

needs over

life time

Customer Centric Approach…with a bouquet of products

18

Synergistic Approach to Growth

Entry level vehicles and UV/MUV

Small Road Transport Operator (SRTO)

Rural markets and UV/MUV segment

Tie up with car manufacturers 4.5

70%

46 UV/Cars

1-5 vehicle owners (esp .FTB segment)

SRTO

LCV & SCV

Tie up with CV manufacturers 7.0 85%* 44 Commercial

Vehicles (CV)

Land owning farmers

25-75 HP tractors

Alliances with OEMs

New product introductions 3.5 63% 45 Tractors

First time buyers, Small fleet drivers

M&HCV, Refinance

LCV

High vintage vehicles (7-8 years) 4.5 72% 35 Used Assets

Small Scale Entrepreneurs Increase collaboration with OEMS

Wider product range 22.0 81% 41

Construction

Equipment (CE)

SME segment

Working capital, business expansion MSME segment 23.0 NA 32 SME Loans

Self employed

Informal segment

Larger contribution from Tier 3-4

towns Mortgage

Key customer segments Focus areas to drive growth Average

ticket size

(Rs lakh)

Loan to

value

Door to door

tenure

(months)

Numbers represent average for disbursements done in Q1 FY15

* LTV has been calculated without considering cost of truck body, which is not funded. Inclusive of body in the cost of asset, LTV would be approx. 73%

Captive customers

Rural agri based products

Penetrate motor insurance market

Rural agri markets

General

Insurance

Products

18

Leverage branch / collection presence and understanding of product, target customer behaviour and its requirements to grow

new products

35.4 38% 156

19 19

Disbursement Mix

28.3% 31.0% 29.3% 35.3%

26.1%

27.7% 18.5% 12.2%

11.6%

9.8%

17.0%

13.5%

10.0%

11.8%

7.8%

10.1%

15.2%

13.8%

14.7%

12.8%

11.0% 14.4%

17.4%

17.9%

19.7%

5.9% 7.4%

8.9%

8.0%

7.6%

8.5% 0.8%

16.2%

0%

25%

50%

75%

100%

FY12 FY13 FY14 Q1 FY14 Q1 FY15

UV/Cars CV CE Used Assets Tractors SME Loans Mortgage

Disbursement

43.7%

56.3%

Share of Tractor, SME, Used Assets, Mortgage consciously increased to 56% in Q1 FY15 from 27% in FY12, driving increase in

NIMs

8,678 9,081 2,398 1,808 7,404

Values in Rs crore

20 20

Loan Assets Mix

25.6% 27.6% 27.6% 28.4% 27.2%

33.8% 23.6%

17.8% 22.1%

16.5%

17.3%

13.8%

11.8%

13.5%

11.2%

8.4%

9.8%

11.3%

10.2%

11.4%

10.2%

12.4% 16.0%

13.3%

16.8%

4.8%

4.7% 5.6%

4.8% 5.6%

7.6% 9.4% 7.1% 10.8%

0.4% 0.5% 0.5% 0.5%

0%

25%

50%

75%

100%

FY12 FY13 FY14 Q1 FY14 Q1 FY15

UV/Cars CV CE Used Assets Tractors SME Loans Mortgage Gold Loans

16,240 17,877 Total Loan Assets 18,295 16,274

Includes Off B/S loan assets and values in Rs crore

54.9%

45.1%

12,036

Diversified portfolio of 8 products with the highest share of a single product less than 30% of total book

21





Pan-India Coverage



Driving

Execution

Excellence

#1

#2

#3

#4

#5

#6

#7

21

22 22

Region-wise Distribution of Branch Network

Pan - India Reach • 275 branches across 22 states /union territories

• Coverage of over 75% of ~670 districts in India

• 10,240 employees including 9,162 front line staff

Rural, 87

Semi Rural, 98

Urban, 90

Rural-Urban Breakup of Branch Network

Branch Network

North, 74

East, 62

South, 55

West, 84

As on 30th June 2014

23 23

Total Loan Assets: Rs. 18,295 crore

Delhi/Uttarakhand, 7%

Haryana, 7% Punjab/HP, 4%

Rajasthan, 9%

UP, 11%

Bihar, 3%

Jharkhand, 2%

Orissa, 3%

WB, 5%

AP, 8% Karnataka, 5% Kerala, 5%

TN, 4% Chattisgarh, 3%

Gujarat, 6%

MP, 8%

Maharashtra, 10%

North: 38%

South: 22%

East: 13% West: 27%

State-wise Loan Assets Breakup

Includes Off B/S loan assets

Diversification of loan book exposure minimizes impact of regional/local/single event risks

24





Pan-India Coverage



Driving

Execution

Excellence

#1

#2

#3

#4

#5

#6

#7

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25

53.1% 55.8% 53.9% 58.7%

30.7% 28.9% 30.0% 25.8%

16.2% 15.3% 16.1% 15.5%

0%

25%

50%

75%

100%

FY13 FY14 Q1 FY14 Q1 FY15

Tier I/II Capital Debt Capital Markets Banks

25

Instrument Rating (CARE)

Short term Debt A1+

Long term Debt AA

Preference Capital AA-

Subordinate Debt AA-

Diversified liability sources limit concentration risk, allows stable flow of funds and

improved rating, all leading to lower costs

Consortium of 22 public & private sector banks

Capital market funding from wide spectrum of lenders including MFs, Insurance

companies, Pension / Provident funds and Corporates among others

Other unsecured debt includes Perpetual debt, Sub debt and Preference capital

Liability Profile

On B/S Debt includes Preference Capital and based on MFL Consolidated financials; Values in Rs crore as on closing day of the period ;

10,599 10,375 On B/S Debt 11,128 10.673

26





Pan-India Coverage



Driving

Execution

Excellence

#1

#2

#3

#4

#5

#6

#7

26

27

10,976 11,352

11,448 12,296

5,264 6,525

4,826

6,000

5.48%

5.51%

5.60%

5.76%

5.40%

5.60%

5.80%

-

5,000

10,000

15,000

20,000

FY13 FY14 Q1 FY14 Q1 FY15

On Book Assets Off Book Assets NIM (yoy) NIM (qoq)

27

Loan Assets (Rs cr) 16,240 18,295 17,877 16,274

Loan Book Growth

Lo

an

Asse

ts

NIM

Improvement in NIM driven by change in product and customer mix

NIM: (Total Income – Interest Expenses)/Average Loan Assets

28 28

P&L Statement (Consolidated)

Values in Rs crore

29 29

Balance Sheet (Consolidated)

Values in Rs crore

30 30

Key Ratios (Consolidated)

CRAR based on MFL (Standalone) financials

Assets implies average of opening and closing balance of On B/S Assets of MFL (Consolidated)

31

Annexures

31

32 32

Accelerated Adoption of RBI Draft Guidelines on ‘Prudential Norms’

Months Past Due RBI stipulated Norms for

NBFCs

Secured Unsecured

0 to 6 months 0.25% 0.25%

> 6 to 24 months 10% 10%

> 24 to 36 months 20% 100%

> 36 to 60 months 30% 100%

> 60 months 50% 100%

Loss Assets 100% 100%

Provisioning Norms

Months Past Due Magma’s Provisioning

Policy

Secured Unsecured

0 to 4 months 0.30% 0.30%

> 4 to 16 months 15% 25%

> 16 to 28 months 25% 100%

> 28 to 52 months 40% 100%

> 52 months 100% 100%

Loss Assets 100% 100%

Standard

Sub

Standard

Doubtful

These provisioning norms are considered the minimum and higher provision is made based on perceived credit risk

where necessary.

33 33

NPA Provisioning

NPA Provisions (% of Total Loan Assets) @ as per RBI norms

0.7%

2.7%

3.2%

0.3%

2.0% 2.4%

0.0%

1.0%

2.0%

3.0%

4.0%

FY13 FY14 Q1 FY15

GNPA % NNPA %

Based on MFL Consolidated financials

NNPA factors in the higher than required provisions already made by Magma

• Magma follows conservative NPA recognition at 4 months default & creates higher provision compared to RBI norms

• Magma recognises income on securitised assets on receipt basis

34 34

Shareholding

Promoters, 33.6% Overseas

Bodies, 26.2%

FII, 29.7%

Domestic Investors,

4.6%

Public, 5.9%

Top Non Promoter Shareholders Shareholding of Magma Fincorp (on 30 Jun 2014)

KKR

IFC, Washington

Chrys Capital

India Capital

Bank Muscat

Net Worth and PAT for all subsidiaries (at 100% value) as per FY14 financials

Magma Fincorp

(Standalone)

Magma ITL JV

(tractor biz)

Magma HDI JV

(general

Insurance biz)

Magma

Housing

Finance

Magma Fincorp

(Consolidated)

100% 74% 37% 100%

Holding Structure

Net Worth: Rs 1,264 cr

PAT: Rs 136 cr

Net Worth: Rs 128 cr

PAT: Rs 30 cr

Net Worth: Rs 175 cr*

PAT: Rs (-)23 cr*

Net Worth: Rs 208 cr

PAT: Rs 3 cr

Net Worth: Rs 1,504 cr

PAT: Rs 160 cr

35 35 35

Forward Looking Statements

Certain statements in this document with words or phrases such as “will”, “should”, etc.., and similar expressions or variation of

these expressions or those concerning our future prospects are forward looking statements. Actual results may differ materially

from those suggested by the forward looking statements due to a number of risks or uncertainties associated with the

expectations. These risks and uncertainties include, but are not limited to, our ability to successfully implement our strategy and

changes in government policies. The company may, from time to time, make additional written and oral forward looking

statements, including statements contained in the company’s filings with the stock exchanges and our reports to shareholders.

The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf

of the company.

Thank You

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