Corporate Presentation – FY14
Agenda Overview of the Company Changing Asset Composition Product Offering Credit Processes Liability Profile Board of Directors Shareholding Pattern Financial Results Corporate Presentation 2
Overview • Capital First Ltd. (NSE Code CAPF) is an NBFC with record of consistent growth & profitability. • CAPF focuses on providing financial services to retail and MSME customers. • The company has increased its retail financing contribution from 10% in FY 10, to 28% in FY11 to 56% in FY12, 74% in FY13 and 81% as on March 31, 2014. • CAPF has loan assets under management of Rs. 96.79 bn as on March 31, 2014. • CAPF has a strong distribution network of 164 branches and 1,089 employees across India covering 40 cities as on March 31, 2014 • The Net Worth of CAPF is Rs. 11.72 bn as on March 31, 2014. The Capital Adequacy is 22.16% as on March 31, 2014. • The Gross and Net NPA of the Company stood at 0.45% and 0.08% respectively as on March 31, 2014. • The Company long term credit rating including NCD and Subordinated Debt is rated highly at AA+ by rating agencies. Corporate Presentation 3
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 4
Agenda Overview of the Company Changing Asset Composition Product Offering Credit Processes Liability Profile Board of Directors Shareholding Pattern Financial Results Corporate Presentation 5
Increasing Share of Retail Assets AUM (Rs. Bn) Retail Credit Assets (%) Wholesale Credit Assets(%) 10% 19 26% % 28% 44% 72% 81 56% % 74% 90% FY10 FY11 FY12 FY13 FY14 Rs. 9.35 bn Rs. 27.51 bn Rs. 61.86 bn Rs. 75.10 bn Rs. 96.79 bn Corporate Presentation 6
Agenda Overview of the Company Changing Asset Composition Product Offering Credit Processes Liability Profile 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 Company understands that the following “ Challenges and Risks ” are inherent in this business, and • takes preventive measures in terms of processes and controls to address the same. Challenges Evaluation of the cash flow of an SME can be challenging considering the low transparency, large cash based • income, seasonality, low disclosures among SMEs etc. Risks Since SME loans are primarily provided to the MSME players based on the cash flow analysis of their • businesses, downturn during the economic cycles may affect their cash flows. The other risk associated is sudden crash in real estate prices, although this risk is low in India. 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 Company understands that the following “ Challenges and Risks ” are inherent in this business, and • takes preventive measures in terms of processes and controls 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 Company understands that the following “ Challenges and Risks ” are inherent in this business, and takes • preventive measures in terms of processes and controls 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 requires relationship with hundreds of dealerships across remote geographies leading to high operating and distribution costs. 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
Consumer Durable Loans Capital First provides financing for consumer electronic goods like LED, LCD TVs, Washing • Machine, Laptops, Furniture through easy EMIs to salaried and self employed customers. From a distribution point of view, this is a highly fragmented market. Since inception in FY10, Capital First has • tied up with all leading Consumer Durable manufacturers and has grown the business with the help of extensive reach, robust credit processes, quick turnaround and efficient customer services. The Average Ticket Size is Rs. 28,000. The average Loan to Value ratio is ~70%. The Door to Door tenure for • the loan is around 8 months. The Company checks the application with the Credit Bureau (Bureau Score), and evaluates the application • using the Application Score (AS) in parallel. The decision is conveyed to the customer and dealership within 3 minutes. Challenges Like in the case of Two-Wheelers, this business is complex, as the ticket size of loans is low, and the tenor is • short (average actuarial tenor is 4 months), and requires relationship with thousands of dealerships across remote geographies leading to high operating and distribution costs. It is a challenge to build the required critical mass for this business. The collection effort and collection cost involved for collecting the small EMIs from large number of customers is a key challenge. Risks The on-boarding process is prone to identity frauds which affect portfolio quality. CFL has invested in fraud • management systems, identity authentication processes to minimize such instances. The scoring system needs to be validated and recalibrated on an ongoing basis. Corporate Presentation 11
Agenda Overview of the Company Changing Asset Composition Product Offering Credit Processes Liability Profile Board of Directors Shareholding Pattern Financial Results Corporate Presentation 12
Credit Processes Credit Policy Business Credit Loan Booking Portfolio (Defining Origination Underwriting and Operations Monitoring & Lending Norms) Team Team Team Collections • Sales, credit, operations and collections are independent of each other, with independent reporting lines Corporate Presentation 13
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