Reaching New Heights in Retail Finance - lease.magma… · Diversification of loan book exposure minimizes impact of regional/local/single event risks . 11 ... Magma recognises income

1 1 Magma Fincorp Limited

Reaching New Heights in Retail Finance

Q2 FY15 Update

2 2 2

HELPING PEOPLE REACH OUT TO THEIR DREAMS

3 3

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%

4

Leadership Team

Business Overview and Strategy

Annexures

Financial Results – Q2 FY15

4

5

Loan book increased by 13% yoy, driven by conscious growth in share of mortgage, tractor and used assets

financing

Mortgage finance and general insurance business contributing to overall profitability, in accordance with

guidance

5

Key Business Highlights – Q2 FY15

Consolidated PAT increased 31% yoy to Rs 42 crore and Standalone PAT increased 13% yoy to Rs 35 crore

#1

#3

#4

Based on MFL financials for Q2 FY15

NIM continued the upward trend, improving by 53 bps yoy, as a result of shifts in the product-customer-

geography mix

#2

6 6

Financial Results – Q2 FY15 (Consolidated)

Values in Rs crore

** Due to investment in process and technology for substantially increased collections efforts

Q2 FY15

Q2 FY14

18,836

13%

16,698

3.49%

3.21%

5.87%

5.34%

53 bps

42.23

32.16

31%

Loan Assets Opex / Loan

Assets ** NIM Profit After Tax

27 bps

7

28.3% 31.0% 29.3% 28.6% 24.6%

27.4% 17.8% 11.7% 13.9%

11.5%

16.8%

14.2%

10.0% 10.9%

8.0%

10.6%

15.3%

14.2% 14.1%

14.2%

11.0% 14.4%

17.4% 16.1%

15.0%

5.9% 7.4%

8.9% 9.0%

8.4%

8.5% 7.4% 18.3%

0%

25%

50%

75%

100%

FY12 FY13 FY14 Q2 FY14 Q2 FY15

UV/Cars CV CE Used Assets Tractors SME Loans Mortgage

7

Disbursement Mix

8,678 9,081 Disbursements 2,550 2,196

Values in Rs crore

44.0%

56.0%

7,404

Share of Tractor, Used Assets, Mortgage and SME Loans consciously increased to 56% in Q2

FY15 from 27% in FY12, driving increase in NIMs

8 8

Loan Assets Mix

25.6% 27.6% 27.6% 28.4% 26.6%

33.8% 23.6%

17.8% 20.7% 15.6%

17.3%

13.8%

11.8% 13.0%

10.5%

8.4%

9.8%

11.3% 10.6%

11.6%

10.2%

12.4% 16.0%

14.3%

17.2%

4.8%

4.7% 5.6% 5.0%

5.6%

7.6% 9.4% 7.4% 12.3%

0.4% 0.5% 0.6% 0.5%

0%

25%

50%

75%

100%


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

16,240 17,877 Total Loan Assets 18,836 16,698

Closed down Gold Loan business; Includes Off B/S loan assets and values in Rs crore

52.8%

47.2%

12,036

Diversified portfolio of 7 products with the highest share of a single product less than 30% of

total book

9

Improvement in NIM driven by change in product and customer mix

10,976 11,352 12,853

11,828

12,853

5,264 6,525

5,984 4,870 5,984

5.48% 5.51%

5.80%

5.34%

5.87%

5.00%

5.20%

5.40%

5.60%

5.80%

6.00%

-

5,000

10,000

15,000

20,000

FY13 FY14 FY15 YTD Q2 FY14 Q2 FY15

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

9

Loan Assets (Rs crore) 16,240 18,836 17,877 16,698

Loan Book Growth

Lo

an

Asse

ts

NIM

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

18,836

10 10

Total Loan Assets: Rs. 18,836 crore

Uttarakhand/Delhi, 7%

Haryana, 7% Punjab/Himachal, 4%

Rajasthan, 7%

Uttar Pradesh, 11%

Bihar, 3%

Jharkhand, 3%

Orissa, 4%

West bengal, 5%

Seemandhra/ Telangana, 8%

Karnataka, 5% Kerala, 6%

Tamil Nadu, 4%

Chattisgarh, 3%

Gujarat, 6%

Madhya Pradesh, 10%

Maharashtra, 7%

North: 37%

South: 23%

East: 15% West: 25%

State-wise Loan Assets Breakup

Value as on 30 Sep 2014; Includes Off B/S loan assets

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

11

63.9% 53.1% 55.8% 55.1% 61.2%

23.0% 30.7% 28.9% 29.5% 24.6%

13.1% 16.2% 15.3% 15.4% 14.2%

0%

25%

50%

75%

100%


Tier I/II Capital Debt Capital Markets Banks

11

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 11,871 10,706 6,327

12 12

NPA Provisioning

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

0.7%

2.7%

1.8%

3.5%

0.3%

2.0%

1.2%

2.6%

0.0%

1.0%

2.0%

3.0%

4.0%

FY13 FY14 Q2 FY14 Q2 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

13 13

P&L Statement (Consolidated)

Values in Rs crore

Y-o-Y Q-o-Q

Income from Ops. 572.4 500.5 544.3 14% 5% 2,081.3 1,651.6

Interest Expenses 308.2 290.9 293.5 6% 5% 1,177.1 926.2

Net Operating Income 264.2 209.6 250.8 26% 5% 904.2 725.4

Other Income 8.2 10.4 9.4 -22% -13% 36.1 49.9

Net Total Income 272.4 220.0 260.2 24% 5% 940.4 775.2

Prov./Write Offs 62.6 46.0 49.4 36% 27% 184.1 96.6

Post Prov Profit 209.8 174.0 210.8 21% 0% 756.3 678.6

Operating Expenses 161.9 132.4 159.5 22% 2% 558.6 466.2

:Personnel Expenses 82.1 55.3 82.3 49% 0% 243.1 204.0

:Other Expenses 72.6 68.3 70.3 6% 3% 282.4 224.6

:Depreciation 7.3 8.9 6.9 -18% 6% 33.2 37.6

Profit Before Tax 47.9 41.6 51.3 15% -7% 197.7 212.5

Taxes 5.7 9.4 5.5 -40% 3% 38.1 67.5

Profit After Tax 42.2 32.2 45.8 31% -8% 159.6 144.9

FY13Q2 FY15 Q2 FY14 Q1 FY15% Change

FY14

14 14

Balance Sheet (Consolidated)

Values in Rs crore

Y-o-Y Q-o-Q

LIABILITIES 14,793 13,255 14,069 12% 5% 13,178 13,114

Net Worth 1,589 1,457 1,546 9% 3% 1,504 1,397

Share Capital 38 38 38 0% 0% 38 38

Reserves and Surplus 1,550 1,419 1,508 9% 3% 1,466 1,359

Minority Interest 37 29 36 28% 3% 33 26

Preference Capital 137 154 137 -11% 0% 150 197

Borrowings 11,735 10,552 10,991 11% 7% 10,226 10,402

Other Liabilities 1,297 1,063 1,359 22% -5% 1,266 1,092

ASSETS 14,793 13,255 14,069 12% 5% 13,178 13,114

Loan Assets 12,853 11,828 12,296 9% 5% 11,352 10,976

Fixed Assets 200 176 192 14% 4% 193 177

Other Assets 831 655 786 27% 6% 756 651

Cash & Bank Balance 909 596 795 53% 14% 877 1,309

TOTAL LOAN ASSETS 18,836 16,698 18,295 13% 3% 17,877 16,240

Q2 FY15 Q2 FY14 Q1 FY15% Change

FY14 FY13

15 15

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)

Y-o-Y Q-o-Q

Total Income/Assets 16.1% 15.5% 16.3% 63 -16 16.1% 16.0%

Interest Exp/Assets 8.5% 8.8% 8.6% -26 -7 9.0% 8.7%

Gross Spreads 7.6% 6.7% 7.6% 89 -9 7.2% 7.3%

Prov & WO/Assets 1.7% 1.4% 1.5% 34 28 1.4% 0.9%

Opex/Assets 4.5% 4.0% 4.7% 48 -19 4.2% 4.4%

PBT/Assets 1.3% 1.3% 1.5% 7 -18 1.5% 2.0%

RoA 1.17% 0.97% 1.34% 20 -17 1.21% 1.36%

RoE 9.68% 7.52% 10.64% 216 -95 9.55% 9.97%

Tier 1 11.1% 10.8% 11.2% 31 -7 11.5% 10.6%

Total 16.9% 16.1% 17.1% 78 -19 16.6% 16.0%

CRAR

Q2 FY15 Q2 FY14 Q1 FY15Change (in bps)

FY14 FY13

16 16

Segment wise Performance – Q2 FY15

Total includes 100% of asset finance and mortgage finance and 37% of general insurance business; Values in Rs crore

** Gross Written Premium (GWP) reported by general insurance business

Closing Loan Assets 16,512 2,324 n/a 18,836

Disbursements 2,083 467 111 ** 2,550

NIM 5.90% 5.46% n/a 5.87%

Total Income 501.5 78.2 2.6 580.6

Finance Expenses 259.4 48.8 - 308.2

Operating Expenses 143.9 18.0 - 161.9

Credit Costs 58.8 3.8 - 62.6

Profit Before Tax 39.5 7.5 2.6 47.9

Asset

Finance

Mortgage

Finance

General

InsuranceTotal

17

Leadership Team


Annexures


17

18

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

18

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

19

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% 44 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 23.0 81% 43

Construction

Equipment (CE)

SME segment

Working capital, business expansion MSME segment 23.0 NA 31 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 H1 FY15

* LTV has been calculated without considering cost of truck body

Captive customers

Rural agri based products

Penetrate motor insurance market

Rural agri markets

General

Insurance

Products

19

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

new products

31.30 39% 162

20 20

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

Vertically Aligned Business Model

Retail

0 dpd

1 - 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

21 21

Region-wise Distribution of Branch Network

Pan - India Reach • 275 branches across 23 states /union territories

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

• 10,409 employees including over 9,300 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 Sept 2014

22

Leadership Team


Annexures


22

23 23

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

Ritva Laukkanen –

Non Executive

Director

(Nominee of IFC) *

Ex-Director in IFC. Over 3 decades

of experience in investments,

financial markets and development

finance

Narayan K Seshadri

Entrepreneur consultant. Former

Country Head - KPMG Consulting &

Head of Business Consulting in

Arthur Andersen

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

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

* Joined in October 2014

24

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

24

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

25 25

Shareholding

Promoters, 33.6% Overseas

Bodies, 26.2%

FII, 29.5%

Domestic Investors,

4.9%

Public, 5.8%

Top Non Promoter Shareholders Shareholding of Magma Fincorp (on 30 Sept 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

26 26 26

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

27

Leadership Team


Annexures


27

28 28

Profit & Loss Statement (Standalone)

Y-o-Y Q-o-Q

Income from Ops. 492.6 446.2 470.6 10% 5% 1,846.8 1,568.3

Interest Expenses 267.0 261.8 258.3 2% 3% 1,055.2 887.4

Net Operating Income 225.6 184.4 212.3 22% 6% 791.6 680.9

Other Income 7.9 8.3 8.0 -5% -1% 28.9 37.9

Net Total Income 233.5 192.7 220.3 21% 6% 820.5 718.7

Prov./Write Offs 56.5 40.3 47.0 40% 20% 161.4 86.1

Post Prov Profit 177.0 152.4 173.3 16% 2% 659.1 632.7

Operating Expenses 140.1 114.1 135.5 23% 3% 480.7 453.5

:Personnel Expenses 65.2 49.3 66.2 32% -1% 213.1 202.8

:Other Expenses 67.6 55.9 62.4 21% 8% 234.5 214.0

:Depreciation 7.3 8.9 6.9 -18% 6% 33.1 36.7

Profit Before Tax 36.9 38.2 37.9 -4% -3% 178.4 179.2

Taxes 2.4 7.6 3.3 -69% -27% 42.8 56.4

Profit After Tax 34.5 30.6 34.6 13% 0% 135.6 122.8


FY14

All values in Rs crore

29 29

Balance Sheet (Standalone)


Y-o-Y Q-o-Q

LIABILITIES 12,444 11,713 12,072 6% 3% 11,318 11,742

Net Worth 1,333 1,233 1,298 8% 3% 1,264 1,174

Share Capital 38 38 38 0% 0% 38 38

Reserves and Surplus 1,295 1,195 1,260 8% 3% 1,226 1,136

Minority Interest - - - - -

Preference Capital 101 118 101 -15% 0% 114 161

Borrowings 10,016 9,467 9,629 6% 4% 8,918 9,432

Other Liabilities 993 895 1,044 11% -5% 1,021 975

ASSETS 12,444 11,713 12,072 6% 3% 11,318 11,742

Loan Assets 10,924 10,414 10,550 5% 4% 9,878 9,824

Fixed Assets 184 160 176 15% 5% 177 161

Other Assets 627 637 650 -1% -3% 657 634

Cash & Bank Balance 738 525 738 41% 0% 745 1,243

TOTAL LOAN ASSETS 16,488 15,068 16,200 9% 2% 15,909 14,747


FY14 FY13

30 30

Profit & Loss Statement: Magma ITL (MITL)


Y-o-Y Q-o-Q

Income from Ops. 33.7 32.3 36.7 4% -8% 136.8 101.0

(-) Interest Expenses 15.3 14.3 14.7 7% 4% 61.5 42.5

Net Operating Income 18.4 18.0 22.0 2% -16% 75.3 58.5

(+) Other Income - - - 0% 0% 0.4 -

Net Total Income 18.4 18.0 22.0 2% -16% 75.7 58.5

(-) Prov./Write Offs 3.0 2.3 -0.2 32% NA 7.5 0.8

(-) Operating Expenses 9.0 9.0 11.9 0% -24% 41.1 21.5

Profit Before Tax 6.5 6.8 10.3 -5% -37% 27.1 36.2

(-) Taxes 1.8 1.6 1.3 12% 40% -3.7 11.8

Profit After Tax 4.7 5.2 9.1 -10% -48% 30.8 24.4


FY14

31 31

Profit & Loss Statement: Magma Housing Finance (MHF)

* FY13 financials for full year; Consolidation with Magma was effective from 11th Feb 2013


Y-o-Y Q-o-Q

Total Income 44.7 28.3 38.4 58% 16% 121.6 85.3

(-) Interest Expenses 27.4 17.9 23.9 53% 15% 76.0 44.1

Net Income 17.4 10.4 14.5 66% 19% 45.6 41.2

(-) Prov./Write Offs 1.9 1.4 1.0 32% 96% 6.7 1.8

(-) Operating Expenses 11.9 8.5 11.5 41% 4% 34.5 20.2

Profit Before Tax 3.6 0.6 2.1 533% 71% 4.5 19.2

(-) Taxes 1.2 0.2 0.7 533% 71% 1.8 6.5

Profit After Tax 2.4 0.4 1.4 533% 71% 2.6 12.6


FY14 FY13 **

32 32

Profit & Loss Statement: Magma HDI General Insurance Company (MHDI)

Y-o-Y Q-o-Q

Gross Written Premium 111.0 98.4 106.8 13% 4% 429.9 95.8

Net Earned Premium 100.8 48.9 94.7 106% 6% 228.2 14.3

(-) Claims Incurred 79.3 43.8 75.0 81% 6% 193.6 12.5

(-) Net Commission 5.1 4.3 3.4 18% 50% 14.8 3.2

(-) Management Expenses 28.8 21.2 27.4 36% 5% 90.0 29.6

Underwriting Profit -12.3 -20.4 -11.1 NA NA -70.2 -31.0

(+) Investment Income 14.9 8.3 13.6 80% 9% 36.9 19.2

Profit Before Tax 2.6 -12.1 2.5 NA 2% -33.3 -11.8

(-) Taxes 0.8 - 0.8 NA -3% -10.0 -2.4

Profit After Tax 1.8 -12.1 1.7 NA 5% -23.3 -9.4


FY14


Documents

Reaching New Heights in Retail Finance - lease.magma… · Diversification of loan book exposure minimizes impact of regional/local/single event risks . 11 ... Magma recognises income