AGENDA Hedge Group an Introduction NBFC market landscape Business plan & indicative financials Meet the promoters AGENDA Hedge Group an Introduction Vision To enhance the wealth creation capability of the organization in a global environment, delivering superior and sustainable stakeholder value” Mission Create customer satisfaction and provide quality and professional service Offer rewarding career opportunities and cultivate staff commitment Build values and deliver superior returns to shareholders THE HEDGE GROUP Hedge Equities Hedge Equities is the flagship company of the Hedge Group. The venture revolutionized and popularized share trading culture in Kerala. Today, Hedge Equities enjoys the patronage of 35,000 satisfied customers who are reaping the benefits of professionally managed portfolios. Hedge Commodities Hedge Commodities offers a viable platform to engage in futures trading in agricultural and non-agricultural commodities. The in-depth knowledge of the Indian and world markets help our advisors to provide appropriate and timely assistance to our customers. Hedge School of Applied Economics The dire dearth of qualified share trading professionals in Kerala is what prompted the Hedge Group to commence the Hedge School of Applied Economics. Present and potential stock brokers are moulded to international standards under the guidance of veteran financial experts. Live trading sessions and world class academic amenities are the highlights of the Hedge School. Hedge Wealth Management Service (WMS) The premium Wealth Management Services (WMS) was introduced by Hedge Equities. The comprehensive financial package is intended at building, managing and growing the wealth of the client. Service offerings of WMS include Portfolio Management Services (PMS), Portfolio Advisory Services (PAS), Mutual Fund Advisory (MFA), Commodities, Foreign Exchange and Derivatives. A specialized team of SEBI registered portfolio managers and dealers furnish each investor with customized and research oriented solutions to garner maximum possible returns. Hedge Finance With the inception of Hedge Finance, the Hedge Group entered the prestigious NBFC market of India. The company adheres strictly to the RBI regulations and primarily focuses on the Loan Against Security sector. Hedge Finance has huge growth potential and intends to diversify its services in the near future. Hedge Equities takes its root from over 25 years experience of business leaders in various industries laying the platform for one of the biggest broking houses in Kerala today. World class Infrastructure : 170 outlets and 500 plus qualified personals catering to over 35000 clients. State of the art Technology : Adoption of cutting edge technology thus giving users unparalleled user experience Unparalleled Brand value : Rated as one of the fastest growing brands in Kerala, Hedge equities has carved for itself a niche in the mindspace of the people of the state. Innovation DNA : Pioneers in introducing various programs and trendsetters in initiatives aimed at tapping market. NBFCs constitutes a reasonable big chunk of the country’s overall financial system accounting for 9.1% or Rs. 4 trillion of assets of the entire financial system in India. NBFC industry today is a more mature, developed and promising since the days of inception and is destined to shape the future of India. NBFCs have enjoyed tremendous competitive advantages relative to their banking peers for over a decade now Backed by Hedge Equities, Hedge Finance is all set to be one of the top Non Banking Finance company in the country. Focus to be on the niche under tapped Loan against Securities area apart from the other traditional areas. Years of expertise in the financial market, a robust infrastructure in place and the backing of the brand name of Hedge Equities, Hedge Finance holds an edge in this segment. AGENDA NBFC market landscape Number & Asset Size of NBFC - D and NBFC - ND SI Key NBFC figures – Overall (USD Bn.) 100 80 13,500 13,014 67.7 60 40 0 12,000 2009-10 Revenue Profitability Number of NBFCs Total Assets (NBFC-D & NBFC -ND SI) as % of Total Bank Assets 12 10 8 6 4 2 0 11.1 11.0 4.4 1997 - 98 2005 - 06 2009 - 10 Abbreviations: NBFC D – Deposit taking NBFCs; NBFC ND SI – Non deposit taking NBFCs, but having asset size greater than USD 22.5 Mn (INR 1000 Mn) 160,000 120,000 1000 65,219 80,000 600 400 200 2.93 1.12 2005-06 Asset Size 12,500 16.7 5.6 1420 800 12,622 20 1400 1200 13,000 149,421 1600 0 7,862 1997 - 98 Number 586 575 2005 - 06 2009 - 10 40,000 - Total Assets (USD Mn.) • The total number of NBFCs has witnessed a declining trend over the past few years. • Acquisition of smaller NBFCs by bigger ones, closure of NBFCs by RBI due to noncompliance and exit of some deposit accepting NBFCs (NBFC-D) have contributed towards this decrease. • However, the asset size, revenues and ensuing profitability have improved during the same period, growing at a CAGR of 17%, 31% and 21% from 2005- 06 to 2010 -11. • The NBFC-ND-SI sector, which constitutes 70% of total assets of NBFCs have in particular, recorded significant growth. Type of NBFC Total Assets in USD Bn. (as on FY 2010) Public Sector NBFCs 14,009 Infrastructure Companies 44,329 Asset Finance Companies 25,752 Gold Loan Companies 1,955 Micro Finance Institutes Other Loan and Investment Companies All NBFCs 120 100 19.40% 15.60% 3% 7.10% 2% NBFC - D RoA 28.60% NBFC ND-SI RoE Leverage Ratio* * Tier-I Capital as a % to Total Assets 91 84 55 60 41 40 3,090 60,286 0 12 17 26 22 27 26 31 35 32 4 2006 - 07 2007 - 08 Asset Finance Companies Profitability Indicators of NBFCs (FY 2010) 112 80 20 149,421 Growth of Assets (USD Bn.) as per type of NBFCs 2008 - 09 2009 - 10 Investment Companies 2010 - 11 Loan Companies • Asset size of the different categories of NBFCs have seen continuous growth for the last few years, implying the overall prospects of the NBFC sector. • The Asset size of Investment companies have seen maximum growth, increasing at a CAGR of around 70%, while AFCs and LCs have grown at a CAGR of around 28% since 2006-07. • The growing number of middle income households, increase in disposable income and a consequent investment in houses, consumer goods and other related expenditure, and a strong emphasis on infrastructure development of the country are some of the key contributing factors expected to drive growth of NBFCs in the near future. Sr. No. Name of NBFC Type of NBFC Year of establis hment 1 Shriram Transpor t Finance Company Ltd. (STFC) AFC 1979 STFC is also India's largest commercia l vehicle financing company branches No. of employees 488 16,919 • STFC has a large and growing mobile sales team that tries to create new leads and monitor loan payments to its huge customer base. • STFC uses technology in order to keep the sales team connected with the offices, and to improve processing times for new applications or monitor payments. Recently, it has tied up with IBM to implement cloud computing technology to ensure all of its field sales reps have access to reliable email that can be accessed on the road, at their desk and from their mobile devices No. of Major Products • Financing of Commercial Vehicles, that can be categorised as i.) pre-owned vehicles ii.) new vehicles Customer Segments • Small truck owners (less than 2-3 trucks) as well as existing customer base upgrading to new trucks • STFC also empowers first time entrepreneurs in the Commercial vehicle segment who are not readily supported or acknowledged by mainstream financial institutions Technology Usage 2 Bajaj AFC Finance Ltd.(BFL) 1988 • Two Wheeler • Individuals, Professionals & Financing HNIs • Loans for Manufacturers & Traders Consumer Durables • Loans for Construction Equipments • Small Business Loans • Loan against Property • Loan against Shares 225 1657 • As part of its strong Risk Management System, BFL has set up an in house analytics team. The team is responsible for real time analysis of data from various business lines to monitor their operations • BFL also uses the CIBIL database actively and has built an in-house customer database to keep a track of their performance and for future references 3 Muthoot Finance 1997 •Gold Loans 2733 16,688 • Muthoot Finance uses a well informed and dedicated analytics team to maximise profits as the Gold loan business requires high levels of operational and business foresight to transact in gold and help the corporate office fix and inform the rates to offer at all its branches • Muthoot Finance also deploys modern equipments and technology to enhance the safety features of all its branches for storage of its gold inventory LC • Small businessmen, vendors, traders, farmers, salaried individuals, professionals and small sized entrepreneurships Sr. No. Name of NBFC Type of NBFC Year of establis hment Major Products Customer Segments No. of branche s No. of employees Technology Usage 4 SREI Infrastructur e Finance Limited (SREI) IFC 1989 • Fund based, Fee based and Strategic Investment activities in the Infrastructure Business: • Fund based services: Equipment Financing, Project Financing • Fee based Services: Project Advisory, Venture Capital, Project Development • Strategic Investment based services: Telecom infrastructure, Power & Transportation, IT Infrastructure Infrastructure and Construction Companies and SMEs 77 2116 • Srei invests heavily in technology to remain at the forefront of innovation and to adhere to a process-oriented structure in the way of doing business. • The Company has a robust information technology set-up with proper security measures, which helps in electronic documentation and report generation. Besides, it has an off-site disaster recovery system that prevents any loss of data in case of exigencies 5 IDFC IFC 1997 • Corporate & Investment Banking (Project Finance, Investment Banking) • Alternative Asset Management (Private Equity, Venture Capital) • Public Market Asset Management (Mutual Funds) in the Infrastructure Sector Infrastructure and Construction Companies, Entrepreneurships and SMEs - 586 • IDFC uses a range of high performance network solutions to ensures servers and applications are available to its employees and global clients round the clock besides meeting security requirements 6 HDFC HFC 1977 • Home Loans, Loan against Property, Rural Housing Finance Salaried and Self Employed People 283 1607 • Robust IT system to improve Loan appraisal and disbursement process 7 Gujarat Venture Finance Limited (GVFL) LC 1990 • Seed & Start up Funding, Growth Funding Technology oriented Start ups (with recent focus on biotechnology and infra); Companies in their growth stage requiring funding support - - NIM 276 24% 66% 25% 4.20% 27.94% 8.36% 4.42 0.40% 2 Bajaj Finance Ltd.(BFL) 1812 1633 101 8 297 305 1507 55.5 46.6% 74% 20% 4.30% 19.70% 10.76% 3.96 0.80% 3 Muthoot Finance 2983 2640 1.7 72 229 301 2698 111 22.4% 67% 15% 3.72% 51.50% 10.86% 8.95 0.25% 4 SREI Infrastructure Finance Limited (SREI) 3007 1075 566 112 481 593 2274 40.5 26.7% 77% 29% 1.64% 10.72% 3.76% 3.73 5 IDFC 10686 8461 1832 5.17 1980 2847 8158 288 4.50% 62% 24% 3.00% 12.90% 3.70% 3.44 0.07% 6 HDFC 29995 26469 2674 66 3847 3913 20516 799 3.49% 62% 14% 1.18% 21.41% 4.30% 6.66 0.77% 7 GVFL 0.9 0.22 0.06 0.25 0.66 0.91 - 0.16 - 71% - 26.8% 103% - - - Cost to Income ratio PAT Net NPA ratio RoE 4467 D/E ratio RoA 1102 CRAR 1056 Opex to Income ratio Net Worth 51 Borrowings Reserves and Surplus 825 Paid up Capital 5484 Investments 5570 Loans & Advances Shriram Transport Name Assets 1 Sr. No. 0.60% AGENDA Business plan & indicative financials Key Benefits Product description and characteristics Margin Funding: This product allows customers to borrow against their securities or investment portfolio. Such borrowing can be used against the purchase of further securities in the market. The company will fund up to 50% of the mark to market value of the holdings of the customer. Arguably one of the safest methods of lending to a customer as loans are backed by highly liquid securities. Loan Against Shares: Loan Against Securities (LAS) is a product that enables acquiring instant liquidity from your investment without selling them. The applicant will need to pledge his securities in favor of HEDGE FINANCE Limited, This enables the customer to enjoy all corporate benefits accrued on the securities and still avail loan against them. No EMI or prepayment charges applicable. Interest will be charged only on the actual amount and that too for the time it was disbursed. Estimated interest charged : 18-21% Easy disbursal processes No further collateral security required Short Term fund requirement catered to immediately Flexibility in repayment Easy documentation Potential to tap various stock market opportunities Challenges Greater reliance on technology for monitoring margin fall Creating customer awareness Product description and characteristics Loan against property are secured-term-loans ,secured by mortgage of a residential or commercial property. The end-use of this loan should be towards any declared legal purpose. Some commonly seen LAP types are as follows: Key Benefits Loan for personal/educational/business needs against existing property Loan for acquisition of commercial property Loan against future rental receivable Challenges Estimated interest charged : 18-21% Loans available from 5 lakh up to 5 crore Simple documentation Fast processing Easy repayment options Loan tenure of 12 months to 120 months for properties Loan Recovery Compete with Banks and other lending institutions offering low interests Key Benefits Product description and characteristics The Hedge Finance loans against Gold will help customers avail of any requirement in funds without having to sell off gold jewellery. These loans are hassle-free with least amount of documentation. Most importantly, there is no need of income proof. Easy Repayment with only interest being paid each month. Principal to be paid only at the end of loan tenor. Maximum value against security Simple procedures Quick sanctioning High liquidity for gold Maximum individual lending limit Easy micro credits Flexible gold loan product Challenges Estimated interest charged : 18-21% Purity Verifications Market Rate fluctuations Custodial risk Year 1 Year 2 Year 3 EBIDTA 62.82% 76.01% 80.35% EBITA 61.10% 73.66% 78.26% PBT 57.92% 36.61% 48.92% PAT 39.12% 24.74% 32.56% ROE 7.99% 13.89% 38.23% DEBT EQUITY 0.05 1.65 4.30 EPS 0.80 1.39 3.82 AGENDA Meet the promoters Alex K Babu (MD) Bhuvanendran (CEO) Alex K Babu is the Founder & Managing Director of Hedge Equities. He has over 9 years of experience in equity research and fund management with considerable experience across all market capitalizations. He is a specialist in mid-cap and infra stock selection. Ever since joining the Hedge Family, he has been designing, developing and implementing the strategic plan for the company in the most cost effective and time efficient manner. He was also instrumental in establishing and assembling a strong research team with equal emphasis on macroeconomic, industrial, and company level research Professionalism augmented by profound vision is a perfect phrase to describe Bhuvanendran. His rich experience spanning 22 years with the leading names in the Indian financial services industry, is often camouflaged by his youthful appearance, till Mr.Bhuvanendran opens up his favourite subject-Money matters. Bhuvanendran is a talented and introspective writer whose creativity has been capitalized by various financial journals. He is also in the limelight for a market related show which aims at quenching the financial queries of professionals and investors in a leading Malayalam television channel. Bobby Jose (COO) Mr. Bobby has been responsible for the entire operations of Hedge Equities ever since its inception. He has proved his versatility by showcasing excellent Man-Management and Marketing Activities and is well versed in all aspects of Indian Financial Markets. In the last 15 years, he has worked with all the major players in the financial service sector of the country which has added oodles to his workmanship. P R Sankaranarayanan (Executive Director) Mr. P.R.Sankaranarayanan, a Chartered Accountant by profession, holds a Masters in Commerce and a Post Graduate Diploma in Management. He was the Executive Director of Federal Bank (1995-2006), one of the leading private sector banks. Prior to that he held the position of General Manager of UTI and had earlier served Canara Bank. He is a seasoned banker, mutual fund specialist and finance expert with top level management exposure in several functional areas. Targeting 100 Crore Capital by Private Placement Placement with Low Premium Excellent Long Term Investment option Low Break Even branches Low NPA ratio for NBFC’s Expected discounted ROE 20-32% THANK YOU