1. Non-Banking Financial Companies
Bhavesh Tanna-160
Aniket Tawde-161
Vishal Thadani-163
Sagar Thakkar-165
Aditya Vaidya-169
Kamlesh Varma-170

2. Introduction
 What is NBFC ?
 Cannot accept demand deposits
 Cannot issue cheques to its customers.
 DICGC is not available for NBFC

3. Introduction
 Financial Asset of Company > 50% of Total Asset
 Income from Financial assets > 50% Gross Income
…...then the company will be treated as NBFC

4. Classification
NBFC
NBFC-D NBFC-ND
NBFC
Infrastructure Core
Asset Finance Investment
Loan Company Finance Investment
Company company
Company Company

5. Activities
Hire
Purchase
Equipment
Investment
Leasing
Activities
Activities
NBFC
Loan Mutual
Granting Fund
Activities Finance
Housing Insurance
Finance Business

6. Current Scenario
Source: Issues & Concerns in NBFC, Aug 2011, RBI

7. Current Scenario
Source: Issues & Concerns in NBFC, Aug 2011, RBI

8. Current Scenario
Source: Issues & Concerns in NBFC, Aug 2011, RBI

9. Prominent NBFC companies in India.
COMPANIES

10. Mahindra Financial Services Ltd
 MMFSL subsidiary of M&M ltd
 Focused on Rural & Semi-Urban Sector
 Primarily in Auto & Utility Vehicle Loans
 CRISIL AA+/Stable

11. Growth Prospects
 By 2015-16 19/1000 Vs 9/1000 (Today) Will Own Cars
 Long Term Growth Driven By Rising Household Income
 Positive Demand Drivers
 Affordability,
 New Launches,
 Growth in Addressable Market,
 Infra Development

12. Business Strategies
 Increasing Share in Auto Fin Sector
 Expanding National Network of Branches
 Diversification of Product Portfolio
 Leveraging Existing Customers Base
 Attract & Retain Talented Employees
 Effective use of Technology

13. Risks & Risk Mitigation
Risk Mitigation
Volatility in Interest Rates Matching Assets & Liabilities
Rising Competition Increasing Branch Network
Raising Funds at Competitive Rates Maintaining Credit Ratings & Improving
Asset Quality
Dependence on M&M Increasing Non-M&M Portfolio
Adhering to Employee Retention Job Rotation/ESOP/Recovery Based
Performance Initiatives
Physical Cash Management Insurance & Effective Internal Control

14. Muthoot Finance Ltd
 India’s Biggest Gold Lending Company
 Gold Loans – Convert Economically Passive Asset Into Active
 Short Term Finance Solution To Borrowers
 1000 Member Conduct Audits To Ensure Quality Of Gold Assets

15. Critical Factors For Gold Loan Companies
Reach &
Strong
Network
Distribution
Technology
Brand
Systems &
Recognition
Procedure
Faster
Turnaround
Success Access to
Low Cost
Time Factors Funds
Expertise in
Unique &
Evaluating
Customized
Gold
Offering
Ornaments
Security of
Gold as
Collateral

16. Growth Prospects
 Fund Availability
 Shift From Unorganized Gold Loan Sector To Organized
 Low Interest Rates
 Flexible Repayment Options
 Very Less Defaults In Case Of Gold Loans

17. Risks & Risk Mitigation
Risk Risk Mitigation
Decline in the value of gold collateral Around 40% buffer is kept on the value
of jewellery for calculation of the loan
amount
Any failure of the counterparty to abide Constant audits to keep in check the
by the terms and conditions NPAs
Any interest rate movement Company prefers to have loans,
Borrowings at fixed rate of interest;
No dependence on single source
A cyclical or seasonal nature of business borrower profile consists of people
of a borrower engaged in various income generation
Activities

18. Bajaj Finance Ltd
 Focused On Semi-urban & Rural Markets
 Largest Two Wheeler Lender In India
 Largest Consumer Electronics Lender In India
 Focused On High Net Worth SMEs
 85% Of Business Secured By Mortgages & Marketable Sec

19. Growth Prospects
 Reasonably well capitalized for next 3 quarters
 EMI cards for customer durable clients
 Increase in consumption of consumer durable goods
 Approval to raise 750 cr
 Launch of new product line called “Lifestyle financing”.

20. Risk Factors
 Fluctuating Dollar rate
 Slowing Growth rate of the Auto sector
 Slowdown in economy could reduce credit off-take
 Default in payment from customers
 More slowdown in the construction equipment and
infrastructure business.

21. IndiaBulls Finance
 One Of The Major Housing Fin Company
 Loans For Vehicle, SMEs, Business, Home Loan
 Mortgages Comprise 71% Of The Total Asset Books
 Avg Ticket Size Of Rs. 23 Lacs,
 Avg LTV Of 64% For Avg Term Of 14 Years

22. Growth Prospects
 Massive growth in Housing Financing
 Rise in the no of vehicle loans
 Interest among the young youth in stock markets
 Rising Competition among peer companies
 Quick and efficient services

23. Risks
 Management, Governance Structure
 Downgrading Of Credit Rating
 Public Opinion
 Housing Bubble (?)

24. Lets dig a little deeper …
FINANCIALS

25. Assignment Assignment
Subordinated 8%
12%
Debt
CP, ICD 8%
9% CP
3%
Bank Term
FD Bank Term Loan
9% Loan 41%
48%
NCD -
Muthooth
Gold Bonds
NCD 33% NCD
22%
7%
MMFSL MFL
Funding
Other CP
Treasury 10%
Insurance &
14%
PFs
7%
NCD
28%
Bank Term Bank Term
MFs
Loan Loan
21%
58% 62%
BFS Lending IBFSL

26. Pre-
Owned
Loans & Advances
CV & CE 12%
11% Auto/UV
31%
Cars
27% Tractors
19%
MMFSL
CVs
8%
Commercial
16%
Consumer
Corp Loan
Finance
21%
39%
Mortgages
SME 71%
45%
BFS Lending IBFSL

27. MMFSL MFL
Rs.30,000 25% Rs.50,000 20%
Rs.45,000 18%
Rs.25,000
Rs.40,000 16%
Rs.35,000 14%
Rs.20,000 20%
Rs.30,000 12%
Rs.15,000 Rs.25,000 10%
Rs.20,000 8%
Rs.10,000 15%
Rs.15,000 6%
Rs.10,000 4%
Rs.5,000
Rs.5,000 2%
Rs.0 10% Rs.0 0%
FY 10 FY 11 FY 12 Q1 FY 13 FY 10 FY 11 FY 12 Q1 FY 13
Revenues PAT PAT %age Revenues PAT PAT %age
Source: Compiled from Audited ARs IBFSL
BFS Lending
Rs.25,000 25% Rs.35,000 35%
Rs.30,000 30%
Rs.20,000 20%
Rs.25,000 25%
Rs.15,000 15% Rs.20,000 20%
Rs.15,000 15%
Rs.10,000 10%
Rs.10,000 10%
Rs.5,000 5%
Rs.5,000 5%
Rs.0 0% Rs.0 0%
FY 10 FY 11 FY 12 Q1 FY 13 FY 10 FY 11 FY 12 Q1 FY 13
Revenues PAT PAT %age Revenues PAT PAT %age

28. MMFSL MFL
Rs.25,000 Rs.30,000
Rs.25,000
Rs.20,000
Rs.20,000
Rs.15,000
Rs.15,000
Rs.10,000
Rs.10,000
Rs.5,000
Rs.5,000
Rs.0 Rs.0
FY 10 FY 11 FY 12 Q1 FY 13 FY 10 FY 11 FY 12 Q1 FY 13
AUM 2 per. Mov. Avg. (AUM) AUM 2 per. Mov. Avg. (AUM)
Source: Compiled from Audited ARs
BFS Lending IBFSL
16000 35000
14000 30000
12000
25000
10000
20000
8000
15000
6000
10000
4000
2000 5000
0 0
FY 10 FY 11 FY 12 Q1 FY 13 FY 10 FY 11 FY 12 Q1 FY 13
AUM 2 per. Mov. Avg. (AUM) AUM 2 per. Mov. Avg. (AUM)

29. Capital Adequacy
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
MMFSL MFS BFS Lending IBFSL
Tier 1 Tier 2 Source: Compiled from Audited ARs

30. Source: Compiled from MoneyControl Data
EPS
140
120
100
80
60
40
20
0
Mar '08 Mar '09 Mar '10 Mar '11 Mar '12
MMFSL 18.58 22.14 35.37 44.53 59.63
MFS 87.71 126.13 19.94 7.56 15.43
BFS Lending 5.5 9.27 24.43 67.42 98.37
IBFSL 14.71 6.88 8.27 19.57 23.21

31. Source: Compiled from MoneyControl Data
Book Value
600
500
400
300
200
100
0
1 2 3 4 5
MMFSL 137.93 151.62 178.39 239.23 283.74
MFS 318.59 444.72 75.75 19.42 41.67
BFS Lending 290.57 297.5 314.94 370.77 487
IBFSL 115.88 120.26 130.83 133.5 137.06

32. A comparative look at similar NBFCs
PEER to PEER

33. Net Profit Margin Book Value
23% 600
22%
22% 487
500
21%
21% 400
21%
321.84
20% 300 283.74
264.79
19%
19% 200
18%
100
17%
0
M&M Financial Bajaj Finance Shriram TransFi Sundaram Fin
M&M Financial Bajaj Finance Shriram TransFi Sundaram Fin
EPS Source: Compiled from MoneyControl Data P/E & P/B
120 14
109.75 12.31
11.99
12 10.91
100
9.83
10
80
67.49 8
65.28
60 54.44 6
EPS
4 2.76
40 2.22 2.24 2.58
2
20
0
M&M Financial Bajaj Finance Shriram TransFi Sundaram Fin
0
M&M Financial Bajaj Finance Shriram TransFi Sundaram Fin P/E P/B

34. Net Profit Margin Book Value
25% 70
22% 61.28
60
20%
50
15% 40
11% 28.31
30
10%
20
5%
10
0
0%
Muthoot Finance Manapuram Finance
Muthoot Finance Manapuram Finance
EPS Source: Compiled from MoneyControl Data P/E & P/B
6
30
5.18
25.49 5
25
4
20
3
15 2.16
Series1 2
1.3
10
7.63
1
5
0
Muthoot Finance Manapuram Finance
0
Muthoot Finance Manapuram Finance P/E P/B

35. Net Profit Margin Book Value
30% 200
180 173.64
25%
25%
160
136.98
140
20%
120 112.59
15%
15% 100
12%
80
10%
60
40
5%
20
0% 0
Indiabulls Fin Services LIC housing Finance Dewan Housing Finance Indiabulls Fin Services LIC housing Finance Dewan Housing Finance
Source: Compiled from MoneyControl Data
EPS P/E & P/B
30 16
27.2 14.24
14
25 23.6
12
20 17.55 10
8.06
15 8
5.97
6
10
4
2.22
5 1.39
2 0.94
0 0
Indiabulls Fin Services LIC housing Finance Dewan Housing Finance Indiabulls Fin Services LIC housing Finance Dewan Housing Finance

36. A look at what the industry thinks ….
ANALYST OPINIONS

37. MMFSL
 BUY Ratings
 Motilal Oswal, Emkay, Arihant CapMkt, Plilladher
 Strong AUM Growth (38% YoY)
 Robust Disbursement Growth (35% FY12)
 Good Asset Quality (Inc. in GNPA is Seasonal)
“MMFS is well positioned to sustain its qualitative growth momentum on
the back of its multiproduct strategy. This also augurs well for its asset
quality.” – Motilal Oswal Research

38. MFS
 BUY Ratings (Aggressive Investors)
 Hedge Equities, Nirmal Bang
 Positive Outlook on Gold
 RBIs New Norms to Prevent Gold Bubble

39. BFS Lending
 BUY Ratings
 Nirmal Bang, Motilal Oswal, IIFL
 Net Profit Growth (52% YoY)
 Asset Quality Healthy, NPA Declined 6bp
 Disbursement Growth High (32% YoY)
 New Customers Growth (38% YoY)

40. IBFSL
 SELL
 Veritas
 Good Asset quality (.33% NPA)
 High Operating Profit Margins (87.5%)
 1 Year Return Of 33%
 Bad Practices Of Corporate Governance
 Credit Rating Downgraded