Indostar Capital Finance Limited · NSE:INDOSTAR
Indostar Capital Finance — Investor Presentation (June 2021)
45 slides from Indostar Capital Finance's investor presentation, Jun 29, 2021
Slide 1: Regulation 30 disclosure cover letter
ICFL/LS/0081/2021-22 29 June 2021 BSE Limited National Stock Exchange of India Limited Listing Department, 1st Floor, Exchange Plaza, C-1, Block G, P J Towers, Dalal Street, Fort, Bandra Kurla Complex, Mumbai - 400 001 Bandra (E), Mumbai – 400 051 Scrip Code: 541336 Symbol: INDOSTAR Sub.: Disclosure
Slide 2: IndoStar Capital Finance Limited
INDOSTAR CAPITAL FINANCE LIMITED
Slide 3: Disclaimer
Disclaimer This presentation and the accompanying slides (the “Presentation”) have been prepared by IndoStar Capital Finance Limited (“IndoStar” or the “Company”) solely for information purposes and do not constitute an offer to sell or, recommendation or solicitation of an offer to subscribe for or
Slide 4: IndoStar: A secured retail lending franchise
IndoStar: A secured retail lending franchise IndoStar was capitalized in 2011 by Everstone and commenced business with a focus on Corporate lending In 2017, IndoStar on-boarded R Sridhar (former CEO of Shriram Transport) to build out a secured retail lending franchise IndoStar got listed in Ma
Slide 5: IndoStar: Corporate journey
IndoStar: Corporate journey Brookfield invested INR Received RBI 12,250mn during COVID Commenced its registration in 2010 SME finance Successful IPO Share of corporate and commenced operations exposure reduced lending in 2011 New management hires 2011 2017 2022 2010 2015 2018 2021 R Sr
Slide 6: Our Journey
Our Journey Our Recent Past Corporate Lending : Profitable but de-focused line of business IndoStar Brookfield partnership Retailisation strategy on track Present Situation Strong liquidity position and diversified funding profile Re-started retail disbursements and reached pre covid disbu
Slide 7: Our Recent Past: Last 3 years
Our Recent Past : Last 3 years Corporate Lending : Profitable but de-focused line of business IndoStar Brookfield partnership Retailisation strategy on track
Slide 8: Corporate Lending: Profitable but de-focused line of business
Corporate Lending : Profitable but de-focused line of business Corporate Lending AUM (INR mn) Reduced corporate lending significantly post ILFS crisis. Reduced book by more than 1/2 in the last 2 years. IndoStar has publicly announced its decision to exit Corporate lending business Corporate b
Slide 9: IndoStar Brookfield partnership
IndoStar Brookfield partnership Brookfield is a leading global alternative asset manager with AUM of USD 515bn+ IndoStar is the first private equity deal by Brookfield in India in the financial services space Total transaction size of ~USD 296 mn. Primary investment into IndoStar of ~USD 162 m
Slide 10: Retailisation Strategy On track
Retailisation Strategy On track AUM: CL vs Retail (%) Disbursements: CL vs Retail (%) 96,899 98,098 90,842 88,645 83,976 7,324 868 2,152 6,611 8,635 71% 71% 73% 75% 72% 78% 87% 89% 95% 98% 29% 29% 27% 25% 28% 22% 13% 11% 5% 2% Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Tot
Slide 11: Post integration branch rationalisation on course
Post integration branch rationalisation on course 217 218 212 215 202 208 207 207 44 48 64 65 10 10 10 10 Jun-20 Sep-20 Dec-20 Mar-21 SME Finance Housing Finance CV Finance Retail Lending - Employee Base 2,014 2,007 1,944 1,941 Jun-20 Sep-20 Dec-20 Mar-21 On roll employees only 9
Slide 12: Present Situation
Present Situation Re-started retail disbursements and reached pre covid disbursement levels Strong liquidity position and diversified funding profile Stable Asset Quality Stable Collections Performance Prudent cost management Strengthened Management Team Strengthened partnership with I
Slide 13: AUM to be back on growth track led by revival in disbursements
AUM to be back on growth track led by revival in disbursements Loan Disbursements (INR mn) 10,000 8,635 9,000 8,000 7,324 6,611 7,000 6,000 5,000 4,000 6,340 4,769 8,495 3,000 2,152 2,000 868 1,000 2,045 1,842 984 777 0 91 107 140 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Corporate Retail Loan disbursement
Slide 14: Stable asset quality; Aggressive provisioning to build cushion
Stable asset quality ; Aggressive provisioning to build cushion AUM (INR mn) Margin Analysis (%) On-book Loans Off-book Loans 14.0% 14.1% 14.0% 13.9% 13.1% 96,899 98,098 90,842 88,645 13,813 83,976 10.5% 13,968 13,016 10.3% 10.2% 10.2% 13,130 12,583 9.8% 82,930 84,285 77,826 75,515 71,393 4.6% 5.9%
Slide 15: Strong Liquidity & ALM
Strong Liquidity & ALM Particulars INR mn Cash and Bank Balance 1,184 Liquid Debt Mutual Funds 12,764 Incremental funds raised INR 6,769 mn since April 2021 at a lower rate bringing down the Term Deposits with Banks 1,644 overall interest expense Undrawn funding Lines 1,740 Total 17,331 Particulars
Slide 16: Diversified Funding Profile
Diversified Funding Profile Funding Mix - Dec 2020 Funding Mix - Mar 2021 Equity NCD NCD Equity 36% 19% 22% 38% Banks Banks 31% 30% CP CP 2% 2% Securitisation Securitisation 10% 10% Incremental Funding Mobilized Strong Credit Ratings Particulars (INR mn) Q1FY21 Q2FY21 Q3FY21 Q4FY21 Borrowing Type Ra
Slide 17: Collections trending well
Collections trending well Retail Month Billing Total Collections % Jan-20 2,267 2,350 103.60 Feb-20 2,122 2,209 104.10 Mar-20 2,232 1,462 65.50 Apr-20 2,130 154 7.20 May-20 2,134 389 18.30 Jun-20 2,219 1,023 46.10 Jul-20 2,234 1,450 64.90 Aug-20 2,211 1,565 70.80 Sep-20 2,182 2,008 92.00 Oct-20 2,15
Slide 18: Prudent Cost Management
Prudent Cost Management Froze new recruitments Eliminated superfluous positions Branch rationalisation Renegotiated rentals and reduced the size of the branches Digitisation to interact with customers which should over time bring significant reduction in opex Already, most of our collect
Slide 19: Strengthened Management Team
Strengthened Management Team Deep Jaggi Jaya Janardanan Ravi Kumar Arvind Uppal Chief Business Officer Chief Operating Officer Business Head – Asset Head, Collections (CBO) (COO) Finance 25+ years of experience in 20+ years of work experience in 20+ years of experience in 18+ years of experi
Slide 20: Future: Next 5 years
Future: Next 5 years Key strategic initiatives Digitization Product Extension Smart Branch Expansion
Slide 21: 3 key pillars for achievement of IndoStar's vision
3 key pillars for achievement of IndoStar’s vision 1 Digitization 2 Product 3 Smart Branch extension Expansion Cost reduction Used Tractor and 5x growth in Construction Eq branches Productivity in asset finance enhancement Standalone Small ticket LAP branches for in housing Housing business finance
Slide 22: Journey towards becoming a digital NBFC
1 Journey towards becoming a digital NBFC Journey Technology Expected Partners Go-Live Key Benefits Under- Decimal 1. Reduced TAT Sep, 2021 Construction Technologies 2. Increased Productivity Home Loan 3. Reduced hand over 4. Quick credit decisioning 5. Paperless User Selection In- Commercial Dec, 2
Slide 23: Ramping up the Digital deliveries for scale, growth and cost effectiveness
Ramping up the Digital deliveries for scale, growth and cost effectiveness 21
Slide 24: Product extension to Used Tractors & CE
2 Product extension to Used Tractors & CE Key objectives / initiatives – Tractor, CE and PV Used tractor (~20%) and Used const. eq. (~18%) portfolios are attractive from a yield perspective Attractive from securitization perspective as well due to classification under PSL IndoStar’s targeted d
Slide 25: Smart branch model to drive scale-up and unit economics
3 Smart branch model to drive scale-up and unit economics Smaller, Smarter Branches Substantial Cost Savings Shorter Breakeven Period Smart branch strategy Area: Reduce branch size Overall: ~INR 1mn savings per Vehicle Finance by ~1/2 to 600 sq. ft. branch through reduced opex Business: Breake
Slide 26: FY22 Outlook
FY 22 Outlook Substantial growth capital to pursue calibrated growth Strong ALM Focus on high yield Used CV & affordable housing Hub and Spoke Smart branch expansion - deeper penetration in Tier 2/3 cities Digitisation to help improve TAT and customer service Expanding Product/ Geography
Slide 27: Annexure
Annexure 25
Slide 28: Favorable industry dynamics
Favorable industry dynamics Well poised to capitalize on the large near-term opportunity to increase market share Industry Significant & accelerated consolidation in NBFC’s driven by continued pressure on liabilities Likely bipolar world – some players will have access to liabilities and some
Slide 29: Sector outlook: Commercial Vehicle Finance
Sector outlook: Commercial Vehicle Finance Industry Challenges Significant contraction expected in demand for new commercial vehicles - HCVs as well as LCVs Industrial goods, fleet operators impacted significantly Steady improvement underway as vehicles have started plying from May/June Si
Slide 30: Industry trend - CV
Industry trend - CV CV sales declined by 45% over the period FY19 to FY21; this was primarily due to Covid-19 pandemic induced lockdowns impacting movement of goods With an expected rebound in economy and resultant capex cycle, construction, mining and manufacturing segments are expected to grow
Slide 31: Strong Industry Potential – Commercial Vehicles
Strong Industry Potential – Commercial Vehicles CV Industry Growth Drivers Overall CV industry market size is pegged at Freight capacity expected to grow at 1.25x GDP around INR 5.6 trillion; nearly ~31% is in the 5-10 growth going forward years age segment (INR 1.7 tn segment) Stringent traff
Slide 32: Back to growth, after due patience during Covid
Back to growth, after due patience during Covid Q4FY21 disbursements are ~91% of peak in Q4FY19 and nearing pre COVID levels Target mix of 75% Used CV loans and balance new CV, used PV, tractors etc Additional 10% to be targeted through new, high yield products such as Used CE and tractors CV
Slide 33: High yield, high ROA business
High yield, high ROA business High yields driven by higher mix of used CV business; Used CV yields are ~17%, 4% higher than new Scope for significant improvement in cost/income ratio with scale-up in disbursements Asset quality largely in check despite tough macro environment for CV industry i
Slide 34: Sector outlook: Affordable Housing Finance
Sector outlook: Affordable Housing Finance Industry Challenges Significant cash flow impact on cash salaried and self employed borrowers in “non essential" small businesses Subdued construction activity and weak home loan disbursements for next few quarters Silver Linings Continued policy
Slide 35: Affordable Housing: Size of opportunity
Affordable Housing: Size of opportunity Indian Housing Finance Market Share (as of Dec’20) YTD Growth (Mar-20 to Dec-20) Affordable HFCs YTD Growth (Dec20 vs Mar 20) Banks 6.0% 8% Banks 67% Industry 5.0% Affordable segment to NBFCs continue to grow faster 33% NBFCs 3.0% Market Size- INR 22.1 Tn than
Slide 36: Housing Finance: Pursuing aggressive growth
Housing Finance : Pursuing aggressive growth At an inflection point with availability of capital, pipeline of new branches and strong team Touched lifetime peak disbursements in Mar’21 at ~INR 490mn Added small ticket LAP product Housing Finance –Quarterly Disbursement Trend (INR mn) 1,308 1,2
Slide 37: Housing: Pristine asset quality with high growth potential
Housing : Pristine asset quality with high growth potential Attractive yields at ~14% due to focus on NTC customers, self construction and Tier 2/3 cities Avg. GNPAs of <1% resulting in attractive ROAs Further improvement possible in unit economics with higher leverage and lower cost of funds
Slide 38: Sector outlook: SME Finance
Sector outlook: SME Finance Industry Challenges Significant impact due to supply chain disruptions coupled with demand moderation Higher ticket size loans particularly with Lease Rental Discounting (LRD) to face pressure Silver Linings Significant push from the Govt. to revive the SME sect
Slide 39: SME Finance disbursements
SME Finance disbursements We have ramped up disbursements in SME after observing customer behavior during COVID SME Finance – Quarterly Disbursement Trend (INR mn) 1,992 1,530 1,384 1,317 664 745 679 4 429 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 37
Slide 40: To continue to focus on sourcing through existing infra
To continue to focus on sourcing through existing infra High quality origination and underwriting as demonstrated by cumulative assignment/DA of more than INR 6,000mn thus far Discipline on LTV has held us in good stead Key performance indicators Branches & Employees FY19 FY20 FY21 Revenue from
Slide 41: Entrepreneurial Leadership Team with Strong Sponsor Backing
Entrepreneurial Leadership Team with Strong Sponsor Backing Several years of experience and in-depth understanding of the specific industry and geographic regions Separate business & credit heads for each vertical Strong alignment through large ESOP program 20+ years of 30+ years of experi
Slide 42: Entrepreneurial Leadership Team with Strong Sponsor Backing
Entrepreneurial Leadership Team with Strong Sponsor Backing Several years of 24 years of Several years of experience with experience in experience with financial financial SME, Institutions 20+ years of Institutions commercial experience in banking, and Previously Siva S. Previously fina
Slide 43: Strong & Distinguished Board
Strong & Distinguished Board 14 committees composed of independent and non-independent directors and also employees Distinct and delineated responsibilities to ensure good corporate governance Strong capital sponsorship also providing access to best industry practices and international corpora
Slide 44: Shareholding Pattern
Shareholding Pattern Shareholding# @ 31 March 2021 Brookfield Public 52.06% 6.69% Indostar Capital Mauritius 41.26%^ # Excluding CCPS ^ includes ECP II & ECP III ESOP is 4.37% of diluted shares capital (excluding CCPS) Source – NSE, Company data 42
Slide 45: For Further Queries
For Further Queries Salil Bawa Head Investor Relations Contact No: +91 9987644008 Email – sbawa@indostarcapital.com Email - investor.relations@indostarcapital.com
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