Mahindra & Mahindra Financial Services Ltd. · NSE:M&MFIN
Mahindra & Mahindra Financial Services — Q1 FY2009 Earnings Presentation
38 slides from Mahindra & Mahindra Financial Services's earnings presentation, June 2008
Slide 1: Mahindra & Mahindra Financial Services Limited Quarter Result June-08
Mahindra & Mahindra Financial Services Limited Quarter Result June-08 0
Slide 2: Agenda
Agenda 1 Industry Overview / MMFSL Overview 2 Operations 3 Performance Highlights 4 Key Risks 5 Principal Investment Themes 1
Slide 3: Automobile Industry
Automobile Industry (units) 2007-08 2011-12E CAGR% Over 1.50 million passenger cars and utility vehicles were sold in India in 2008 Passenger cars 1,201,321 2,137,898 15.5%* Utility Vehicles (domestic) 344,340 561,437 13.0%* The total demand for cars and utility vehicles is expected to grow at a CAG
Slide 4: Tractor Industry
Tractor Industry Over 3.46lac tractors were sold by Indian tractor industry during FY08 on the back of improvement in realisations and easy availability of finance Almost all tractors are sold on finance due to structured financing, easy repayment norms and longer tenure of finance. M&M-Punjab Tract
Slide 5: The Auto Finance Industry
The Auto Finance Industry Disbursements: Organised auto finance * 2008-2012 (Rs. billion) 2005-06 2006-07E 2007-08P 2011-12 (CAGR%) New car finance 240 270 293 447 11.00 New UV finance 79 94 106 164 12.00 New CV finance 197 268 280 405 10.00 Total New auto finance market 516 632 679 1016 11.00 Used
Slide 6: Overview
Overview MMFSL is a Mahindra and Mahindra subsidiary, one of India’s leading tractor and utility vehicle manufacturer The Company is one of India’s leading non-bank finance companies focused on the rural and semi-urban sector MMFSL finances purchase of utility vehicles, tractors, cars and commercial
Slide 7: Excellent Competitive Positioning
Excellent Competitive Positioning Our competitive edge is our immense domain experience in a challenging industry Industry Characteristics MMFSL An early entrant with a large existing client base, Government thrust to give a boost to the rural MMFSL is well poised to take advantage of the economy ru
Slide 8: Business Strengths
Business Strengths Knowledge Knowledge of of the the rural rural and and semi-urban semi-urban markets markets Extensive Extensive branch branch network network Relationship Relationship with with M&M M&M Quick Quick approval approval and and simple simple administration administration procedures pr
Slide 9: Business Strategy
Business Strategy Continue to maintain market position in rural and semi urban automobile financing Significant experience of the local characteristics of the rural and semi-urban markets across India Simple documentation and prompt loan approval procedures Nationwide network of branches and locally
Slide 10: Business Strategy: Diversify Product Portfolio
Business Strategy Diversify Product Portfolio Started financing non-M&M vehicles in 2002 Commenced insurance broking business in MIBL in Fiscal 2005 Commenced financing Commercial Vehicles in 2006 Commenced mutual fund distribution business Commenced housing loans business in MRHFL in Oct 2007 9
Slide 11: Agenda
Agenda 1 Industry Overview / MMFSL Overview 2 Operations 3 Performance Highlights 4 Key Risks 5 Principal Investment Themes 10
Slide 12: Extensive Distribution Network
Extensive Distribution Network MMFSL has an extensive distribution network with presence in 25 states and 2 union territories in India through 437 branches – Our market categorised into five zones and 16 regions with branches reporting into their respective regional office – Branches provided author
Slide 13: Funding
Funding MMFSL has consistently enjoyed a good FAA+ FAA+ FAA+ FAA+ credit rating enabling it to borrow funds Fixed Deposits / Bond FAA FAA at competitive rates FAA- FAA- FAA- Rating linked to credit rating of M&M, decline in rating in FY03 due to rating FA+ downgrade of M&M Mar Mar Mar Mar Sep Dec Ma
Slide 14: Source of Borrowing
Source of Borrowing Fund Mix on the basis of Instrument. Fund Mix on the basis of Investor profile Bonds/ Mutual Fund NCD's ( Insurance Co. (2839Crs) 3624Crs) (180Crs) 45% 3% 57% Others(233Crs) Banks (3087Crs) Banks ( 1550 Commercial 4% 48% Crs ) Paper 24% Securitisation (33 Crs) (1132Crs ) 1% 18% 1
Slide 15: Asset Securitisation
Asset Securitisation MMFSL securitises parts of its loan portfolio to improve its cash flows and reduce borrowings The company did its first securitisation / Assignment transaction in FY02 and has done 32 securitisation transactions till date aggregating Rs. 31.02 bn All securitisation programs (exc
Slide 16: Challenges
Challenges • Ave. cash collection/day-Rs. 109 mn • More than one Bank A/c per location • Small denomination notes/ mutilated notes • Non-acceptance of cash • Huge cash collection charges • High revenue leakage 15
Slide 17: Agenda
Agenda 1 Industry Overview / MMFSL Overview 2 Operations 3 Performance Highlights 4 Key Risks 5 Principal Investment Themes 16
Slide 18: Profit & Loss Statement
Profit & Loss Statement (Rs.million) June- 07 June- 08 March- 08 Income from Operations 2446 2946 12058 Other Income 50 48 210 Total Income 2496 2994 12268 Interest Cost 1032 1103 4560 Administrative Cost 1120 1451 4901 Depreciation 21 21 87 Total Expenditure 2173 2575 9548 PBT 323 419 2720 PAT 214
Slide 19: Balance Sheet: Liabilities
Balance Sheet: Liabilities (Rs.million) June- 07 June- 08 March- 08 Net Worth 7987 13406 13129 Equity Share Capital 841 954 953 Reserves & Surplus 7146 12452 12176 Employee Stock Option O/S 14 12 14 Secured Loans 41090 39333 46135 Unsecured Loans 10897 12740 4547 Current Liabilities & Provs. 6080 66
Slide 20: Balance Sheet: Assets
Balance Sheet: Assets (Rs.million) June- 07 June- 08 March- 08 Fixed Assets 291 305 308 Investments 38 58 31 Intangible Assets 22 12 13 Sundry Debtors 30 10 9 Other Current Assets 48 36 15 Cash & Bank Balance 2142 2132 2153 Loans & Advances & others 62689 68267 66435 Deferred Tax Asset 808 1316 1254
Slide 21: Brief highlights of MIBL
Brief highlights of MIBL (Rs.million) June- 07 June- 08 March- 08 Total Income 34 62 180 Net Premium 298 460 1398 PBT 11 30 77 PAT 7 19 50 20
Slide 22: Consolidated Profit & Loss Statement
Consolidated Profit & Loss Statement (Rs.million) June- 07 June- 08 March- 08 Income from Operations 2468 2990 12164 Other Income 48 48 203 Total Income 2516 3038 12367 Interest Cost 1031 1105 4558 Administrative Cost 1130 1466 4931 Depreciation 21 22 90 Total Expenditure 2182 2593 9579 PBT 334 445
Slide 23: Consolidated Balance Sheet: Liabilities
Consolidated Balance Sheet: Liabilities (Rs.million) June- 07 June- 08 March- 08 Net Worth 8032 13511 13208 Equity Share Capital 841 954 953 Reserves & Surplus 7191 12557 12255 Employee Stock Option O/S 14 12 14 Secured Loans 41090 39333 46135 Unsecured Loans 10858 12782 4599 Current Liabilities & P
Slide 24: Consolidated Balance Sheet: Assets
Consolidated Balance Sheet: Assets June- 07 June- 08 March- 08 Fixed Assets 295 310 314 Investments 12 3 95 Intangible Assets 22 12 14 Sundry Debtors 46 45 39 Other Current Assets 48 36 14 Cash & Bank Balance 2157 2209 2163 Loans & Advances & others 62701 68350 66475 Deferred Tax Asset 807 1317 1254
Slide 25: Robust Growth
Robust Growth Cumulative no. of Customer Contracts (Nos.) Total Assets (INR million) 900,000 856,206 80,000 72,136 CAGR 31% CAGR 19% 800,000 70,000 66,067 689,527 700,000 60,000 50,868 600,000 501,077 50,000 500,000 40,000 400,000 30,000 300,000 200,000 20,000 100,000 10,000 0 0 June06 June07 June08
Slide 26: Summary of Results
Summary of Results (Rs.million) June- 07 June- 08 March- 08 Total Income 2496 2994 12268 Profit before tax 323 419 2720 Profit after tax 214 268 1770 Dividend (%) -- -- 45 Equity Share Capital 841 954 953 Reserves & Surplus 7146 12452 12686 Net Worth 7987 13406 13129 EPS (Basic) 2.55 2.80 20.81 Mark
Slide 27: Ratio Analysis
Ratio Analysis June- 07 June- 08 March- 08 PBT/Total Income 12.9% 14.0% 22.2% PBT/Total Assets 1.2% 1.3% 3.9% RONW (Avg. Net Worth) 6.5% 4.2% 16.9% Overheads/Total Assets 3.4% 3.6% 3.6% Debt / Equity 6.39:1 3.86:1 3.84:1 Book value multiple 2.6 2.0 2.1 Capital Adequacy 14.4% 19.9% 20.7% Tier I 8.7%
Slide 28: Provisioning Norms
Provisioning Norms Duration (months) RBI Norms Duration (months) MMFSL > 5 and <= 18 10% > 5 and <= 11 10% > 18 and <= 30 20% > 11 and <= 24 50% > 30 and <= 54 30% > 24 months 100% > 54 months 50% At MMFSL NPA provisioning norms are more stringent than RBI norms for loan. 27
Slide 29: NPA
NPA* (Rs.million.) June- 07 June- 08 March- 08 Gross Non - Performing Assets 5,207 7,501 5,572 Less: NPA Provisions 2,689 4,417 3,519 Net Non – Performing Assets 2,518 3,084 2,053 Total Assets (Incl. NPA Provision) 68,756 76,554 73,736 Gross NPA to Total Assets(%) 7.6% 9.8% 7.6% Net NPA to Total Ass
Slide 30: Spread Analysis
Spread Analysis June- 07 June- 08 March- 08 Total Income/Average Assets 14.9% 16.1% 18.4% Interest / Average Assets 6.3% 6.1% 6.7% Gross Spread 8.6% 10.0% 11.7% Overheads/Average Assets 3.5% 3.7% 3.8% Write offs & NPA provisions / Average Assets 3.8% 4.9% 3.7% Net Spread 1.3% 1.4% 4.2% 29
Slide 31: Agenda
Agenda 1 Industry Overview / MMFSL Overview 2 Operations 3 Performance Highlights 4 Key Risks 5 Principal Investment Themes 30
Slide 32: Key Risks & Management Strategies
Key Risks & Management Strategies Volatility in interest rates Matching of Asset Liabilities Rising competition Increasing Branch Network Funds at competitive rates Maintaining Credit Rating & Asset Quality Dependence on M&M Increasing Non-M&M Portfolio Vagaries of nature Increasing Geographical Spr
Slide 33: Treasury & Risk Management
Treasury & Risk Management Treasury Management Risk Management The treasury department undertakes The Risk management team is a eight liquidity management by maintaining member team which identifies, assesses optimum level of liquidity and complying and monitors the principal risks of the with RBI r
Slide 34: Agenda
Agenda 1 Industry Overview / MMFSL Overview 2 Operations 3 Performance Highlights 4 Key Risks 5 Principal Investment Themes 33
Slide 35: Key Investment Themes
Key Investment Themes Immense potential in the rural and semi urban markets Early entry and knowledge of the rural and semi urban market M&M Parentage Strong Capital Base Extensive Branch Network / Dealer Relationships Consistent financial performance Client Base Prudent loan approval and administra
Slide 36: Shareholding Pattern (as on 30 June 2008)
Shareholding Pattern (as on 30 June 2008) th Promoters 60% Shareholding Public 4% ESOP Trust 2% FII 34% Incorporated in 1991 mainly to finance Mahindra vehicles by Mahindra & Mahindra Ltd. The Company inducted a financial investor, Copa Cabana in January 2006. Copa Cabana, a 100% subsidiary of Chrys
Slide 37: Important Notice
Important Notice No representation or warranty, express or implied is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of such information or opinions contained herein. The information contained in this presentation is only current as of the date o
Slide 38: Thank you
Thank you | 37 @/D Mahindra Finance
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