Mahindra & Mahindra Financial Services Ltd. · NSE:M&MFIN
Mahindra & Mahindra Financial Services — Q3 FY2008 Earnings Presentation
38 slides from Mahindra & Mahindra Financial Services's earnings presentation, December 2007
Slide 1: Mahindra & Mahindra Financial Services Limited Quarter Result December-07
Mahindra & Mahindra Financial Services Limited Quarter Result December-07 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) 2006-07 2010-11E CAGR% Over 1.3 million passenger cars and utility vehicles were sold in India in 2007 Passenger cars 1,076,408 1,948,986 16.0%* Utility Vehicles (domestic) 303,290 444,047 10.0%* The total demand for cars and utility vehicles is expected to grow at a CAGR
Slide 4: Tractor Industry
Tractor Industry With net sales of 3.53lac Tractors, the Indian tractor industry grew by 20.4% during FY07 on the back of higher demand growth, improvement in realisations and easy and cheaper availability of finance Almost all tractors are sold on finance due to structured financing, easy repayment
Slide 5: The Auto Finance Industry
The Auto Finance Industry Disbursements: Organised auto finance * 2002-2006 2007-2011 (Rs. billion) 2004-05 2005-06 2006-07P 2010-11 (CAGR %) (CAGR%) New car finance 211 240 295 516 18.98 15.02 New UV finance 69 79 92 147 20.73 12.47 Total new auto finance market 273 293 387 663 19.42 14.41 Used veh
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 financing Two-wheeler & Personal loan on pilot ba
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 434 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 Investor profile Fund Mix on the basis of Instrument. Bonds ( 4498 Crs) 67% Mutual Fund (3378Crs) Insurance Co. 51% (285Crs) 4% Banks ( 1062 Crs ) Others (254Crs) Fixed 16% Securitisati 4% Banks (2753Crs) Commercia Deposits 41% on l Paper ( 0.46 Crs ) ( 9
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 30 securitisation transactions till date aggregating Rs. 26.73 bn All securitisation programs (exc
Slide 16: Challenges
Challenges • Ave. cash collection/day-Rs. 86 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) Dec- 06 Dec- 07 March- 07 Income from Operations 5669 8509 8291 Other Income 115 163 155 Total Income 5784 8672 8446 Interest Cost 2283 3380 3241 Administrative Cost 2315 3670 3103 Depreciation 45 66 74 Total Expenditure 4643 7116 6418 PBT 1141 1556 2028 PAT 752
Slide 19: Balance Sheet: Liabilities
Balance Sheet: Liabilities (Rs.million) Dec- 06 Dec- 07 March- 07 Net Worth 7541 8789 7769 Equity Share Capital 833 841 840 Reserves & Surplus 6708 7948 6929 Employee Stock Option O/S 22 17 13 Preference Share Capital -- -- -- Secured Loans 41435 44719 45803 Unsecured Loans 5228 12212 3310 Current L
Slide 20: Balance Sheet: Assets
Balance Sheet: Assets (Rs.million) Dec- 06 Dec- 07 March- 07 Fixed Assets 261 306 273 Investments 519 31 269 Intangible Assets 8 16 7 Stock on Hire -- -- -- Sundry Debtors 11 20 10 Other Current Assets 11 106 19 Cash & Bank Balance 1270 2258 2831 Loans & Advances & others 56885 67237 58655 Deferred
Slide 21: Brief highlights of MIBL
Brief highlights of MIBL (Rs.million) Dec- 06 Dec- 07 March- 07 Total Income 94 122 119 Net Premium 635 990 844 PBT 52 47 60 PAT 34 30 38 20
Slide 22: Consolidated Profit & Loss Statement
Consolidated Profit & Loss Statement (Rs.million) Dec- 06 Dec- 07 March- 07 Income from Operations 5732 8584 8368 Other Income 103 159 132 Total Income 5835 8743 8500 Interest Cost 2282 3378 3240 Administrative Cost 2323 3698 3118 Depreciation 46 67 74 Total Expenditure 4651 7143 6432 PBT 1184 1600
Slide 23: Consolidated Balance Sheet: Liabilities
Consolidated Balance Sheet: Liabilities (Rs.million) Dec- 06 Dec- 07 March- 07 Net Worth 7586 8854 7808 Equity Share Capital 833 841 840 Reserves & Surplus 6753 8013 6968 Employee Stock Option O/S 22 17 13 Preference Share Capital -- -- -- Secured Loans 41435 44720 45803 Unsecured Loans 5209 12162 3
Slide 24: Consolidated Balance Sheet: Assets
Consolidated Balance Sheet: Assets (Rs.million) Dec- 06 Dec- 07 March- 07 Fixed Assets 264 312 276 Investments 513 5 264 Intangible Assets 8 17 8 Stock on Hire -- -- -- Sundry Debtors 35 42 23 Other Current Assets 11 106 20 Cash & Bank Balance 1277 2267 2840 Loans & Advances & others 56891 67253 586
Slide 25: Robust Growth
Robust Growth Cumulative no. of Customer Contracts (Nos.) Total Assets (INR million) 900,000 80,000 780,894 7% 71,022 800,000 R2 CAGR 35% 70,000 CAG 700,000 59,524 595,286 60,000 600,000 50,000 44,116 500,000 429,296 40,000 400,000 30,000 300,000 200,000 20,000 100,000 10,000 0 0 Dec05 Dec06 Dec07 D
Slide 26: Summary of Results
Summary of Results (Rs.million) Dec- 06 Dec- 07 March- 07 Total Income 5784 8672 8446 Profit before tax 1141 1556 2028 Profit after tax 752 1016 1329 Dividend (%) -- -- 40 Equity Share Capital 833 841 840 Reserves & Surplus 6708 7948 6929 Net Worth 7541 8789 7769 EPS (Basic) 8.91* 12.09* 15.8 Market
Slide 27: Ratio Analysis
Ratio Analysis Dec- 06 Dec- 07 March- 07 PBT/Total Income 19.7% 17.9% 24.0% PBT/Total Assets 2.4% 2.6% 3.2% RONW (Avg. Net Worth) 13.2% 14.6% 18.1% Overheads/Total Assets 3.0% 3.5% 3.1% Debt / Equity 6.08:1 6.41:1 6.24:1 Book value multiple 3.1 3.1 2.6 Capital Adequacy 15.2% 14.9% 14.7% Tier I 11.8%
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.) Dec- 06 Dec- 07 March- 07 Gross Non - Performing Assets 4,245 6,487 3,582 Less: NPA Provisions 2,140 3,578 2,034 Net Non – Performing Assets 2,105 2,909 1,548 Total Assets (Incl. NPA Provision) 61,666 74,600 64,843 Gross NPA to Total Assets(%) 6.9% 8.7% 5.5% Net NPA to Total Asset
Slide 30: Spread Analysis
Spread Analysis Dec- 06 Dec- 07 March- 07 Total Income/Average Assets 14.0% 17.0% 14.9% Interest / Average Assets 5.5% 6.6% 5.6% Gross Spread 8.5% 10.4% 9.3% Overheads/Average Assets 3.3% 3.7% 3.4% Write offs & NPA provisions / Average Assets 2.4% 3.8% 2.2% Net Spread 2.8% 2.9% 3.7% 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 31 December 07)
Shareholding Pattern (as on 31 December 07) st Promoters 68% Public 5% Trust 2% FII 25% 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 Capital III, LL
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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