Mahindra & Mahindra Financial Services Ltd. · NSE:M&MFIN
Mahindra & Mahindra Financial Services — Investor Presentation (March 2007)
40 slides from Mahindra & Mahindra Financial Services's investor presentation, March 2007
Slide 1: Mahindra & Mahindra Financial Services Limited Analyst Meet March-07
Mahindra & Mahindra Financial Services Limited Analyst Meet March-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
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 repay
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: Domestic Performance of M&M
Domestic Performance of M&M FY-06 FY-07 % Growth Light CVs 143,569 192,282 34% Utility Vehicles(Uvs) 194,502 220,199 13% Med. & Heavy CVs 207,472 275,600 33% Cars & MPVs 948,574 1,159,499 22% Total Industry (AUTO) 1,494,117 1,847,580* 24% M&M 121,473 136,575 12% Total Industry (FES) 262,621 318,315
Slide 7: 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 comm
Slide 8: 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 9: 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 10: 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 11: 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 Recently commenced mutual fund distribution business Recently commenced financing Two-wheeler on pilot
Slide 12: Agenda
Agenda 1 Industry Overview / MMFSL Overview 2 Operations 3 Performance Highlights 4 Key Risks 5 Principal Investment Themes 11
Slide 13: Extensive Distribution Network
Extensive Distribution Network MMFSL has an extensive distribution network with presence in 25 states and 2 union territories in India through 403 branches – Our market categorised into five zones and 16 regions with branches reporting into their respective regional office – Branches provided auth
Slide 14: 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 Dec Mar Mar Mar Aug04
Slide 15: Source of Borrowing
Source of Borrowing Insurance Co. Mutual Fund (293Crs) Bonds (2377Crs) 5% ( 3387Crs) 41% 59% Others (88Crs) Banks 2% (2979Crs) 52% Banks Fixed (1520Crs.) Securitisation Deposits 27% ( 826Crs ) ( Rs.4Crs ) 14% 0% 14
Slide 16: 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 25 securitisation transactions till date aggregating Rs. 21.64 bn All securitisation program
Slide 17: Challenges
Challenges • Ave. cash collection/day-Rs. 67 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 16
Slide 18: Agenda
Agenda 1 Industry Overview / MMFSL Overview 2 Operations 3 Performance Highlights 4 Key Risks 5 Principal Investment Themes 17
Slide 19: Profit & Loss Statement
Profit & Loss Statement (Rs.million) March- 05 March- 06 March- 07 Income from Operations 3970 5823 8291 Other Income 78 141 155 Total Income 4048 5964 8446 Interest Cost 1332 2194 3241 Administrative Cost 1349 2096 3103 Depreciation 39 52 74 Total Expenditure 2720 4342 6418 PBT 1328 1622 2028 PAT 8
Slide 20: Profit & Loss Statement (excluding securitisation provision write-back)
Profit & Loss Statement (excluding securitisation prov. write-back) (Rs.million) March- 05 March- 06 March- 07 Income from Operations 3970 5695 8235 Other Income 78 141 155 Total Income 4048 5836 8390 Interest Cost 1332 2194 3241 Administrative Cost 1349 2096 3103 Depreciation 39 52 74 Total Expendi
Slide 21: Balance Sheet: Liabilities
Balance Sheet: Liabilities (Rs.million) March- 05 March- 06 March- 07 Net Worth 3556 6819 7769 Equity Share Capital 702 833 840 Reserves & Surplus 2854 5986 6929 Employee Stock Option O/S -- 8 13 Preference Share Capital 500 500 -- Secured Loans 22036 34837 45803 Unsecured Loans 2506 3993 3310 Curre
Slide 22: Balance Sheet: Assets
Balance Sheet: Assets (Rs.million) March- 05 March- 06 March- 07 Fixed Assets 168 230 273 Investments 368 2982 269 Intangible Assets 6 12 7 Stock on Hire 15 5 -- Sundry Debtors 131 21 10 Other Current Assets 8 3 19 Cash & Bank Balance 1114 1489 2831 Loans & Advances & others 28973 44991 58655 Deferr
Slide 23: Brief highlights of MIBL
Brief highlights of MIBL (Rs.million) March- 05 March- 06 March- 07 Total Income 34 64 119 Net Premium 217 423 844 PBT 28 45 60 PAT 17 29 38 22
Slide 24: Consolidated Profit & Loss Statement
Consolidated Profit & Loss Statement (Rs.million) March- 05 March- 06 March- 07 Income from Operations 3990 5861 8368 Other Income 78 119 132 Total Income 4068 5980 8500 Interest Cost 1332 2194 3240 Administrative Cost 1341 2088 3118 Depreciation 39 52 74 Total Expenditure 2712 4334 6432 PBT 1356 16
Slide 25: Consolidated Balance Sheet: Liabilities
Consolidated Balance Sheet: Liabilities (Rs.million) March- 05 March- 06 March- 07 Net Worth 3574 6843 7808 Equity Share Capital 702 833 840 Reserves & Surplus 2872 6010 6968 Employee Stock Option O/S -- 8 13 Preference Share Capital 500 500 -- Secured Loans 22036 34837 45803 Unsecured Loans 2502 39
Slide 26: Consolidated Balance Sheet: Assets
Consolidated Balance Sheet: Assets (Rs.million) March- 05 March- 06 March- 07 Fixed Assets 168 230 276 Investments 363 2977 264 Intangible Assets 6 12 8 Stock on Hire 15 5 -- Sundry Debtors 137 28 23 Other Current Assets 8 3 20 Cash & Bank Balance 1129 1495 2840 Loans & Advances & others 28974 44994
Slide 27: Robust Growth
Robust Growth Cumulative no. of Customer Contracts (Nos.) Total Assets (INR million) 700,000 641,087 70,000 62,809 CAGR 38% 3% 600,000 60,000 CA GR 4 50,201 500,000 467,977 50,000 400,000 336,819 40,000 31,147 300,000 30,000 200,000 20,000 100,000 10,000 0 0 FY05 FY06 FY07 FY05 FY06 FY07 Total Incom
Slide 28: Summary of Results
Summary of Results (Rs.million) March- 05 March- 06 March- 07 Total Income 4048 5964 8446 Profit before tax 1328 1622 2028 Profit after tax 823 1083 1329 Dividend (%) 35 35 40 Equity Share Capital 702 833 840 Reserves & Surplus 2854 5986 6929 Net Worth 3556 6819 7769 EPS (Basic) 13.2 14.59 15.81 Mar
Slide 29: Ratio Analysis
Ratio Analysis March- 05 March- 06 March- 07 PBT/Total Income 32.8% 27.2% 24.0% PBT/Total Assets 4.3% 3.2% 3.2% RONW (Avg. Net Worth) 26.4% 20.1% 18.1% Overheads/Total Assets 2.7% 2.7% 3.1%* Debt / Equity 7.04:1 5.65:1 6.24:1 Book value multiple - 3.0 2.6 Capital Adequacy 17.8% 18.2% 14.7% Tier I 10
Slide 30: Provisioning Norms
Provisioning Norms Duration (months) RBI Norms Duration (months) MMFSL > 5 and <= 18 10% > 5 and <= 12 10% > 18 and <= 30 20% > 12 and <= 24 50% > 30 and <= 48 30% > 24 months 100% > 48 months 50% At MMFSL NPA provisioning norms are more stringent than RBI norms for loan. 29
Slide 31: NPA
NPA* (Rs.million.) March- 05 March- 06 March- 07 Gross Non - Performing Assets 1,992 2,472 3,582 Less: NPA Provisions 1045 1,339 2,034 Net Non – Performing Assets 947 1,133 1,548 Total Assets (Incl. NPA Provision) 32,191 51,541 64,843 Gross NPA to Total Assets(%) 6.2% 4.8% 5.5% Net NPA to Total Asse
Slide 32: Spread Analysis
Spread Analysis March- 05 March- 06 March- 07 Total Income/Average Assets 15.7% 14.7% 14.9% Interest / Average Assets 5.0% 5.3% 5.6% Gross Spread 10.7% 9.4% 9.3% Overheads/Average Assets 3.3% 3.3% 3.4%* Write offs & NPA provisions / Average Assets 2.2% 2.0% 2.2% Net Spread 5.2% 4.1% 3.7% *Includes o
Slide 33: Agenda
Agenda 1 Industry Overview / MMFSL Overview 2 Operations 3 Performance Highlights 4 Key Risks 5 Principal Investment Themes 32
Slide 34: 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 Geogra
Slide 35: 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 R
Slide 36: Agenda
Agenda 1 Industry Overview / MMFSL Overview 2 Operations 3 Performance Highlights 4 Key Risks 5 Principal Investment Themes 35
Slide 37: 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 38: Shareholding Pattern (as on 31 March 07)
Shareholding Pattern (as on 31 March 07) st Promoters 68% Shareholding Others 1% Public 5% Trust 2% FII 24% 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
Slide 39: 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
Slide 40: Thank you
Thank you | @/D Mahindra Finance 39
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