Mahindra & Mahindra Financial Services Ltd. · NSE:M&MFIN
Mahindra & Mahindra Financial Services — Investor Presentation (September 2007)
38 slides from Mahindra & Mahindra Financial Services's investor presentation, September 2007
Slide 1: Mahindra & Mahindra Financial Services Limited Analyst Meet September-07
Mahindra & Mahindra Financial Services Limited Analyst Meet September-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 424 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 ( 4308 Crs) Mutual Fund 67% Insurance Co. (3216Crs) (275Crs) 49% 4% Banks Fixed Others (186Crs) ( 1339 Crs ) Securitisatio Commercial Deposits 3% Banks 20% n( 886Crs ) Paper ( 1 Crs ) (2889Crs) 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 28 securitisation transactions till date aggregating Rs. 24.65 bn All securitisation programs (exc
Slide 16: Challenges
Challenges • Ave. cash collection/day-Rs. 80 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) Sep- 06 Sep- 07 March- 07 Income from Operations 3532 5322 8291 Other Income 83 114 155 Total Income 3615 5436 8446 Interest Cost 1427 2117 3241 Administrative Cost 1404 2373 3103 Depreciation 30 43 74 Total Expenditure 2861 4533 6418 PBT 754 903 2028 PAT 496 592
Slide 19: Balance Sheet: Liabilities
Balance Sheet: Liabilities (Rs.million) Sep- 06 Sep- 07 March- 07 Net Worth 7285 8364 7769 Equity Share Capital 833 841 840 Reserves & Surplus 6452 7523 6929 Employee Stock Option O/S 17 15 13 Preference Share Capital -- -- -- Secured Loans 37877 44899 45803 Unsecured Loans 5134 11904 3310 Current L
Slide 20: Balance Sheet: Assets
Balance Sheet: Assets (Rs.million) Sep- 06 Sep- 07 March- 07 Fixed Assets 246 304 273 Investments 525 38 269 Intangible Assets 9 19 7 Stock on Hire -- -- -- Sundry Debtors 14 18 10 Other Current Assets 17 65 19 Cash & Bank Balance 1703 2484 2831 Loans & Advances & others 52035 66709 58655 Deferred T
Slide 21: Brief highlights of MIBL
Brief highlights of MIBL (Rs.million) Sep- 06 Sep- 07 March- 07 Total Income 56 78 119 Net Premium 369 626 844 PBT 30 30 60 PAT 19 19 38 20
Slide 22: Consolidated Profit & Loss Statement
Consolidated Profit & Loss Statement (Rs.million) Sep- 06 Sep- 07 March- 07 Income from Operations 3570 5368 8368 Other Income 81 111 132 Total Income 3651 5479 8500 Interest Cost 1426 2116 3240 Administrative Cost 1411 2387 3118 Depreciation 30 43 74 Total Expenditure 2867 4546 6432 PBT 784 933 206
Slide 23: Consolidated Balance Sheet: Liabilities
Consolidated Balance Sheet: Liabilities (Rs.million) Sep- 06 Sep- 07 March- 07 Net Worth 7326 8422 7808 Equity Share Capital 833 841 840 Reserves & Surplus 6493 7581 6968 Employee Stock Option O/S 17 15 13 Preference Share Capital - -- -- Secured Loans 37877 44899 45803 Unsecured Loans 5110 11867 32
Slide 24: Consolidated Balance Sheet: Assets
Consolidated Balance Sheet: Assets (Rs.million) Sep- 06 Sep- 07 March- 07 Fixed Assets 247 309 276 Investments 519 12 264 Intangible Assets 10 20 8 Stock on Hire -- -- -- Sundry Debtors 29 38 23 Other Current Assets 17 65 20 Cash & Bank Balance 1708 2499 2840 Loans & Advances & others 52040 66721 58
Slide 25: Robust Growth
Robust Growth Cumulative no. of Customer Contracts (Nos.) Total Assets (INR million) 800,000 741,223 80,000 4% 70,548 R3 700,000 CAGR 37% 70,000 CAG 600,000 542,571 60,000 55,068 500,000 50,000 392,111 39,542 400,000 40,000 300,000 30,000 200,000 20,000 100,000 10,000 0 0 Sep05 Sep06 Sep07 Sep05 Sep
Slide 26: Summary of Results
Summary of Results (Rs.million) Sep- 06 Sep- 07 March- 07 Total Income 3615 5436 8446 Profit before tax 754 903 2028 Profit after tax 496 592 1329 Dividend (%) -- -- 40 Equity Share Capital 833 841 840 Reserves & Surplus 6451 7523 6929 Net Worth 7285 8364 7769 EPS (Basic) 5.84 7.04* 15.8 Market capi
Slide 27: Ratio Analysis
Ratio Analysis Sep- 06 Sep- 07 March- 07 PBT/Total Income 20.9% 16.6% 24.0% PBT/Total Assets 2.5% 2.1% 3.2% RONW (Avg. Net Worth) 12.7% 11.8% 18.1% Overheads/Total Assets 3.1%* 3.6% 3.1% Debt / Equity 5.80:1 6.71:1 6.24:1 Book value multiple 2.7 2.5 2.6 Capital Adequacy 15.4% 14.4% 14.7% Tier I 12.4
Slide 28: 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. 27
Slide 29: NPA
NPA* (Rs.million.) Sep- 06 Sep- 07 March- 07 Gross Non - Performing Assets 3519 5,829 3,582 Less: NPA Provisions 1756 2,994 2,034 Net Non – Performing Assets 1763 2,835 1,548 Total Assets (Incl. NPA Provision) 56,822 73,542 64,843 Gross NPA to Total Assets(%) 6.2% 7.9% 5.5% Net NPA to Total Assets(%
Slide 30: Spread Analysis
Spread Analysis Sep- 06 Sep- 07 March- 07 Total Income/Average Assets 13.4% 15.8% 14.9% Interest / Average Assets 5.3% 6.2% 5.6% Gross Spread 8.1% 9.6% 9.3% Overheads/Average Assets 3.2% 3.8% 3.4% Write offs & NPA provisions / Average Assets 2.1% 3.5% 2.2% Net Spread 2.8% 2.3% 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 30 September 07)
Shareholding Pattern (as on 30 September 07) th 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, L
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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