Mahindra & Mahindra Financial Services Ltd. · NSE:M&MFIN
Mahindra & Mahindra Financial Services — Investor Presentation (September 2006)
39 slides from Mahindra & Mahindra Financial Services's investor presentation, September 2006
Slide 1: Mahindra & Mahindra Financial Services Limited Analyst Meet September-06
Mahindra & Mahindra Financial Services Limited Analyst Meet September-06 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 Over a million passenger cars and utility (units) 2005-06 2009-10E CAGR% vehicles were sold in India in 2006 Passenger cars 882,094 1,699,613 17.8% The total demand for cars and utility Utility Vehicles (domestic) 260,943 399,956 11.3% vehicles is expected to grow at a CAGR o
Slide 4: Tractor Industry
Tractor Industry With net sales of 2.93lac Tractors, the Indian tractor industry grew by 18.2% during the first nine months of FY06 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 relativ
Slide 5: The Auto Finance Industry
The Auto Finance Industry Disbursements: Organised auto finance * 2002-2006 2006-2010 (Rs. billion) 2001-02 2004-05 2005-06 2009-10 (CAGR %) (CAGR%) New car finance 108 206 216 379 18.98 15.07 New UV finance 36 67 76 149 20.73 18.10 Total new auto finance market 144 273 293 528 19.42 15.88 Used vehi
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 and cars. The
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
Business Strategy Diversify Product Portfolio Started financing non-M&M vehicles in 2002 Commenced insurance broking business in MIBL in Fiscal 2005 Recently commenced mutual fund distribution business Recently commenced financing Two-wheeler on pilot basis Plans to enter housing loans and personal
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 380 branches – Our market categorised into five zones and 16 regions with branches reporting into their respective regional office – Branches provided auth
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 Dec Mar Mar Mar Aug04
Slide 14: Source of Borrowing
Source of Borrowing Mutual Fund (2547Crs) 52% Insurance Co (297Crs) Bonds 6% ( Rs.3366 Crs) 69% Others (84Crs) Banks 2% (1942Crs) 40% Banks ( Rs.773Crs ) Securitisatio Fixed 16% n ( Rs. Commercial Deposits 569Crs ) Paper (Rs. ( Rs.7Crs ) 12% 155Crs.) 0% 3% 13
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 21 securitisation transactions till date aggregating Rs. 17 bn All securitisation programs (
Slide 16: Challenges
Challenges • Ave. cash collection/day-Rs. 60 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 05 Sep 06 March-06 Income from Operations 2509 3532 5823 Other Income 61 83 141 Total Income 2570 3615 5964 Interest Cost 942 1427 2194 Administrative Cost 916 1404 2096 Depreciation 23 30 52 Total Expenditure 1881 2861 4342 PBT 689 754 1622 PAT 450 496 1083
Slide 19: Profit & Loss Statement (excluding securitisation provision write-back)
Profit & Loss Statement (excluding securitisation prov. write-back) (Rs.million) Sep 05 Sep 06 March-06 Income from Operations 2381 3476 5695 Other Income 61 83 141 Total Income 2442 3559 5836 Interest Cost 942 1427 2194 Administrative Cost 916 1404 2096 Depreciation 23 30 52 Total Expenditure 1881
Slide 20: Balance Sheet: Liabilities
Balance Sheet: Liabilities (Rs.million) Sep 05 Sep 06 March-06 Net Worth 4005 7285 6819 Equity Share Capital 701 833 833 Reserves & Surplus 3304 6452 5986 Employee Stock Option O/S - 17 8 Preference Share Capital 500 - 500 Secured Loans 27048 37877 34837 Unsecured Loans 4652 5134 3993 Current Liabil
Slide 21: Balance Sheet: Assets
Balance Sheet: Assets (Rs.million) Sep 05 Sep 06 March-06 Fixed Assets 202 246 230 Investments 970 525 3169 Intangible Assets 14 9 12 Stock on Hire 17 - 5 Sundry Debtors 57 15 21 Other Current Assets 14 17 3 Cash & Bank Balance 1575 1703 1303 Loans & Advances & others 36279 52035 44991 Deferred Tax
Slide 22: Brief highlights of MIBL
Brief highlights of MIBL (Rs.million) Sep 05 Sep 06 March-06 Total Income 29 56 64 Net Premium 177 369 423 PBT 22 30 45 PAT 15 19 29 21
Slide 23: Consolidated Profit & Loss Statement
Consolidated Profit & Loss Statement (Rs.million) Sep 05 Sep 06 March-06 Income from Operations 2528 3570 5861 Other Income 60 81 119 Total Income 2588 3651 5980 Interest Cost 942 1426 2194 Administrative Cost 911 1411 2089 Depreciation 23 30 52 Total Expenditure 1876 2867 4334 PBT 712 784 1646 PAT
Slide 24: Consolidated Balance Sheet: Liabilities
Consolidated Balance Sheet: Liabilities (Rs.million) Sep 05 Sep 06 March-06 Net Worth 4037 7331 6843 Equity Share Capital 701 833 833 Reserves & Surplus 3336 6498 6010 Employee Stock Option O/S - 17 8 Preference Share Capital 500 - 500 Secured Loans 27048 37877 34837 Unsecured Loans 4648 5110 3978 C
Slide 25: Consolidated Balance Sheet: Assets
Consolidated Balance Sheet: Assets (Rs.million) Sep 05 Sep 06 March-06 Fixed Assets 203 247 230 Investments 965 519 3163 Intangible Assets 15 10 12 Stock on Hire 17 - 5 Sundry Debtors 64 31 28 Other Current Assets 14 17 3 Cash & Bank Balance 1599 1708 1309 Loans & Advances & others 36280 52040 44306
Slide 26: Robust Growth
Robust Growth Cumulative no. of Customer Contracts (Nos.) Total Assets (INR million) 600,000 60,000 55,068 542,571 CAGR 39% 7% 500,000 50,000 CA GR 4 392,111 39,542 400,000 40,000 281,754 300,000 30,000 25,612 200,000 20,000 100,000 10,000 0 0 Sep04 Sep05 Sep06 Sep04 Sep05 Sep06 Total Income (INR mi
Slide 27: Summary of Results
Summary of Results (Rs.million) Sep 05 Sep 06 March-06 Total Income 2570 3615 5964 Profit before tax 689 754 1622 Profit after tax 450 496 1083 Dividend (%) - - 35 Equity Share Capital 701 833 833 Reserves & Surplus 3304 6451 5987 Net Worth 4005 7285 6819 EPS (Basic) 6.13 5.84 14.59 Market capitalis
Slide 28: Ratio Analysis
Ratio Analysis Sep 05 Sep 06 March-06 PBT/Total Income 26.8% 20.9% 27.2% PBT/Total Assets 2.9% 2.5% 3.3% RONW (Avg. Net Worth) 18.8% 12.7% 20.1% Overheads/Total Assets 2.5% 3.1%* 2.7% Debt / Equity 8.04:1 5.80:1 5.65:1 Book value multiple - 2.7 3.0 Capital Adequacy 16.1% 15.4% 18.2% Tier I 9.5% 12.4
Slide 29: 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. 28
Slide 30: NPA
NPA* (Rs.million.) Sep-05 Sep-06 March-06 Gross Non - Performing Assets 3046 3519 2,472 Less: NPA Provisions 1277 1601 1,259 Net Non – Performing Assets 1768 1917 1,213 Total Assets 39,542 55,068 49,513 Gross NPA to Total Assets(%) 7.5% 6.2% 4.9% Net NPA to Total Assets(%) 4.5% 3.5% 2.5% * Excluding
Slide 31: Spread Analysis
Spread Analysis Sep-05 Sep-06 March-06 Total Income/Average Assets 13.9% 13.5% 14.80% Interest / Average Assets 5.2% 5.4% 5.30% Gross Spread 8.7% 8.1% 9.50% Overheads/Average Assets 2.8% 3.2%* 3.30% Write offs & NPA provisions / Average Assets 2.5% 2.2% 2.00% Net Spread 3.4% 2.7% 4.20% *Includes out
Slide 32: Agenda
Agenda 1 Industry Overview / MMFSL Overview 2 Operations 3 Performance Highlights 4 Key Risks 5 Principal Investment Themes 31
Slide 33: 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 34: 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 35: Agenda
Agenda 1 Industry Overview / MMFSL Overview 2 Operations 3 Performance Highlights 4 Key Risks 5 Principal Investment Themes 34
Slide 36: 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 37: Shareholding Pattern (as on 30 Sep 06)
Shareholding Pattern (as on 30 Sep 06) th Promoters 68% Shareholding Others 1% Public 5% Trust 3% FII 23% 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
Slide 38: 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 39: Thank you
Thank you | @/D Mahindra Finance 38
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