corporate profile2 shriram group holding structure shriram capital ltd., shriram holdings (madras)...
TRANSCRIPT
SHRIRAM CITY UNION FINANCE LIMITED
1
Corporate Profile
May, 2012
2
SHRIRAM GROUP HOLDING STRUCTUREShriram Capital Ltd.,
Shriram Holdings
(madras) Pvt Ltd
Shriram Transport
Finance Co. Ltd.,
51%
41%
Shriram Retail Holdings Pvt Ltd
Shriram Enterprise
Holdings Pvt Ltd
Shriram City Union Finance Ltd
55%
100%
17%
34%
Shriram Credit Co. Ltd.,
Shriram Life
Insurance Co. Ltd.,
Shriram General
Insurance Co. Ltd.,
Shriram Chits
Shriram Insight Share Brokers Ltd.,
Shriram Fortune
Solutions Ltd.,
Shriram Wealth
Advisors Ltd.,
87%
90%
99%
100%
74%74%
Bharat Re-
Insurance Brokers Pvt Ltd.,
67%
Shriram Overseas Investments.,
92%
Bharat Investments Pte Ltd. Singapore
82%
Overseas Insurance Ventures
4%
Shriram Housing Finance Ltd
77.25%
100%
Shriram Equipment
Finance Co. Ltd.,
Shriram Auto mall
Corporate Profile
1 Corporate history and Company overview
2 Financial performance over the years
3 Unique positioning and analysis
4 Future growth
3
Company Overview
4
ShriramCity – Company Overview
ShriramCity is a major organized lender in
the Retail and Micro & small enterprises
credit space with leading market share in the
southern region.
Strategically present in multiple
products, with expertise in loan
origination, valuation and collection.
Unique access on Shriram Eco-system, viz.
Shriram Chits and Shriram Transport, which
provide a massive infrastructure, built over
time to ensure better financial productivity.
Large customer base of 6.5 million and
growing everyday.
Eminent Board and experienced management
team.
Listed on National Stock Exchange and
Bombay Stock Exchange
Capital infusion by pedigree investors – ICICI
Ventures, Bessemer and Chrys Capital and
TPG
Large distribution network and AUM
Pan India presence through a network of over
1000 business outlets
Over 10000+ dedicated workforce
Total AUM of Rs. 134.31 billion as at Mar
2012
Company overview
5
Corporate History
ShriramCity was established
2005
1st preferential Allotment of equity shares to PE Investors @ Rs. 160/- per share
1986
Focus on Retail Financing
Listed on National Stock Exchange
2006
2nd preferential Allotment of equity shares toPrivate Equity Investors @ Rs. 400/- per share.TPG invests in the holding Company
2008
2010
ShriramCity’s Net Worth touches Rs.1000 Crore
2007
Launches – Small Enterprises
Finance
Launches Loan Against gold
2003 Listed on Bombay Stock Exchange
Launches Shriram Housing – 100%Subsidiary
2011
6
Strong Business Model
Retail and Small Enterprises Finance financing Model
Small Enterprises
FinanceRetail Loans
Personal LoansTwo wheeler
LoansAuto Loans
Localized
Presence
Field force drawn locally
Advantage of domain knowledge & personal knowledge of the customers
Quick Credit
Approvals
Centralized broad policy formulation; Decentralized decision making authority
Speedy approvals - superior turn around time in loan processing
Collection /
Recovery skills
Credit team responsible for monitoring early warning signals
Deal originators being responsible for the portfolio quality
No outsourcing
Focus Market 80% of the branch network focuses on rural and semi - urban areas
Pan India presence with an existing concentration in South India; expanding into other geographies
Origination & credit evaluation through own team
Loan against gold
7
Performance Track Record
Total Income (Rs. Mns) Net profit (Rs. Mns)
Earnings Per Share (Rs.) Book value per share (Rs.)
8
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
3,490 6,232
9,339 11,028
13,209
20,524
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
516 876
1,170
1,943
2,405
3,425
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
16 22 26
41 49
69
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
83 104
155 203
245
334
Superior Return on Networth
Net worth (Rs. Mns)
Return on Equity (%) Capital Adequacy ( % )
9
23.97%
22.86%
20.47%
22.73%
21.75%
23.14%
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
23.95%
20.25%
25.74% 26.28%
20.52%
17.40%
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
3,257
4,265
7,097
10,000
12,121
17,482
Growth in AUM with Low NPAs
AUM (Rs Mns)
NPA levels
10
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
25,069 33,689
46,295 52,155
79,980
134,310
2.30%
1.52%
2.07%2.27%
1.86%
1.55%
1.47%
0.90% 0.96%0.71%
0.43% 0.38%
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
GNPA NNPA
Strengths of ShriramCity
11
Why ShriramCity
Diversified Product Portfolio
Seasoned Credit Policy & Process
Healthy Asset Quality & strong profitability
1
3
2
4
7
Strong management backed by eminent board
Has attracted Quality Investors
5 Optimum borrowing mix
6
Sound risk management systems
12
1. Diversified Product Portfolio
A Balanced Mix of High Yield and Low Risk Portfolio
Split of AUM – Rs 134.31 billion*
Small Enterprises Finance-
Commenced in Dec 2005
Key financials
Average Tenor: 36 Months
Average Yield: 22 – 24%
Retail Loans
Personal Loans
Commenced in Jan 2006
Key financials
Average Tenor : 30 Months
Average Yield: 24 – 27%
Two Wheelers
Commenced in Dec 2002
Key financials
Average Tenor: 24 Months
Average Yield: 24 – 26%
Auto Loans
Commenced in Dec 2005
Key financials
Average Tenor : 30 months
Average Yield: 22 – 24%
18% 12% 6%
29%
Loan Against Gold
Commenced in Oct 2006
Key financials)
Average Tenor : 4 Months
Average Yield: 18- 20%
35%
* As at Mar 2012
13
2 Seasoned Credit Policy & Process
Credit team
responsible for
monitoring early
warning signals
Proprietary
integrated ERP –
Linking business from
the origination point
to the final accounts Average LTV lower/ equal to
the industry average
Immovable assets & personal
guarantees as collateral for
personal & Small Enterprises
Finance
Centralized broad policy formulation
Decentralized decision making authority
Speedy approvals -
superior turn
around time in loan
processing
Pre lending Field
Investigation (FI)
& the post lending
appraisal by
dedicated teams
Origination & credit
evaluation through own team
Deal originators being
responsible for the portfolio
quality
Systematized
Controls Loan to
Value (LTV)
Quick
Credit
Approvals
FI &
Post Lending
Verification
“No
Outsourcing
” Policy
Credit
policy &
process
Assigning
Responsibility
14
3 Healthy Asset Quality
Enables decentralized decision making
Ensures quick turn around time
Systematized controls
Well defined incentive plan for field
officers to ensure low default rates
50% of the compensation is by way of
performance based incentives.
Deal originators being responsible for
monitoring early warning signals
Customized repayment structures
Localized presence – field force being
drawn locally.
Prudent Credit norms
Reasons for Low Delinquency
Incentive Schemes
Asset Quality
Asset Coverage Ratio
15
2.30%
1.52%
2.07%2.27%
1.86%
1.55%
1.47%
0.90% 0.96%
0.71%
0.43% 0.38%
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
GNPA NNPA
37%41%
54%
69%74% 76%
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
…and Strong Profitability
Spread Analysis FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Interest from Financing
Operations / Average AUM 18.0% 18.0% 20.8% 23.1% 21.8% 19.9% 19.0%
Interest Expenses^ /
Average AUM 8.9% 7.1% 8.5% 10.8% 9.4% 7.8% 8.1%
Gross Spread 9.1% 10.9% 12.3% 12.3% 12.4% 12.2% 10.9%
OPEX / Average AUM 4.0% 6.1% 6.6% 6.2% 4.8% 5.0% 4.6%
Provisions & Write offs **/
Average AUM 1.5% 1.3% 1.7% 1.9% 2.4% 1.8% 1.7%
Net Spread 3.6% 3.5% 3.9% 4.2% 5.2% 5.4% 4.7%
^ Interest expenses includes only the Financial expenses.
**Provisions include the standard assets provisioning @ 0.25%
16
Has attracted Strong Interest from Quality Investors
Consistent track record and high
growth potential has attracted reputed
institutional and Private Equity
investors to infuse growth capital
Details of Shares capital issues
Asia Bridge - Invested in May ‘08 @ Rs. 400/- per share [0.58 mn shares]
Bessemer Venture partners - Invested in May ‘08 @ Rs. 400/- per share [1.25 mn shares]
Chrys Capital - Dec ’06 @ Rs.160/-and May ‘08 @ Rs. 400/- per share. [6.625 mn shares in total]
ICICI Ventures - Invested in May ‘08 –Rs. 400/- per share [0.75 mn shares]
Norwest Venture Partners - July ‘09 –Secondary Market Purchase
Capital Adequacy ratio as of Mar 2012:
16.92%
*Share holding pattern is as at 31st Mar 2012
^TPG has stake in Shriram Retail Holdings
4
17
Key Shareholder* Shareholdings
(Millions)
Shareholding)(
%)
Shriram Enterprise Holdings 17.92 34.22%
Shriram Retail Holdings^ 8.56 16.34%
Shriram Capital Ltd., 2.30 4.39%
Norwest Venture Partners 4.34 8.29%
Van Gogh Ltd. (Chrys Capital) 6.63 12.65%
Bessemer Venture Partners 2.50 4.77%
Asiabridge Fund I LLC 1.18 2.24%
Acacia Partners LP 1.56 2.97%
Acacia Institutional Partners 0.54 1.04%
India Advantage Fund VI (ICICI
Ventures) 3.70 7.07%
Others 3.15 6.01%
Total 52.37
Optimum Borrowing Mix
Segment FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
Total Borrowings 8,652 15,224 29,992 43,228 46,671 73,278 96,226
Retail Borrowings
(incl Public issue of
NCD) 81.1% 54.4% 32.4% 33.0% 40.1% 28.5% 35.7%
Institutional Borrowings 18.9% 45.6% 64.9% 60.8% 55.6% 59.6% 54.3%
Market Borrowings - - 2.7% 6.2% 4.3% 11.9% 10.0%
5
18
(Rs. Mns)
Borrowing Pattern
March 2012 Borrowing %
Weighted
Average Tenor
Total Borrowings 96,226 30.76
Fixed Rate Borrowings 58% 38.03
Floating Rate Borrowings 42% 19.26
Segment wise Borrowings as at 31st Mar 2012
Long Term Rating of “AA “ by CARE and “AA-” by Fitch & Crisil.
Highest rating in Short term by all three rating agencies
19
Retail NCD
21%
Retail Sub Debt
6%
Public Issue NCD
8%Utilised Cash
Credit Limits
13%
Term Loans O/s
42%
Inst
Sub Debt
2%
Inst NCD
8%
Optimum Borrowing Mix
Each product is an exclusive vertical, headed by a product head
Strong Management Team6
20
Board of Directors
Managing Director
Mr. R. Duruvasan
Chief Operating
Officer-
Mr. Y.S. Chakravarti
Chief Technical &
Accounts Officer -
Mr. R. Chandrasekkar
Chief Financial
Officer-
Ms. Subhasri Sriram
Product Management
Credit
Legal Recovery
Market
AnalysisAccounts & Audit
Information
Technology
&
Innovation
Management
Information
System
Back Office Administration
Strategic Planning & Risk
Management
Finance
Talent Engagement &
Development
Investor Relations
Internal
Audit
Type of Risk ShriramCity Model
Concentration Risk Multiple products ensure risk diversification.
optimum mix of retail & institutional borrowings
Interest Rate Risk Balanced mix of fixed / floating rate loans.
Loan assets are at Fixed rates and the borrowings are an equal mix of
fixed and floaters
The entire retail liability are all at fixed rates with the average balance
maturity of approx. 30 months.
Liquidity Risk Adequate liquidity back up in the form of unutilized working capital
limits, fixed deposits with banks.
Continues to maintain liquidity support by having cash credit limits
which are not being fully utilized.
ALM Risk Positive cumulative mismatch in all the buckets – assets being of short
tenors (average 15 months) and borrowings of longer tenors (30
months)
Sound Risk Management Systems7
21
Strategy for future growth
22
Product Expansion – Small Enterprises Finance
Financial inclusion has become a national and a government imperative in the last few years.. Many
believe that fastest and most efficient way to ensure economic development of financially excluded is by
improving the bankability and thereby competitiveness of Micro, Small & Medium Businesses (MSMEs)
MSMEs – Some statistics
Constituting around 26 million units
Contributes to 45% of industrial output
40% of exports are from MSMEs
Employs 60 million people
Creates 1.3 million jobs every year
Lending is largely addressed by unorganized
sector
Expertise of Shriram Group
Localized presence - loans are to be processed
and delivered at the customers doorsteps
Ability to understand the customer’s business
model and provide tailor made loans
Lending to this segment, cannot be based purely
on collaterals - this is where ShriramCity scores
over competition
Shriram Chits has years of expertise in this
segment. We have an extensive borrower
database of Shriram Chits – which is combined
with our own borrower database
Gives us an edge over competition in assessing
customers’ requirements and ability to repay the
loan
Shriram City is the India’s largest Small Enterprises Finance Company
(as per Frost & Sullivan – Analysis of MSME Loan Market for NBFC in India- July 2011)
23
Currently 29% of SCUF’s loan portfolio
is towards MSME loans
Shriram Housing Finance Limited
Shriram Housing Finance Limited(SHFL), promoted by Shriram City in November 2010 as a fully owned
subsidiary and commenced operations by December 2011 after being registered with the National Housing Bank
as a Housing Finance Company
In March 2012, Valiant Mauritius Partners FDI Limited signed the agreement to pick up effective 22.75% stake
in Shriram Housing.
The deal envisages a cumulative investment of Rs. 1705 million by Valiant and Rs. 1654 Million by Shriram
City. The infusion by Shriram City will be at Rs 10/share and that of Valiant will be at Rs.35/share in all
tranches.
The investment in SHFL by Shriram City and Valiant (which shall be simultaneous) shall be in three
tranches, with the first tranche of investment being completed in April 2012. In April 2012, Valiant invested Rs.
752.5 million & Shriram City invested Rs. 700 million (inclusive of the Rs. 148 million invested as at 31st
March 2012)
Post-money equity valuation of Shriram Housing is expected to be Rs. 7496 Million excluding the possible
accruals of profits in this period.
Shriram Housing Finance Limited(SHFL), during the year ended 31st March 2012, has been operating out of 31
branches across India and had sanctioned loans of Rs. 167 million.
The Company as at March 2012, had a equity share capital of Rs. 148 million and incurred a loss of Rs. 44.5 million
which is inclusive of the pre- operative expenses of Rs.15.6 million.24
25
Disclaimer
This presentation is for information purposes only and does not constitute an offer, solicitation or advertisement with respect tothe purchase or sale of any security of Shriram City Union Finance Limited (the “Company”) and no part of it shall form the basisof or be relied upon in connection with any contract or commitment whatsoever. No offering of securities of the Company will bemade except by means of a statutory offering document containing detailed information about the Company.
This presentation is not a complete description of the Company. Certain statements in the presentation contain words or phrasesthat are forward looking statements. All forward-looking statements are subject to risks, uncertainties and assumptions that couldcause actual results to differ materially from those contemplated by the relevant forward looking statement. Anyopinion, estimate or projection herein constitutes a judgment as of the date of this presentation, and there can be no assurancethat future results or events will be consistent with any such opinion, estimate or projection. The information in this presentationis subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain allmaterial information concerning the Company. We do not have any obligation to, and do not intend to, update or otherwise reviseany statements reflecting circumstances arising after the date of this presentation or to reflect the occurrence of underlyingevents, even if the underlying assumptions do not come to fruition.
All information contained in this presentation has been prepared solely by the Company. No information contained herein hasbeen independently verified by anyone else. No representation or warranty (express or implied) of any nature is made nor is anyresponsibility or liability of any kind accepted with respect to the truthfulness, completeness or accuracy of anyinformation, projection, representation or warranty (expressed or implied) or omissions in this presentation. Neither the Companynor anyone else accepts any liability whatsoever for any loss, howsoever, arising from any use or reliance on this presentation orits contents or otherwise arising in connection therewith. This presentation may not beused, reproduced, copied, distributed, shared, or disseminated in any other manner. The distribution of this document in certainjurisdictions may be restricted by law and persons into whose possession this presentation comes should inform themselvesabout, and observe, any such restrictions.
26