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CRABS GOLD LOAN CO.

GROUP 4 - CRABS

Ashwin Trivedi - 52

Sachin Tilak - 51

Archana Prabhu - 38

Kejal Kothari - 28

Vicky Sheth - 47

Chandana Das - 9

Parag Babaria - 2

MAJOR PLAYERS

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WHY- An individual / business in urgent need of money at competitive interest rates. Also a farmer in rural area is in urgent need of cash and does not have a bank account.

When � There is no collateral available to be pledged in banks and not all sources of funds can be disclosed. Cash is required immediately.

HOW- Pledge available gold and get cash on the 75% (as per KUB Rao committee report) of gold valued (valuation) with variety of re-payment schemes and at interest rates lower than personal loans.

WHY, WHEN, HOW

GOLD LOAN COMPANIES NBFC / BANKS

NBFC�s Bank�s

1. Primary Products, better service offering 1. Gold Loan for agri, as safer bet for priority

sector lending

2. Command premium on interest upto 24% 2. Low on returns compared to NBFC and

personal loans approx 14.5%

3. Flexibility and Rapid disbursal, KYC norms

not very stringent

3. Stringent KYC norms and paper work

dissuade customer from approaching banks.

3. Low default percentage 3. High Defalut percentage

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GEOGRAPHICAL DEMAND OF GOLD

MASLOW'S LAW OF HIERARCHY

Business need / Fund requirement

Loan for personal works /Family emergency

To cover shortfall for home loan/ Repay old debts of higher interest/ To tackle crop failure etc

TARGET SEGMENT

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WHY GLC

WHY GLC

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WHY GLC

Gold price increase CAGR 24% and GL by Banks and NBFC�s increase by CAGR of 65%

BCG MATRIX

Stars

Smart Gold Loans

Question marks

Forex Transfer

Cash cow

Express 3 minutes Gold Loans

Dogs

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SWOT

Strength

1. Over the counter deals

2. Minimal paper work

3. Very low NPA levels

4. Flexibility of early repayment

5. No minimum limit.

Weakness

1. Lean KYC procedures

2. Loan Concentration

3. Proper claim settlement procedures

Opportunity

1. Tap into 2 tier, 3 tier and Rural market

2. Tap markets of high real estate growth.

Threat

1. Drastic fall in Gold prices (weak threat)

2. Entry of organised banks into GL market.

THREAT TO BUSINESS

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PORTERS 5 FORCES

Moderate competition

Medium Threat of

new entrants, Existing banks

Buyers power is

low

Moderate threat of

substitute

Suppliers power is

High

GOLD LOAN FEATURES : WHY US

� Secured Loan

� Multiple options available depending on payback period and

amount of loan

� Low disbursal times:

Banks : Few days ( strict KYC procedure)

Disburse loans as low as three minutes to a few hours ( lean KYC

norms)

� High loan-to-value (LTV) ratios:

Banks <= 60% of the gold value as loan

Our Value offer : 75% in case of high-purity gold

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GOLD LOAN FEATURES : WHY US� Shorter loan tenures:

No minimum period, if need be, loan amount can be returned the very next

day

� Varied interest rates:

Depends on the tenure and amount of loan

Banks : Varies from 17% to 19% in the case of banks

Our offer :Spanning from 21% to 24%. ( on daily reducing balance)

� Multiple repayment options:

Interest amount with principal being repaid at the end of the period in one lump

Sum OR

Repayment through EMI covering interest as well as principal on Daily reducing

balance

STRATEGY

Create Awareness on �ADVANTAGES�

� Avoids debt trap

� Simple procedures, fast disbursal

� No depreciation of underlying asset

� In practice, without recourse

� No questions asked

� Suited for the unorganised sector

� Moral pressure against default

� Gains for the wider economy

� Economical Differentiator: Marginally low interest rates for various products and moderately low for long term products.

� Social Differentiator: To attract customers who go to local pawn brokers / co-opertative society for loans through effective marketing.

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TARGET MARKET

� Satara �Kolhapur Belt

� Initially 3 branches in Phase 1

- Satara

- Karad

- Kolhapur

Phase 2

- Vai

- Shirwal

- Sangli

- Koregaon

High decibel promotion of products during yearly fairs( held in rural areas) or places of worship

Then expansion to various districts in Maharashtra in phase wise manner if the products are successful

SOURCE OF FUNDS

� Initial funding for setup expenses from Banks ( Loans against

personal Guarantee) / WC for setup of office and administrative

expenses

� Venture capital funding / PE investor

� VC or PE investor will help provide the platform for growth and the capital

required for rolling the business

� Bank Borrowing

� Banks lend at Base rate (i.e 13.75 %)

NCD�d:

GLC can raise loans via NCD�s but since a new company this route is

practically not workable.

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SOURCE OF FUNDS

USE OF FUNDS

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60

30

10

On the spot Loan

Short term

Long Term

LOAN CONCENTRATION

PROPOSED INCOME PLAN

YEAR 2012-13 2013-14 ALLOCATION OF FUNDS

Sales 5,00,00,000 11,00,00,000 4 new branches opened

VC 40000000 80% 88000000 80%

Salary, operating expenses, expansion

cost, Marketing, promotions, Admin,

Interest payable on borrowed funds etc

C 10000000 22000000

FC 2000000 20% 4400000 20% Rent, Security

PBIT 8000000 17600000

Interest 1040000 13% 2420000 14%

PBT 6960000 15180000

Tax 20,88,000 30% 4554000 30%

Net Profit 48,72,000 10626000

0.09744 9.7% 0.0966 9.66%

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REGULATORY ISSUES

� To increase LTV ratio to 75% will help GLC�s to increase business at rapid pace.

� A cap on lending rate (spread) would affect the profitability of GLC�s

� Use of Pan card and cheque based disbursement for transactions over 2 lakhs.

� GLC�s to reduce there dependence on NCD�s as it will affect there long term

performance.

� If the spread i.e. difference between borrowing rate and lending rate is regulated by

RBI then profitability would be majorly hampered. Currently GLC�s enjoy a spread of

approx 9.75% to 11%.

WHY ITS FLOURISHING / OR WHY VERY LOW

NPA

� LTV is regulated at 60% and hence even the remotest possibility of gold prices decreasing by 10% would be hedged against the collateral available.

� Average repayment period of GL is in 3 to 6 months

� Gold is traditionally and asset which is kept as a hedge against inflation, war or market crash and emergency requirement.

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ASSET QUALITY AND GROSS NPA

TOP LINE AND BOTTOM LINE

� Profitability:

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LONG TERM STRATEGY

� To expand cautiously in Rural markets and ensure penetration

specially in agricultural belts of Maharashtra.

� To continue the trend for approx 5 years and then with enough

cash reserves buyout the VC funds stake and become a major

partner.

Thank You