Investor Teaser

Hedge Group an Introduction NBFC market landscapeBusiness plan & indicative financials Meet the promoters

AGENDA

Hedge Group an Introduction

AGENDA

Vision

To enhance the wealth creation capability of the organization in a global environment, delivering superior and sustainable stakeholder value”

Mission

Create customer satisfaction and provide quality and professional service

Offer rewarding career opportunities and cultivate staff commitment

Build values and deliver superior returns to shareholders

GROUP VISION AND MISSION

Hedge EquitiesHedge Equities is the flagship company of the Hedge Group. The venture revolutionized and popularized share trading culture in Kerala. Today, Hedge Equities enjoys the patronage of 35,000 satisfied customers who are reaping the benefits of professionally managed portfolios.

Hedge CommoditiesHedge Commodities offers a viable platform to engage in futures trading in agricultural and non-agricultural commodities. The in-depth knowledge of the Indian and world markets help our advisors to provide appropriate and timely assistance to our customers.

Hedge School of Applied EconomicsThe dire dearth of qualified share trading professionals in Kerala is what prompted the Hedge Group to commence the Hedge School of Applied Economics. Present and potential stock brokers are moulded to international standards under the guidance of veteran financial experts. Live trading sessions and world class academic amenities are the highlights of the Hedge School.

Hedge Wealth Management Service (WMS)The premium Wealth Management Services (WMS) was introduced by Hedge Equities. The comprehensive financial package is intended at building, managing and growing the wealth of the client. Service offerings of WMS include Portfolio Management Services (PMS), Portfolio Advisory Services (PAS), Mutual Fund Advisory (MFA), Commodities, Foreign Exchange and Derivatives. A specialized team of SEBI registered portfolio managers and dealers furnish each investor with customized and research oriented solutions to garner maximum possible returns.

Hedge FinanceWith the inception of Hedge Finance, the Hedge Group entered the prestigious NBFC market of India. The company adheres strictly to the RBI regulations and primarily focuses on the Loan Against Security sector. Hedge Finance has huge growth potential and intends to diversify its services in the near future.

THE HEDGE GROUP

Hedge Equities takes its root from over 25 years experience of

business leaders in various industries laying the platform for one

of the biggest broking houses in Kerala today.

World class Infrastructure : 170 outlets and 500 plus qualified personals catering to over 35000 clients.

State of the art Technology : Adoption of cutting edge technology thus giving users unparalleled user experience

Unparalleled Brand value : Rated as one of the fastest growing brands in Kerala, Hedge equities has carved for itself a niche in the mindspace of the people of the state.

Innovation DNA : Pioneers in introducing various programs and trendsetters in initiatives aimed at tapping market.

HEDGE EQUITIES - THE STORY SO FAR

NBFCs constitutes a reasonable big chunk of the country’s overall financial system accounting for 9.1% or Rs. 4 trillion of assets of the entire financial system in India.

NBFC industry today is a more mature, developed and promising since the days of inception and is destined to shape the future of India.

NBFCs have enjoyed tremendous competitive advantages relative to their banking peers for over a decade now

Backed by Hedge Equities, Hedge Finance is all set to be one of the top Non Banking Finance company in the country.

Focus to be on the niche under tapped Loan against Securities area apart from the other traditional areas.

Years of expertise in the financial market, a robust infrastructure in place and the backing of the brand name of Hedge Equities, Hedge Finance holds an edge in this segment.

HEDGE FINANCE - THE WAY FORWARD

NBFC market landscape

AGENDA

1997 - 98 2005 - 06 2009 - 100

200

400

600

800

1000

1200

1400

1600

-

40,000

80,000

120,000

160,000

1420

586 575

7,862

65,219

149,421

Number & Asset Size of NBFC - D and NBFC - ND SI

Number Total Assets (USD Mn.)

1997 - 98 2005 - 06 2009 - 1002468

1012

4.4

11.1 11

Total Assets (NBFC-D & NBFC -ND SI) as % of To-tal Bank Assets

Abbreviations: NBFC D – Deposit taking NBFCs;NBFC ND SI – Non deposit taking NBFCs, but having asset size greater than USD 22.5 Mn (INR 1000 Mn)

• The total number of NBFCs has witnessed a declining trend over the past few years.

• Acquisition of smaller NBFCs by bigger ones, closure of NBFCs by RBI due to noncompliance and exit of some deposit accepting NBFCs (NBFC-D) have contributed towards this decrease.

• However, the asset size, revenues and ensuing profitability have improved during the same period, growing at a CAGR of 17%, 31% and 21% from 2005- 06 to 2010 -11.

• The NBFC-ND-SI sector, which constitutes 70% of total assets of NBFCs have in particular, recorded significant growth.

2005-06 2009-100

20

40

60

80

100

12,000

12,500

13,000

13,500

67.7

163

5.616.7

1.12 2.93

13,014

12,622

Key NBFC figures – Overall (USD Bn.)

Asset Size Revenue ProfitabilityNumber of NBFCs

BRIEF OVERVIEW (1/2)

2006 - 07 2007 - 08 2008 - 09 2009 - 10 2010 - 110

20

40

60

80

100

120

12 1722 26

31

4

26 27 32 3541

55

8491

112

Growth of Assets (USD Bn.) as per type of NBFCs

Asset Finance Companies Investment Companies

Loan Companies

• Asset size of the different categories of NBFCs have seen continuous growth for the last few years, implying the overall prospects of the NBFC sector.

• The Asset size of Investment companies have seen maximum growth, increasing at a CAGR of around 70%, while AFCs and LCs have grown at a CAGR of around 28% since 2006-07.

• The growing number of middle income households, increase in disposable income and a consequent investment in houses, consumer goods and other related expenditure, and a strong emphasis on infrastructure development of the country are some of the key contributing factors expected to drive growth of NBFCs in the near future.

Type of NBFC Total Assets in USD Bn.

(as on FY 2010)

Public Sector NBFCs 14,009

Infrastructure Companies 44,329

Asset Finance Companies 25,752

Gold Loan Companies 1,955

Micro Finance Institutes 3,090

Other Loan and Investment Companies 60,286

All NBFCs 149,421

NBFC - D NBFC ND-SI

3% 2%

19.40%

7.10%

15.60%

28.60%Profitability Indicators of NBFCs

(FY 2010)

RoA RoE Leverage Ratio*

* Tier-I Capital as a % to Total Assets

BRIEF OVERVIEW (2/2)

Sr.No.

Name of NBFC

Type of NBFC

Year of establishment

Major Products

Customer SegmentsNo. of

branchesNo. of

employeesTechnology Usage

1 Shriram Transport Finance Company Ltd. (STFC)

AFC - STFC is also India's largest commercial vehicle financing company

1979 •Financing of Commercial Vehicles, that can be categorised asi.) pre-owned vehiclesii.) new vehicles

•Small truck owners (less than 2-3 trucks) as well as existing customer base upgrading to new trucks

•STFC also empowers first time entrepreneurs in the Commercial vehicle segment who are not readily supported or acknowledged by mainstream financialinstitutions

488 16,919 •STFC has a large and growing mobile sales team that tries to create new leads and monitor loan payments to its huge customer base.

•STFC uses technology in order to keep the sales team connected with the offices, and to improve processing times for new applications or monitor payments. Recently, it has tied up with IBM to implement cloud computing technology to ensure all of its field sales reps have access to reliable email that can be accessed on the road, at their desk and from their mobile devices

2 Bajaj Finance Ltd.(BFL)

AFC 1988 •Two Wheeler Financing

•Loans for Consumer Durables

•Loans for Construction Equipments

•Small Business Loans

•Loan against Property

•Loan against Shares

•Individuals, Professionals & HNIsManufacturers & Traders

225 1657 •As part of its strong Risk Management System, BFL has set up an in house analytics team. The team is responsible for real time analysis of data from various business lines to monitor their operations

•BFL also uses the CIBIL database actively and has built an in-house customer database to keep a track of their performance and for future references

3 Muthoot Finance

LC 1997 •Gold Loans •Small businessmen, vendors, traders, farmers, salaried individuals, professionals and small sized entrepreneurships

2733 16,688 •Muthoot Finance uses a well informed and dedicated analytics team to maximise profits as the Gold loan business requires high levels of operational and business foresight to transact in gold and help the corporate office fix and inform the rates to offer at all its branches

•Muthoot Finance also deploys modern equipments and technology to enhance the safety features of all its branches for storage of its gold inventory

SNAPSHOT OF A FEW INDIAN NBFC’S

Sr.No.

Name of NBFC

Type of NBFC

Year of establishment

Major ProductsCustomer Segments

No. of branche

s

No. of employees Technology Usage

4 SREI Infrastructure Finance Limited (SREI)

IFC 1989 •Fund based, Fee based and Strategic Investment activities in the Infrastructure Business:

•Fund based services: Equipment Financing, Project Financing

•Fee based Services: Project Advisory, Venture Capital, Project Development

•Strategic Investment based services: Telecom infrastructure, Power & Transportation, IT Infrastructure

Infrastructure and Construction Companies and SMEs

77 2116 •Srei invests heavily in technology to remain at the forefront of innovation and to adhere to a process-oriented structure in the way of doing business.

•The Company has a robust information technology set-up with proper security measures, which helps in electronic documentation and report generation. Besides, it has an off-site disaster recovery system that prevents any loss of data in case of exigencies

5 IDFC IFC 1997 •Corporate & Investment Banking (Project Finance, Investment Banking)

•Alternative Asset Management (Private Equity, Venture Capital)

•Public Market Asset Management(Mutual Funds) in the Infrastructure Sector

Infrastructure and Construction Companies, Entrepreneurships and SMEs

- 586 •IDFC uses a range of high performance network solutions to ensures servers and applications are available to its employees and global clients round the clock besides meeting security requirements

6 HDFC HFC 1977 •Home Loans, Loan against Property, Rural Housing Finance

Salaried and Self Employed People

283 1607 •Robust IT system to improve Loan appraisal and disbursement process

7 Gujarat Venture Finance Limited (GVFL)

LC 1990 •Seed & Start up Funding, Growth Funding

Technology oriented Start ups (with recent focus on biotechnology and infra);Companies in their growth stage requiring funding support

- -  

SNAPSHOT OF A FEW INDIAN NBFCS

Sr.No.

Name

Assets

Loans &

Advances

Investments

Paid up

Capital

Reserves and Surplus

Net Worth

Borrowin

gs

PAT Opex to

Income

ratio

Cost to

Income

ratio

CRAR RoA RoE NIM D/E ratio

Net NPA ratio

1 Shriram Transport

5570 5484 825 51 1056 1102 4467 276 24% 66% 25% 4.20% 27.94% 8.36% 4.42 0.40%

2 Bajaj Finance Ltd.(BFL)

1812 1633 101 8 297 305 1507 55.5 46.6% 74% 20% 4.30% 19.70% 10.76% 3.96 0.80%

3 Muthoot Finance 2983 2640 1.7 72 229 301 2698 111 22.4% 67% 15% 3.72% 51.50% 10.86% 8.95 0.25%

4 SREI Infrastructure Finance Limited (SREI)

3007 1075 566 112 481 593 2274 40.5 26.7% 77% 29% 1.64% 10.72% 3.76% 3.73 0.60%

5 IDFC 10686 8461 1832 5.17 1980 2847 8158 288 4.50% 62% 24% 3.00% 12.90% 3.70% 3.44 0.07%

6 HDFC 29995 26469 2674 66 3847 3913 20516 799 3.49% 62% 14% 1.18% 21.41% 4.30% 6.66 0.77%

7 GVFL 0.9 0.22 0.06 0.25 0.66 0.91 - 0.16 -  71% -  26.8% 103%  - - - 

SNAPSHOT OF A FEW INDIAN NBFCS (FINANCIALS)

Business plan & indicative financials

AGENDA

Product description and characteristics Key Benefits

Easy disbursal processes No further collateral security

required Short Term fund requirement

catered to immediately Flexibility in repayment Easy documentation Potential to tap various stock

market opportunities

Margin Funding: This product allows customers to borrow against their securities or investment portfolio. Such borrowing can be used against the purchase of further securities in the market. The company will fund up to 50% of the mark to market value of the holdings of the customer. Arguably one of the safest methods of lending to a customer as loans are backed by highly liquid securities.

Loan Against Shares: Loan Against Securities (LAS) is a product that enables acquiring instant liquidity from your investment without selling them. The applicant will need to pledge his securities in favor of HEDGE FINANCE Limited, This enables the customer to enjoy all corporate benefits accrued on the securities and still avail loan against them. No EMI or prepayment charges applicable. Interest will be charged only on the actual amount and that too for the time it was disbursed.

Estimated interest charged : 18-21%

PRODUCT 1 - MARGIN FUNDING/LOAN AGAINST SHARES

Greater reliance on technology for monitoring margin fall

Creating customer awareness

Challenges

Loan against property are secured-term-loans ,secured by mortgage of a residential or commercial property. The end-use of this loan should be towards any declared legal purpose. Some commonly seen LAP types are as follows:

Loan for personal/educational/business needs against existing property

Loan for acquisition of commercial propertyLoan against future rental receivable

Estimated interest charged : 18-21%

Loan Recovery Compete with Banks and other

lending institutions offering low interests

Loans available from 5 lakh up to 5 crore Simple documentation Fast processing Easy repayment options Loan tenure of 12 months to 120 months

for properties

PRODUCT 2 - LOAN AGAINST PROPERTY (LAP)

Product description and characteristics Key Benefits

Challenges

The Hedge Finance loans against Gold will help customers avail of any requirement in funds without having to sell off gold jewellery.

These loans are hassle-free with least amount of documentation. Most importantly, there is no need of income proof. Easy Repayment with only interest being paid each month. Principal to be paid only at the end of loan tenor.

Estimated interest charged : 18-21% Purity Verifications Market Rate fluctuations Custodial risk

Maximum value against security Simple procedures Quick sanctioning High liquidity for gold Maximum individual lending limit Easy micro credits Flexible gold loan product

PRODUCT 3 - GOLD LOAN

Product description and characteristics Key Benefits

Challenges

PROJECTED PROFITABILITY STATEMENT

PROJECTED BALANCE SHEET

KEY RATIOS

Year 1 Year 2 Year 3

EBIDTA 62.82% 76.01% 80.35%

EBITA 61.10% 73.66% 78.26%

PBT 57.92% 36.61% 48.92%

PAT 39.12% 24.74% 32.56%

ROE 7.99% 13.89% 38.23%

DEBT EQUITY 0.05 1.65 4.30

EPS 0.80 1.39 3.82

Meet the promoters

AGENDA

Alex K Babu is the Founder & Managing Director of Hedge Equities. He has over 9 years of experience in equity research and fund management with considerable experience across all market capitalizations. He is a specialist in mid-cap and infra stock selection. Ever since joining the Hedge Family, he has been designing, developing and implementing the strategic plan for the company in the most cost effective and time efficient manner. He was also instrumental in establishing and assembling a strong research team with equal emphasis on macroeconomic, industrial, and company level research

Bhuvanendran (CEO)Alex K Babu (MD)

P R Sankaranarayanan (Executive Director)

Bobby Jose (COO)

Mr. P.R.Sankaranarayanan, a Chartered Accountant by profession, holds a Masters in Commerce and a Post Graduate Diploma in Management. He was the Executive Director of Federal Bank (1995-2006), one of the leading private sector banks. Prior to that he held the position of General Manager of UTI and had earlier served Canara Bank. He is a seasoned banker, mutual fund specialist and finance expert with top level management exposure in several functional areas.

Professionalism augmented by profound vision is a perfect phrase to describe Bhuvanendran. His rich experience spanning 22 years with the leading names in the Indian financial services industry, is often camouflaged by his youthful appearance, till Mr.Bhuvanendran opens up his favourite subject-Money matters. Bhuvanendran is a talented and introspective writer whose creativity has been capitalized by various financial journals. He is also in the limelight for a market related show which aims at quenching the financial queries of professionals and investors in a leading Malayalam television channel.

Mr. Bobby has been responsible for the entire operations of Hedge Equities ever since its inception. He has proved his versatility by showcasing excellent Man-Management and Marketing Activities and is well versed in all aspects of Indian Financial Markets. In the last 15 years, he has worked with all the major players in the financial service sector of the country which has added oodles to his workmanship.

MEET THE PROMOTERS

Targeting 100 Crore Capital by Private Placement

Placement with Low Premium

Excellent Long Term Investment option

Low Break Even branches

Low NPA ratio for NBFC’s

Expected discounted ROE 20-32%

HEDGE FINANCE - A SNAPSHOT

THANK YOU