m&m:$ roadmap$to$2018 - mbacasecomp.com · gorural&s emiu rban$:opportunities$$...
TRANSCRIPT
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M&M: Roadmap to 2018
JMSB Consulting Presented to Board Members of Mahindra
Samie L.S. Ly Nadim Shamseddine Catherine Sumague Rachel Abourbih
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How can M & M Financial Services continue it’s growth in the Indian
market?
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
STRATEGIC RECOMMENDATION
REMAIN THE LEADER IN THE RURAL AND SEMI-‐URBAN MARKETS
• Not saturated with market knowledge • Lack of compeEEon-‐Stay in India
Focus on Rural and Semi-‐Urban
• Payment Banks • Infrastructure, home, crops, educaEon
M&M’s Products
• Mobility plaMorms (APP) • Online payment, Direct deposits Technology
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
STRATEGIC RECOMMENDATION
• Not saturated with market knowledge • Lack of compeEEon-‐Stay in India
Focus on Rural and Semi-‐Urban
• Payment Banks • Infrastructure, home, crops, educaEon
M&M’s Products
• Mobility plaMorms (APP) • Online payment, Direct deposits Technology
REMAIN THE LEADER IN THE RURAL AND SEMI-‐URBAN MARKETS
Cost : 10 Billion Rs 46 Billion Rs by 2018
Profit Margin 23% 3Years
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Analysis
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
GO RURAL & SEMI-‐URBAN : OPPORTUNITIES
URBAN IS HIGHLY COMPETITION WITH NO VALUE PROPOSITION: STAY RURAL & SEMI URBAN
0
200
400
600
800
1000
1200
1400
2001 2011
Rural Urban
PopulaEon Divide
Rural Urban
833 Million
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
GO RURAL & SEMI-‐URBAN :OPPORTUNITIES
PERIOD AGRI -‐ GDP (RS)
WORKERS EMPLOYED (MILLION)
SHARE OF AGRICULTURE GDP (%)
SHARE OF WORKERS
ENGAGED IN AGRI (%)
1952-‐53 162,112 97 56.5 69.8
1972-‐73 258,070 126 43.5 68.7
1992-‐93 406,404 185 29.3 64.8
2012-‐13 745,385 263 14.3 54.6
WORKERS EARN MORE , BUT OPPORTUNITIES ARE RISING
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
GO RURAL: OPPORTUNITIES
IT IS NOT TIME TO SPREAD YOURSELF, THERE IS STILL A LOT TO CAPTURE
250,000 villages are sEll available (50% of the market)
Low compeEEon
Good Understanding of the Market
Growing Middle Class in Rural India
High Debt Countries (GDP) South Korea, China, South Africa
Highly leverage , strong compeEEon
Lack of Understanding of the market
Plan for long term , not now
STAY IN INDIA INTERNATIONAL – NOT NOW
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
THE CUSTOMER PROFILE
BUSINESS PRODUCTS TOWARD SEGMENT
Live in widely scaFered villages
Seasonal Income
Cash-‐Based Economy
Under 30 Years Old EducaPon
Payment Bank
No Future Investment Plan
Technology Oriented
Working Class
Family Businesses – Farming crops
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
PAYMENT BANK IS IS THE FUTURE
PRODUCTS CAN USE PAYMENT BANKING
Vehicle Financing
SME Financing
Pre-‐Owned Vehicles
Rural Personal Loans –
EducaPon
Technology Focused
Housing Finance
Mobile Money
10 potenPal compePtors received Licenses
FIRST MOVER ADVANTAGE
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
STRATEGIC OVERVIEW
THESE ARE ELEMENTS THAT WILL ENSURE YOUR SUCCESS
Focus on Rural and Semi-‐
Urban M&M Products Technology
Unsaturated Market that you understand
EducaEon, Home, Crops Payment Banks
Mobility Work Force
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Financial Analysis
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
FINANCIAL OVERVIEW
Current Market SaturaEon
Increasing cost
Declining Profit margins
Profit has been steadily declining
Profit margin has decreased to 15% in 2015
Employee expense and finance cost has outpaced revenue growth
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
29% CAGR REVENUE GROWTH OVER LAST 10 YEARS
41 46
13 14
28
42 41
29
14
0
5
10
15
20
25
30
35
40
45
50
2008 2009 2010 2011 2012 2012 2013 2014 2015
Annual Revenue Growth
REVENUE GROWTH HAS DECLINED STEADLIY OVER LAST COUPLE OF YEARS
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
PROFIT MARGINS HAVE BEEN DECLINING
YOU NEED TO REINVENT YOURSELF WITH A NEW STRATEGY
18 16 15 15.6
22 24
22 22
18 15
0
5
10
15
20
25
30
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Net Profit Margins
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
EMPLOYEE EXPENSES & FINANCE COST HAVE OUTPACED REVENUE GROWTH
YOUR MARGINS ARE BEING SQUEEZED, TIME TO RETHINK YOUR STRATEGY
29
33
31
27
28
29
30
31
32
33
34
CAGR over last 10 years
RENEVUE EMPLOYEE EXPENSES FINANCE COSTS
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
CURRENT RATIO HAS BECOME CRITICALLY LOW
NEED TO MOVE BEYOND CURRENT MARKET TO LOOK FOR GOOD LOAN OPPORTUNITIES
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
2011 2012 2013 2014 2015
CURRENT RATIO
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
HIGH NUMBER OF EMPLOYEES COMPARED TO COMPETITORS
YOU HAVE AN OPPORTUNITY TO IMPROVE THROUGH THE USE OF TECHNOLOGY
0
2
4
6
8
10
12
BAJAJ FINANCE SUNDARAM FINANCE SHRIRAM TRANS. RELIANCE CAPITAL MAHINDRA FINANCE
REVENUE PER EMPLOYEE -‐ M Rs -‐ 2015
BAJAJ FINANCE SUNDARAM FINANCE SHRIRAM TRANS. RELIANCE CAPITAL MAHINDRA FINANCE
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Alternatives
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
STRATEGIC POSITIONING ASSESSMENT
RURAL & SEMI-‐URBAN MARKETS
Not saturated Market knowledge Under 30
CONTINUE TO GROW!
Explosion of digital technology Payment bank iniEaEve Rural & semi-‐urban areas
COMPETITIVE ADVANTAGES
Geographic penetraPon Pioneer & leader Trusted brand Current customer
profile saturated
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
STRATEGIC POSITIONING ASSESSMENT
RURAL & SEMI-‐URBAN MARKETS
Not saturated Market knowledge Under 30
CONTINUE TO GROW!
Explosion of digital technology Payment bank iniPaPve Rural & semi-‐urban areas
COMPETITIVE ADVANTAGES
Geographic penetraPon Pioneer & leader Trusted brand Current customer
profile saturated
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
STRATEGIC POSITIONING ASSESSMENT
ROOM TO GROW!
RURAL & SEMI-‐URBAN MARKETS
Not saturated Market knowledge Under 30
CONTINUE TO GROW!
Explosion of digital technology Payment bank iniPaPve Rural & semi-‐urban areas
COMPETITIVE ADVANTAGES
Geographic penetraPon Pioneer & leader Trusted brand Current customer
profile saturated
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
OPTIONS OpEon 1:
Leverage technology, push payment bank & penetrate urban areas
Med
Med
High
Difficult
OpEon 2:
Leverage technology, push payment bank & penetrate internaEonal
markets
High
Low
High
Difficult
OpEon 3:
Leverage technology, push payment bank & conEnue focus in rural & semi-‐urban areas
Low
High
Low
Accessible
Capital Expenditure
Market Knowledge
CompeEEon
Market PenetraEon
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
OPTIONS OpEon 1:
Leverage technology, push payment bank & penetrate urban areas
Med
Med
High
Difficult
OpEon 2:
Leverage technology, push payment bank & penetrate internaEonal
markets
High
Low
High
Difficult
OpEon 3:
Leverage technology, push payment bank & conEnue focus in rural & semi-‐urban areas
Low
High
Low
Accessible
Capital Expenditure
Market Knowledge
CompeEEon
Market PenetraEon
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
OPTIONS OpEon 1:
Leverage technology, push payment bank & penetrate urban areas
Med
Med
High
Difficult
OpEon 2:
Leverage technology, push payment bank & penetrate internaEonal
markets
High
Low
High
Difficult
OpEon 3:
Leverage technology, push payment bank & conEnue focus in rural & semi-‐urban areas
Low
High
Low
Accessible
THE RIGHT FOCUS & LEVERAGING TECHNOLOGY IS KEY
Capital Expenditure
Market Knowledge
CompeEEon
Market PenetraEon
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
RISK & MITIGATION STRATEGIES
CompeEEon moves in
Protect market by conEnuing to
customize products
Strong markeEng push
Seasonality (ex. dry season)
Seasonal contracts for employees
Employee Eme-‐share
Revenue growth misses projecEon
Lower loan rates
Look for internaEonal opportuniEes
RISKS MITIGATION CONTINGENCY
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
STRATEGIC RECOMMENDATION
• Not saturated with market knowledge • Lack of compeEEon-‐Stay in India
Focus on Rural and Semi-‐Urban
• Payment Banks • Infrastructure, home, crops, educaEon
M&M’s Products
• Mobility plaMorms (APP) • Online payment, Direct deposits Technology
REMAIN THE LEADER IN THE RURAL AND SEMI-‐URBAN MARKETS
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Action Plan
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
TIMELINE AT A GLANCE SHORT TERM (1 YEAR)
MEDIUM TERM (2 YEAR)
LONG TERM (3 YEAR)
MAHINDRA’S PATH TO CONTINUED GROWTH
Mahindra Payment
Mobile Technology
MarkeEng Campaign
Rural Market PenetraEon
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
M&M ORGANIZATIONAL STRUCTURE
M&M Mahindra Finance Mahindra IT
Mahindra Automobile
Mahindra Aerospace
CAPITALIZE ON NEW OPPORTUNITIES IN PAYMENT BANK MARKET
Mahindra Payment
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
NEW MARKETS THROUGH TECHNOLOGY
Mahindra Payment
Mobile App
MoboMoney
Tap N Pay
Direct Deposit
LEVERAGE M&M GROUP SYNERGIES AND LEAD THE CHARGE OF DIGITAL INDIA
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
MAHINDRA PAYMENT TARGET CUSTOMER Average age under 30
Access to communicaEons technology
No access to financial products
Present on social media
Rural or semi-‐urban dweller
UNDERSTAND YOUR CUSTOMER TO ANTICIPATE THEIR DEMANDS
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
REACHING YOUR TARGET CUSTOMER
• Celebrity influencers (eg. Star cricket player) • Sponsor sports teams • Instagram, Twioer, Facebook
Social Media
• Sports and news apps • Gaming devices
Web Ads
• University events • Favorable rates for educaEon loans
EducaEonal InsEtuEons
WORD OF MOUTH IS KEY TO REACHING TARGET CUSTOMER
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
MAHINDRA PAYMENT FINANCIAL SERVICES
SATISFY THE NEEDS OF YOUR RURAL CUSTOMERS
Direct Deposit
Agricultural loans & subsidies
EducaEon loans
Bill Payment
TuiEon Fees
Mobile Fees
Mahindra Loan
Repayments
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
CHANGES TO ENABLE MAHINDRA’S DIGITAL INDIA
• CreaEon, development and maintenance • Training • Cultural changes
InformaEon Technology
• ReducEon in manpower • Part-‐Eme employee for seasonality
Human Capital
• Uniform technology plaMorm • Knowledge sharing • Technology Taskforce integraEng Mahindra Finance & Mahindra Payment
Corporate Governance
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
RURAL VILLAGE PENETRATION
PENETRATE THE RURAL MARKET THROUGH TECHNOLOGY
250,000 Villages
Current Year 1:
40,000 villages
Year 2: 65,000 villages
Year 3: 105,000 villages
Goal
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
MAHINDRA FINANCE FUTURE OPPORTUNITIES
Infrastructure Loans
Home Loans
Crop Insurance
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GOVERNMENT INVESTMENT PRESENTS SIGNIFICANT MARKET OPPERTUNITIES
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Financial Projections
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
FINANCIAL OVERVIEW
Market PenetraEon
Cost Improvement
Profit OpEmizaEon
210,000 villages in 3 years
Profit to reach Rs. 46B in 2018 Profit Margin has been improved
to 23%
Revenue growth to outpace employee expenses and finance
costs
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
COST ANALYSIS Cost Item
Year 1: CreaEon of Mahindra Payment Mobile App MarkeEng Training
1.5B 1.5B 0.5B 0.5B
Year 2: Mobile App New Markets MarkeEng
1B 2B 0.5B
Year 3: Technology New markets MarkeEng
1B 1B 0.5B
TOTAL COST 10 BILLION INVESTMENT OVER 3 YEARS
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
ADDITIONAL REVENUE SOURCES ADD TO TOP-‐LINE
SAVINGS IN EMPLOYEES AND FINANCIAL COSTS IMPROVE BOTTOM LINE
Year 2015 2016 2017 2018 Revenue From Current OperaEons 60211 66232 72855 80140
Revenue from new villages -‐ 166082 43575 87150
Revenue from new services -‐ 10000 15000 20000
Total Revenue 60211 92840 131430 187351
Employee Expenses 5671 7071 9000 11585
Finance Cost 26430 34359 45000 58066
All other cost 14509 18613 24260 31292
Total Expenses 46610 60043 78260 100943
Profit before tax 13999 32797 53170 86340
Tax 4750 10823 21170 40349
Profit 9129 21974 32000 46000
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RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN
REVENUE GROWTH OUTPACE EXPENSES
POWERFUL OPPORTUNITY TO IMPROVE BOTTOM LINE
40
28 30
0
5
10
15
20
25
30
35
40
45
CAGR over next 3 years
RENEVUE EMPLOYEE EXPENSES FINANCE COSTS
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Question & Answers Thank you!