Strictly Confidential

This report is solely for internal use. No part of it may be circulated, quoted, or reproduced for distribution outside the organization without prior written approval from Fullerton India Credit Company Limited.

Author : FICCL

Fullerton India Credit Company Limited

February 7, 2013

Fullerton India – Rural Business Overview

1!

Our promoters

Incorporated since 2003. FFH invests in financial institutions in emerging markets, bringing an operational perspective to all investment decisions. Primarily, it focuses on both Business banking and Consumer banking. Within Business banking, FFH focuses on the Commercial, SME and Self-employed mass market segments. On the other hand, it focuses on the Mass affluent and Mass salaried segments within Consumer banking. Currently it is spread across 9 countries

Commercially launched in Jan 2007. Retail Non-banking Finance Company registered with the Reserve Bank of India. 0ver 350 branches across India & 6000 employees – offering small SME loans , Mortgage loans, Commercial Vehicle and Two-wheeler loans, business loans, personal loans.

2!

100  %  

100  %  

Launch of Pilots for urban retail financing

NBFC

Skoch Virtual Corporation Award for Robust and Scalable

IT Infrastructure

Voted one of the World’s Hottest

Brands by AdAge Magazine, USA

Product Portfolio

Key Corporate Milestones

•  SME loans •  Mortgage loans •  Business loans •  Two wheeler loans

FICC is a Category –A (Deposit Accepting) Non Banking Finance Company (NBFC), providing retail financial services to rural and urban mass market in India

Fullerton India Credit Company Set up in 2006 -offers a wide range of retail products

2005

2006

2007

2008

2009

2010 Entry in the

SME segment

Asia Microfinance Award for Innovation in

Technology

2011

•  Commercial vehicle loans •  Personal loans •  Microfinance

Launch of Rural

pilots Commercial Launch

of urban retail financing network

Commercial launch of rural

business

3!

Fullerton India – 3 key verticals

Retail Business

§ Flagship business

§  Urban centres

§  238 branches countrywide

•  Personal Loans •  2W Loans •  Mortgage Loans

Commercial Business §  ABF : Asset Backed Finance §  34 branches §  Commercial Vehicle Finance

§  SME Funding

§  50 L – 5 Cr § Mortgage Loans for Working Capital §  Capital expenses

Rural Gramshakti

§  Rural centres

§  117 branches – 6 states §  Rural Housing Loans § Group Loans §  Growing Enterprise Loans §  2W Loans §  Commercial Vehicle Loans

4!

Fullerton India

•  Capital Adequacy : 24.5% of assets

•  Host of reputed lenders to Fullerton India –  Public Sector Banks –  Private Sector & MNC Banks –  Mutual funds –  DFIs – Development Financial Institutions

•  Were recently sanctioned INR 750 Mn by SIDBI – Small Industries Development Bank of India •  For addressing “missing middle market” - micro-enterprises – for Loans upto Rs.250,000 ( USD 5000) •  For “green” enterprises including for investments in renewable energy

Retail Target Market - Urban

Self  employed  /  small  businesses   Salaried  Employees    

Annual  sales  turnover   Annual  Household  income  

(INR  0.3  Mn)  

(INR  6.1  Mn)  

(INR  24.5  Mn)  

(INR  490  Mn)  

(INR  0.5  Mn)  

(INR  0.2  Mn)  

(INR  0.06  Mn)  

(INR  1.2  mn)  

100%  =  59  million  HH  (House  Hold)  

Large  and    medium    corp.  

SME    1.4mn    enMMes  

Small    business    0.75  million    HH  

Micro  business    19.9  million  HH  

ProducMve  poor    

Lower    Affluent    

HNW  

Mass  market    18.5  million  HH  

Upper  mass  market    10.3  million  HH  

Upper    Affluent    

Target    segment  

Target  segment    

5!

Client Segment FICC Offering Unique Business Value Client Needs

Our Retail Business

SME - Turnover > INR 100 MM

•  SME (LAP) •  LAS

•  Business Expansion •  Capital Expense •  Working Capital

•  Higher Loan Amount – LAP + Unsecured Business Loan (Term Loan + Ready Credit)

Mass Retail Salaried / Self Employed Income : INR 150 K – 1MM

•  Asset creation •  Medical / hospitalization •  Children’s marriage /

education •  Emergency •  Business capital

•  Personal Loans •  2 wheeler / used car •  Gold Loan

•  Geographical Spread Credit expertise in lower income segment

•  Choice of loan options under the same roof

•  Client relationships across client life stage

 Mass Affluent Self Employed Income : INR 1MM - 5MM / Turnover <100MM

•  Business Expansion •  Capital Expense •  Working Capital •  Home Renovation    

•  Mortgage (LAP) •  Commercial Vehicle

•  Geographical Spread •  Credit expertise in Self

Employed segment •  Accept different types of

property •  Smaller vehicles, used CV

6!

Client Segment FICC Offering Unique Business Value Client Needs

Our Rural Business

Women’s Livelihood Groups Self employed / Agri-allied livelihoods/ Rural livelihoods Income: INR 100 K– 500 K

•  Dairy farming – purchase of cattle

•  Purchase of stock/ working capital/ machinery

•  Business capital •  Home improvement •  Purchase of FICC

marketed merchandise

•  Solidarity Group Loans •  Merchandise loans •  Two wheeler loans

•  Wide geographical Spread •  Credit expertise in lower

income segment •  Last mile service/ door-step

service •  Client relationships across

client life stage

 Small Enterprises Small manufacturing enterprises/ wholesalers/ large dairies/ other small enterprises - Turnover INR 300K to 3 MM

•  Business Expansion •  Capital Expense •  Working Capital •  Home/ shop Renovation •  Local Transportation

•  Growing Enterprise Loans - Unsecured Business loans

•  Two wheeler loans •  CV loans

•  Wide geographical Spread •  Credit expertise in Self

Employed segment •  Last mile-doorstep service •  Client relationships across

client life stage •  Cash collection at doorstep

Rural Self-Employed Individuals / Small enterprises / wholesalers/ traders/ small transporters

•  Marketing of merchandise •  Loans to fund

merchandise purchase

•  Access to merchandise •  Last mile service •  Funding for merchandise

•  Alternative power supply •  Eco-friendly stoves •  Water filters •  Cattle feed

7!

Fullerton India – Large customer Base

1 Million Customers §  Urban customers : 500,000+ customers §  Rural Customers: 450,000 +

Asset base :

§  Over Rs.4000 Crores ( USD 800 Mn)

10!

TAMIL NADU – 25

MAHARASHTRA– 22

KARNATAKA– 16

CHATTISGARH -7

CHANDIGARH -1

RAJASTHAN - 16

GOA - 2

GUJARAT -19

HARYANA - 8

HIMACHAL PRADESH -3

JAMMU & KASHMIR - 1

KERALA - 3

MADHYA PRADESH - 21

PUNJAB - 16

DELHI - 6

UTTAR PRADESH- 14

WEST BENGAL - 3

JHARKHAND - 3

ORISSA - 2

ANDHRA PRADESH – 31

KARNATAKA – 22

MAHARASHTRA– 22

GUJARAT -19

RAJASTHAN - 14

TAMIL NADU – 28

ANDHRA PRADESH – 10

UTTARANCHAL - 6

Retail network – 225 branches – 21 states; Rural – 117 branches – 6 states Rural branches

Retail branches

11!

Gramshakti – Rural Business

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Rural market segmentation

Self employed / small businesses / Salaried Employees

Annual Household income Rupees /(USD)

Rs. 60000/ (US$1200)

365,00 (US$7310)

100% = 153 million HH (Households)

Mass Market 90 million HH

Productive poor

Gramshakti target segment

55 mn HH

7 mn HH

1 mn entities 3 mn

(US$60,000)

Annual Sales Turnover Rupees / (USD)

50 mn (US$ 1 mn)

Each Household (HH) = 5 individuals

Upper mass

market

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Our rural business approach

•  Larger objective : Financial Inclusion

•  Identifying & mapping the Livelihood value chain

•  Identifying needs of each segment in the chain

•  Developing products for each segment in the chain

•  Capitalizing on opportunity in the full value chain

•  Building market linkages to develop the market

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Gramshakti - overview

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Gramshakti – mnemonic symbolizing our rural business – helping livelihood advancement

1.Women’s  hand  –  with  symbols  of  all  rural  livelihoods  2.  Five  fingers  represent  a  borrowing  group  of  5  women    2.Rural  livelihood  cycle  of  borrowing  and  repaying  and  growing  3.  Elements  of  FICC  rural  operaMons  

33!

Rural market segmentation

Self employed / small businesses / Salaried Employees

Household income Rupees /(USD)

60000 (US$1200)

365,00 (US$7310)

100% = 153 million HH (House Hold)

Mass Market 90 million HH

Productive poor

Gramshakti target segment

55 mn HH

Upper mass

market 7 mn HH

1 Mn-Small enterprises

3 mn (US$60,000)

Annual Sales Turnover Rupees / (USD)

50 mn (US$ 1 mn)

Each Household (HH) = 5 individuals

TAMIL NADU – 28 Population: 72 Mn

ANDHRA PRADESH – 10 Population: 84 Mn

KARNATAKA – 22 Population: 61 Mn

MAHARASHTRA – 22 Population: 112 Mn

RAJASTHAN – 16 Population : 68 Mn

Rural network – 117 branches - 6 states ~ 12500 villages

GUJARAT – 19 Population: 60 Mn

34!

Branch catchment – 25 Km radius – 120 villages

§  Coverage: 25 km radius around the branch – total of 625 sq km

§  Each branch catchment has 40,000+ households – approx 200,000 population

§  Varied livelihoods, farming and non-farm activity, cottage and small industry

§  Each branch has 12-15 officers reporting to a Branch Manager

§  Last mile reach – each officer has his motorcycle

§  All staff stay in the dormitory above the branch

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§  A strong culture of process compliance

§  A non-compromise disciplined environment

§  High customer-contact technology enabled business operations

§  Localised credit assessment and operations

What we have managed to build in the market

§  Deployed good online technology for efficient operations

§  Use of bio-metric devices for efficiency, transparency and convenience of both staff and customers

§  Designed programs : To support and enhance livelihoods we fund – builds customer relationships and ensures repayments

§  To promote adoption of new and alternate livelihoods – builds customer relationships, goodwill and trust in the segment – creates funding opportunities

§  Highly committed and motivated team

§  High level of employee engagement – unique initiatives

Robust Technology infrastructure

§  Fullerton India was the first company to invest in a fully computerized branch network with an online booking system at all rural branches with bio-metric device enabled transaction devices

§  Computer platforms: Each branch has 3-4 computers on WAN ,

one high speed scanner and printer

§  Central Server linkage : Branches linked to central server where all loan data rests

§  Internet connectivity: All branches have internet broadband connectivity with server and Credit Bureaus – High Mark for Microfinance & CIBIL for all others

§  Bio-Metric devices : All officers equipped with bio-metric touch screen transaction devices to issue customer finger print authenticated installment receipts

44!

Women’s Livelihood Group Loans – Over 400,000 existing women customers §  Occupation: Traditional non-farm Rural livelihoods – weaving, dairy, cottage industry, retail trade, agri and non-agri labour §  Age group- 18 – 50 – median age 35 §  Annual household income: Rs.125,000-400,000 §  Own house

Our rural customer base

Growing Enterprise Loans

§ Small entrepreneurs – Over 25,000 existing customers – largely male

§ Occupation : Large dairy, Retailers, wholesalers, traders, small manufacturers

§ Annual business turnover : Rs.250,000- 50,00,000

§ Own House, house +shop, motorcycle

Rural 2 wheeler loans ( recently launched) §  Over 20000 customers in rural ( Over 250,000 in urban) § Across customer segments

Commercial vehicle loans ( recently launched) §  Captive users of Small Commercial Vehicles §  Occupation : Wholesalers, distributors, services, agri-business

Leveraging our rural network – marketing relevant merchandise

Merchandise marketing : relevant products for rural households leveraging customer relationships and last mile reach on behalf of manufacturers

§  Products enhance standard of living, productivity and health of customers and families

§  Marketing and promotions & product demonstrations

§  Marketing and order booking done by Gramshakti leveraging last mile reach in rural markets

§  Special Merchandise loans to enable purchase

§  Products being promoted and financed:

§  Eco-stoves, Cattle feed, solar lamps, water filters, drip irrigation equipment

§  Each of the six states of Fullerton India’s Gramshakti -Rural network,  (Tamil  Nadu,  Andhra  Pradesh,  Maharashtra,  Karnataka,  Gujarat  &  Rajasthan) are among the top 6 States in India for wind energy potential.

§  Together these 6 States account for 97 % of the wind resources of India and wind powered energy generation.

§  These 6 States will continue to dominate the wind energy generation for the next 20-30 years; both in the grid tied megawatt (1MW to 500MW) generation as well as off-grid, micro wind (1KW to 10KW) energy generation.

Alternate energy financing business

§  Combining micro wind turbines (capacity from 600W to 3500W) with equal or lesser or more capacity of SolarPV synchronised to feed the load is referred as micro hybrid.

§  Micro hybrids could range from 1Kw to 10Kw capacity. Generally the energy generated from the hybrid system is stored in a battery bank; thus referred as off-grid system.

§  These micro hybrid systems could be mounted on the roof top of the building, typically the total weight of the system (including the mast) is about 200Kgs to 800Kgs.

What is a micro hybrid, off-grid system?

§  Fullerton serves over 12,000 villages in these 6 States

§  Targeting 30% of the villages to be covered ( 3500 villages) in the next 5 years for community powering based on wind + solar hybrid

§  …with an average of 2 systems/village being deployed.

§  Each hybrid of 1.5 KW capacity ( 850 to 1000W of wind + 650 to 500W of Solar PV)

§  In specific cases, the hybrid configuration can go up to 10KW capacity) ( 7KW of wind and 3KW of SolarPV

§  Potential is 7000 hybrid units over the next 5-7 years.

§  Each unit @ INR 300,000 (average) for every 1.5KW hybrid.

§  Total capital funding: INR 2,100 Mn

Potential of wind energy financing business

Promoting alternate energy solutions

Promoting use of alternate energy through merchandise loans for wind / solar energy equipment 1. Hypothecation Loans for promoting Alternate Energy systems among micro-eneterprises 2. Loan amounts – Rs.100,000 to Rs 1 Mn 3. Also offer loans to SMEs/ small enterprises to install higher end hybrid energy systems for commercial use

Thank you

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