Shriram Capital Ltd Sanlam Investor Day– October 2012
2
Table of Contents
Section 1: Executive Summary
Section 2: Shriram Group
Section 3: Shriram Capital
Section 4: Overview of Financial Services operating companies
A. Shriram Transport Finance
B. Shriram City Union Finance
C. Shriram General Insurance
D. Shriram Life Insurance
E. Shriram Credit Company
Shriram Insight Share Brokers
Shriram Fortune Solutions/ Shriram Financial Product Solutions
Section 5: Shriram Capital future plans
3
Table of Contents
Section 1: Executive Summary
Section 2: Shriram Group
Section 3: Shriram Capital
Section 4: Overview of Financial Services operating companies
A. Shriram Transport Finance
B. Shriram City Union Finance
C. Shriram General Insurance
D. Shriram Life Insurance
E. Shriram Credit Company
Shriram Insight Share Brokers
Shriram Fortune Solutions/ Shriram Financial Product Solutions
Section 5: Shriram Capital future plans
4
Impeccable
Pedigree
Established in 1974, Shriram Group is one of the most respected Groups in India with an established track record of 35+
years.
Currently Assets under Management is over US$ 11.80 bn
Presence of
Marquee
Investors
A mix of strategic and financial investors including Sanlam Group, TPG Investments, Chryscapital , Bessemer Venture
Partners and ICICI Ventures, LeapFrog Investments etc
Diversified
conglomerate
with cross sell
opportunities
Presence in all aspects of Financial Services – Asset and Retail financing, Life and General Insurance, stock broking,
financial products distribution and wealth advisory services
Cross selling of various group products across 9.3 mn strong client base of the Group
Competitively
positioned
Shriram Transport is the largest used CV finance provider in the country with approximately 25% market share
Shriram City is amongst the largest and one of the most well diversified retail finance NBFCs in India
Shriram Life leverages on the captive customer base and infrastructure of the Shriram Group
Shriram General focuses mainly on motor insurance which forms a large part of Shriram Transport and Shriram City portfolio
High Yielding
Businesses
with low NPAs
Shriram Transport with an FY12 RoA of 3.8% and an RoE of 22.8% is amongst the most profitable NBFCs with low NPAs of
0.44%
Shriram City Union with an FY 12 RoA of 3.1% and an RoE of 24% is highly profitable with low NPAs of 0.38%
Shriram Life turned profitable in the very 1st year of operation vs. 7-10 years for a typical life insurance firm without sacrificing
growth
Shriram General is among the few profitable general insurance companies despite following ‘Motor only’ strategy
Brand Equity The brand “Shriram” is one the most trusted and reputed brands in India which lends a competitive edge in attracting
customers and exploring untapped business potential
Key Highlights- Shriram Capital
5
Table of Contents
Section 1: Executive Summary
Section 2: Shriram Group
Section 3: Shriram Capital
Section 4: Overview of Financial Services operating companies
A. Shriram Transport Finance
B. Shriram City Union Finance
C. Shriram General Insurance
D. Shriram Life Insurance
E. Shriram Credit Company
Shriram Insight Share Brokers
Shriram Fortune Solutions/ Shriram Financial Product Solutions
Section 5: Shriram Capital future plans
6
Shriram Group Founder’s profile
Founder Chairman of the Shriram Group of Companies
Founded the Shriram Group in 1974 to cater to the financial needs of a very large “unbanked / credit starved” customers
Has envisioned and strategized the development of the financial businesses as well as the Shriram Group’s diversification into
non-financial businesses
By inculcating the philosophy of “putting people first”, has transformed the Shriram Group into India’s premier networked
financial services supermarket chain
Has four decades of experience in general insurance industry
– Has worked with New India Assurance Co. Ltd., J.B. Boda & Co. Pvt. Ltd. and has mentored several large insurance broking
companies
Education:
Masters in Mathematics
Masters in Mathematical Statistics from Indian Statistical Institute, Calcutta
Associate of Chartered Insurance Institute, London
Visiting faculty of Asian Institute of Insurance, Philippines on Consequential Loss Insurance
Mr. R. Thyagarajan
Founder, Shriram Group
Among the most respected visionaries in the financial services industry in India
7
Established in 1974, Shriram Group is one of the most respected Groups in India with a predominant presence in the financial services
space
Shriram Capital Limited (SCL) is the overarching holding arm of all the financial services entities of the group.
Currently its financial service businesses include commercial vehicle (CV) financing, retail financing, chit fund, equipment financing,
mortgages, life insurance, general insurance, stock broking, distribution of financial products and wealth advisory services.
Shriram Group (non financial services arm) has significant presence in engineering services, property development, information
technology and interest in auto component manufacturing and renewable energy.
The group manages assets of over US$ 13 bn (including non-financial services).
The group has been promoting financial inclusion across sections of the society.
Key Operating Parameters
Branch Network Over 2,500
Marketing Force Over 100,000
Manpower Strength Over 51,000
Customer Base Over 9.3 mn
Key Financials (aggregated(1),in USD mn) FY12
Revenue 2,670
Profit After Tax 369
Assets Under Management (AUM) 13,351
Note 1: Aggregated financials including non-financial services
Note: FY12, FY11 & FY10 respectively represents Financial Year ending on 31st March 2012, 31st March 2011 & 31st March 2010 throughout this presentation
Note: Exchange rate has been taken as 1 US $ = Rs. 52 throughout this presentation
Shriram Group Brief Overview
8
Shriram Group
Shriram Enterprise Trust
(holding Non-Financial Services
Businesses)
Shriram Ownership Trust
(holding Financial Services Businesses)
Shriram Capital
Limited
Shriram Chits
(Tamil Nadu/ Hyderabad/
Karnataka/Maharashtra)
(Chit Fund Business)
Shriram Transport
Finance (Listed)
(Commercial Vehicle
Finance)
Shriram City
Union (Listed)
(Retail, Enterprise,
and Gold loan )
Shriram Insurance
Businesses
(Life & General
Insurance)
Shriram Equipment
(Construction
Equipment
Finance)
The Shriram group manages its businesses through two Trusts. These trusts are run independent of each other with a significant
number of trustees being independent professionals
Shriram Ownership Trust holds the financial services businesses and Shriram Enterprise Trust holds the non financial services
businesses
Shriram Credit Co.
(Brokerage, Financial
Product Distribution
Infrastructure support
and PMS & Wealth Mgt)
Shriram Enterpreneurial Ventures Limited
Engineering / Property Development /
Information Technology / Auto Component
Manufacture / Renewable Energy
Shriram Housing
Finance
(Mortgages)
Shriram Automall
(Facilitate
secondary sale of
trucks)
Note: Only the main holding company and main operating businesses are depicted above
Shriram Group Holding Structure
9
Shriram Group Partners and Investors
Business Company Investor Domain Investors
Holding company
Shriram Financial Ventures
(Chennai) Private Limited International
SANLAM Group of South Africa
Shriram Capital Limited International TPG Investments
Truck Finance Shriram Transport Finance International
TPG Investments, Chryscapital, Blue Ridge, Tiger Global
Management LLC
Domestic Axis Bank, Citi Corp, JM Finance Ventures
Retail Finance Shriram City Union
Finance International
TPG Investments, Merrill Lynch, Chryscapital, Cambridge Place
Investment Management, Bessemer Venture Partners, Asia Bridge
Domestic ICICI Venture
Housing Finance Shriram Housing Finance International Valiant Capital Partners
Life Insurance Shriram Life Insurance International
SANLAM Group of South Africa
Non-Life Insurance Shriram General Insurance
Stock Broking & Distribution
of Financial Products
Shriram Credit Company International
LeapFrog Financial Inclusion Fund
Engineering Shriram EPC
International
Chryscapital, Bessemer Venture Partners, New Vernon, Argonaut
Ventures, Hamon Group & Cie of Belgium, Leitwind B.V. Olympus
Capital, India Industrial Growth Fund, Gaja Partners,
Equipaggiamenti Electronic Industrial
Domestic UTI – IAS
Property Development Shriram Properties International
Sun Apollo, Walton Street Capital, Starwood Capital, TPG
Investments and India Opportunity Real Estate Fund
Note: Includes Past and Present investors & partners
Includes only primary infusion. Does not include secondary/market purchases
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Arun Duggal Chairman
Shriram Capital
Chairman of Board of Directors of Shriram Capital, Shriram Transport, Shriram Properties, Shriram City, Shriram EPC and Bellwether Microfinance
Fund
Senior Advisor to TPG Capital and Vice Chairman of International Asset Reconstruction Company
Former Chairman of American Chamber of Commerce, India and was also on the Board of Governors of the National Institute of Bank Management
Prior to joining Shriram Group, he had a 26 years career with Bank of America, mostly in the U.S., Hong Kong and Japan
A Mechanical Engineer degree from Indian Institute of Technology (IIT), Delhi and an MBA from Indian Institute of Management (IIM), Ahmadabad
Governing Council Financial Services
Akhila
Srinivasan MD
Shriram Life
Ms.Akhila is currently the Managing Director of Shriram Life Insurance Co. Ltd. which is a part of the Rs.60,000 crores Shriram Group.
Her contribution to the Group has been exemplary and has transcended professional excellence into one, filled with commitment, dedication and
exceptional work ethic.
Under her leadership, the Shriram Group set up the Shriram Foundation in 1993. Ms.Akhila is the State President of the Art of Living Foundation
She has been selected as one of the twenty-five Most Powerful Women in Indian business by ‘Business Today’ in the year 2008 & and as one of the
thirty Most Powerful Women in Indian business by ‘Business Today’ in 2010.
A K Singh MD
Shriram AMC
Mr AK Singh has a rich professional career of over 25 years out of which last 17 years have been in the Financial Services space. He has been
associated with Shriram Group since 1994 starting his career as the President of Shriram City Union Finance Limited
In 2005 he took up the position of MD in Shriram Insight Share Brokers, and He has recently taken up the position of MD of Shriram Asset
Management Company Ltd, a step forward for the group’s foray into wealth management
Mr.Akhilesh Kumar Singh is a B.Tech (IIT Kahargpur) and PGDM from IIM Bangalore
R Thyagarajan Advisor
Founder of the Shriram Group of Companies
Founded the Group to cater to the financial needs of a very large “unbanked / credit starved” customers, and has transformed the Shriram Group
into India’s premier networked financial services supermarket chain
Among the most respected visionaries in the financial services industry in India
R Kannan Advisor
R Kannan is amongst the senior-most Directors of the Shriram Group
Spearheaded group's Chit Fund companies to achieving the leadership status in the industry
S. Natarajan Advisor
Joined Shriram Group in 2001 and is part of the core team
Responsible for strategy compliance of the group companies with statutory and regulatory bodies
A Chartered Accountant with specialization in taxation matters, strategic planning and corporate financial restructuring, property development and
promotion of new business initiatives
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Governing Council Financial Services
G S
Sundararajan Group Director
Former CEO & Managing Director of Fullerton India Credit Company Ltd, a fully owned subsidiary of Temasek Holdings, Singapore.
Had a long and distinguished career with Citi Bank
Holds a Bachelor of Engineering degree from Coimbatore and an MBA from Indian Institute of Management (IIM), Ahmadabad
Umesh
Revankar MD
STFC
He has been with Shriram Group for last 24 years and possesses extensive experience in the financial service industry.
Mr Revankar is a storehouse of knowledge on the transport industry and has grown by hard work combined with a high degree of professionalism.
He holds bachelor's degree in Business Management from Mangalore University and MBA in Finance. He had attended Advanced Management
Program at Harvard Business School.
R. Sridhar MD & CEO
Shriram Capital
Fellow member of the Institute of Chartered Accountants of India
Joined Shriram in 1985 and was later promoted as President of the company in 1994 and appointed as Managing Director in 2000
Has over two decades of experience in the financial service sector, especially in commercial vehicle financing.
Member of Finance Industry Development Council and is actively involved with social organizations such as Shri Shanmukhananda Fine Arts &
Sangeetha Sabha, Mumbai (as a Treasurer) and Srikrishna Gana Sabha, Chennai (as a member)
JS Gujral MD & CEO
Shriram GI
Prior to becoming the MD & CEO of Shriram General Insurance, He was MD &CEO of Shriram Overseas Finance Ltd
Gujral is known for offering excellent and out of box Business solutions. He has been running the enterprise as a businessman and has created
five businesses including “SGI” as a new business from scratch
Mr Gural holds a bachelors degree in Commerce and is a Management Graduate and has done Advanced Management Program from Kellogg
Business School, Chicago and Executive Management program from IIM Ahmadabad.
R Duruvasan MD
Shriram City
Union Finance
Mr.Duruvasan has been serving the Shriram Group for 34 years
Mr Duruvasan played a key role as Managing Director and Principal Officer of Shriram Life Insurance Co. Ltd in the initial 5 years of the company’s
story and was greatly responsible for making synergies from the groups customers and creating a potential life insurance business for the group
D V Ravi MD
Shriram Capital
Started his career with Karnataka Oil Seeds Federation, Bangalore in 1987 and joined the Commercial Vehicle Finance business of the Shriram
group in 1992
Areas of expertise include corporate strategy, synergy creation, risk management efforts, leadership development and corporate finance
Non Executive Director and Co-founder of TAKE Solutions Ltd, a global technology solutions and service provider
Commerce graduate from the University of Bangalore and post graduate in management from the Institute of Rural Management, Anand (IRMA)
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Table of Contents
Section 1: Executive Summary
Section 2: Shriram Group
Section 3: Shriram Capital
Section 4: Overview of Financial Services operating companies
A. Shriram Transport Finance
B. Shriram City Union Finance
C. Shriram General Insurance
D. Shriram Life Insurance
E. Shriram Credit Company
Shriram Insight Share Brokers
Shriram Fortune Solutions/ Shriram Financial Product Solutions
Section 5: Shriram Capital future plans
13
Objectives of SCL:
To provide overall Governance and Corporate support to all the financial services investments in the group
To put in place senior management representation on the board of operating companies
To create synergy between different financial services companies
To provide assistance and support to all financial services companies in Shriram Group as needed in various areas such as Liability Management,
Investor Relations, Risk Management, Rating Agencies Relations, Financial Institutions and Central Bank Relations, PR, Government Interface, etc
To determine the overall strategy for the financial services companies in Shriram Group and oversee implementation of that strategy, including
inorganic growth
Management development of executives across Shriram Group financial services entities
To promote and strengthen the “Shriram” brand
Shriram Capital An active holding company
Key Financials (Standalone, USD mn) FY12(1) FY11
Revenue 8 9
Profit Before Tax 1 1
Profit After Tax 1 3
Net worth 132 148
Note 1 : Based on effective stake Shriram Capital holds in various operating companies, the profit of Shriram Capital would be approximately USD 105 mn in FY’12
Aggregate Financials (USD mn) FY12(1) FY11
Revenue 2,011 1,664
Profit After Tax 345 290
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Shriram Capital Holding Structure
Shriram Retail
Holdings
Shriram Holdings
(SHMPL)(1)
Bharat Re-
Insurance Broker Shriram Credit
Company (SCCL)(2)
Other investments Shriram General
Insurance
Shriram Life
Insurance
Shriram Capital Ltd
Shriram Ownership
Trust
Shriram Transport
Finance Co. Ltd.
Shriram
Enterprise
Holdings
Shriram Insight
Brokers
Shriram City Union
Finance Ltd.
Shriram Wealth
Advisors
Shriram Fortune
Solutions
TPG
10.48%
11.10%
51% 49% 51% 49%
41.26% 100%
100% 99.58%
67.49% 100%
90%
80%
97.83%
Unlisted Holding Company
Unlisted Operating Company
Listed Operating Company
Legend 50.76%
Holding chit
business
Strategic/JV Partner
5.04%
Note 1: SHMPL will be merged with STFC on receipt of High Court Approval
Note 2: LeapFrog Financial Inclusion Fund, Mauritius invested in Compulsorily Convertible Preference Shares of SCCL representing 13.6% of its fully diluted equity share capital
Shriram Housing
Finance Ltd
Shriram Equipment
Finance Company
Ltd
100%
76.50%
4.39%
Shriram Automall
India Ltd
100%
Shriram Asset
Management Co.
Ltd
40%
Shriram Financial
Ventures (Chennai)
Pvt. Ltd
66.85%
78.42%
Sanlam 33.15%
Shriram Financial
Products Solutions
(Chennai)
100%
15
Shriram Financial Ventures (Chennai)/ Sanlam Stake
Holding Structure
Shriram Capital Ltd
Shriram Ownership
Trust
Shriram Financial
Ventures (Chennai)
Pvt. Ltd
Sanlam Emerging
Market (Maritius)
Ltd., Mauritus
Sanlam Ltd.
South Africa
Commercial Vehicle
Finance
Insurance Business
(Life and General)
Brokerage, Financial
Product Distribution
Infrastructure support,
Portfolio Management &
Wealth Mgt
Housing Finance Construction
Equipment Finance
Facilitation of
Secondary sale of
trucks
10.48%
66.85%
33.15%
78.42%
TPG
11.10%
Retail, Enterprise
and
Gold loan
16
Shriram Capital Board of Directors
Arun Duggal
D. V. Ravi
R. Sridhar
G.S. Sundararajan
Heinie Werth
Sanlam Nominee
Puneet Bhatia
TPG Nominee
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Shriram Capital Senior Management Team
S.Murali
Eexcuitve
Director, CFO &
Company
Secretary
Has 23 years of rich experience in various industries in India and abroad
High level of expertise in financial services, financial analysis, risk management, valuation, regulatory/ compliance matters,
management study, identification of control weakness, framing of corporate financial policies for sound internal control systems,
etc
Is a Chartered Accountant, a Company Secretary, Associate of the Chartered Institute of Management Accountants (UK) and a
CWA (India)
R.Vasudevan Chief Risk
Officer
Rich experience of over 30 years as Head of Management Information/Finance/Accounts/Secretarial with leading Companies in
India in both financial and non-financial services sectors
One of the Promoter Directors of Proactive Solutech, Chennai, a Management Consultancy Company in operation since 1995
Head and Director (RISK Management Committee) for Shriram Group of Companies
Specalised in Corporate Finance, Resource Mobilization, Management Accounts ,Costing and Systems, Secretarial Functions,
Risk, Operational and Management Audit.
Commerce graduate , Cost Accountant and Associate Company Secretary
A.C.Sinha Executive
Director -
External
Relations
Vani
Narayanan Senior Vice
President
Over 25 years of experience in various entities in financial services sector including Commercial Bank, leading Development
Financial Institution in India and NBFCs
Has been with Shriram Group since 2004
Science Graduate and an MBA from Indian Institute of Management (IIM), Bangalore
N.Mani Senior Vice
President
Has been with Shriram Group for nearly three decades
Rich and varied experience in the areas of Accounts/General Administration/Public Relations/Taxation
More than 25 years of experience in Operations and External Relations
Law Graduate and an MBA
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FY12
(12 months)
June’ 12
(3months)
Total Premuim 124 23
New Premuim 75 16
Total Capital Injected
Profit after tax
34
11
34
Sum Assured 4760 4912
Note 1: Revenue is Net Interest Income (NII) + other income
2: TN: Tamil Nadu, AP: Andhra Pradesh, MH: Maharashtra and KT: Karnataka
Strategy
Strengths
Key
Business
Financials
(US $ mn)
Shriram City Union
Leverage Shriram Group’s Chit fund
customer base and distribution
infrastructure
Focus on and provide access to under-
banked sections of the society
Seasoned credit policy processes
backed by recovery skills of Shriram chits
Among the most diversified player in the
retail finance place
Offers gold loans (36% of total book),
small enterprise loans (29%), auto loan
(18%), two wheeler loan (10%) and
personal and consumer durables (7%) to
retail consumers
Recently forayed into Housing finance.
Valiant Capital has committed to invest
US$ 35 mn (Including US $ 15 mn
already invested) for 23% stake
Shriram Transport
Continue growing its market share in pre-
owned CVs
Leverage existing franchisee for financing
new CVs and construction equipments
Ability to value pre-owned CVs
Recovery/ Collection skills
Geographical reach and proximity to
customers
Provides purchase finance for pre-owned
trucks (5-12 years old) to small truck
owners (owning less than 3 trucks)
Offers value added services to
Commercial Vehicle (CV) operators
Diversified into Equipment Finance with
FY12 AUM of US$ 370 mn and setting up
of Automall (market for sale of pre-owned
CVs)
(Standalone) FY12
(12 months)
June’ 12
(3 months)
Revenue1 645 168
PAT 242 62
Net worth 1,145 1214
AUM 7,733 8062
(Standalone) FY12
(12 months)
June’ 12
(3months)
Revenue1 217 72
PAT 66 20
Net worth 336 356
AUM 2,583 2863
SCL Subsidiaries Business Snapshot
Shriram Life Insurance
Leverage Shriram Group’s large
customer base and network
Significant expertise in designing
products for ‘Bottom of Pyramid’
Association with Sanlam
Strong presence in TN, AP, MH and
KT(2)
Underwrite life insurance business
Offer a suite of investment and
insurance products
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Strategy
Focus on retail clients
Expand into mass affluent
segments
Aims to become a one stop
super store for all kind of
insurance and investment
products
Strengths
An active client base of 184,000
customers
A network of 700+ branches
and 1,189 trading terminals
Distribution footprint - a pan
India branch network of 360
branches and 37,000 agents
Clientele - Customer base of 1
mn+ through
Key
Business
Equity (cash and derivative)
and commodities brokerage
services to retail clients
Loan against shares (through
SCCL , an NBFC)
Distribution of financial products
like life & general insurance,
fixed deposits, debentures and
mutual funds
Financials
(US $ mn)
Shriram General Insurance
Focus on tapping captive
transportation customer base
Become market leader in motor
insurance in the medium term
Captive customer base in
transportation segment
Association with Sanlam
Strong presence in TN, AP, MH and
KT(1)
Collecdted Gross Premuim of over
USD 550 mn. within a span of 4 years
(Market share of 5.63% in FY’12 )
Underwrite motor, fire,
engineering, liability and
shopkeeper’s insurance
Note 1 :TN: Tamil Nadu, AP: Andhra Pradesh, MH: Maharashtra and KT: Karnataka
2: Aggregate revenue and PAT of Shriram Insight (broking business), Insight Commodities and Shriram Credit ( financing business) 3) Indicates to Profit before tax
FY12
(12 months)
June 12
(3 months)
Gross
Direct
Premuim
244 63
Net
Premuim 125 59
Profit After
Tax 12 5
FY12
(12 months)
June 12
(3 months)
Revenue2 12 3
Profit After
Tax2
2 13
Net worth 16 17
FY12
(12 months)
June 12
(3 months)
Revenue 17 5
Profit After
Tax
2 13
Net worth 3 4
Shriram Credit Company Limited (SCCL)
Stock Broking Distribution of Financial
Products
SCL Subsidiaries Business Snapshot
20
Table of Contents
Section 1: Executive Summary
Section 2: Shriram Group
Section 3: Shriram Capital
Section 4: Overview of Financial Services operating companies
A. Shriram Transport Finance
B. Shriram City Union Finance
C. Shriram General Insurance
D. Shriram Life Insurance
E. Shriram Credit Company
Shriram Insight Share Brokers
Shriram Fortune Solutions/ Shriram Financial Product Solutions
Section 5: Shriram Capital future plans
21 21
CV Financing Business Model
Market
Share
Target
Segment &
Expertise
Target
Segment
New
Owned Funds Average core lending business yields 18-24%
Owned Funds Average core lending business yields 15-16%
Securitization Average back-stop funding – Net spread: 5-6%
Small Truck owners (less than 2-3 trucks) with
underdeveloped banking habits
Leadership position with a market share of 20-25%
AUM of approximately US$ 5.9 bn at the end of FY12
Pre Owned (5-12 Years Old CVs)
Existing customer base upgrading to new trucks
7-8%
AUM of approximately US $ 1.8 bn at the end of FY12 Performance
Targets only 5-12 year old trucks bought by Small Road Transport Owners (SRTO)
Risk is relatively low as compared to 12+ year old trucks
Banks lack valuation expertise and risk appetite to finance more than 5 year old trucks
Small truck owners (owning less than 3 trucks), though creditworthy, typically lack paper work to avail bank loans
Leveraged expertise in pre-owned truck to enter into new truck financing.
Securitized portfolio (off book) stands at 45% of total portfolio
5-6% spread in average back stop funding
Shriram Transport Finance Unique Business Model
22 22
Source: Company filings, analyst presentations and research reports
Note 1: Operating income is defined as Net Interest Income + Other Operating Income
Scale
One of the Largest NBFCs in asset financing space with 20-25% market share in pre-owned and 7-8% share in new truck
financing
Total AUM of $7.7 bn with a Net worth of $1.14 bn, generating Income(1) of $ 645mn (FY 12) )
Customer base has grown to 0.8 mn with an employee base of 15,057
Pan India presence with a network of 502 branches serviced by 8,155 field officers and partnership with 500+ financiers
c.60%+ branches located in growth corridor of the country – Maharashtra, Tamil Nadu, Andhra Pradesh and Karnataka
High footprint in difficult to access rural and urban areas
Geographic
Spread
Yield on Advances are in 18% - 24% range for Pre-owned CVs and 15% - 16% for New CVs
Low cost of funds due to a) priority sector status with banks b) high credit appraisal and c) access to institutional funds
High level of valuation skills, locally drawn sales force - customer familiarity, and strong information network resulting in highly
efficient collection mechanism and hence low NPAs at 0.44% (FY 12)
Proprietary credit evaluation tools, asset backed lending with adequate cover and well defined incentive schemes for sales force
helps keep default rates low
Margins and
Asset Quality
Run by a professional management team and backed by a respected promoter group & global financial investors
Average work experience of the top team of over two decades
Presence of marquee investors like TPG, Equinox, ICICI Prudential Life, Genesis India Investment Company etc.
Promoters /
Management
Target AUM of USD 9.5 bn by FY13
Do innovative tie-ups and target new products
Tied up with Axis bank to distribute credit cards to small truck owners - Distributed over 1,70,000 credit cards (Mar ‘11)
Development of Automalls / Touch screen kiosks
Explore acquisition of CV portfolios on an opportunistic basis
Expansion of Shriram Equipment Finance business – FY 12
Market expected to grow at a CAGR of 30% +driven by infrastructure spending
Going
forward
Shriram Transport Finance Key Highlights
23
0.4%0.2%
0.7%
1.2%
0.1%
1.0%
STFC IDFC MMFSL Srei Sundaram LTFH
NPA %
Profitability: RoA, RoE (FY12, %) Scale: Net worth, Assets (FY12, US $ mn)
Market Cap & P/B Multiple (FY12, US $ mn, x) Net NPA (FY12, %)
1,1
45
2,3
35
566
497
344
914
6,8
73
11,6
74
3,5
70
2,4
43
2,4
88
5,1
79
STFC IDFC MMFSL Srei Sundaram LTFHNetworth (YoY) Assets
2,8
15
4,6
27
1,7
82
264
895
1,6
75
2.52.0
3.1
0.5
2.61.8
STFC IDFC MMFSL Srei Sundaram LTFH
Market Cap P/B
Shriram Transport Finance
compares well in almost all
fundamentals as compared to
peers
Comparable size to its peers
in terms of size of balance
sheet
One among the best in peer
group return on assets &
equity
Optimising growth with
keeping asset quality (NPAs)
in check
High P/B multiple suggesting
market expectations of solid
foundations coupled with
high future growth potential
Note : 1) LTFH – consolidated financials considered
2) Market Price - October 2012
Shriram Transport Finance Peer Analysis
3.8% 2.9% 3.9% 2.8% 2.1%
22.8%13.0%
22.8%
2.3%
21.4%11.9%
STFC IDFC MMFS Srei Sundaram LTFH
RoA RoE
24
Retail & Small Enterprises financing model
Small Enterprises
Finance
Personal Loans /
Consumer Durable
Retail Loan
Two wheeler Loans Auto Loans Loan against gold
Shriram City Started Average Tenor Average Yield % of Portfolio Growth YoY
(FY’12) GNPA (%) NNPA (%)
Consumer Durable / Two
Wheeler
Dec’ 2002 24 months 24-26% 12% 18% 6.31% 1.89%
Personal Loans Jan’ 2006 30 months 24-27% 5% 33% 4.12% 0.00%
Auto Loans Oct’ 2005 30 months 22-24% 18% 108% 3.23% 0.73%
Loan against Gold Oct’ 2006 4 months 18-20% 36% 47% Nil Nil
Small Enterprises
Finance
Dec’ 2005 36 months 22-24% 29% 156% 0.59% 0.28%
Focus on under banked segments of society in difficult to access rural / semi urban areas resulting in high yield on assets
Localized sales force, seasoned credit approval processes and shared recovery responsibility results below industry average
NPAs
Business
Model
Shriram City Union Finance Unique Business Model
25
Difficult to
replicate
Portfolio
Amongst the largest and most diversified players in the retail financing space
Target under-banked customers who are otherwise not eligible for credit
Access to 9.3 mn Shriram Group client base
Focus on rural and semi-urban areas; 80% of branch network in such areas
Pan India presence with an existing concentration in South India; expanding into other geographies
Field force drawn locally – advantage of domain knowledge & personal knowledge of the customers
Focus Market
& Geographic
Spread
Streamlined processes & clear responsibility lines results in efficient disbursal and collection machinery
– Originations & Credit evaluation through own team; Centralized broad policy formulation; Decentralized decision making
authority
– Credit team responsible for monitoring early warning signals, deal originators being responsible for the portfolio quality
Successful execution of above policies reflects in results – GNPA at 1.55% and NNPA at 0.38%
Credit Policy
& Asset
Quality
Run by a professional management team and backed by a respected promoter group & global financial investors
Presence of marquee investors like TPG, Bessemer, IDBI Trusteeship, Asia Bridge, NVP Ventures etc.
Promoters /
Management
Product expansion across branches; still large number of branches do not offer full suite of Shriram City products
Leverage Shriram group’s network and clientele to grow its newly launched mortgage finance business
Continued focus on small business loans (especially very small and under banked enterprises)
Going forward
Source: RBI, Company filings, analyst presentations and research reports
Borrowing Mix
& Margins
Optimum borrowing mix with bank borrowing at 55%, retail borrowing at 27% and market borrowing (incl. public NCD) at 18%
– Has been able to reduce dependence on bank from 60% in Mar 11 to 55% in Mar 12; cost of funds remains low at 10%
Focus on high-yielding assets (with yield on advances of 18 - 22%) secured by quality assets
~95% of the loan book is secured with 63% by assets like auto, two-wheelers & gold
Shriram City Union Finance Key Highlights
26
0.4%
0.0%0.1% 0.3%
0.0%0.3%
SCUF Magma BajajFinance
Manap-puram
Future Capital
Chola
NPA %
Profitability: RoA, RoE (FY12, %) Scale: Net worth, Assets (FY12, US $ mn)
Market Cap & P/B Multiple (FY12, US $ mn, x) Net NPA (FY12, %)
317
208
387
458
156
273
2,4
32
1,5
36 2,4
86
2,3
22
901
2,5
81
SCUF Magma Bajaj Finance
Manap-puram
Future Capital
Chola
Networth (YoY) Assets
3.1%0.9%
3.8% 6.0% 2.3% 1.5%
24%
6%
24% 27%
12% 14%
SCUF Magma Bajaj Manap-puram
Future Capital
Chola
RoA RoE
806 237 949 645 197 589
2.5
1.1
2.5
1.41.3
2.2
SCUF Magma BajajFinance
Manappuram
FutureCapital
Chola
Market Cap P/B
Shriram City Union Finance
compares well in almost all
fundamentals as compared
to peers
One among the best in
peer group return on
assets & equity
Optimizing growth and
asset quality (NPAs)
High P/B multiple
suggesting market
expectations of solid
foundation coupled with
high future growth
potential
Note: Market Price - October 2012
Shriram City Union Finance Peer Analysis
27 2
7
27
Competitive
Advantage
Access to captive customer base of Shriram Transport and two wheeler/ auto loan customers of Shriram City Union.
Enhanced ability to mitigate two key risks a) pricing based on competitor pricing and not on risk and b) ‘moral hazard’ i.e. fake
claims
The captive customer base of Shriram is well spread over the country with concentration in Southern states. These states are
among the most developed in terms of GDP growth, banking habits and per capita income
Currently operates 92 branches. New branches breakeven early due to presence of an existing clientele and distribution network
Focus market
& products
Currently offers 46 products including Burglary Insurance, public liability insurance, marine cargo, money insurance, property
insurance, housekeep umbrella insurance and shopkeeper umbrella insurance among others
– However, de-tarification of industry in last 4 years has led to heavy discounting on most of these products. Focus on profitable
growth has led Shriram General to pursue Motor insurance. Also, pursuing motor insurance capitalizes on the captive
customer base (especially Small Road Transport Operators) of the Group companies
Products
Promoted by Shriram Group with an excellent track record in the financial services business in Joint Venture with Sanlam Group,
a well established financial services Group in South Africa with an asset base of around US $ 60 billion. Sanlam Group has in its
fold Santam Limited the leading short term insurer in South Africa
Promoters /
Management
Going forward Shriram General would continue to focus on motor insurance primarily to Small Road Transport Operators and
deliver high return on capital.
Will resume underwriting non motor business as and when the discounting in non motor stabilizes.
Going
forward
Profitability
Margins
One of the few general insurance companies that are currently profitable due to its focus on profitable growth
– Appropriate pricing of the motor insurance based on risk and ability to reduce fake claims
– Stopped underwriting non-motor insurance due to heavy discounting by competitors
Claims/Benefit paid ratio of 70% and Opex ratio of 10% to total income
Shriram General Insurance Key Highlights
28
19%
11%
56%
18%
19% 26% 18%
7% 11%
42%
53% 38% 40% 53% 38%
42%
16%
14% 18% 15%
8% 9%
5% 14%
8% 8%
23% 17%
ShriramGeneral
BhartiAXA
FutureGenerali
Chola RoyalSundaram
Tata AIG UniversalSompo
Fire Marine Motor TP Motor OD Health Others
92
50
84 93 94
53
78
Shrira
mG
enera
l
Bha
rti A
XA
Fu
ture
Genera
li
Chola
Royal
Sun
dara
m
Ta
ta A
IG
Univ
ers
al
Som
po
Branches
FY12 Total Premiums (US $ mn)
FY12 Shareholder’s Account Profit after Tax (US$ mn) FY12 Branches
Shriram General Insurance
was established in 2008
and commenced
operations thereafter
It is one of the most
successful Non-Life
Insurers amongst the new
established players
It is one of the few
profitable general
insurers in India
It benefits greatly from
the strong distribution
capabilities as well as
loyal customer base of
the Shriram Group
244
170 177
259 285
316
78
FY12 Product-wise Distribution (%)
Shriram General Insurance Peer Analysis
12
-27
-10
4
0
-5
-23
ShriramGeneral
BhartiAXA
FutureGenerali
Chola RoyalSundaram
Tata AIG UniversalSompo
Policyholder's PAT
29
Competitive
Advantage Access to Shriram Group customer base of 9.3 mn and infrastructure
Low cost of operations due to access to Group customer base and infrastructure
Promoted by Shriram Group with an excellent track record in the financial services business in Joint Venture* with Sanlam Group
a well established financial services Group in South Africa with an asset base of around US $ 60 billion. Sanlam Group has in its
fold the Santam Limited the leading short term insurer in South Africa. * - Since disinvested by Sanlam Group in September 2012
Promoters /
Management
Expand modularly in geographic and customer segments profitably. Going
forward
Profitability
Margins
Earned profits in the very first year of operations
Apart from SBI Life, the only private insurer to have cumulative profits at the end of 5 years of operations
Commission paid ratio of 8% and Opex ratio of 20% to total premium income
Shriram Life Insurance Key Highlights
30
135
208181 185
6033
146
15
53
8 0
Sahara
Life
Shri
ram
Life
Bhart
i A
xa
Life
Futu
re
Genera
li L
ife
IDB
I F
edera
l
Canara
H
SB
C O
BC
Life
Branches Agents ('000)
FY12 Total Premiums (US $ mn)
FY12 Shareholder’s Account Profit after Tax (US$ mn) FY12 Branches & No. of Agents (1)
6
11
-37
-25
-13
-17
Sahara Life Shriram Life
Bharti Axa Life
Future Generali
Life
IDBI Federal
Canara HSBC
OBC Life
Shriram Life Insurance was
established in 2005 and
commenced operations
thereafter
It is one of the most
successful Life Insurers
amongst the new
established players
It is one of the few
profitable life insurance
companies in India
It benefits from the strong
distribution capabilities as
well as loyal customer
base of the Shriram
Group
1,962
1,229
2,696
565
1,132
2,526
1,439
43 124 149 150 142358
HDFC Life Max NYL ICICI Pru Life
Kotak Old Mutual
Birla Sunlife
SBI Life Bajaj Allianz
Sahara Life
Shriram Life
Bharti Axa Life
Future Generali
Life
IDBI Federal
Canara HSBC OBC
Life
Oct ’00 Nov ’00 Nov ‘00 Jan ‘01 Jan ‘01 Mar ’01 Aug ‘01 Feb ‘04 Nov ‘05 Jul ‘06 Sep’ 07 Dec’ 07 May 08 Established in:
Note : 1 Except Shriram Life others figure are based on FY’ 11
Shriram Life Insurance Peer Analysis
31
Shriram Credit Company
Shriram Credit Company Limited
(SCCL) incorporated in 1980 is a
Non-Deposit taking NBFC registered
with RBI
SCCL is directly engaged in
Financing activities mostly Loan
against Shares
Through its subsidiaries, SCCL is
engaged in
Stock Broking (Shriram Insight
Share Brokers Limited)
Distribution of Financial Products
(Shriram Fortune Solutions
Limited)
Infrastructure Provider (Shriram
Financial Products Solutions
(Chennai) Private Limited)
Expanded into Wealth Management
Services (Shriram Wealth Advisors
Limited) activities of which are at a
nascent stage.
Leapfrog invested US$ 15 mn. in
October 2011 for 13.57% stake
valuing the company at around US$
110 mn
Shriram Credit
(NBFC)
Business: Loan Against Shares and holdco for other
companies
Shriram Insight Share
Brokers
Business: Stock and commodity Broking
Shriram Fortune
Solutions
Business: Infrastructure Provider
Shriram Financial Products
Solutions (Chennai)
Business: Distribution of financial products
Shriram Wealth
Business: PMS & Wealth Mgmt.
(yet to commence business)
32
Shriram Insight Share brokers, incorporated in
1995, is a professionally managed stock broking
arm of Shriram group
Commenced operations in cash segment at
NSE in 1996
Commenced operations in derivatives at NSE
in 2003
Commodity broking services on MCX through a
wholly owned subsidiary
Focused on retail clients
An active client base of 184,000 customers
Aims to target mass affluent customers to drive
next level of growth
Products include equities broking, derivatives
broking, commodities broking (through a 100%
subsidiary), online trading, margin financing,
trading, IPO distribution, demat account and basic
research support (intraday calls, technical analysis
etc)
Member of National Stock Exchange (NSE)
(equity and derivatives) and Bombay Stock
Exchange (BSE) for stocks
Depository participant with Central Depositary
Services (India) Limited (CDSL)
Has a network of around 700 + branches and
1,189 trading terminals
Key Financials
Key Financials (in USD mn) FY’12 FY11
Revenue1 12 18
EBITDA1 3 4
PAT1 2 2
Net worth 16 15
Total Assets 22 31
Note 1 : Aggregate revenue and PAT of Shriram Insight (broking business), Insight Commodities and Shriram Credit (financing business)
Source : Corporate website
Peer Comparison (FY11 Revenue & Profit after Tax(1) (US$ mn))
18 31
24
502
54
2 11
2
150
10
Shriram Insight A.K. Capital Emkay Indiabulls Geojit BNPP
Revenue PAT
Shriram Credit Shriram Insight Share Brokers
33
Shriram Fortune/ Shriram Financial Products distribute a
range of investment and insurance products, primiraly of
Shriram Group and offer infrastructre support services /
training facilities
A nationwide distribution network with 428 branches and
an agency force of more than 50,000 personnel catering
to a pan India customer base of more than 1.5 million
Direct presence through 65 branches and an indirect
presence through 363 branches
An employee base of 2,300
Products distributed :
A range of deposits/ debenture products of Shriram
Group
Life insurance products of Shriram Life
General insurance products of Shriram General and
Health Insurance of Apollo Munich, Star Health, etc.
Mutual fund products of 34 Asset Management
Companies (AMC) (out of a total 44 AMCs active in
India)
Total Volume of investment & insurance product distributed by Shriram Group
Source: Corporate website
Peer Comparison (FY12 Branches & Clients)
644
300
1000.25
1,500
541
160
374
8
428
Geojit BNPP Indiabulls Emkay A.K. Capital Shriram Fortune Solutions
Clients ('000) Branches
Particulars (in USD mn) FY12 FY11
Deposit / Debenture 476 439
Life Insurance (APE) 24 28
General Insurance 3 2
Mutual Fund 2 1
Shriram Credit Shriram Fortune Solutions/Shriram Financial Product Solutions (Chennai)
34
Table of Contents
Section 1: Executive Summary
Section 2: Shriram Group
Section 3: Shriram Capital
Section 4: Overview of Financial Services operating companies
A. Shriram Transport Finance
B. Shriram City Union Finance
C. Shriram General Insurance
D. Shriram Life Insurance
E. Shriram Credit Company
Shriram Insight Share Brokers
Shriram Fortune Solutions/ Shriram Financial Product Solutions
Section 5: Shriram Capital future plans
35 35
Banking
Opportunity
Equipment Finance business which targets small to medium contractors is expected to grow with significant operating synergies
with its parent company - STFC
Housing Finance will cater to the large middle income population of the country and provide the additional housing product to
Shriram group’s existing customer base.
Passenger CV and Tractor Financing will enhance the products market scope of STFC.
Wealth Management products development will augment the group’s product capability as it targets the mass affluent segment ;
The listed AMC within the group will be an added advantage
New
Businesses
Consolidate STFC operations and maintain a modest growth rate
Grow SCUF into a large enterprise finance entity at an attractive growth rate
Expand modularly in geographic& customer segments profitably for SLIC
Expand and develop Corporate Insurance programs, while simultaneously growing the Motor book
The large customer base of the group will continue to be data mined for Financial product distribution and Brokerage services
Growth in
existing
businesses
Shriram
Capital
Institutionalize active engagement with all operating companies
Identify and induct Strategic partners & financial investors in SCL and subsidiary companies
Prepare for a potential IPO of SCL and other unlisted companies
Shriram Capital Future Plans
Drive financial inclusion and provide a wider product suite to existing customers as well as new customers in the
same/similar space
Deepen our presence by covering new customer segments in its existing geographies as well as by expanding its
distribution presence in new geographies to tap the unbanked/under-banked customers in those locations
www.shriram.com
www.shriramcapital.com
Forward Looking Statement
Certain statements in this document with words or phrases such as “will”, “should”, etc., and similar expressions or variation of these
expressions or those concerning our future prospects are forward looking statements. Actual results may differ materially from those
suggested by the forward looking statements due to a number of risks or uncertainties associated with the expectations. These risks
and uncertainties include, but are not limited to, our ability to successfully implement SCL’s (the Company) strategy and changes in
government policies. The Company may, from time to time, make additional written and oral forward looking statements, including
statements contained in the Company’s filings with the stock exchanges and our reports to shareholders. The Company does not
undertake to update any forward-looking statements that may be made from time to time by or on behalf of the Company.