magma investor presentation may2010

8/6/2019 Magma Investor Presentation May2010

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1

Magma Fincorp Limited

Reaching New Heights in Retail Finance

May 2010



2

2

• Introduction to Magma

• Business Overview

• Financial Performance

• Business Strategy

Table of contents



3

3





Table of contents


http://slidepdf.com/reader/full/magma-investor-presentation-may2010 4/30 44

Investing in the smallest dream

Magma caters to diverse financial needs of small entrepreneurs in rural* and semi urban*

markets of India …

Magma’s growth is a reflection of India’s new emerging entrepreneurs.

* Based on company’s market surveys and estimates



Magma understands financial needs of people of rural

and semi urban India

… leverages this knowledge to create and build new

markets.

Our target markets and customers

Financing First Time Truck Owners >

Magma finances small entrepreneurs to own

construction equipments,

In the process, creating new entrepreneurs



…besides tractors, Magma funds multi-utility vehicles and more,

strengthening rural entrepreneurship and Magma’s business

potential

Magma actively pursues farmers owning less than6 acres of agricultural land and provides funds for

purchase of tractors

Our target markets and customers …

Magma funds small land-owning farmers

Overladen vehicle carrying passengers fromvillage to a nearby town



− 153# Branches across 21 States/ Union

Territories

Focus on first time buyers and small entrepreneurs in semi-urban/ rural markets

− Over 75% branches in rural*/ semi urban*

markets

− Many of Magma customers are first time

buyers and/or small entrepreneurs

Urban23%

Semi -

Urban

35%Rural

42%

Our pan India presence, largely rural and semi urban…

# As of Mar 31, 2010 ; * Based on company’s market surveys and estimates



Our financing products …

Backhoe loaders, excavators,

cranes, dumpers etc

… fleet of machines for

bigger projects

Passenger Cars and Utility

VehiclesAll classes of trucks -

light, medium and heavy

Used Commercial Vehicles

used in smaller areas TractorsLoans to SMEs for working

capital/ expansion

Infrastructure support for

Asset Insurance and Credit

Covers

Tailored for our

target marketsand customers



99

Our human resources, our greatest assets

We value human capital … access to

~4600 trained manpower directly and

indirectly.

H R

D E L I V E R A B L E

S

Performance Management

Specific & Measurable KRAs for FOS#/

Leaders

Monthly variable payout as per KRA

achievement

Leadership Development

Career progression plans

MDP* for leaders/ high performers

Training

Intensive induction for new joinees

Regular functional and soft skills training for

existing employees

~ 875 training man-days per month

Our Core Values

Openness & Transparency

Integrity & Credibility

Fairness & Impartiality

Trust & Respect for people

Demanding Excellence

Manpower Distribution (Mar 31, 2010)

2nd LineLeaders,

285, 6%

Branch

Backoffice

, 474, 10%

HO, 250,5%

FOS, 2915,

64%

1st Line

Leaders,

677, 15%

* Management Development Programme # Fleet on street, i.e. manpower on field



1010

Our enduring business and financial partnerships

Banks

Rating Agencies

Manufacturers/

Vendors*

Mutual Funds#

# Mutual funds have invested in debt instruments of the company* The list is indicative



1111

Origination

Credit

Underwri-

ting

OperationsCollections

(0-180)

ARD*

resolutions

Back office/ Support Functions

New

Customer

Closure of

contract

Origination : Lead Management and Business Development

Credit Underwriting : Credit Screens, RCU#, Risk Management

Operations : Documents Management, Internal Controls

Collections : Bucket-wise processes

ARD Resolution : Legal/ Hard recovery skills

Well defined KRAs in different

functional verticals leading

to alignment of functional goals

to Organisation Goal of

Sustained Profitable Growth

Business/ Functional Vertical

Our structures and processes…

* Asset Reconstruction Division (ARD); # Risk Containment Unit (RCU) , a sub function in Credit function



1212

… supported by strong technology

Oracle 10g and customised ERP applications, integrating all functions from

origination to contract closure, with accounting / back office transactions

Networking of all branches enabling real time data processing and report access

Disaster Recovery for Business Continuity

Oracle 10gApplication

Server

Oracle 10gApplication

Server

WebServer

Report

Writer

KOLKATA OTHER LOCATIONS

Internet Users

WebDatabase

Oracle 10g

Database Server Reportingdatabase

SchematicRepresentation of

the application

SERVICE PROVIDER VPNCLOUD

(IP-based MPLS-enabled)

HOZO/SBUBIG BRANCH

Branch Networking



1313

Started Retail

FinancingExpanded Retail Financing

operations in eastern region

Acquisition of Consortium

Finance – expansion of

network in North India

Started

financing

business

Insurance tie-ups

FY 89#FY 89#

FY 96FY 96

FY 98

FY 98

FY 01FY 01

FY 05FY 05

Launched Tractor Business

FY 08FY 08

FY 09FY 09

Started SME Loans Business

FY 07FY 07

Merger with Shrachi

FY 10FY 10

1371 Cr*

2544 Cr*

3673 Cr*

4559 Cr*

Entered into Insurance

JV with HDI -Gerling

High Growth Phase

20 years of successful organic and inorganic growth

# The fiscal years ended on 30th

Jun for years upto FY95, 30th

Sep for years FY96 to FY99, 31st

Mar for FY01 onwards.FY01 is a 18-month fiscal period from 1st Oct 1999 to March 2001.

* The figures represent disbursement made by the company and its subsidiaries in the respective financial years

3513 Cr*



1414

As of 31st Oct 2009

Promoters’ Profile

Mayank Poddar, Chairman

Age 56 Years, B.Com

Co-founder Magma

Oversees Strategy and Policy making

35 years experience

Sanjay Chamria,

Vice Chairman & Managing Director

Age 45 years, FCA

Co-founder Magma

CEO formulating strategy, execution and day-to-day management

24 years experience

Shravan Kumar Todi, Vice Chairman

Age 67 yrs, M.Com

Ravi Todi, Joint Managing Director

Age 40 Yrs, B.Com

Originally Shrachi Group, comprising Financial Services, Realty, Agricultural Tools

& Engineering businesses

Became co-promoters with merger of Shrachi Infrastructure Finance into Magma

20 years experience of Ravi Todi

Our ownership

Shareholding >>>

Domestic

Investors

10.6%

Promoters

41.8%

Public

9.5%

FIIs

38.1%

As of May 21, 2010



1515

Board of Directors

International and Indian Independent directors

Wide knowledge including Insurance, Rural Marketing, Business

Development, Risk and Investment management

Active participation in committees

Leadership MD, JMD, CFO, COO, Chief - Receivables Management, CEO

designate – Insurance JV, CPO and CIO

Management

Management Committee

Audit Committee

Risk Management Committee

Asset Liability Committee

Our corporate governance and management



1616

Our Insurance Joint Venture with HDI Gerling

Experience in relation to distribution of asset

insurance products

Related diversification into general insurance

underwriting

Magma/ Promoter Associates - 74%, HDI -

26%

Magma to receive Rs. 28 Cr as market

entry fee from the JV partner, which would

cover its equity contribution.

Post-initial capitalisation of Rs. 110 Cr,further capitalisation of Rs. 96 Cr solely by

the JV partner

Magma to earn distribution income

Infrastructure sharing cost reimbursement,

as JV will utilise Magma’s branch network

• HDI Gerling, part of Talanx Group- over

100-year old group in Germany•Talanx is 3rd largest insurance group in

Germany, operating as multi-brand

provider incl. Hanover Re, active in 150

countries on five continents.

•Anticipated Group GWP of over €21 bn

(FY09)

•JV marks Talanx entry into Asia, andfirst into India with Magma

Talanx Group and HDI Gerling –A Corporate Overview*

Magma’s JV extends its product capability and creates further value

* Based on information given in website of Talanx and HDI Gerling on 19.04.2010



1717





Table of contents



1818

0

1000

2000

3000

4000

5000

FY05 FY06 FY07 FY08 FY09 FY10

R s C

r

Cars & UV CV CE Used CV, Tractors, SME

Products FY05-FY10

Construction Equipment 30%

Comercial vehicles 22%

Cars & Utility Vehicles 23%

27% CAGR disbursement growth (FY05 – FY10)

Key Product Disbursement CAGR

New Product Introductions

Products FY05-FY10

Used CV (Suvidha) FY06

Tractors FY08

SME Loans FY09

• Continued lending in FY 09, despite economic slowdown

• FY 10 performance (disbursement of Rs. 4559 Cr) reflects Company’s

higher growth trajectory.

Business on a high growth trajectory

Overall CAGR

27%



1919

De-risked business strategy

Const

Equipment

& Str CE

29%

Passenger

Cars and

Utility

Vehicles23%

Tractors

5%

Used CV

3%

SME

5% Commercial

Vehicles

35%

FY10 Disbursement - Product Wise FY10 Disbursement - Geographical Mix

Wide canvass across geographies & products reduces impact of any external shocks

MAHARASHTRA

11%

CHHATTISGARH /

MP10%

ORISSA

5%

JHARKHAND /BIHAR

8%

KERALA

3%

KARNATAKA

4%

TAMIL NADU

2%

ANDHRA

PRADESH

13%

DELHI

8%

PUNJAB / HP

5%

RAJASTHAN

7%UP

6%HARYANA

4%GUJARAT

6%

WEST BENGAL

8%



2020

…Increasing share of higher yield products*

Car & UV

22%

Used CV

8%

CV

45%

CE

25%

Car &

UV

23%

CV35%

CE

29%

Tracto

r

5%

Used

CV

3%

SME

Loans

5%

SME

Loans

3%

Car &

UV

27%

Used

CV

4%

Tracto

r

2%

CV

30%

CE

34%

Disbursement Mix

New product contribution - 8% New product contribution - 9% New product contribution - 13%

FY07 FY09 FY10

New higher* yield products launched over the last 3 years contribute 13% of disbursement

* Higher yield products as referred here comprise Used CV, Tractor and SME loans and these financing products earnyields in the range of 16.5%-22% per annum



2121

Strong fund raising capability

Sources of Funds

Working Capital Facilities - Major banks part of consortium

Term Loans /Debentures - Banks and Financial Institutions

(FIs) like SIDBI & IREDA

Securitisation of Receivables - Banks / Mutual Funds / FIs

Tier 2 Funds (Sub-debt) - AA- rated, subscribed to by Banks and

Mutual Funds

Tier 1 Funds (Perpetual Debt) - AA- rated, subscribed to by Banks

* PSL stands for “ Priority Sector Lending”, as defined by Reserve Bank of India from time to time

Continued availability of adequate funding lines at competitive rates

Magma’s assets, a significant portion being PSL*, enables bank funding at

lower cost

Consistent investment grade rating of Magma’s debt instruments

Basel II rating of Magma enables lower risk weight of 20%

Long banking relationships ensured continued lending during economic downturn



2222





Table of contents

FY10 K A hi t Di b t G th



2323

FY10 Key Achievements… Disbursement Growth

689

1389

0

500

1,000

Q4 FY09 Q4 FY10

• Disbursements Growth of 102% as against Q4

of FY09 and 32% as compared to Q3 of FY10

(Rs.1049 Cr)

102 % Growth

• 24% growth in FY10, despite sluggish first

half

• Share of higher yield products (Used CV,Tractors and SME Loans) at 13% for the year

as against 9% last year 3,673

4,559

2,000

3,000

4,000

5,000

FY09 FY10

24% Growth

FY10 K A hi t E h d NIM



2424

3.8% 3.6%

5.1%

0%

1%

2%

3%

4%

5%

6%

FY 08 FY 09 FY10

Net Interest Margins* Yield on Advances & Cost of funds

10.2%11.8%

8.7%

13.8%

14.0%15.4%

0%

5%

10%

15%

20%

FY 08 FY 09 FY10

Yield on Advances Cost of Funds

• Net Interest Margin (NIM) enhanced to 5.1% in FY10• NIM for Q4FY10 at 5.5 % (vs 4.5 % Q4FY09)

• NIM growth due to greater share of high yield products (13%) and

interest cost management

FY10 Key Achievements… Enhanced NIM

* Net Interest Margin is defined as difference between yield on advances and cost of funds

FY10 Key Achievements … Sustained improvement in collection



2525

y p

performance and asset quality

0.51% 0.46%0.54%0.67%

0.00%

0.50%

1.00%

FY07 FY08 FY09 FY10

Write-offs to Total Assets - %

Annual credit charge to PL is a reflection of Magma’s origination quality and

collection performance

96.8% 97.0%97.8%

99.8%

0%FY07 FY08 FY09 FY10

Collection Efficiency* - %

• Collection Efficiency in Q4 FY10 at 103.4%

(vs 100.8% Q4 FY09)

• Accordingly, write-offs contained well within

0.5% of total assets for FY10

* Collection Efficiency is defined as installment collections made during the period divided by installments billed during the period as percentage

G i t d i ffi i d fit bilit



2626

279

472

631

723

FY07 FY08 FY09 FY10

CAGR 37%

Total Income (Rs Cr)

5040

71

FY08 FY09 FY10

Profit After Tax (Rs Cr)

32.9% 32.7%

29.6%

FY08 FY09 FY10

Operating Efficiency (Costs to Income Ratio)

… Growing trend in efficiency and profitability

Up 79%

Growing trend in efficiency and profitability



2727

… Growing trend in efficiency and profitability

15.9%

11.4%

19.4%

28.1%

FY08 FY09 FY10 Q4 FY10

Return on Equity

2.1%

1.3%

1.8%

2.4%

FY08 FY09 FY10 Q4 FY10

Return on Assets

Table of contents



2828





Table of contents

Business Strategy



2929

Business Strategy

Market

positioning

Product

portfolio

• Business growth across all products

• Increasing share of higher yield products: Used CV, Tractors & SME loans

• General Insurance foray to expand product offerings

• Focus on first time buyers and small entrepreneurs

• Focus on semi urban and rural markets

Financials

• Drive RoE/RoA through

• Higher NIM and higher business volumes

• Greater contribution from higher yield products to overall business• Improvement in operating efficiency



3030

Forward Looking Statements

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 materiallyfrom 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 our 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.

Thank You