Memorial University of Newfoundland. Mahindra Finance. Strategy 2020: Radical Thinking to drive Posi9ve Change. Edge Consulting

Transcription

1 Memorial University of Newfoundland Mahindra Finance Strategy 2020: Radical Thinking to drive Posi9ve Change Edge Consulting

2 Agenda Problem Statement Neal Key Issues Key Objec9ves Analysis Alterna9ves Lindsey Recommenda9on Implementa9on Plan Angela Financials Ryan Risks and Mi9ga9ons Angela Conclusion

3 Problem Statement What strategy should Mahindra Finance u9lize to meet it s growth goals and become one of the 50 most admired global brands?

4 Key Issues Global Recogni9on Growth Innova9on Company Values

5 Key Objec9ves q Top 50 most admired global brands q Growth goals q Innova9on q Company Values

6 Assump9ons Indian government stability U9liza9on of exis9ng infrastructure (co- loca9on) Con9nued commitment to rural consumers

7 Analysis External Analysis Industry in India 13.1%- 17.1% ( ) growth in NBFCs Bajaj Finance 4.4x net worth, 12x assets Mahindra Finance 4x net worth, 5.6 x assets Lots of exis9ng compe99on Fast growth NBFCs are a very compe99ve sector

8 Analysis External Analysis Public Sector Banks Control 80% of the market Well established rural presence Private Sector Banks Aggressively entering semi- rural and rural areas Technology focused Rural climate becoming more compe99ve

9 Analysis External Analysis SmartCi9es Housing For All: Rural Development AMRUT Housing for All Opportuni9es s9ll exist in rural India

10 Revenue versus Profit Revenues Market showing diminishing returns Net Profit Revenues Net Profit

11 Analysis Internal Analysis Mahindra Finance Knowledge of rural market 3% ROA compared to.5 in urban Long standing rela9onships Advantage provided by working history

12 Return on Equity % 20.00% 15.00% 14.90% 16.70% 13.60% 14.80% 20.50% 19.30% 21.10% 20.30% 18.10% 15.30% 10.00% 5.00% 0.00% Market exhibits diminishing returns Return on Equity Return on Equity

13 Analysis Internal Analysis Empowered Companies Entrepreneurial Independance Group- wide synergies Ability to enter and support promising markets

14 Ownership of Mahindra Finance Foreign Ins9tu9onal Investors 38% Mutual Funds and Domes9c Ins9tu9ons 4% Non Ins9tu9ons 6% ESOP Trust 1% Mahindra and Mahindra 51%

15 Analysis Internal Analysis Structural Support Mahindra owns 48% of assets Poten9al for financial safety Support and exper9se for new rural markets New market entry can be supported

16 Alterna9ves 1 Expand into urban India focusing on immigrants from rural 2 Expand reach in rural India by incorpora9ng payment banks 3 Expand into developing economies interna9onally

17 Alterna9ve One: Expand into urban India focusing on immigrants from rural Edge - Large market - Familiarity with target - Intense well- established compe99on - Low margins, high investment - Outside exper9se - No fit with global goal - Not innova9ve or radical - Not synergis9c

18 Alterna9ve Two: Expand reach in rural India by incorpora9ng payment banks Edge - Innova9ve and radical - Organiza9on fit - Market familiarity and rela9onships - Immense opportunity - Low investment - Synergis9c - Compe99ve forces - New area

19 Alterna9ve Three: Expand into developing economies interna9onally Edge - Radical and innova9ve - Synergis9c - Organiza9on fit - Proven formula - High margins - Low compe99on - Lack of market familiarity - Risk

20 Decision Matrix Value alignment Urban India Expansion Payment Bank Expansion Developing Country Expansion Innova9ve and Radical Global recogni9on Revenue and Growth

21 Recommenda9on Expand within rural India using revised strategy, with the addi9on of payment banks Expand in developing countries using current, successful model (focusing on Africa and Southeast Asia)

22 Implementa9on Plan Short Term (0 months 1 year) Introduc9on of Payment Banks Global inves9ga9ons India Rural Expansion Medium Term ( 1-2 years) Con9nua9on of expansion plan Global Inves9ga9on Long Term (2+ years) Entry into Global Opportuni9es

23 Introduc9on of Payment Banks U9lize exis9ng infrastructure Roll out upgrades to pymt bank (1 pymt. bank/550 villages) Total of 550 upgrades to full service branches Low cost technological advantage One Year Two Years 3-4 Years Infrastructure Development Staff training Word of Mouth Roll out to 225 Pymt. Banks Cont. Roll out to 225 Pymt. Banks Total Pymt Bank upgraded: 550 Total villages serviced: 302,500 Monitoring of balance Addi9onal infrastructure as needed

24 Expansion into Rural India 100,000 villages lej to service in India Objec9ve 20,000 villages (80/20 based on M&M sales) One Year Infrastructure Development Staff training Word of Mouth Roll out to 45 full service Two Years Cont. Roll out Total full service: 91 Total villages serviced: 20, Years Monitoring of balance Addi9onal infrastructure as needed

25 Selec9on Criteria for New Infrastructure M&M Farm Sales Compe9tor Sales Real Estate Opportuni9es Housing for All involvement Bank acct. balances

26 Global Rural Expansion South Africa, Bangladesh, Indonesia, Philippines Expansion India office coordinators to manage Marke9ng through work of mouth approach One Year Infrastructure Development 10 offices per new country Service: 11,000 global villages Two Years Cont. develop. 10 more office/ country Service: 22,000 global villages New country inves9ga9on: Kenya 3-4 Years Cont. develop. Entry into new countries (Kenya)

27 Global Considera9ons Village popula9ons Familiarity with M&M brand Access to banking services Debt to GDP ra9o Technology services On the ground exper9se

28 Implementa9on Overview Pymt. Bank Upgrades Year One 225 Total Upgrades Year Two 550 Total Updates Year Three Further Explora9on New full service India Rural Year One 45 new Full service Year Two 90 total full service Year Three Further Explora9on Global Expansion. Year One 40 new offices Year Two 80 total new offices Year Three Further Explora9on

29 Implementa9on Overview Total Pymt. Banks updates: 550 Total new offices: 170 Total Villages reached (Globally): 283,000

30 In Million of rupees Edge Financials Year One Year Two Year Three Pymt. Banks Upgrades 1,350 2,450 1,100 New Full Service India Rural Global Expansion Total 1,860 3,590 1,540

31 Where does the money come from? Internal Funding from strong historical earnings Partnership investments

32 Revenue versus Profit Revenues Net Profit Revenues Net Profit Assump9ons: 1. 10% of housing under Homes for All go to M&M Finance 2. Consistent costs of borrowing and lending money 3. Growth rate of 8% (Consistent b/w India and Foreign markets) 4. Maintenance of current product mix 5. 80/20 mix of Indian vs Foreign customers

33 Risks and Mi9ga9ons Risk Level Mi9ga9on Economic downturn Company Reputa9on Government Regula9ons Medium Low Low - Payment structure and clientele base - History - Rela9onships - Compliance - Rela9onship- building

34 What Good Looks Like Edge

35 Conclusion q Top 50 most admired global brands q Growth goals q Innova9on q Company Values

36 Memorial University of Newfoundland Thank You Ques9ons? Edge Consulting

37 Con9ngency Plan Expand in developing countries using current, successful model (focusing on Africa and Southeast Asia)

38 Alterna9ve Three: Expand into developing economies interna9onally Edge - Radical and innova9ve - Synergis9c - Organiza9on fit - Proven formula - High margins - Low compe99on - Lack of market familiarity - Risk

39 Mahindra Finance Assets Under Management Tractors 31% Pre- Owned 15% Commercial Vehicles and Construc9on 13% Auto/U9lity 18% Cars