REPCO Home Finance Initiating Coverage

Transcription

1 REPCO Home Finance Initiating Coverage November 29,

2 Catch them young, watch them grow We see REPCO Home Finance as a multi-year growth play on the theme of low-ticket size, more profitable selfemployed customer segment of housing finance in Southern & Western India. We believe the business has legs to sustain >25% growth rate with an improving ROE profile (from ~17% to 21% by FY18E) translating into a strong compounding story in 3-5 year horizon with potential to be a double bagger in a 3-year time frame. Holds promise of further structural improvements in leverage, ROE and therefore multiples as company demonstrates its performance overtime in line with peers and wins stake-holder confidence. Initiate coverage with rating and a TP of valuing business at 2.7X FY15E ABV. Key sector thoughts: Housing finance to self-employed segment and small ticket size loans remains under penetrated despite regulators favouring lower ticket size loans by allowing lower risk weights, PSL status and refinancing options at low rates. Recently announced cap of 2% in Rural Housing Fund (RHF) refinance window of NHB makes lending sub-optimal (Rs. 0.2mn to Rs.1.5mn) or not feasible for HFCs operating in the <Rs. 0.2mn segment and may be reversed. Under-ownership of houses is higher in Southern and Western India and has increased further in the last decade Things that we like in REPCO In right geographies & preferred lower ticket size market: Presence of close to 90% by branches and 96% by loan book in Southern and Western geographies. Ticket sizes of REPCO are almost 1/3rd lower than LICHF and close to half of the ticket size of HDFC at Rs. 1mn. Volume driven growth: Loan book growth of 2.5X between FY10-13 has come with healthy 1.8X growth in customers Focus on Self- Employed Segment: minimal reliance on DSA channel: 50% of home loan book from selfemployed segment compared to 10-20% of other large players. Owns customers as it does not rely on DSA model. Margin buffers to cope with loss of RHF: Upgrade from rating agencies from A+ to AA-; potential liability diversification to NCD/CP market; securitization (PSL benefit) and increase in proportion of LAP book to 18% by FY16E from 14% in FY13 would help in absorbing some margin pressure without resorting to rate hike Similar ROAs as peers; leverage key difference: Has similar ROA profile as peers but inability to leverage without impairing rating differentiates it from them. Winning stakeholder confidence and given that GOI ownership of parent REPCO Bank should help in addressing this issue helping it in improving ROE s structurally over time. Removal of cap of 2% on RHF by NHB can add 1.5-2% to structural ROE s. Financial summary Year NII (Rs. mn) PAT(Rs. mn) ROE (%) ROA (%) ABV P/ABV(x) FY13 1, % 2.4% FY14E 1,925 1, % 2.9% FY15E 2,493 1, % 2.9% Date 29 Nov, 2013 Market Data SENSEX Nifty 6092 Bloomberg Shares o/s Market Cap Initiating Coverage Stock performance (%) REPCO IN 62mn Rs. 19bn 52-wk High-Low Rs m Avg. Daily Vol Rs. 5mn Index member BSE 500 Latest shareholding (%) Promoters 37.4 Institutions 18.6 Public m 3m 12m REPCO 7% 35% N/A Sensex 0% 14% 9% Bankex 1% 25% -7% Jyothi Kumar Varma jyothikumar@sparkcapital.in Abhinesh Vijayaraj abhinesh@sparkcapital.in Navin Babu navin@sparkcapital.in

3 Table of Contents Section Page Introduction Factsheet 4 Click Industry section Housing loans to Self-employed class 6 Click Low ticket size loans 7 Click Ownership trends in key geographies 8 Click Urban Housing ownership 9 Click NHB refinance schemes 10 Click Lending cap on RHF scheme 11 Click Company section Key valuation drivers 13 Click Markets & segments 14 Click Margin Sustenance Click Financial Leverage 17 Click Valuation 18 Click Crystal gazing 19 Click Risks 20 Click Financial Summary 21 Click 3

4 Factsheet Corporate Factsheet Background Presence Management depth REPCO is a housing finance company headquartered in Chennai, Tamil Nadu. It was incorporated in April 2000 as a wholly owned subsidiary of the REPCO Bank Limited, a Government of India enterprise. REPCO BANK was registered in 1969 as a Cooperative Society with Jurisdiction over the State of Tamil Nadu, Andhra Pradesh, Karnataka, Kerala and Union Territory of Pondicherry for the purpose of promoting the rehabilitation activities for repatriates from neighbouring countries mainly from Sri Lanka and Burma. It is 80% held by GOI and other state governments. REPCO is operating through 82 branches and 20 satellite centres in Tamil Nadu, Andhra Pradesh, Kerala, Karnataka, Maharashtra, Gujarat, Odisha, West Bengal and Pondicherry. Mr. R Varadarajan (Managing Director) Mr. R Varadarajan began his career with Syndicate Bank and worked in various capacities for around 23 years, and thereafter joined Repco Bank as General Manager in the year He became Executive Director during 2006 and took charge as MD in Mr. P Natarajan (Executive Director) Mr. P Natarajan has nearly 30 years of experience in banking services, and previously he was a general manager at REPCO bank. Mr. V Raghu (Executive Director) Mr. V Raghu has an MBA & a masters degree in economics, and has prior work experience with NHB & RBI. Management tenure Mr. R Varadarajan has been with the HFC for 13 years, and played a key role in the initial public offering of REPCO. Business Corporate Structure REPCO derives majority of its business from the four southern states. REPCO was incorporated as a wholly owned subsidiary of Repatriates Co-operative Finance and Development Bank Limited. REPCO bank currently holds 37% stake in the company. Loan book mix Home loans to Individuals 84% Loan against property (Mortgage) 16% Key Success Factors Capital History Auditors Owned Customer base, Operating in relatively niche market and sound underwriting IPO in March 2013 raised Rs. 2.3bn R Subramanian & Co., Chartered Accountants. 4

5 Industry Section 5

6 Salaried Self-emp. Salaried Self-emp. Salaried Self-emp. Salaried Self-emp. Fee paid (Rs.thousands) REPCO Home Finance # 1. Competition lesser in self employed space (SE); Pricing is better SE form 50% of work force but only 10-15% of home loans SE segment typically has higher GNPA to salary segment % Salaried, 16% Casual labour, 34% Self employed, 51% 4.00% 3.00% 2.00% 1.00% 0.00% Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Salaried segment GNPA Non Salaried segment GNPA Source: NSSO, Spark Capital Research...and number of other challenges Source: Company, Spark Capital Research Difference in originating fee structures also reflect the same* Salary class Non-Salaried Class Templatization of Lending process 60 Pooling of customers Intensity of KYC checks 0 NPA volatility Post Disbursement follow-up HFC1 HFC2 Bank1 Bank2 Loan amount (Rs.mn) Source: Spark Capital Research Favourable Unfavourable Source: Spark Capital Research, * Industry interaction 6

7 # 2. Small ticket housing - It is simple but not easy; not growing despite regulatory push GNPAs in lower ticket size 3-4x of larger size loans......pushing participants to chase higher value loans*... 14% 12% 10% 8% 6% 4% 2% 0% FY10 FY11 FY12 <Rs. 0.2 mn Rs. 0.2mn- Rs. 0.5mn Rs. 0.5mn- Rs. 1.0mn Rs. 1.0mn- Rs. 2.5mn >Rs. 2.5mn 1% mn 3% > 2.5 mn 43% mn 14% mn 25% mn 14% Source: NHB, Spark Capital Research...bringing down proportion of lower ticket size loans... Housing credit outstanding (SCBs) 100% > 2.5 mn 80% mn 60% mn 40% mn 20% Upto 0.2 mn 0% FY10 FY11 FY12 Source: NHB, SCB data, Spark Capital Research Source: NHB, Spark Capital Research,* FY12 disbursement data for HFCs...despite various incentives extended by regulators Ticket Size Upto Rs. 0.2 mn Between Rs. 0.2 mn to Rs. 0.5 mn Between Rs. 0.5 mn to Rs. 1.5 mn Between Rs. 1.5-Rs. 2.5 mn Upto Rs mn > Rs. 7.5 mn Source: Spark Capital Research Lowe NHB Refinance rates PSL status Lower risk weight 7

8 # 3. Under ownership of houses higher in Southern & Western India; declined further in the last decade Source: Census 2011, Spark Capital Research On other social parameters like safe drinking water, electrification and sanitation southern and western Indian states score better 8

9 # 4. Cohabitation & housing ownership increasing in urban; Rural India surprisingly going more nuclear Urban ownership of housing is going up in India.....driven by higher housing credit penetration despite which Urban and metro housing accounting for 77% of total credit Urban, 28% Metro, 49% Semi urban, 16% Urban Rural Total Owned (%) Rural, 7% Source: Census 2011, Spark Capital Research...households with >1 family is up in urban, down in rural Source: : NHB*, SCB data for FY11, Spark Capital Research Urban Rural Total Proportion of households with >1 married couples/house Implications More opportunity for housing finance in rural areas compared to past as nuclearization picks up Opportunity in urban areas especially in lower ticket sizes can go up as next generations starts seeking their own homes Source: Census 2011, Spark Capital Research 9

10 # 5. HFCs are key takers of NHB refinance schemes; especially in Rural Housing Fund Windows of NHB refinancing to HFCs Scheme Location Ticket Size Customer type Covenants Liberalized Refinance Scheme (LRS) Any Upto Rs. 1.5mn Any Interest rate Cap introduced recently (Sep 05, 2013) Golden Jubilee Rural Housing Refinance Scheme (GJRHRS) Rural Upto Rs. 1.5mn Any Rural Housing Fund (RHF) Rural Upto Rs. 1.5mn Weaker Sections 2% above max refinance rate Special Refinance for Urban Low Income Housing Urban Upto Rs. 1.0mn Refinance Scheme for Women Urban Upto Rs. 2.5mn Annual HH Income of < Rs. 0.2mn Women ownership (Sole/Joint ownership 2.75% above max refinance rate; If interest rate cap reduces viability of refinance in this scheme, it would curtail disbursements through this window Source: NSSO, Spark Capital Research 40% NHB disbursements* is to rural o/w >50% is through RHF Since inception ~80% of disbursements in RHF to HFCs Repco, 11% Urban, 61% GJRHF, 18% RHF, 21% Non-HFC institutions, 19% Other, 81% Other HFCs, 70% Source: NHB Data, Spark Capital Research * FY12 data Source: NHB data, Company, Spark Capital Research 10

11 FY10 FY11 FY12 FY13 FY10 FY11 FY12 FY13 FY10 FY11 FY12 FY13 FY10 FY11 FY12 FY13 FY10 FY11 FY12 FY13 Incremental Lending in Rs. mn REPCO Home Finance # 6. With a lending cap of 2% RHF scheme unviable/sub-optimal for most HFCs; may push NHB to rethink Favourable refinance rates but constrained by ticket size GRUH, REPCO and SUHF ticket sizes match RHF requirement Ticket Size Rate of Refinance through RHF* Upto Rs. 0.2mn 6.5% Between Rs. 0.2mn to Rs. 0.5 mn 7.0% Between Rs. 0.5mn to Rs. 1.5 mn 7.5% GRUH REPCO SUF LICHF HDFC Source: NHB, Spark Capital Research * rates as of FY12 Source: Spark Capital Research Lending rate cap on RHF creates sub-optimal ROE; may push HFCs to look at other avenues S. No Particulars MMFS GRUH REPCO SUHF 1 Eligible Refinance rate 6.5% 7.5% 7.5% 7.5% 2 Int cost as % of assets ( assuming 85% of B/S is debt ) 5.5% 6.4% 6.4% 6.4% 3 Opex to Assets (Only 33% of opex taken except for MMFS) 7.0% 0.3% 0.3% 0.3% 4 Credit costs 0.3% 0.3% 0.3% 0.3% 5 Min rate to cover opex, cc and COF (2+3+4) 12.8% 7.0% 7.0% 7.0% 6 Max lending rate possible (Eligible refinance rate + 2.0%) 9.5% 9.5% 9.5% 9.5% 7 Int income as % of assets (assuming 97% of B/S is loans) 9.3% 9.3% 9.3% 9.3% 8 Pre-Tax ROA(7-5) -3.5% 2.3% 2.3% 2.3% 9 Post Tax ROA ( Tax rate of 25%) -3.5% 1.8% 1.8% 1.8% 10 Assets/ Equity (15% equity) ROE (9*10) -23.4% 11.7% 11.7% 11.7% With 2% cap on RHF funding, lending is unviable or suboptimal. If off-take in RHF decreases NHB may rethink on the lending rate cap Source: Spark Capital Research 11

12 Company Section 12

13 Key valuation drivers Presence in under-owned regions of Southern and Western India Margin sustenance through Liability diversification + increase in proportion of LAP Valuation rerating Presence in segments with pricing power (LAP+ Self Employed) Structural increase in financial leverage pushing up ROE 13

14 # 1. Right markets, profitable segments & Owned customers base 2.5X growth in loan book; 1.8X increase in customers 91% of branches and 96% of loan book in under-owned states SCB Large HFC REPCO 100% 80% 60% 40% 20% 0% 15% 16% 51% Branches 13% 12% 66% Loan Book Loan Book growth Growth in customers TN Karnataka AP Maharashtra Guj Kerala WB Odisha Source: Company,NHB, Spark Capital Research, *HFC & SCB date not available for FY13 Housing loan book with pricing power >50% of the book* Source: Spark Capital Research No reliance on DSA imply Owned Customers ; Better pricing 100% 40% 80% 42% 35% 30% 60% 40% 20% 0% 58% REPCO 82% 18% Other large HFCs 25% 20% 15% 10% 5% 0% 20% 15% 0% REPCO HDFC LICHF Sale through DSA Channel LAP+ Self-Employed Housing loans Housing Loan to Salaried class Source: Spark Capital Research, * Indicative range only, excluded developer book from ambit Source: Spark Capital Research, Company 14

15 # 2. Liability diversification, rating benefit and increase in LAP book. improvement from A+ to AA -to push down borrowing costs % 10.10% 10.4% 10.3% 10.2% 10.1%...and help in market related borrowings at lower rates 100% 80% 60% 63% 68% 65% 40% 1 0 A rating AA rating Capital Consumed for loan of Rs. 100 Differential in indicative lending rates 10.0% 9.9% 20% 24% 18% 10% 13% 12% 20% 0% FY13 FY14E FY15E NHB-non RHF Refinance RHF Refinance Banks CPs & NCD Source: Spark Capital Research Source: Spark Capital Research Higher yield LAP book to increase from 14% to 18% by FY15 20% 18% 16% Securitization window yet to be explored As sizable portion of the loans originated by REPCO qualify for PSL, securitization window can give funding at lower than bank base rates 14% 18% 16% 12% 14% 10% FY13 FY14E FY15E Source: Spark Capital Research 15

16 Impact on Pre-Tax ROA in bps REPCO Home Finance.alleviating some pain from lower borrowing from RHF refinance window Despite 50bps loss in pre-tax ROA due to loss of RHF refinance* owing to 2% cap, we see Sufficient levers like increase in LAP, utilizing securitization window which can reduce the impact to 20bps without resorting to any hike in rates Impact of loss of RHF funding Change to NCD/CP Securitization Increase in LAP portion Effective loss Source: Spark Capital Research, *Assuming it is replaced by bank borrowing Given that almost 100% of the customers are owned customers pricing power would be better which can help in absorbing the loss; In case NHB revokes the 2% cap on RHF, the above changes in liability and loan book composition can push up pretax ROA s by almost 30bps. 16

17 # 3. Financial Leverage to push up ROE; Regulatory capital consumption low Improving leverage to result in ROE improvement from 18% to 21% by FY18E S. No Particulars FY14E FY15E FY16E FY17E FY18E FY19E 1 Loan Growth 29.5% 29.3% 28.0% 28.0% 27.0% 27.0% 2 ROA 2.9% 2.9% 2.7% 2.6% 2.6% 2.5% 3 Equity 15.9% 14.8% 13.7% 12.8% 12.0% 11.3% 4 Leverage ROE 17.6% 19.2% 19.0% 19.3% 20.7% 21.3% 6 Capital Adequacy 23.7% 22.1% 20.5% 19.1% 17.9% 16.9% ROE to steadily increase to ~21% by FY18 Notably regulatory capital ( Tier-1) would still be ~17% well above the mandatory requirement 7 ABV Removing cap on RHF refinance window can push up ROA structurally by 1.4-2%* S. No Particulars FY14E FY15E FY16E FY17E FY18E FY19E 1 Loan Growth 29.5% 29.3% 28.0% 28.0% 27.0% 27.0% 2 ROA 2.9% 2.9% 2.7% 2.8% 2.8% 2.7% 3 Equity 15.9% 14.8% 13.7% 13.0% 12.3% 11.7% 4 Leverage ROE 17.6% 19.2% 19.0% 20.9% 22.0% 22.5% Stock to get rerated in case NHB removes the lending Cap 6 Capital Adequacy 23.7% 22.1% 20.5% 19.3% 18.4% 17.5% 7 ABV Souce: Spark Capital, *1.4% assuming 15% of liabilities are funded through Rural Housing Finance scheme 17

18 P/ABV REPCO Home Finance #4. Higher potential leverage over time can drive multiples higher GRHF clear outlier in valuations HDFC GRHF 4 REPCO 3 2 LICHF 1 DEWH Return on Equity (%) Source: Spark Capital Research, Bloomberg Estimates GRHF trading at 5X-1yr fwd multiple in similar space x x x x x - Nov-09 Nov-10 Nov-11 Nov-12 Nov-13 Source: Company, Spark Capital Research Similar ROA s but higher leverage give higher ROEs for peers REPCO** SUHF GRHF Net Interest income 4.22% 4.91% 4.95% Total Income 4.22% 4.91% 4.95% Opex 0.73% 1.04% 0.99% Pre-Provisioning Profit 3.49% 3.87% 3.96% Provisions 0.28% 0.49% 0.36% PBT 3.21% 3.38% 3.60% Tax 0.81% 0.96% 1.03% PAT 2.41% 2.42% 2.58% Assets/Equity 7.1 / RoE 24%/ 17% 30.1% 29.2% Credit A+/AA- AA+ AA+ Group support enables better rating, higher leverage ergo higher ROE for the businesses in peer group As REPCO demonstrates good credit record over a period, it can improve or sustain rating even at higher leverage Government of India holds 73% of the parent REPCO bank which can be used to leverage over a period of time Source: Spark Capital Research, *FY13 numbers; ** REPCO adjusted for Capital raise 18

19 Crystal gazing returns FY15E FY16E FY17E FY18E NIMs of 4% with stable asset quality Consistent RoAs of 2.5%, with RoEs of 18-21% PAT (Rs. mn) 1,579 1,865 2,253 2,872 ROA 2.9% 2.7% 2.6% 2.6% ROE 19.2% 19.0% 19.3% 20.7% In 3 years, we see REPCO to demonstrate its capability of growing >25% comfortably in the more profitable selfemployed segment of the market with further Accretion to book value Steady compounding effect of ROEs Book Value per share (Rs.) Adj Book Value per share (Rs.) FY15E FY16E FY17E FY18E An outperformer with possible returns of 2x. improvement in branch strength As stake holders gain confidence A probable rerating P/B multiple FY18E ABV Price target 3.0x x

20 Risks & Other Issues ESOP given below market price; Shared MD with REPCO bank REPCO has given ~0.93mn (~1.3% of capital base) ESOPs at a fixed price of Rs. 78 per share to all the employees of REPCO. Although these stocks were to be awarded in Aug-2012, SEBI required these to be awarded only after 6 months of IPO. These options would be given out to employees over the next three years (~0.24mn given in Q2FY14) with a vesting period of one year. Rewarding employees with ESOPs below market price is an uncommon practice. While we are not votaries of such a practice we take comfort from the fact that the scheme is extended to all the employees of REPCO and secondly, fixed pay of the top management is the lowest with ED pay ~Rs. 2.2mn for FY13. We add potential dilution and impact on operating costs in our assumptions. Further, ~100,000 options has been set aside in lieu of a civil suit which the ex-md of REPCO is facing in Honourable High Court of Madras. REPCO bank and REPCO home finance share a MD. Other Risks TN and Chennai Concentration in loan book High concentration risk as 2/3 rd s of the book comes from Tamil Nadu and 1/4 th of the book is from Chennai. Any sharp correction in these markets can mean growth can take a hit. We do not expect NPA to be concern, however growth can take a back seat Management tenure The current management tenure is for the next three years. In the event of the current management not taking an extension, management change is a key risk for investors looking beyond 3 years horizon. 20

21 Financial Summary Abridged Financial Statements Key Metrics Rs.mn FY12 FY13 FY14E FY15E FY12 FY13 FY14E FY15E Profit & Loss Growth ratios Net Interest Income 1,165 1,401 1,925 2,493 ABV per share 14% 62% 17% 19% Other Income Loan Assets 35% 26% 30% 29% Total Income 1,166 1,403 2,119 2,712 Borrowings 37% 23% 24% 29% Operating Expenses NII 19% 20% 37% 29% Pre-Provisioning Operating Profit 972 1,160 1,788 2,273 PAT 9% 30% 51% 30% Provisions EPS 9% -3% 51% 30% PBT 816 1,068 1,625 2,105 Asset-Liability Profile PAT ,212 1,579 Leverage (x) Balance Sheet Leverage (x) (Incl Off B/S) Networth 3,033 6,345 7,470 8,964 Core Tier 1- CAR 16.4% 26.7% 24.3% 21.6% Paid Up Capital Profitability and Efficiency Reserves 2,568 5,724 6,848 8,339 Net Interest Margin 4.8% 4.4% 4.7% 4.7% Others Capital Instruments ROA 2.5% 2.4% 2.9% 2.9% Borrowings 24,860 30,647 38,007 49,098 ROE 22.6% 17.1% 17.5% 19.2% Total Liabilities & Networth 28,527 37,926 46,947 60,629 Cost/Income 17% 17% 17% 16% Advances 28,041 35,448 45,917 59,348 Dupont Analysis Fixed Assets NII/Total Assets 4.7% 4.2% 4.5% 4.6% Net Current Assets 293 2, ,853 TI/Total Assets 4.7% 4.2% 5.0% 5.0% Total Assets 28,527 37,926 46,947 60,629 Opex/Total Assets 0.8% 0.7% 0.8% 0.8% Off Balance Sheet Assets PPOP/Total Assets 3.9% 3.5% 4.2% 4.2% Total AUM 28,527 37,926 46,947 60,629 Provisions/Total Assets 0.6% 0.3% 0.4% 0.3% Shares outstanding (mn) Valuation PAT/Total Assets 2.5% 2.4% 2.9% 2.9% Current market price (Rs.) Book Value per share (Rs.) Market capitalization (Rs. mn) 13,793 18,462 18,462 18,540 Adj Book Value per share (Rs.) Earnings per share (Rs.) P/ABV (x) Dividend per share (Rs.) P/E (x)

22 Absolute Interpretation Recommendation History Buy Stock expected to provide positive returns of >15% over a 1-year horizon Date price Add Stock expected to provide positive returns of >5% <15% over a 1-year horizon Reduce Stock expected to provide returns of <5% -10% over a 1-year horizon Sell Stock expected to fall >10% over a 1-year horizon Spark Disclaimer Spark Capital Advisors (India) Private Limited (Spark Capital) and its affiliates are engaged in investment banking, investment advisory and institutional equities. Spark Capital is registered with SEBI as a Stock Broker and Category 1 Merchant Banker. This document does not constitute or form part of any offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. Nothing in this document should be construed as investment or financial advice, and nothing in this document should be construed as an advice to buy or sell or solicitation to buy or sell the securities of companies referred to in this document. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject Spark Capital and/or its affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to a certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such applicable restrictions. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. Spark Capital makes no representation or warranty, express or implied, as to the accuracy, completeness or fairness of the information and opinions contained in this document. Spark Capital, its affiliates, and the employees of Spark Capital and its affiliates may, from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through an independent analysis by Spark Capital. While we would endeavour to update the information herein on a reasonable basis, Spark Capital and its affiliates are under no obligation to update the information. Also, there may be regulatory, compliance or other reasons that prevent Spark Capital and its affiliates from doing so. Neither Spark Capital nor its affiliates or their respective directors, employees, agents or representatives shall be responsible or liable in any manner, directly or indirectly, for views or opinions expressed in this report or the contents or any errors or discrepancies herein or for any decisions or actions taken in reliance on the report or the inability to use or access our service in this report or for any loss or damages whether direct or indirect, incidental, special or consequential including without limitation loss of revenue or profits that may arise from or in connection with the use of or reliance on this report. Spark Capital and/or its affiliates and/or employees may have interests/positions, financial or otherwise in the securities mentioned in this report. To enhance transparency, Spark Capital has incorporated a disclosure of interest statement in this document. This should however not be treated as endorsement of views expressed in this report: 22

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