Our Agenda Overview of the Company Changing Asset Composition Segments served Branches Credit Processes Management Funding Financials Corporate Presentation 2
Overview Capital First Ltd. (CFL) is an NBFC with record of consistent growth & profitability. CFL largely focuses on providing financial services to retail and MSME customers. CFL is continuously expanding the composition of Retail loans to overall assets, which has steadily increased from 7% in FY 10, to 28% in FY 11 to 56% in FY 12, and 71% as on December 31, 2012. CFL has loan assets under management of Rs. 70 bn (~ $ 1.3 billon) CFL focuses on secured lending and has high asset quality Gross and Net NPA of the Company stood at 0.13% and 0.00% respectively. CFL has a strong distribution of 200 branches and ~1200 employees across India covering 42 cities. The Net Worth of CFL is Rs. 9.87 bn (~ $ 180 mn) Recent Developments: On 04th December, 2012, Warburg Pincus completed the acquisition of 70 % of the equity shares of the company, and are the promoters of the company. The long term credit rating of the Company, including NCD and Subordinate debt has been revised to AA+ by rating agencies. * USD INR conversion has been assumed to be 55 Corporate Presentation 3
Our Vision To be a leading financial services provider, admired for high level of customer service, and respected for ethics, values and corporate governance. To provide Micro, Small and Medium Enterprises in India with debt capital and services to support the growth of the MSME sector. To finance the growing consumption needs of the Indian consumers, which is driven by increased affluence, growing aspirations and favourable demographics. Corporate Presentation 4
Our Agenda Overview of the Company Changing Asset Composition Segments served Branches Credit Processes Management Funding Financials Corporate Presentation 5
Increasing Share of Retail loans Wholesale Credit AUM (%) Retail Credit AUM (%) Total AUM (Rs. bn) 90% 10% 72% 28% 44% 56% 29% 71% FY10 FY11 FY12 Q3-FY13 Rs. 9.3 bn Rs. 27.5 bn Rs. 61.7 bn Rs. 70.1 bn Gross NPA % Net NPA % 5.28% 0.25% 0.08% 0.13% 3.78% 0.06% 0.00% 0.00% Corporate Presentation 6
Retail Loan Book Composition (as of 31 Dec 2012) Mortgage Loans, 74.9% Others, 4.7% Conumer Durable Loans, 4.9% Two-Wheeler Loans, 3.6% Gold Loans, 12.0% The retail loan book of the Company has increased by 58% from Rs. 19.58 Bn as of 31 Dec 2011 to Rs. 30.99 Bn as of 31 Dec 2012 Corporate Presentation 7
Our Agenda Overview of the Company Changing Asset Composition Segments served Branches Credit Processes Management Funding Financials Corporate Presentation 8
Serving Customers Across selected segments Retail Credit Consumer Durable Loan Two Wheeler Loan Gold Loan SME Loan against Property Customer Segment Mass / Mass Affluent Salaried & Self Employed Small and Mid Size Businesses Average Loan Size Rs. 25 40 K Rs. 25 40 K Rs. 75-200 K Rs. 7 12 mn Average Tenure < 1 Year 2 Years 1-2 Years 5-6 Years Corporate Presentation 9
Our Agenda Overview of the Company Changing Asset Composition Segments served Branches Credit Processes Management Funding Financials Corporate Presentation 10
Extensive Branch Network Amritsar: Jalandhar: Chandigarh: Delhi & NCR Jaipur Ajmer Kotta Jodhpur Udaipur Bhopal Ahmadabad Baroda Rajkot Indore Surat: Nasik Mumbai& Thane Pune Bangalore Coimbatore Ludhiana Dehradun Chennai Vellore Salem Through an Extensive Branch Network, Capital First has reached Customers across most of the states and major cities in India Lucknow Vizag Hyderabad Raipur Nagpur Bhubaneswar Kolkata 200 Branches, ~1200 Employees Corporate Presentation 11
Our Agenda Overview of the Company Changing Asset Composition Segments served Branches Credit Processes Management Funding Financials Corporate Presentation 12
Processes Underwriting Control At Capital First, there is segregation of authorities and responsibilities across all functions. Sales, credit, operations and collections are independent of each other, with independent reporting lines. We underwrite all loans on the basis of cash flow capability of the customers as well as LTV norms. Proposals are checked with credit bureaus, and loans are approved after checking with India s leading Credit Bureau, CIBIL. A robust collections infrastructure is in place. Corporate Presentation 13
Mortgages Credit Underwriting Process Rigorous and robust credit assessment processes in Capital First help in maintaining the high asset quality and low NPA levels -7 In Mortgages, 29% of the total applications are disbursed after passing through several levels of scrutiny and checks, mainly centred around cash flow evaluation, credit bureau and reference checks -39 100-5 -10-10 29 Application Logged in CIBIL Rejections Rejections due to Insufficient Cashflow Rejections after Personal Interview Rejections due to Defective Title Deeds Others Rejections Net Disbursals Corporate Presentation 14
Maintaining Strong Asset Quality 6.00% 5.28% 5.00% 4.00% 3.00% 2.00% 2.60% 1.98% 1.00% 0.00% 0.27% 0.25% 0.05% 0.03% 0.04% 0.08% 0.13% 0.18% 0.13% Q4-FY10 Q1-FY11 Q2-FY11 Q3-FY11 Q4-FY11 Q1-FY12 Q2-FY12 Q3-FY12 Q4-FY12 Q1-FY13 Q2-FY13 Q3-FY13 Gross NPA (%) Net NPA (%) The Company maintained high asset quality over time The current Gross and Net NPA levels compare well among financial players in India Corporate Presentation 15
Our Agenda Overview of the Company Changing Asset Composition Segments served Branches Credit Processes Management Funding Financials Corporate Presentation 16
Profile Chairman & Managing Director Mr. V. Vaidyanathan is the Chairman and Managing Director of Capital First Limited. He recently concluded the India s largest Management Buyout of a listed company which is one of his most significant professional achievements. As part of this MBO, Warburg Pincus, one of the worlds most reputed Private Equity players, with funds of over US$ 40 billion in 36 countries, has acquired a majority stake (70%) in Capital First Limited. In 2010, in order to take an entrepreneurial role, he joined Capital First Limited (CFL) from ICICI Prudential Life Insurance Company, where he was the Managing Director and CEO. From a largely wholesale financing company with assets of USD 200 million, he changed CFL into largely a retail lending company with loan assets over USD 1.3 billion, out of which 70% is retail assets. Since his joining CFL, he has successfully launched a number of retail businesses including MSME financing, Gold Loans, Two Wheeler loans Consumer Durable loans and Wealth Management. He is instrumental in implementing latest cutting edge technologies and scoring solutions for on-boarding, credit scoring and customer lifecycle management to improve asset quality and customer service significantly. Within 3 years, he has built a large retail franchise of 200 branches, 1200 employees across 42 cities, and has made CFL a leading player in lending to MSMEs. Under his leadership, the company s long term credit rating has been re-rated thrice from A+ to AA+ within 3 years. He was earlier appointed as Executive Director on the Board of ICICI Bank at the age of 38. He was also the Chairman of ICICI Home Finance Co. Ltd, and served on the Board of ICICI Lombard General Insurance Company and CIBIL, India s first credit bureau. He started his career with Citibank India in 1990 and served in the Consumer Banking Division of Citibank till 2000. He joined ICICI Bank in early 2000 and helped transition the then ICICI Limited from a Domestic Financial Institution (DFI) to a Universal Bank. He was responsible for launching the Retail Banking Business since its inception in 2000 and managed the retail business till 2009. He built ICICI bank into a large retail powerhouse in the country and built a loan book of USD 30 billion in Mortgages, Auto, Consumer loans and credit cards, and took the bank to market leadership. He also built a network of 1400 ICICI Bank branches across 800 cities, built a vast deposit base, and a franchise of 25 million customers. He also built the SME business and Rural Banking Business for the bank. His key passion is the usage of new age technology to expand organized retail lending and deposits to a vast expanse of India. Over the years, his contribution won him many domestic and international awards including Best Retail bank in Asia 2001, Excellence in Retail Banking Award 2002, Best Retail Bank in India 2003, 2004, and 2005 from the Asian Banker, Most Innovative Bank 2007, and was nominated Retail Banker of the Year by EFMA Europe for 2008 and 2009. He is an alumnus of Birla Institute of Technology and Harvard Business School. He is a regular marathoner and has run 7 marathons. He lives in Mumbai with his family of father, wife and three children. Corporate Presentation 17
Board of Directors Vishal Mahadevia Non-Executive Director Anil Singhvi Independent Director N.C. Singhal Independent Director Hemang Raja Independent Director M S Sundar Rajan Independent Director Profile Vishal joined Warburg Pincus in 2006, is co-head of the firm's Mumbai office. Previously, he was a principal at Greenbriar Equity Group, a fund focused on private equity investments. Prior to that, Mr. Mahadevia worked at Three Cities Research, Inc., a New York-based private equity fund, and with McKinsey & Company Anil is the Chairman of Ican Investments Advisors Pvt Ltd. Prior to establishing Ican Investments, he was the Advisor to Reliance ADA Group. Mr. Singhvi was the Managing Director of Ambuja Cements Ltd. He played a key role in the growth of the company from 0.7 million tonnes to 17 million tonnes. N. C. Singhal was a Banking Expert to the Industrial Development Bank of Afghanistan, for the World Bank project and a Consultant and Management Specialist with the ADB in Philippines, South Korea, Pakistan and Uzbekistan. He was the founder Chief Executive Officer of The Shipping Credit & Investment Corporation of India Limited. Hemang has a vast experience of over thirty three years in financial services encompassing fund based businesses such as Project Finance and Corporate Banking with IL&FS. He has been involved in the Private Equity and Fund Management business with Credit Suisse and Asia Growth Capital Advisers in India as MD and Head-India Sundar Rajan was Chairman and Managing Director (CMD) of Indian Bank and has total experience of over 38 years in the Banking Industry. He has also earlier worked with Union Bank of India for over 33 years. During his Stewardship as CMD of Indian Bank, the said Bank has won many accolades and awards Corporate Presentation 18
Experienced Management Team V. Vaidyanathan Chairman & MD Apul Nayyar CEO Consumer Business Ashok Shinkar CEO Wholesale Business Nihal Desai Chief Risk Officer Pankaj Sanklecha CFO & Head Corporate Center Adrian Andrade Head HR & Admin 15 Years in Financial Services 19 Years in Financial Services 18 Years in Financial Services 17 Years in Financial Services 22 years in Financial Services Apul was the Executive Director & CEO with India Infoline Investment Services Ltd and held leadership position in DSP Merryl Lynch and Citi Financial in different areas like across Product Development, Marketing, Sal es & Distribution, Risk Management, Product Portfolio Management, Treasury Management, Investments, Fund raising, etc Ashok has held senior positions in J M Morgan Stanley and SSKI Corporate Finance in the field of Corporate Finance Advisory, M&A, Private Equity, Debt and Equity Structuring and Merchant Banking activities including merchant banking, corporate and financial advisory in various sectors Nihal has worked in ICICI Bank for 16 years where he held various leadership roles in credit, collections, retail and wholesale banking. Before joining Capital First, he was the managing director of Serco Global Services and was in-charge of establishing Serco s frontline business in India Pankaj has extensive experience in Indian Retail and SME banking segment. Prior to joining CFL, he was the Head of Credit for Retail lending, managing a portfolio of close to $ 2.5 billion in Standard Chartered Bank. He has earlier worked with ICICI Bank in senior business and risk management positions. Adrian has several years of experience in HR relationship Mgmt, L&D, R&R management, HR operations, Mergers & Acquisition and Project Mgmt. Prior to joining Capital First, was previously the Head HR Risk, products, Marketing & Academy with Standard Chartered Bank. He has also worked with ANZ Bank prior to joining Standard Chartered Corporate Presentation 19
Our Agenda Overview of the Company Changing Asset Composition Segments served Branches & Infrastructure Credit Processes Management Funding Financials Corporate Presentation 20
Funding (as on 31 Dec 2012) Credit Rating Borrowing Profile Bank Funding, 73.45% 3 notch Rating upgrade received in the last 2 years of operation AA+ A+ AA- Equity, 16.27% FY11 FY12 FY13 Commercial Paper, 1.81% Long Term NCD, 8.48% The Company has a healthy overall Capital Adequacy Ratio of 18.90% with Tier -1 Capital Adequacy at 15.08% The Company has access to a wide range of funding options, including reputed Mutual Funds, Provident Funds, Banks through NCDs, CPs, and long term loans. Corporate Presentation 21
Asset Liability Management (as on 31 Dec 2012) 30,000 25,000 20,000 15,000 10,000 All figures are in Rs. mn unless specified 5,000-26,808 11,412 26,203 19,123 14,294 11,296 22,664 22,664 Year 1 Year 2 Year 3 Year 3 onwards Total Inflows into the Company Total Outflows from the Company The Company follows a policy of matched funding, whereby all assets are entirely funded by corresponding liability of similar maturities on an actuarial basis, thus protecting the company from liquidity risks. Floating rate loans are funded by floating rate liabilities to cover interest rate risks. Corporate Presentation 22
Our Agenda Overview of the Company Changing Asset Composition Segments served Branches Credit Processes Management Funding Financials Corporate Presentation 23
Significant Changes in Accounting Policy in FY 13 During the quarter ending September 2012, the company changed the accounting policy and made it more conservative. These changes and its impact on the P and L are described below. The company, in the course of its normal business collects fees for wholesale lending, receives income by assigning loans, and pays fees for securing credit limits to financial institutions. The net income from such activities in FY12 was Rs. 946 mn. On an average, the net income every quarter from such activities,booked upfront, infy12, was Rs. 236 mn. So far, the company has followed a policy of booking this income upfront. From Q2-FY13, this income is being amortized over the average tenure of loans, and therefore the profits will accrue to the P&L of the company over the life of the loan. Since in FY12 the above income was accounted upfront, and in FY13 this is being amortized, the YOY and QOQ financials are not comparable. Corporate Presentation 24
Simulation on effect of Amortization of Income in FY 13 This slide is a simulation to understand the impact of the new policy of amortising fee income from lending businesses and income from securitization For purpose of this simulation, the average actual quarterly performance of FY12 for income from such activities has been assumed constant over next few quarters, and the impact has been demonstrated here. This is merely a simulation and if not intended as a guidance. Reported Quarterly Income (Rs. mn) 300 250 200 150 100 50 0 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 Q15 Q16 Old Accounting Method New Accounting Method Income - Old Method Amortized Income from Q5 Amortized Income from Q6 Amortized Income from Q7 Amortized Income from Q8 Amortized Income from Q9 Amortized Income from Q10 Amortized Income from Q11 Amortized Income from Q12 Amortized Income from Q13 Amortized Income from Q14 Amortized Income from Q15 Amortized Income from Q16 As seen from the illustration above, in the next few quarters, the income from these activities is expected to reduce by about Rs. 180-200 Mn per quarter, compared to the prior years, on account of the change in Accounting Policy. This income will be booked over the life of the loan and will reflect in future years. The -ve impact on the reported income is neutralized over time as the economic value is the same under both accounting methods. Corporate Presentation 25
9M - Profit & Loss (Consolidated) All figures are in Rs. mn unless specified Particulars 9M-FY12 9M-FY13 Interest Income 3,920 5,346 Less: Interest Expense 2,411 3,495 Net Interest Income (NII) 1,509 1,852 Income from Assignment 382 312 Fee income 405 264 Other Income 236 90 Exceptional Item - 224 Total Income 2,533 2,741 Opex 1,158 1,954 Operating profit 1,375 787 Provision 229 80 PBT 1,146 707 Tax 355 157 PAT 791 550 If the new Accounting Policy (of amortising Fees received from customers, and amortising income from assignment of loans) is applied to the past financials, Profit After Tax would have increased by 21% from Rs. 543 mn in 9M-FY12 to Rs. 657 mn in 9M-FY13 Corporate Presentation 26
Equity Shareholding Pattern (as on 31 Dec 2012) Promoters (Warburg Pincus- Cloverdell), 70.28 % Others, 1.62% Individuals, 7.50% Bodies Corporate, 19.31 % Financial Institutions, 0.29 % FII, 1.01% The stake mentioned of Warburg Pincus as mentioned above includes CCPS of 30,86,420, which will be converted to shares anytime before the expiry of 18 months ending 28-March-2014 Financial Institutions include Banks, Mutual Funds, Insurance Companies and other Financial Institutions Others include NRI-Repatriable, NRI-Non-Repatriable, Clearing Members and Trusts Corporate Presentation 27
Capital First Limited India Bulls Finance Centre Tower II, 15th Floor Senapati Bapat Marg Elphinston (West) Mumbai 400 013 Website www.capitalfirst.com E-mail Investor Relations - Investor.relations@capitalfirst.com Telephone +91 22 40423400 Corporate Presentation 28