Approach Note Federal Bank * SME Banking

Report
AGENDA
Hedge Group an Introduction
NBFC market landscape
Business plan & indicative financials
Meet the promoters
AGENDA
Hedge Group an Introduction
Vision
To enhance the wealth creation capability of the organization in a global
environment, delivering superior and sustainable stakeholder value”
Mission
 Create customer satisfaction and provide quality and professional service
 Offer rewarding career opportunities and cultivate staff commitment
 Build values and deliver superior returns to shareholders
THE HEDGE GROUP
Hedge Equities
Hedge Equities is the flagship company of the Hedge Group. The venture
revolutionized and popularized share trading culture in Kerala. Today, Hedge
Equities enjoys the patronage of 35,000 satisfied customers who are reaping the
benefits of professionally managed portfolios.
Hedge Commodities
Hedge Commodities offers a viable platform to engage in futures trading in
agricultural and non-agricultural commodities. The in-depth knowledge of the
Indian and world markets help our advisors to provide appropriate and timely
assistance to our customers.
Hedge School of Applied Economics
The dire dearth of qualified share trading professionals in Kerala is what
prompted the Hedge Group to commence the Hedge School of Applied
Economics. Present and potential stock brokers are moulded to international
standards under the guidance of veteran financial experts. Live trading sessions
and world class academic amenities are the highlights of the Hedge School.
Hedge Wealth Management Service (WMS)
The premium Wealth Management Services (WMS) was introduced by Hedge
Equities. The comprehensive financial package is intended at building, managing
and growing the wealth of the client. Service offerings of WMS include Portfolio
Management Services (PMS), Portfolio Advisory Services (PAS), Mutual Fund
Advisory (MFA), Commodities, Foreign Exchange and Derivatives. A specialized
team of SEBI registered portfolio managers and dealers furnish each investor
with customized and research oriented solutions to garner maximum possible
returns.
Hedge Finance
With the inception of Hedge Finance, the Hedge Group entered the prestigious
NBFC market of India. The company adheres strictly to the RBI regulations and
primarily focuses on the Loan Against Security sector. Hedge Finance has huge
growth potential and intends to diversify its services in the near future.
Hedge Equities takes its root from over 25 years experience of
business leaders in various industries laying the platform for one
of the biggest broking houses in Kerala today.
 World class Infrastructure : 170 outlets and 500 plus qualified
personals catering to over 35000 clients.
 State of the art Technology : Adoption of cutting edge technology thus
giving users unparalleled user experience
 Unparalleled Brand value : Rated as one of the fastest growing brands
in Kerala, Hedge equities has carved for itself a niche in the mindspace
of the people of the state.
 Innovation DNA : Pioneers in introducing various programs and
trendsetters in initiatives aimed at tapping market.
 NBFCs constitutes a reasonable big chunk of the country’s overall
financial system accounting for 9.1% or Rs. 4 trillion of assets of the
entire financial system in India.
 NBFC industry today is a more mature, developed and promising since
the days of inception and is destined to shape the future of India.
 NBFCs have enjoyed tremendous competitive advantages relative to
their banking peers for over a decade now
 Backed by Hedge Equities, Hedge Finance is all set to be one of the top
Non Banking Finance company in the country.
 Focus to be on the niche under tapped Loan against Securities area
apart from the other traditional areas.
 Years of expertise in the financial market, a robust infrastructure in place
and the backing of the brand name of Hedge Equities, Hedge Finance
holds an edge in this segment.
AGENDA
NBFC market landscape
Number & Asset Size of NBFC - D and
NBFC - ND SI
Key NBFC figures – Overall (USD Bn.)
100
80
13,500
13,014
67.7
60
40
0
12,000
2009-10
Revenue
Profitability
Number of NBFCs
Total Assets (NBFC-D & NBFC -ND SI) as % of
Total Bank Assets
12
10
8
6
4
2
0
11.1
11.0
4.4
1997 - 98
2005 - 06
2009 - 10
Abbreviations:
NBFC D – Deposit taking NBFCs;
NBFC ND SI – Non deposit taking NBFCs, but having asset size greater than
USD 22.5 Mn (INR 1000 Mn)
160,000
120,000
1000
65,219
80,000
600
400
200
2.93
1.12
2005-06
Asset Size
12,500
16.7
5.6
1420
800
12,622
20
1400
1200
13,000
149,421
1600
0
7,862
1997 - 98
Number
586
575
2005 - 06
2009 - 10
40,000
-
Total Assets (USD Mn.)
• The total number of NBFCs has witnessed a declining trend
over the past few years.
• Acquisition of smaller NBFCs by bigger ones, closure of
NBFCs by RBI due to noncompliance and exit of some
deposit accepting NBFCs (NBFC-D) have contributed
towards this decrease.
• However, the asset size, revenues and ensuing profitability
have improved during the same period, growing at a CAGR of
17%, 31% and 21% from 2005- 06 to 2010 -11.
• The NBFC-ND-SI sector, which constitutes 70% of total
assets of NBFCs have in particular, recorded significant
growth.
Type of NBFC
Total Assets in USD
Bn.
(as on FY 2010)
Public Sector NBFCs
14,009
Infrastructure Companies
44,329
Asset Finance Companies
25,752
Gold Loan Companies
1,955
Micro Finance Institutes
Other Loan and Investment Companies
All NBFCs
120
100
19.40%
15.60%
3%
7.10%
2%
NBFC - D
RoA
28.60%
NBFC ND-SI
RoE
Leverage Ratio*
* Tier-I Capital as a % to Total Assets
91
84
55
60
41
40
3,090
60,286
0
12
17
26
22
27
26
31 35
32
4
2006 - 07
2007 - 08
Asset Finance Companies
Profitability Indicators of NBFCs
(FY 2010)
112
80
20
149,421
Growth of Assets (USD Bn.) as per type of
NBFCs
2008 - 09
2009 - 10
Investment Companies
2010 - 11
Loan Companies
• Asset size of the different categories of NBFCs have seen
continuous growth for the last few years, implying the overall
prospects of the NBFC sector.
• The Asset size of Investment companies have seen maximum
growth, increasing at a CAGR of around 70%, while AFCs and
LCs have grown at a CAGR of around 28% since 2006-07.
• The growing number of middle income households, increase in
disposable income and a consequent investment in houses,
consumer goods and other related expenditure, and a strong
emphasis on infrastructure development of the country are
some of the key contributing factors expected to drive growth
of NBFCs in the near future.
Sr.
No.
Name of
NBFC
Type of
NBFC
Year of
establis
hment
1
Shriram
Transpor
t Finance
Company
Ltd.
(STFC)
AFC 1979
STFC is
also
India's
largest
commercia
l vehicle
financing
company
branches
No. of
employees
488
16,919
• STFC has a large and growing mobile sales team
that tries to create new leads and monitor loan
payments to its huge customer base.
• STFC uses technology in order to keep the sales
team connected with the offices, and to improve
processing times for new applications or monitor
payments. Recently, it has tied up with IBM to
implement cloud computing technology to ensure
all of its field sales reps have access to reliable
email that can be accessed on the road, at their
desk and from their mobile devices
No. of
Major Products
• Financing of
Commercial
Vehicles, that can
be categorised as
i.) pre-owned
vehicles
ii.) new vehicles
Customer Segments
• Small truck owners (less than 2-3
trucks) as well as existing
customer base upgrading to new
trucks
• STFC also empowers first time
entrepreneurs in the Commercial
vehicle segment who are not
readily supported or
acknowledged by mainstream
financial
institutions
Technology Usage
2
Bajaj
AFC
Finance
Ltd.(BFL)
1988
• Two Wheeler
• Individuals, Professionals &
Financing
HNIs
• Loans for
Manufacturers & Traders
Consumer Durables
• Loans for
Construction
Equipments
• Small Business
Loans
• Loan against
Property
• Loan against
Shares
225
1657
• As part of its strong Risk Management System,
BFL has set up an in house analytics team. The
team is responsible for real time analysis of data
from various business lines to monitor their
operations
• BFL also uses the CIBIL database actively and
has built an in-house customer database to keep
a track of their performance and for future
references
3
Muthoot
Finance
1997
•Gold Loans
2733
16,688
• Muthoot Finance uses a well informed and
dedicated analytics team to maximise profits as
the Gold loan business requires high levels of
operational and business foresight to transact in
gold and help the corporate office fix and inform
the rates to offer at all its branches
• Muthoot
Finance
also
deploys
modern
equipments and technology to enhance the
safety features of all its branches for storage of
its gold inventory
LC
• Small businessmen, vendors,
traders, farmers, salaried
individuals, professionals and
small sized entrepreneurships
Sr.
No.
Name of
NBFC
Type of
NBFC
Year of
establis
hment
Major Products
Customer
Segments
No. of
branche
s
No. of
employees
Technology Usage
4
SREI
Infrastructur
e Finance
Limited
(SREI)
IFC
1989
• Fund based, Fee based and
Strategic Investment activities in the
Infrastructure Business:
• Fund based services: Equipment
Financing, Project Financing
• Fee based Services: Project
Advisory, Venture Capital, Project
Development
• Strategic Investment based
services: Telecom infrastructure,
Power & Transportation, IT
Infrastructure
Infrastructure and
Construction
Companies and
SMEs
77
2116
• Srei invests heavily in technology to
remain at the forefront of innovation
and to adhere to a process-oriented
structure in the way of doing
business.
• The Company has a robust
information technology set-up with
proper security measures, which
helps in electronic documentation
and report generation. Besides, it
has an off-site disaster recovery
system that prevents any loss of data
in case of exigencies
5
IDFC
IFC
1997
• Corporate & Investment Banking
(Project Finance, Investment
Banking)
• Alternative Asset Management
(Private Equity, Venture Capital)
• Public Market Asset Management
(Mutual Funds) in the Infrastructure
Sector
Infrastructure and
Construction
Companies,
Entrepreneurships
and SMEs
-
586
• IDFC uses a range of high
performance network solutions to
ensures servers and applications are
available to its employees and global
clients round the clock besides
meeting security requirements
6
HDFC
HFC
1977
• Home Loans, Loan against
Property, Rural Housing Finance
Salaried and Self
Employed People
283
1607
• Robust IT system to improve Loan
appraisal and disbursement process
7
Gujarat
Venture
Finance
Limited
(GVFL)
LC
1990
• Seed & Start up Funding, Growth
Funding
Technology oriented
Start ups (with
recent focus on
biotechnology and
infra);
Companies in their
growth stage
requiring funding
support
-
-
NIM
276
24%
66%
25%
4.20%
27.94%
8.36%
4.42
0.40%
2
Bajaj Finance
Ltd.(BFL)
1812
1633
101
8
297
305
1507
55.5
46.6%
74%
20%
4.30%
19.70%
10.76%
3.96
0.80%
3
Muthoot Finance
2983
2640
1.7
72
229
301
2698
111
22.4%
67%
15%
3.72%
51.50%
10.86%
8.95
0.25%
4
SREI
Infrastructure
Finance Limited
(SREI)
3007
1075
566
112
481
593
2274
40.5
26.7%
77%
29%
1.64%
10.72%
3.76%
3.73
5
IDFC
10686
8461
1832
5.17
1980
2847
8158
288
4.50%
62%
24%
3.00%
12.90%
3.70%
3.44
0.07%
6
HDFC
29995
26469
2674
66
3847
3913
20516
799
3.49%
62%
14%
1.18%
21.41%
4.30%
6.66
0.77%
7
GVFL
0.9
0.22
0.06
0.25
0.66
0.91
-
0.16
-
71%
-
26.8%
103%
-
-
-
Cost to Income ratio
PAT
Net NPA ratio
RoE
4467
D/E ratio
RoA
1102
CRAR
1056
Opex to Income ratio
Net Worth
51
Borrowings
Reserves and Surplus
825
Paid up Capital
5484
Investments
5570
Loans & Advances
Shriram
Transport
Name
Assets
1
Sr.
No.
0.60%
AGENDA
Business plan & indicative financials
Key Benefits
Product description and characteristics


Margin Funding: This product allows customers to
borrow against their securities or investment
portfolio. Such borrowing can be used against the
purchase of further securities in the market. The
company will fund up to 50% of the mark to market
value of the holdings of the customer. Arguably one
of the safest methods of lending to a customer as
loans are backed by highly liquid securities.
Loan Against Shares: Loan Against Securities
(LAS) is a product that enables acquiring instant
liquidity from your investment without selling them.
The applicant will need to pledge his securities in
favor of HEDGE FINANCE Limited, This enables
the customer to enjoy all corporate benefits accrued
on the securities and still avail loan against them.
No EMI or prepayment charges applicable. Interest
will be charged only on the actual amount and that
too for the time it was disbursed.
Estimated interest charged : 18-21%






Easy disbursal processes
No further collateral security
required
Short Term fund requirement
catered to immediately
Flexibility in repayment
Easy documentation
Potential to tap various stock
market opportunities
Challenges


Greater reliance on technology
for monitoring margin fall
Creating customer awareness
Product description and characteristics
Loan against property are secured-term-loans
,secured by mortgage of a residential or commercial
property. The end-use of this loan should be
towards any declared legal purpose. Some
commonly seen LAP types are as follows:



Key Benefits





Loan for personal/educational/business needs
against existing property
Loan for acquisition of commercial property
Loan against future rental receivable
Challenges


Estimated interest charged : 18-21%
Loans available from 5 lakh up to 5 crore
Simple documentation
Fast processing
Easy repayment options
Loan tenure of 12 months to 120 months
for properties
Loan Recovery
Compete with Banks and other
lending institutions offering low
interests
Key Benefits
Product description and characteristics
The Hedge Finance loans against Gold will help
customers avail of any requirement in funds without
having to sell off gold jewellery.
These loans are hassle-free with least amount of
documentation. Most importantly, there is no need of
income proof. Easy Repayment with only interest
being paid each month. Principal to be paid only at
the end of loan tenor.







Maximum value against security
Simple procedures
Quick sanctioning
High liquidity for gold
Maximum individual lending limit
Easy micro credits
Flexible gold loan product
Challenges
Estimated interest charged : 18-21%



Purity Verifications
Market Rate fluctuations
Custodial risk
Year 1
Year 2
Year 3
EBIDTA
62.82%
76.01%
80.35%
EBITA
61.10%
73.66%
78.26%
PBT
57.92%
36.61%
48.92%
PAT
39.12%
24.74%
32.56%
ROE
7.99%
13.89%
38.23%
DEBT EQUITY
0.05
1.65
4.30
EPS
0.80
1.39
3.82
AGENDA
Meet the promoters
Alex K Babu (MD)
Bhuvanendran (CEO)
Alex K Babu is the Founder & Managing Director of Hedge
Equities. He has over 9 years of experience in equity research and
fund management with considerable experience across all market
capitalizations. He is a specialist in mid-cap and infra stock
selection. Ever since joining the Hedge Family, he has been
designing, developing and implementing the strategic plan for the
company in the most cost effective and time efficient manner. He
was also instrumental in establishing and assembling a strong
research team with equal emphasis on macroeconomic, industrial,
and company level research
Professionalism augmented by profound vision is a perfect phrase
to describe Bhuvanendran. His rich experience spanning 22 years
with the leading names in the Indian financial services industry, is
often
camouflaged
by
his
youthful
appearance,
till
Mr.Bhuvanendran opens up his favourite subject-Money matters.
Bhuvanendran is a talented and introspective writer whose creativity
has been capitalized by various financial journals. He is also in the
limelight for a market related show which aims at quenching the
financial queries of professionals and investors in a leading
Malayalam television channel.
Bobby Jose (COO)
Mr. Bobby has been responsible for the entire operations of Hedge
Equities ever since its inception. He has proved his versatility by
showcasing excellent Man-Management and Marketing Activities
and is well versed in all aspects of Indian Financial Markets. In the
last 15 years, he has worked with all the major players in the
financial service sector of the country which has added oodles to
his workmanship.
P R Sankaranarayanan
(Executive Director)
Mr. P.R.Sankaranarayanan, a Chartered Accountant by profession,
holds a Masters in Commerce and a Post Graduate Diploma in
Management. He was the Executive Director of Federal Bank
(1995-2006), one of the leading private sector banks. Prior to that
he held the position of General Manager of UTI and had earlier
served Canara Bank. He is a seasoned banker, mutual fund
specialist and finance expert with top level management exposure in
several functional areas.
 Targeting 100 Crore Capital by Private Placement
 Placement with Low Premium
 Excellent Long Term Investment option
 Low Break Even branches
 Low NPA ratio for NBFC’s
 Expected discounted ROE 20-32%
THANK YOU

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