Empowering Rural Indians through Financial Inclusion STRATEGY MAHINDRA FINANCE

Transcription

1 Empowering Rural Indians through Financial Inclusion STRATEGY MAHINDRA FINANCE

2 Mahindra Finance Ramesh Iyer Jillian Watson Andrew Winnett Lea Matulovic

3 Mahindra Goals Be among the top 50 globally admired brands by 2021! Increase customer base, create new business, and foray overseas Segment Goals! Home Finance! Serve 500,000 customers and achieve loan book size of 1Bn by 2016 (vs. current 82,000 & $150 million)! Insurance! 100,000 villages in the next 4 years! SME Finance! INR 40Bn in financing by 2015

4 Strategy 2020 for Mahindra Rural Focus Capitalize on Homes for All by 2020 Disruptive & Radical Technology Innovation! There is opportunity to grow in the wellunderstood rural market (serving <1% of population)! Partner with Indian Government to achieve development goals, while growing Mahindra s Home Financing business! Leverage existing Mahindra Tech resources, providing additional value to customer through innovative MoboShare app

5 Key Issues

6 Mahindra s Issues Net profit fallen by 6% Deterioration in asset quality Increasing competition (Non-banking Financial Companies & large banks) Sluggish rural economy Slowing utility & tractor sales

7 Prioritizing Mahindra s Issues URGENCY! Slowing utility & tractor sales Net profit fallen by 6% Deterioration in asset quality Sluggish rural economy Increasing competition IMPORTANCE!

8 Things to consider for Strategy 2020! Rural and/or Urban focus! Coordinated being an asset financing and payment bank! Leverage new technology! Capitalize on new housing programs in India! International markets vs. domestic high-growth market focus! What new capabilities are needed for the Strategy

9 Analysis MAHINDRA

10 India Factors affecting Mahindra Finance Political Key Takeaway Economic Social Technological New government reforms: 100 Smart cities Housing for All by 2022 Government facilitated the opening of 185 million bank accounts Economy is sluggish in areas 69% of population resides in rural villages Rely on word of mouth Mahindra finance is poised to capitalize on High cellphone use in rural Tendency to share cellphones favourable economic, social and Build technological their homes in Movement towards piece-meal technology use with trends in India Cash flows are banking and other seasonal due to industries farming Community Oriented

11 Mahindra Finance 1. Trusted Bank in rural areas 2. AAA rating 1. Weak loan growth Key Takeaway S W 3. Diversification of Auto Loan 2. Deterioration of asset quality business (40% from non-mahindra 3. Little international growth customers) 4. 80% of collections are cash There is 4. an 38% chance FDI for Mahindra Finance to use strengths to defend external threats and take advantage of specific opportunities O ,000 rural villages 2. Create more international partnerships 3. Potential to attract new FDI 1. Sluggish auto sales 2. Sluggish economy T

12 A closer look at Home Financing Strengths: 63% increase in profit Key Takeaway Weaknesses: Only serving <1% of rural population In light of political developments & segment performance there is an opportunity for Mahindra to focus on it s Home Finance segment to reach Strategy 2020 goals. Opportunities: 6 million houses developed in rural India over next 7 years Threats: Not able to get 40% down payment

13 Revenue per Employee Heavy reliance on field technicians & local people for face-to-face interactions to be more responsive to local demands & conduct credit-worthiness Key Takeaway Company( Profit(A.er(Tax( Number(of(Employees( Profit(per(employee( Cholamandalam) ))))))))))))))))254,525)) )))))))))))))))))))))))))))))))))))2,583)) 98.54) There is an opportunity for Mahindra to improve Revenue/Employee by decreasing reliance on field agents and improving mobile analytics Bajaj) ))))))))))))))))324,100)) )))))))))))))))))))))))))))))))))))5,058)) 64.08) Sundaram) ))))))))))))))))162,610)) )))))))))))))))))))))))))))))))))))3,563)) 45.64) Shriram)Transport) ))))))))))))))))591,082)) )))))))))))))))))))))))))))))))))16,061)) 36.80) Mahindra) ))))))))))))))))368,780)) )))))))))))))))))))))))))))))))))14,197)) 25.98) Reliance)Capital) ))))))))))))))))199,230)) )))))))))))))))))))))))))))))))))18,600)) 10.71) Shriram)City)Union) ))))))))))))))))167,170)) )))))))))))))))))))))))))))))))))25,085)) 6.66)

14 Alternatives MAHINDRA

15 The Right Market for Growth Mahindra s Alternatives 1. Expand Mahindra Finance internationally 2. Grow Mahindra Finance in rural India 3. Grow Mahindra Finance in urban India

16 1. Expand Mahindra Finance internationally - New markets with growth potential - 38% Foreign investors may not agree - Success establishing JVs - Not capitalizing on reforms - Does not address Strategy Goals in India - Domestic business isn t mature

17 1. Grow Mahindra Finance in rural India - Capitalize on 3% ROA - Opportunity to capture more of population (69%) - India represents 21% of population (room to grow) - Increased competition due to government initiatives - Competition due to higher ROA in rural - Labour intensive (low population density) - Still young business segments, more room to grow in domestic - Strong understanding of cycles

18 1. Grow Mahindra Finance in urban India - Opportunity for high growth (dense population) - Ability to establish branches, increasing revenue per employee - Lower ROA (0.5% vs. 3%) - Outside of core business model - Not a good understanding of consumer - Lack infrastructure in cities

19 Mahindra s Best Alternative 1 Does not Address 3 Somewhat Addresses 5 Directly Addresses Achievement of Strategy 2020 Goals Weight International Rural India Urban India Net Profit Decrease Decrease in tractor sales Deterioration in asset quality Total

20 Strategy 2020 for Mahindra Rural Focus Capitalize on Homes for All by 2020 Disruptive & Radical Technology Innovation! There is opportunity to grow in the wellunderstood rural market (serving <1% of population)! Partner with Indian Government to achieve development goals, while growing Mahindra s Home Financing business! Leverage existing Mahindra Tech resources, providing additional value to customer through innovative MoboShare app

21 Action Plan MAHINDRA

22 Assumptions! Homes for All by 2020! Homes are subsidized by the government, but homeowners still need to pay a proportion of the cost! Homes are built at once, not in piece-meal! The government release an RFP and Mahindra Real Estate with participate! 185 million new bank accounts! Strong uptake in rural communities, decreasing 80% cash collection rate! MoboMoney is used by rural residents on their mobile phones

23 Mahindra s Rural India Growth Government Partnership Advance with Technology

24 Government Partnership Partner to achieve the Homes for All by 2022 Plan Become one of the non-banking finance company to support rural customers financing of homes 6 million houses annually over the next seven years for a total of 42 million houses Strive to capture 8.3% of 6 million houses to achieve the 500,000 customer goal Mahindra will provide the financing portion that is not covered through the government subsidy

25 Why Mahindra? Expertise Mahindra has the resources in field reps and has built up tacit knowledge through years of experience in rural home financing Incentives Mahindra Real Estate will assist with achieving the goals of the Smart City and Atal Mission for Rejuvenation and Urban Transformation projects at preferred rates Examples of incentives may include green spaces, energy efficient buildings and renewal projects

26 Advance with Technology MoboMoney 2.0 Extending upon the current mobile platform to include MoboShare MoboShare allows rural residents to pool and share money across a mobile platform which allows them to work towards goals and projects (i.e. contributing to purchasing equipment, such as a well, to provide water for the village)

27 About MoboShare Development Mahindra IT s expertise will be leveraged to develop the application Cost: reallocation of internal resources Testing Mahindra will test the app across 20 villages to determine inefficiencies. Field representatives train rural residents in utilizing the app and will distribute and collect feedback forms. Analytics Usage rates by village, number of field rep inquiries by village, creditworthiness

28 Benefits of MoboShare Risk of investment in village resources is decreased as multiple residents can now easily contribute Collecting data to formulate new insights into the Mahindra customer (usage, etc.) Addresses Mahindra s goal of providing value to the customer through innovative products and services

29 Timeline Q Government Partnership Business Development Goal of 500K customers MoboShare Development Testing Long term Adoption

30 Financial Impact of Plan Total(Revenues( 2010( 2011( 2012( 2013( 2014( 2015( 2016( 2017( 2018( 2019( 2020( ((( ((( ((( ((( ((( ((((((((( ((((((((( (((((( (((((( (((((( (((((( 15,612( 20,256( 28,849( 40,950( 52,753( 60,211(( 79,126(( 104,248(( 135,120(( 171,802(( 217,866(( Growth' 30%' 42%' 42%' 29%' 14%' 31%' 32%' 30%' 27%' 27%' ((((((((( ((((((((( ((((((((( ((((((((( ((((((((( Net(Profit( 3561( 4927( 6434( 9270( 9544( 9129( 11,997(( 15,806(( 20,486(( 26,048(( 33,032(( Net'Profit'Margin' 23%' 24%' 22%' 23%' 18%' 15%' 15%' 15%' 15%' 15%' 15%'

31 Risks & Contingencies Risks Likelihood Impact Mitigant Un-successful RFP bid Medium Loss of potential revenue & growth opportunities Continued slow rural economic growth MoboShare decreases need for bank Medium Loss of business & revenues Seek out new growth opportunities internationally Tailor products to suit customers needs. Increase # product/ customer Low Decreased need for loans They will need a financial bank to fund large products & growth

32 Strategy 2020 for Mahindra Rural Focus Capitalize on Homes for All by 2020 Disruptive & Radical Technology Innovation! There is opportunity to grow in the wellunderstood rural market (serving <1% of population)! Partner with Indian Government to achieve development goals, while growing Mahindra s Home Financing business! Leverage existing Mahindra Tech resources, providing additional value to customer through innovative MoboShare app