Upload
tarun-kumar
View
219
Download
0
Embed Size (px)
Citation preview
8/7/2019 avendus report on Financial Institutions
1/13
Private & Confidential
- 1 -
Avendus Banking & Financial Services Conclave
January 14, 2011
8/7/2019 avendus report on Financial Institutions
2/13
Private & Confidential
- 2 -
Key takeaways from the conference
TheAvendusBankingandFinancialconference washeldonJanuary14,2011.Fivecompaniesfrom the listedspaceand fourfastgrowingcompanies from the
unlistedspaceparticipatedintheconference.
Thekeytakeawaysfromtheconferenceare:
Mostbanksandnonbankingfinancialshaveseenstronggrowthintheirloanbookon thebackofincreasedconsumerdemand.Theyexpectthisgrowthtosustain,
supportedbyastrongmacroenvironment.
Spreadsarelikelytobeunderpressureaswholesaleborrowingcostshaveincreasedsignificantly.
NonbankingfinancialssuchasManappuramGeneralFinanceandShriramCityUnionFinanceare likely toseestronggrowth in AUMs, led bya shift from the
unorganizedgoldlendingmarkettotheorganizedspace.
Assetqualityhasimprovedformostnonbankingfinancials,ledbyrisingruralincome.
StockSummary(asonJanuary19,2011)
12.011.41.410.212.8NANA11,782.9101.5SREIInfrastructureFinance
45.11.22.211.113.92.83.5169,168.2748.0ShriramTransportFinance
20.520.815.58.910.91.82.226,188.9530.0ShriramCityUnionFinance
112.84.86.311.720.62.93.959,593.2143.1ManappuramGeneralFinance
27.745.320.99.021.61.01.18,798.7103.4DhanlaxmiBank
1 year3 month1 monthFY12fFY11fFY12fFY11f(INRmn)(INR)
Stockperformance P/EP/EP/BP/BMCAPCMP
Source: Bloomberg
8/7/2019 avendus report on Financial Institutions
3/13
Private & Confidential
- 3 -
Dhanlaxmi Bank (DHLBK IN, NR)
DHLBK
Businessupdate
Currentnetworkof275branches,covering14states.
PresenceacrossIndiahasimprovedwith124nonKeralabranches.
Totalassetbaseof INR114bnason30Sep10, indicating73%growthyoy.
Thebankexpectsloangrowthof80%90%inFY12and45%50%inFY13.
Capitaladequacyratioat14.6%withTierIratioof11.7%ason30Sep10.
Employeestrengthason30Sep10was4,508.
Currently,corporatesdominate,butthebankplanstoincreaseSMElending.
AimstohaveequitabledistributioninSMEs,corporatesandretailbanking.
Has high operating costs, with cost/income ratio currently at c84%;
cost/incomeratiolikelytoremainatc75%tillFY12.
HasmaintainedCASAat20%22%forthepastsixquarters;likelytomaintain
CASAatc22%forthenextfourquarters.
NetNPAratioason30Sep10was0.71%.
About39%of incremental liabilitiesarefromnewbranches.DHLBKexpects
newbranchestobreakevenbyend2QFY12.
LookingtoraiseINR8bnINR11bnin4QFY11.
DoortodoorservicesunderNRI/NREaccountcategoryisthenewoffering.
Planstoaddlessthan50,000cards/yeartothecreditcardsegment.
Inflectionpoints
Marketupdate
Givenitssmallsizeandregionalprofile,DHLBKis likelytofacecompetition
fromlargerbanksoutsidesouthIndia.
MaintainingNIMswouldbeachallenge,givenahigherinterestratescenario
andlowerCASA.
OnebranchhasbeenaddedinJan11,takingthetallyto275.
Likelytoapplyforlicensesfornewbranchesin2QFY12;mostnewbranches
arelikelytobeoutsidesouthIndia.
HasstartedadoortodoorinitiativeforNRI/NREaccounts.
8/7/2019 avendus report on Financial Institutions
4/13
Private & Confidential
- 4 -
Financial Inclusion Network and Operations
FINO
Businessupdate
WasconceptualizedduetotheRBIsinitiativeofprovidingfinancialinclusion
totheloweststrataofsociety.
WassetupinJul06,withICICIBank(ICICIBCIN,Add)asprincipalsponsor.
With 70%80% market share, it is a market leader with c1,500 employees
and12,000BusinessCorrespondents(BCs).
The BCs are responsible for collecting deposits, managing withdrawals and
remittancesadforinsurancepolicies.
Asmartcard(swipecard)actsasavirtualbankaccount forcustomers.
Currently associated with most banks operating in the country (public and
private);alsoundertakesgovernmentdisbursementprojects.
Depositsaretransferredtotherespectivebanks;doesnotcarryliabilitieson
itsbooks.
Receivesaonetimepaymentfrombanksonacquiringnewcustomers,along
withafeeoneverytransaction.
Onaverage,INR30bnishandledpermonth,ledby3mn4mntransactions.
About 65% of FINOs income is earned from signing new customers, while
thebalanceisrecurringincomefromexistingcustomers.
About80%ofnewcustomersarefirsttimeusersofbankaccounts amplyputtingintofocusFINOsaimofexpandingfinancialinclusion.
Currently services c25mn customers across the country; is adding c2mn
customerspermonth.
Hassmallexposuretodirectlending(lessthan1%ofitsincome).
Alsocarriesoutlendingactivityonbehalfofbanks,allowingittoearnagency
commission.
Inflectionpoints
Marketupdate
Thefinancialinclusionmarketisgrowingat200%300%perannum.
Thegovernment islikelytoplayavitalrole ingrowingthemarketasmore
andmoregovernmentrelatedtransactionsmovetotheelectronicspace.
These include the Rashtriya Swasthya Bima Yojana (a cashless health
insurancescheme)andtheNationalRuralEmploymentGuaranteeScheme.
Competitioncouldarisefromtechgiantsvyingtoenterthespace.
However,giventherapidgrowthinthemarket,FINOappearswellplacedto
playouttheopportunity.
Atthecurrentrunrateofclientaddition,FINOexpectstoaddanother25mn
customersoverthenext1820months.
ByMar11,thecompanyexpectstoexpanditsBCnetworkto18,000.
ExpectstoclosethecurrentfinancialyearwithtoplineofINR1.5bn.
TurnedEBITDApositiveinFY10;isaprofitmakingcompanyinFY11.
Plans to raise funds over the medium term. Would require INR2.25bn, of
whichINR1.25bnINR1.35bnwouldbefromfreshequity.
8/7/2019 avendus report on Financial Institutions
5/13
8/7/2019 avendus report on Financial Institutions
6/13
Private & Confidential
- 6 -
Ratnakar Bank
RATNA
Businessupdate
After induction of the new management team, the focus has been on
upgradingoperationsandtechnology,revampingcreditprocessesandcreating
separatebusinessverticalssuchasSMEandConsumer.
Core business areas are SME, Midmarket, Consumer/Retail and Financial
Inclusion.
HadadepositsandadvancesbaseofINR15.8bnandINR11.8bn,respectively,
atendMar10.InvestmentswereINR5.1bn.
Has 88 branchesspread across Maharashtra, Karnataka and Goa, with a
smallpresenceinGujaratandNCR;15branchesareintheMumbai region.
HasinstalledCBSinmostofitsbranches.
Hasover400,000clients.
Totalnumberofemployeesis750.
AtendMar10,theCASAratioofthebankwas35%,grossNPLratiowasc2%
andCARwasc35%.
Inflectionpoints
Marketupdate
While it has had considerable success in hiring at the senior and middle
managementlevels,employeerecruitmentandretentionwillcontinuetobea
focusareaandachallenge,giventhebanksambitiousgrowthplansandthe
highlycompetitivelabourmarketinthesector.
Givenitslargesemiurbanandruralfootprint(50%ofthebranchnetwork),
there existsasignificant opportunity to leverage this presence, especially as
theseregionsarehighergrowthmarketsintermsofconsumptionandwealth
generation.
Inductionofnewmanagementteamsixmonthsago.
Thenewmanagementisfocusedonthetransformationofthebank through
the introduction of new technology and processes, creation of separate
business verticals, addition of new branches and eventually expanding the
footprinttomorestatesinIndia.
Retention
of
existing
clients
and
attracting
newer
clients,
which
will
allow
thebank toachievethedesiredscale,would need significant investments in
branding,distribution,marketingandtechnology.
8/7/2019 avendus report on Financial Institutions
7/13
Private & Confidential
- 7 -
Shriram City Union Finance (SCUF IN, NR)
SCUF
Businessupdate
LoanbookforecasttogrowfromINR63bnatendSep10toINR100bnbyend
Mar12.
Operates 650 branches with over 400 branches operational in south India,
includingMaharashtra.
Loandurationdoesnotexceed40months.
Averagecostofborrowingisc10%.
Procures63%ofitsborrowingsfrombanksintermsofcashcredit,termloans
whilethebalanceisfromInstitutionalNCDsandcommercialpapers.
Borrowingsthroughcommercialpapers likelytoincreasewith improvement
inthecreditratingduring3QFY11.
Planstoforayintohousingloansthrougha100%subsidiaryoverthenext18
months.
5%IRRpaidasoperatingcoststoShriramChitsfortheportfoliosoriginating
fromthem expensedupfrontfromtheP&L.
Averagerateofinterestonloansisc20%perannum.
MonthlycollectionsnowstandatINR3,500mn.
MaintainsCARat23%,asagainstminimumrequirementof15%.
LikelytomaintaingrossNPAsatcurrentlevelofc2%andnetNPAsat0.6%.
Inflectionpoints
Marketupdate
Thereislikelytobea50bphikeinthecostofborrowingoverthenextyear
asnewloansareraisedathigherinterestrates.
Smallbusinessloansandgoldloansarelikelytobethedriversforexpansion
oftheloanbook.
Leveraging the 0.1mnstrong customer network associated with the Chit
Fundbusiness.
Improvement in credit rating likely to help reduce the average cost of
borrowinginthenearfuture.
Focusonproductexpansionacrossbranches.
Capitalizingthereachofgroupcompanies,especiallyforgoldloans.
8/7/2019 avendus report on Financial Institutions
8/13
Private & Confidential
- 8 -
Shriram Transport Finance (SHTF IN, NR)
SHTF
Businessupdate
ExpectstogrowtheloanbookataCAGRof20%toINR500bnbyFY13.
In the preowned market, SHTF has a share of 20%25% and in new truck
financing,ithasashareofc7%.
Passengercommercialvehiclefinancingandequipmentfinancingarelikelyto
bethenewgrowthareas.
Equipment financing would be undertaken by the whollyowned subsidiary,
ShriramEquipmentFinance,whichstartedoperationson13Oct10.
Current loan book of INR 315bn; expects to increase the loan book to
INR500bnbyFY13.
Generates45%ofitsbusinessfromtheSouth,30%fromtheWest,18%from
theNorthandthebalancefromtheEast.
Netinterestmarginslikelytoremainstableas30%ofassetsandliabilitiesareatafloatingrate.
Assetsandliabilitieshavematurityof39monthsand42months,respectively.
Thus, with a change in interest rates, the rates on incremental assets and
liabilitiesarerepricedtothenewinterestrates,keepingNIMsstable.
Competitionincreasesduringgoodeconomicconditions;however, thereisno
riskofsustainedcompetition.
WithsomeforeignplayersexitingthemarketandsomelargedomesticNBFCs
reducingtheirexposure,theprobabilityofincreasingmarketshareishigher.
Inflectionpoints
Marketupdate
Estimated market size of freight bill discounting is INR60bnINR70bn, for
passengercommercialvehiclefinancingitisINR100bn,fortractorfinancingit
isINR192bnandforconstructionequipmentfinancingitisINR300bn.
Industrygrowth likelytobedrivenbyused commercialvehicles and used
equipmentfinancing.
SHTFplanstoincreasethenumberofbranches.
Eachbranchhandlesc2,500customers. Ifthenumberofcustomerscrosses
2,500atanybranch,anewbranchwouldbeopenedatthesamelocation.
Likelytoaddthreeautomallsandover150kiosksinFY11.
Auto malls are likely to help build a strong entry barrier and enhance the
relationshipswithsellersandbuyersacrossvehicles.
Auto malls are likely to help generate brokerage fees for transactions and
alsofinancethebuyingofusedvehicles.
8/7/2019 avendus report on Financial Institutions
9/13
Private & Confidential
- 9 -
SREI Infrastructure Finance (SREI IN, NR)
SREI
Businessupdate
Enjoys 33% market share in the equipment finance business; looking to
maintainmarketshareatcurrentlevels.
Theequipmentfinancebusinessisexpectedtogrowatasteadypace,while
theprojectfinancebusinessisexpectedtogrowfaster,givenitslowbaseand
smallermarketshare.
Projectfinanceloanbookhasthepotentialtogrowfrom INR50bncurrently
toINR200bnINR220bnin23years.
Investment portfolio of INR6.6bn; has pending equity commitment of
INR1.5bnINR2bnoverthenexttwoyears.
Managementnot lookingtoextend its investmentportfoliobeyond INR8bn
tillendMar12 incremental commitment may be met out of rechurning of
portfolio.
NIMintheprojectfinancebusinesslikelytodeclinefrom7.93% in2QFY11to
4.25%,understeadystate,onrepaymentofonetimeloanstoQuippo.
Management expects larger feebased revenue; is targetingcontribution of
20%25%tothebottomline.
Management has guided to standalone PAT of INR2.0bnINR2.1bn and
25%30%growthinFY12.
Inflectionpoints
Marketupdate
SizeoftheequipmentfinanceindustryestimatedatcINR300bn.
Equipmentsaleshavegrownat20% inthepastsixmonths;theequipment
financeindustryisgrowingat20%25%perannum.
In equipment financing,SREIhasextended its portfolio to IT infrastructure
andmedicalequipment,whicharelikelytodrivegrowth.
Likely toget the statusofan Infrastructure NBFC from the RBI in the next
fewmonths.
TargetinganequipmentfinancingportfolioofINR150bnbyMar12,forwhich
it
may
look
at
further
equity
infusion
into
its
JV
with
BNP
Paribas.
8/7/2019 avendus report on Financial Institutions
10/13
Private & Confidential
- 10 -
Tata Capital
TATACAP
Businessupdate
Product offerings include commercial finance, investment banking, private
equity,infrastructurefinance,wealthmanagement,consumerloans,securities,
andtravelrelatedservices.
Vehicle financingdoes not include financingof Tata Motors (TTMT IN, NR)
vehiclesasitisundertakenbyTataMotorFinance.
About18%oftheretailfinancingbookisforchannelfinancing towardsTatadealers.
Has106branches,spreadover40cities.
Total AUMs amount to INR140bn, with a target to scale up to INR400bn
INR500bnoverthenext23years.
Liability mix equally spread among bank funding, commercial papers and
Nonconvertibledebentures.
Netinterestmarginsareabove3%.
CARcurrentlyat18%.
Owns4%oftheequitycapitalofDevelopmentCreditBank(DCBIN,NR).
AlsosettingfootinoverseasmarketswithregisteredofficesinSingaporeand
London.
Inflectionpoints
Marketupdate
Homeloanslikelytooccupyalargerportionofthebookwithin retailloans.
StrongcompetitionfromIDFC(IDFCIN,NR)andbanks intheinfrastructure
financingspace.
Tofocusonhomeloans,infrastructurelendingandcorporatelending.
Intendstoconverttoabank,iftheregulationspermit.
8/7/2019 avendus report on Financial Institutions
11/13
8/7/2019 avendus report on Financial Institutions
12/13
Private & Confidential
- 12 -
Disclaimer and Disclosure
Disclosureofintereststatement(asofJanuary20,2011)
NoNoNoDevelopmentCreditBank
NoNoNoTataMotors
NoNoNoICICIBank
NoNoNoStateBankofIndia
NoNoNoIDFC
NoNoNoSREIInfrastructureFinance
NoNoNoSundaramFinance
NoNoNoMahindra&MahindraFinance
NoNoNoShriramTransportFinance
NoNoNoKarnatakaBank
NoNoNoKarurVysyaBank
NoNoNoManappuramGeneralFinance
NoNoNoShriramCityUnionFinance
No
No
No
No
Avendusoritsassociatecompanys
ownershipofthestock
NoNoLakshmiVilasBank
NoNoDhanlaxmiBank
NoNoCityUnionBank
NoNoFederalBank
Analystownership
ofthestock
InvestmentBankingmandatewith
associatecompaniesofAvendus
8/7/2019 avendus report on Financial Institutions
13/13
Private & Confidential
- 13 -
BSECM INB011292639|NSECM INB231294639|NSEF&O INF231294639SEBIRegistrationNo:AvendusSecuritiesPrivateLimited
F:+912266480040
F:+14842312343F:+918066483636T:+912266480950T:+912266480050
T:+12123515066T:+918066483600Bandra(E),Mumbai400051Bandra(E),Mumbai400051
NewYork,NY10017Ulsoor,Bangalore8.India.BandraKurlaComplexBandraKurlaComplex
16thFloor,#1&2,10thFloor,MurphyRoad,BQuadrant,6thFloor,BQuadrant,5thFloor,
100ParkAvenueTheMillenia,TowerA,IL&FSFinancialCentre,IL&FSFinancialCentre,
NorthAmericaBangaloreInstitutionalBrokingCorporateoffice
OUROFFICES