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Investor Presentation
Cholamandalam Investment and Finance Company Limited
“Financing your Assets…since 1978“
Certain statements included in this presentation may be forward
looking statements made based on management’s currentexpectations and beliefs concerning future developments andtheir potential effects upon Cholamandalam Investment andFinance Company Ltd and its subsidiaries. There can be noassurance that future developments affecting CholamandalamInvestment and Finance Company Ltd and its subsidiaries will bethose anticipated by management. These forward-lookingstatements are not a guarantee of future performance and involverisks and uncertainties, and there are important factors that couldcause actual results to differ, possibly materially, fromexpectations reflected in such forward-looking statements.Cholamandalam Investment and Finance Company Ltd does notintend and is under no obligation, to update any particular
forward-looking statement included in this presentation.
Disclaimer
2
Corporate Overview
Business Overview
Financial Performance
Business Strategy
Wealth Management
Table of Contents
Confidential
Corporate Overview
Confidential 3
Consistent profit making and dividend paying * company since 1978Strong track record of dividend to shareholders
Journey so far …
4Confidential
2008Exited
Consumer Finance Business
2009Sold AMC
Focus on Secured Lending Lines
(Vehicle Finance, Home Equity
& Business Finance)
2007Commenced Home Equity
Business
2010JV with DBS terminated
DBS Shares acquiredCapital infusion
of Rs. 1150 Mn by IFC& Rs.1350 Mn. by other PE Investors
1978Commenced Equipment Financing
1992Commenced
Vehicle Finance
1994Started
Chola Securities
1996Started Chola
Asset Management
Company
2000Started
Chola Distribution
2005Joined hands
with DBS
2006Commenced
Consumer Finance
Note: All years are Calendar years
* exception 2009, average dividend payout for the last 10 years is 38.5% on capital
Shareholding pattern … and recent changes
5Confidential
Murugappa Group acquired 37.48% equity stake from its JV partner (DBS, Singapore) in April 2010
IFC subscribed Rs. 1000 Mn in April 2010 and further Rs 150 Mn in Oct 10 for 9.92% stake in the company.
Infusion of Rs.1350 Mn by Other Private Equity Investors in Oct 2010, by way of preferential allotment improves networth.
Promoter Share holding of 69.07% post DBS exit indicates strong promoter commitment
As at November - 2010
Promoter -Murugappa
Group -
Tube Investments
of India59.30%
Promoter -Murugappa
Group -
Others9.77%
Public & Institutions other than
IFC21.01%
IFC9.92%
* Considering closing share price as on 30th November 2010
Market Data As at Nov 2010
No of Shares - in units 119,283,881
Market Capitalization *
(In Millions) 22,264
Major Companies - Murugappa Group
6Confidential Market Cap is calculated based on share prices as on 30th Sept 2010
In Business since 1964 , 2.9 million tonnes of phosphatic fertilisers , 2nd Largest phosphatic fertiliser company in IndiaMarket Cap - Rs. 86200 Mn.
Part of the Group since 1981 with wide range of products sugar, microalgal health supplements and bio productsMarket Cap - Rs.37150 Mn.
In business since 1954 , Pioneered in coated and bonded abrasives, super refractories, electro minerals and industrial ceramics Market Cap - Rs.21400 Mn.
In business since 1949, Wide range of product - Engineering, Metal Formed Products, E-Scooters, Fitness Equipments and Cycles.Market Cap - Rs.26750 Mn.
Cholamandalam Invt Finance
In business since 1978, financial provider for vehicle finance, business finance, home equity loans, stock broking & distribution of financial productsMarket Cap - Rs.20800 Mn.
In business since 2003, JV with Mitsui Sumitomo Insurance Group of Japan, (5th
largest insurer across the globe). Offers wide range of general insurance products that include Fire, marine, motor, property, accident cover, engineering, health, liability, travel and rural insurance . Market Cap is not applicable since it is not listed.
Strong Corporate Governance
7Confidential
Management
Vellayan Subbiah, Managing Director w.e.f. Aug, 2010 He has been the Managing Director of Laserwords, a leading provider of pre-press services to global publishers since 2005 His professional experience includes 6 year s at McKinsey and Company, Chicago and associations with 24/7 Customer Inc. Las
Gatos and The Carlyle Group, San Francisco He holds a degree of Bachelor of Technology in Civil Engineering from the IIT Madras. He also holds a Masters in Business
Administration from the University of Michigan, Ann Arbor
8Confidential
Mr. N Srinivasan, Mentor Director He has over 26 years of experience in the areas of Corporate Finance, Legal, Projects and General Management He is a Director on the Boards of Tube Investments of India Ltd., Cholamandalam MS General Insurance Company Ltd. and
certain other Murugappa Group companies He is a member of the Institute of Chartered Accountants of India and the Institute of Company Secretaries of India
CEO AND MANAGEMENT TEAM
MBN Rao – Chairman Over 38 years of varied experience in the entire gamut of Banking and Finance, Economics, Foreign Exchange, Money and
Capital Markets, and Administration Former Chairman and Managing Director of Canara Bank and Indian Bank. He was also the Chairman Indian Banks’ Association, Indo Hong Kong Finance Limited, Vice Chairman of Commercial Bank of
India, Russia and is a Director on the Boards of various reputed Companies He also served as a Member of various Committees constituted by the RBI, Ministry of Finance - Government of India, SEBI and
National Institute of Bank Management
Management Team contd….
Mr. Rohit Phadke, Sr. VP & Business Head-Home Equity Rohit has 20 years of rich experience in Asset Financing. His last assignment was with Apple Finance Ltd as Regional Manager. Rohit, has been with the company for over eight years and had led the West Zone of the Vehicle Finance Business with
distinction. Rohit established the Home Equity business in 2006, and has successfully built up a significant franchisee in the mortgage space
recording both profits and growth from commencement of business.
9Confidential
Mr. Arul Selvan, Sr. Vice President & CFO
Chartered Accountant from the Institute of Chartered Accountants of India & MBA from Open University (UK) With over 20 years of experience in Finance and Accounts, Arul heads the Finance function of CIFCL as the CFO. Arul has spent 19 years with the Murugappa Group, with stints in Tube Investments of India, Corporate Strategic Planning
Division, Cholamandalam Mitsui Sumitomo General Insurance , and Group Corporate Finance.
Kaushik Banerjee – President Asset Finance Kaushik has been in Asset Finance business for close to 22 years. He began his career in financial services with ITC Classic
Finance Ltd (a subsidiary of ITC Limited), He headed up the West & East operations of Esanda Finanz Ltd (a subsidiary of ANZ Grindlays Bank) with whom he spent 7
years. He joined CIFCL in 2001 and took over as Senior Vice President of the Vehicle Finance vertical in 2006. The division enjoys a strong reputation as one of the largest financiers of commercial vehicles in the country with a robust
portfolio quality. He currently heads the Asset Finance divisions of Vehicle Finance and Corporate & Mortgage Finance.
Corporate Organisation Structure
10Confidential
*this business was discontinued since Oct, 2008
Cholamandalam Investment and Finance Company Limited
Vehicle
Finance
Business
Finance Home Equity Personal Loan*
Business Functions
Subsidiaries
Cholamandalam Factoring
Cholamandalam Securities
Cholamandalam Distribution
Services
Mr. Kaushik BanerjeePresident – Asset Finance & Head - VF
Finance : Mr. D. Arulselvan
Sr. VP& CFO
Legal & Secretarial:Ms. Sujatha P
VP & Company Secretary
Operations : Mr. Mahesh Waikar
Associate VP
IT : Mr. Venkatesan V
VP
Human Resources : Mr. Chandrasekar R
Associate VP
Internal Audit : Mr. Natraj PAssociate VP
Mr. Vikas Arora AVP & NCM
Mr. Rohit PhadkeSr. VP & Business
Head –Home Equity
Mr. S. Vellayan – Managing Director
Regulatory Framework
11Confidential
•Reserve Bank of India is the functional regulator for Non Banking Finance Companies (NBFCs) in India.
•NBFC is defined as any company registered under the Companies Act engaged in the business of providing loans and advances or leasing/ hire purchase/ insurance/ chit business or receiving deposits under any scheme or lending for acquisition of share/ stocks/ debentures/ or lending in any other manner
•NBFC are classified into Asset Financing Company (AFC) , Investment Company (IC)and Loan Company (LC).
•Chola is a Non Deposit taking Systematically Important Non Banking Financial Company – (ND – SI – NBFC) and is classified as a Loan company.
•Chola is governed by Non Banking Financial (Non Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions issued by Reserve Bank of India
Key Regulatory Framework
12Confidential
Particulars Explanation
CapitalAdequacy Ratio
Ratio derived by dividing net worth by risk weighted assets. The Ratio is to be maintained at a minimum level of 12%. (proposed to be increased to 15% effective Mar 2011 for ND-NBFCs)
Credit Concentration
Lending or investing is restricted to 15% of networth, to a single borrower and upto 25% to a single group of borrowers.Lending and investing is restricted to 25% of networth to a single borrower and upto 40% for a single group of borrowers.
Asset Liability Management
Mismatch in time buckets upto 1 year should not exceed 15% of cumulative outflows
Provisioning Norms
Regulator has defined classification and minimum provisioning norms for stressed assets.
Disclosures & Reporting
Regulator has defined various returns to be submitted for effective supervision based on the size of the Company.
Business Overview
Confidential 13
Business Lines
14
Provides vehicle financing for NEW and
USED HCVs, LCVs, SCVs, MLCVs, MUVs and
Cars
Vehicle
Finance47570
(62%)
Assets* as at 30 Sep ‘10
Home
Equity
Provides loans against residential property
to self employed individuals
Provides loans against collateral of equity
shares, commercial/ residential property
and combination of current assets and
shares
Business
Finance
DescriptionAsset Class
77,000
Confidential
17660
(23%)
5920
(8%)
Personal
Loans
Disbursements discontinued since
October 2008 and currently only collection
activities are continued. Portfolio running
off
5850
(7%)
Managed # Own
42870
(68%)
12670
(20%)
5920
(9%)
1530
(2%)
62,990Total* Assets are net of Provisions#Managed assets refers to Own assets + off balance sheet items which have been securitized / sold on a bilateral assignment basis.
Rs Million
Portfolio Quality – one ofthe best amongst NBFCs
Largest division – 62% oftotal managed loan book(net of provisions)
Profitable since inception
Focus on CommercialVehicles – New / Used
Vehicle Finance
Generated profit from1st year compared toindustry average of 3years
Carved out nichebusiness segment
Low delinquency
Focus on self employednon professional
Home Equity
Profitablesince inception
Highestprofit/employeeamongst all businessdivisions
Nil delinquency sinceinception
Business Finance
Commenced operations in 2006
Discontinued since Oct, 2008 Rs.26000 Mn of asset size
Consumer Finance
Cholamandalam Distribution Services Limited
Cholamandalam Securities Limited
Cholamandalam Factoring Limited
Subsidiaries
Asset Composition – Contd.,
15Confidential
Geographical Presence
Bihar (1)
Chattisgarh (13)
Jharkand (2)
Orissa (8)
West Bengal (6)
Delhi (4)
Punjab (19)
Rajasthan (19) UP (1)
Uttaranchal (2)
Karnataka (11)
Kerala (12)
Tamil Nadu (26)
Maharashtra (25)
Pondicherry (1)
Gujarat
(20)
Goa (1)
Geographical Mix - Locations
Note: Figures in brackets represents no. of branches as on 30th September, 2010
210 branches across 19 states/ union territories
~90% locations are in Tier-II and Tier-III cities
Strong in South, West & North and growing presence in East
Note: Figures as on 30th September, 2010
Madhya Pradesh (11)
Andhra Pradesh (28)
16Confidential
Customer Origination & Credit Appraisal
17Confidential
Particulars Vehicle Finance Home Equity Business Finance
Customer Origination DST & DSA DST, DSA & Direct DSA & Direct
Credit CheckCIBIL, Customer & Asset Investigation
CIBIL & FieldInvestigation, Doc
verification
CIBIL & Field Investigation
ValuationSale Price for New
vehicles & valuation of used vehicles
Approved valuers Stock Price
Separate Sales and Credit Team
Yes Yes Yes
Defining Underwriting Norms
CentralisedCentralised Centralised
Loan Processing –Sanction & Documentation
Branch Level Branch Level Branch Level
Disbursements Centralised Centralised Centralised
DST : Direct Selling Team, DSA : Direct Selling Agent, CIBIL : Credit Information Bureau of India Limited
Collection Mechanism
18Confidential
Particulars Vehicle Finance Home Equity Business Finance
Mode of Collections Cash, PDC & ECS PDC & ECS PDC & ECS
Collection Team In house In house In house
Separate Collection Vertical
Yes Yes No
Bucket wise collection strategy
Yes Yes Yes
Enforcement of security
Repossession and disposal of Vehicle –
2 – 3 Months
Attachment of property –2 – 3 Years
Sale of securities –Immediate
Legal Proceeding Internal / External Internal / External Internal / External
Nature of Legal Actions
Arbitration / Sec 138 / Civil Case
Arbitration / Sec 138 / Civil Case
Arbitration / Sec 138 / Civil Case
PDC : Post Dated Cheques, - to be banked on due date; ECS : Electronic Clearing System – Automatic credit on due date.
Key Concerns & Mitigants
19Confidential
Key Concerns Mitigants
Aggressive competition from PSU Banks andother market players
Focus more on increasing reach particularlyin Tier III & Tier IV towns, which will result inincremental volume growth and enhancecustomer contact and service capabilities.
Impact of Base rate by Banks Banks have implemented base rates and thismay increase the cost of funds for thecompany. The company shall maintain anideal mix of borrowings from banks andmutual funds to reduce the impact of baserate and leverage PSL asset basedborrowings to keep interest cost down.
Attrition of key manpower High impact retention activities supportedby a strong reward & recognition platform.Maintain active pipeline of candidates to fillvacancies.
Vehicle Finance
20Confidential
Vehicle Finance - Business Model & PositioningVehicle Finance - Business Model & Positioning
21Confidential
Principal Operator > 50 Vehicles
Large Operators 26- 50 vehicles
Medium Operators 10 -25 – HCV & LCV vehicles
SRTOs – HCV & LCV
First Time Users & Small Ticket Operators, older vehicles
HighHigh
LowLow
RATES
HCV, LCV, MUV, Cars & SCV
HCV RISK
Losses 0.75 %
Rates New – 10 % to 12 %Used – 13.50% - 15 %
Rates – 20 - 26 %Losses 2.5 %HCV : Heavy commercial vehicle, LCV : Light commercial vehicle, SCV : Small commercial vehicle , MUV : Multi utility vehicle , SRTO : Small Road Transport Operators
Chola positioning-•Middle of the pyramid through New CVs, Used CVs & MUVs
•Top of the Bottom of thepyramid through SCV & older CVs Shubh”
~65% of disbursements are to micro & small enterprises and agribased customer segment
CV Industry
Chola Position
Chola2%
Others 98%
Chola
13%Others
87%
Market Share based on internal estimates and SIAM – All India
Industry commercial vehicles for the half year ended 30th September
2010
Chola14%
Others86%
Market Share in LCV Market Share in Mini LCV
Market Share in M&HCV
Significant Market Share (H1 FY11)
22Confidential
Industry & Market Share in Addressable market
23Confidential
2008-09 2009-10 2010-11 P 2011-12 P CAGR %
LCV Finance Market – (A) 48000 70000 87000 112000 33%
HCV Finance Market – (B) 146000 203000 240000 284000 25%
Total (A + B) 194000 273000 327000 396000 27%
LCV :Light commercial vehicle MHCV: Medium and heavy commercial vehicles, P:Projected
Source : CRISIL Research , Industry SIAM
2007-08 2008-09 2009-10 2010-11 (H1)
HCV - Goods
Ashok Leyland 2% 2% 2% 2%
TATA Motors 2% 2% 2% 3%
LCV - Goods
Force Motors 8% 11% 15% 16%
Mahindra 14% 11% 13% 15%
TATA Motors 11% 8% 18% 22%
Volvo -Eicher 19% 21% 21% 21%
Swaraj Mazda 25% 26% 27% 28%
Industry size ( Rs in Mn.)
Chola Market Share (as a % of Value)
TN16%
Andhra Pradesh
11%
Maharasthra11%
Chattisgarh8%Rajasthan
8%
Gujarat8%
Punjab7%
Kerala7%
Madhya Pradesh
5%
West Bengal5%
Delhi4%
Orissa4%
Karnataka4%
Other States2%
Geographical Mix Disbursement Mix
Geographical & Distribution Mix (H1 FY11)
24Confidential
During FY10, ~36% of Disbursements were from South India and balance were from other zones
Well diversified portfolio
HCV16%
LCV38%
MUV6%
Used CV's25%
Mini LCV15%
SWOT Analysis
25Confidential
• Long term & stable player reputation in market
• Strong relationship with manufacturers / dealers –Tata Motors, Mahindra & Mahindra, Eicher Volvo, Piaggio, Force Motors
• In house sourcing & collection model with experienced and stable team
Strengths
Weakness• Low presence in HCV & Passenger Cars
• Lower Reach in terms of number of branches vis-à-vis competitors
• Higher cost of funds than other NBFCs & Banks
Opportunities
• Large new entrants to the industry
• Higher Employee Attrition due to new industry players
• Drop in Industry volumes
Threats
• Increase presence in HCV & Passenger Cars,• Increase branch network & introduce new product
lines such as Tractors , Farm Equipments• Enhance cross selling to improve profitability
Financials – Vehicle Finance
Disbursements Closing Managed Assets
Profit Before Tax
Confidential 26
Income
Note : H1 – 11 nos are for a period of 6 months
Rs. In Mn
25250
15020
28610
19840
0
5000
10000
15000
20000
25000
30000
35000
FY - 08 FY - 09 FY - 10 H1 - 11 *
33310
30600
39130
47570
20000
25000
30000
35000
40000
45000
50000
FY - 08 FY - 09 FY - 10 H1 - 11
4230
5240
5800
3870
0
1000
2000
3000
4000
5000
6000
7000
FY - 08 FY - 09 FY - 10 H1 - 11
690
380
740 750
0
100
200
300
400
500
600
700
800
FY - 08 FY - 09 FY - 10 H1 - 11
Financials – Vehicle Finance
Net Income Margin (In %) Net Credit Losses (In %)
ROTA (In %)
Confidential 27
Exp Ratio (In %)
Note : H1 – 11 nos are for a period of 6 months
Home Equity
Confidential 28
Self Employed Individuals
Customer ProfileAsset Class
Self Occupied Residential Property
Customer Segment
SEC A
SEC B
SEC C
SEC D
Clear focus on the middle socio economic class of B & C
Focus further refined to Self Employed Non Professional (SENP) in the SEC’s B & C
Home Equity – Business Model
29
Long tenor loans
Confidential
PAN India 32 locations
Major Players
PSU Banks
Turn around time one ofthe best in the industry
Provide personalized service to customers through direct interaction with each customer
Personal visit by credit manager on every case
Assess both collateral and repayment capacity to ensure credit quality
Pricing to maintain net interest margin (NIM)
Recover business origination & credit cost from upfront Fee Income
Generate surplus fee income
Effective cost management
Home Equity – Key Differentiators
Process Differentiator Pricing
Underwriting Strategy
30Confidential
Structure
Separate verticals for sales, credit & collections
Convergence of verticals at very senior levels
Each vertical has independent targets vis-à-vis their functions
SWOT Analysis
31Confidential
• Turn around time at par-best in the industry
• Unified structure and common goals
• Personalized service through customer visits
• Robust credit appraisal process
Strengths
Weakness • Higher cost of funds & lending rates
Opportunities
• No real entry barriers
• Reckless lending by new entrants to gain market share
Threats
• Relatively new product• Branch expansion at low cost on account of sharing of
infrastructure with VF• Large market size
Financials – Home Equity
Confidential 32
Income
Note : H1 – 11 nos are for a period of 6 months
Disbursements Closing Managed Assets
Profit Before Tax
Rs. In Mns
3180
5010
10040
5940
0
2000
4000
6000
8000
10000
12000
FY - 08 FY - 09 FY - 10 H1 - 11
3480
7340
14560
17660
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
FY - 08 FY - 09 FY - 10 H1 - 11
260
930
1690
1170
0
200
400
600
800
1000
1200
1400
1600
1800
FY - 08 FY - 09 FY - 10 H1 - 11
10
160
350
220
0
50
100
150
200
250
300
350
400
FY - 08 FY - 09 FY - 10 H1 - 11
Net Income Margin (In %) Net Credit Losses (In %)
Financials – Home Equity contd…
Confidential 33
Exp Ratio (In %) ROTA (In %)
Note : H1 – 11 nos are for a period of 6 months
Business Finance
Confidential 34
Promoters of large listed entities, High Net worth Individuals, Retail broking clientsCustomer Profile
Asset Class Liquid Shares, Commercial Property, Residential
Property, Current Assets
Business Finance
35Confidential
Divisions
Wholesale segment:
Product offerings - Finance Against Shares / Loan Against Property /Corporate Finance
Target Segment - Promoters, Corporates , HNIs
Retail segment:
Product offerings - RLA Shares , ESOP Funding and Margin Funding
Target Segment – Retail clients
SWOT Analysis
36Confidential
• Strong presence in South
• High client trust and strong relationship with clients
• Nil loan losses since inception
• Lean team and Low cost structure
Strengths
Weakness • Higher interest rates compared to PSU banks
Opportunities
• New entrants in the market
• Lending rate & asset cover norms of competitors
• Bank cum NBFC set up to address retail & promoter funding
Threats
•Can extend offering other capital market services such as Margin funding, IPO financing, Loans against debt products etc.
Closing Managed Assets
Profit Before Tax
Financials – Business Finance
37Confidential
Total Income
Note : H1 – 11 nos are for a period of 6 months
Rs. In Mns
10870
3630
51105920
0
2000
4000
6000
8000
10000
12000
FY - 08 FY - 09 FY - 10 H1 - 11
1280 1330
570
330
0
200
400
600
800
1000
1200
1400
FY - 08 FY - 09 FY - 10 H1 - 11
350
180
150
80
0
50
100
150
200
250
300
350
400
FY - 08 FY - 09 FY - 10 H1 - 11
Net Income Margin (In %)
ROTA (In %)
Financials – Business Finance contd…
38Confidential
Exp Ratio (In %)
Note : H1 – 11 nos are for a period of 6 months
Personal Loans
Confidential 39
Personal Loan was introduced as a new product segment during JV with DBS. During
economic downturn, the company faced high delinquencies and decided to
discontinue its personal loan business in Oct, 2008
Through a combination of asset sell-down and aggressive collection, loan receivables
on balance sheet were brought down from Rs. 13710 Mn. (net of provisions) at the
beginning of FY 10 to Rs. 1530 Mn. (net of provisions) as at end of H1 - FY 11
This segment comprises 7% of the Managed assets net of provisions as on 30th
September 2010.
Personal Loan portfolio
40Confidential
This strategy will continue until the complete run-down of receivables
Movement in Personal loan Portfolio (cont’d)
41Confidential
The portfolio shown above is on managed assets net of provisions
Apart from Non Performing loan provisions, the Company is carrying an additional provision of Rs.480 Mn as on 30th Sep 2010 to meet possible delinquencies.
Rs.2330 Mn of loans are in Zero bucket with nil delinquencies.
0
5000
10000
15000
20000
25000
30000
Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10
Rs in Mn. 28440 27360 24910 21180 18970 16470 14530 12520 7580 5850
Key Competencies
Confidential 42
Human Resources
43
Access to 5225 + trained manpower directly and indirectly
Employee Strength of Chola as on 30 Sept 2010 (1092)
Off-roll Employee strength of Chola as on 30 Sept 2010 (4137)*
Comprises 112 professionals (CA, ICWA, Lawyers and engineers) and 417 MBAs as at 30 Sept 2010
Confidential
* The employees belong to Cholamandalam Business Services Limited
Technologies and Processes
44Confidential
Overview :
The company deploys a hybrid resource model that optimizes use of vendor platforms and resources and at the same time allows us to retain control over Technology function.
Robust Disaster Recovery setup implemented for all our business critical applications .
Applications :
Enterprise-wide business applications used across the company (Finnone, NLADS, Oracle Financials –Central GL system interfaced to all the subsystems, etc.). Business applications are supported by Darpan HR solutions (HRMS solution) , Ideal Finance (Credence Treasury solutions) and other sub-systems
Solution for Cross sell business initiatives through TeleSmart
Technology Optimization Initiatives :
Implementation of a CRM solution towards better Customer Service and Lead Management capabilities
Statistical multi dimensional trend reports to assist Management & Business users in strategic decision making
Standardized Workflow platforms using Microsoft Sharepoint Services (MOSS 2007)
Implementation of Intranet portal for employee interactions
Implementation of Hand-held device based solutions for improving productivity of Collections team
Technology Infrastructure catering to branch expansion in Tier 3 and Tier 4 cities
Risk Management Frame work
45Confidential
Risk Management Committee :
Risk management committee to review the implementation of various risk management
techniques, analytics, systems, policies and procedures.
The heads of various businesses and functions constitute the risk management committee. MD is
the chairman of the Committee.
The Committee reviews the top risks in each business and functions and the changes in risk
perceptions on a bi-monthly basis.
The Board reviews risk management processes on a half-yearly basis.
Internal Control Systems :
SOPs for all business parts are in place
Comprehensive risk registers prepared for businesses and various functions
In-house and independent internal audit teams
Robust mechanism of fraud control, fraud detection and prevention – disciplinary committee
comprising of senior management members
Key operational processes (finance and operations) are centralized at Head office for better
control
Strong IT security system and audit to ensure information security
Financial Performance
Confidential 46
Key Highlights
47Confidential
651%
Performance Highlights of Q – 2 FY – 11 Vs Q -2 FY - 10
Performance Highlights of H – 1 FY – 11 Vs H - 1 FY - 10
Rs.50 Mn.
PBT
148% 310%12%
310%148%510%
155%
Rs.400 Mn.
Rs.(4.35)
EPS
Rs.75
Book Value
Rs.70
Share Price *
Rs.4670 Mn.
Mkt Cap *
Rs. 2.39 Rs.84 Rs.174 Rs.19150 Mn.
12%
Rs.100 Mn.
PBT
Rs.(4.00)
EPS
Rs.75.10
Book Value
Rs.70
Share Price *
Rs.174.10Rs.84.15 Rs. 4.20Rs.630 Mn.
* Price considered is as per last trading session of the quarter
Rs.19150 Mn.
Rs.4670 Mn.
Mkt Cap *
Profit & Loss Account
48Confidential
Note : Overall provision for standard assets created Rs.3000 Mn. as on date utilised is Rs.2700 Mn. and balance to be utilised is Rs.300 Mn.
Rs. In Mn.
Particulars 2006-07 2007-08 2008-09 2009-10 H1 - FY 11
Period 6 Months
Disbursements - Non PL 17,624 28,434 20,027 38,656 25,778
Disbursements - PL 7,972 21,260 8,408 - - - - - - -
Income 4,091 8,917 11,206 9,295 5,526 - - - -
Expenditure
Financing Charges 1,889 3,783 5,941 5,036 2,719
Business Origination Outsourcing 594 1,305 833 575 417
Operating and Other Expenses 778 1,636 1,881 1,429 803
Provisions & Loan Losses 357 1,284 3,381 3,614 951
Total Expenditure 3,619 8,008 12,035 10,653 4,890
Profit before adjustments 473 909 (829) (1,358) 636
Utilisation of Std Assets Provision - - 1,000 1,700 -
Exceptional items - - - (29) -
Profit Before Taxation 473 909 171 313 636
Provision for Taxation: 163 316 (257) 159 216
Profit After Taxation 310 594 427 154 420
12 Months
Profit & Loss Account – PL & Non PL
49Confidential
Rs. In Mn.
Particulars 2007-08 2008-09 2009-10 H1-2010-11
CIFCL PL NON-PL CIFCL PL NON-PL CIFCL PL NON-PL CIFCL PL NON-PL
Income 8,917 4,029 4,888 11,206 4,407 6,800 9,295 1,461 7,834 5,526 154 5,372
Financing Charges 3,783 1,261 2,523 5,941 1,842 4,099 5,036 831 4,205 2,719 175 2,545
Business Origination Outsourcing 1,305 963 342 833 425 408 574 10 564 417 4 413
Operating Exp and Depreciation 1,636 886 749 1,881 868 1,013 1,429 436 993 803 122 681
Provisions and Loan Losses 1,284 937 347 3,381 2,719 661 3,614 2,980 634 951 795 156
Expenditure 8,008 4,047 3,961 12,035 5,854 6,181 10,653 4,257 6,396 4,890 1,095 3,795
PBT Before Standard Assets Provisions 909 (18) 928 (829) (1,448) 618 (1,358) (2,795) 1,438 636 (940) 1,577
Standard Assets Provisions - - - 1,000 1,000 - 1,700 1,700 - - - -
PBT (Before Exceptional Item) 909 (18) 928 171 (448) 618 342 (1,095) 1,438 636 (940) 1,577
Less: Exceptional Item - - - - - - (29) - (29) - - -
PBT 909 (18) 928 171 (448) 618 313 (1,095) 1,409 636 (940) 1,577
Balance Sheet
50Confidential
Note : Post equity infusion of Rs.1500 Mn., Networth would be Rs.10750 Mn. Net of issue expenses (Equity : Rs.1192.80 Mn. & Reserves : Rs.9557.20 Mn.)
Rs. In Mn
Particualrs 2006-07 2007-08 2008-09 2009-10 YTD Sep '10
Sources of Funds
Shareholders' Funds
Equity Share Capital 380 522 665 665 1,100
Preference Share Capital - - 3,000 3,000 -
Reserves and Surplus 2,883 5,064 4,145 4,185 8,154
3,264 5,586 7,810 7,850 9,254
Loan Funds
Secured Loans 19,206 29,939 37,133 38,583 44,618
Unsecured Loans 12,983 24,037 16,777 15,362 18,941
32,188 53,976 53,910 53,945 63,559
Total 35,452 59,562 61,720 61,795 72,813
APPLICATION OF FUNDS
Fixed Assets - Net 336 490 338 138 277 - - - -
Investments 788 1,739 4,052 2,193 2,443 - - - -
Deferred Tax Asset (Net) 35 214 1,501 1,549 1,429 - - - -
Current Assets, Loans and Advances
Receivables under Financing Activity 32,693 54,004 45,548 54,896 67,021
Cash and Bank Balances 2,716 5,337 15,578 7,451 5,060
Other Current Assets 635 1,290 1,448 1,311 1,345
Other Loans and Advances 170 388 758 1,874 2,652
36,214 61,018 63,331 65,532 76,078
Less: Current Liabilities and Provisions
Current Liabilities 1,578 3,075 3,286 3,381 3,141
Provisions 383 900 4,362 4,236 4,273
1,960 3,976 7,648 7,617 7,414
Net Current Assets 34,254 57,042 55,683 57,915 68,665
Miscellaneous Expenditure 39 77 145 - -
Total 35,452 59,562 61,720 61,795 72,813
Off Balance sheet Assets 7,417 17,128 16,760 16,908 14,004
Total Assets under Management 42,869 76,690 78,480 78,703 86,817
Actuals
Confidential 51
Key Ratios
As a % of Average Assets
ParticularsVehicle
Finance
Home
Equity
Business
Finance
Company as
a Whole
Income 18.00% 14.55% 12.33% 16.77%
Less :Cost of Funds -9.51% -8.90% -8.07% -8.25%
Net Margin 8.49% 5.65% 4.26% 8.52%
Opex Expenses -4.50% -2.58% -1.24% -4.77%
Loan Losses -0.52% -0.31% 0.00% -1.82%
PBT 3.47% 2.77% 3.02% 1.93%
Ratios are annualized as per H1 figures
Strong Business Momentum
52Confidential
Asset Mix as on 30th Sep, 2010
Disbursements Disbursement QoQ
Managed Loan Book (net of provisions) Portfolio Asset Mix
Rs. In Mn
-
10,000
20,000
30,000
40,000
50,000
60,000
FY 08 FY 09 FY 10 YTD Sep '10
25,250 15,020
28,613 19,842
3,180
5,010
10,044
5,936
21,260
8,410
-
-
49,690
28,440
38,657
25,778
PL HE VF
4,450
1,250
4,840
7,020
8,730
10,120
12,790 12,460 13,321
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Q2 FY 09
Q3 FY 09
Q4 FY 09
Q1 FY 10
Q2 FY 10
Q3 FY 10
Q4 FY 10
Q1 FY 11
Q2 FY 11
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
FY 08 FY 09 FY 10 YTD Sep' 10
33,310 30,600 39,120
47,566
23,670 18,440
9,710 5,847
10,870
3,630 5,110 5,915
2,480
7,340 14,560
17,664
HE CMF PL VF70330
60010
7699268500
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
VF HE BF PL Total
42,874
12,667 5,915
1,532
62,988
4,692
4,997
-4,315
14,004
Securitised Own47,556
5,915 5,847
76,992
17,664
Significant Turnaround in Profitability
53Confidential
Total Income
Losses of Personal Loan Business Profits of Other Businesses
PBT Before Exceptional Items
Rs. In Mn
910
170
340
640
0
100
200
300
400
500
600
700
800
900
1000
FY - 08 FY - 09 FY - 10 H1 - 11
-20
-450
-1100
-940
-1200
-1000
-800
-600
-400
-200
0
FY - 08 FY - 09 FY - 10 H1 - 11
4030 4410 1460360
4890 6800
7830
5170
0
2000
4000
6000
8000
10000
12000
FY - 08 FY - 09 FY - 10 H1 - 11
Income PL
Income Non PL
8920
5530
9290
11210
FY - 08 FY - 09 FY - 10 H1 - 11
VF 690 380 740 750
HE 10 160 350 220
BF 340 180 150 80
Others -110 -100 200 530
-2000
200400600800
10001200140016001800 1580
1440
620
930
Return on Total Assets
54Confidential
Rs. In Mn.
Continuing Business with gain on sale of assets Continuing Business without gain on sale of assets
473 909 171 313 636
27,786
47,507
60,641 61,758 67,304
1.70%
1.91%
0.28%
0.51%
1.89%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2006-07 2007-08 2008-09 2009-10 YTD Sep'10
CIFCL
PBT Avg Assets ROTA ( PBT)
460 928 618 1,409 1,577
23,996
32,960
39,830
50,082
64,653
1.92%
2.81%
1.55%
2.81%
4.88%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2006-07 2007-08 2008-09 2009-10 YTD Sep'10
PBT Avg Assets ROTA ( PBT)
184 473 243 883 1,049
23,996
32,960
39,830
50,082
64,653
0.77% 1.44%
0.61%
1.76%
3.24%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2006-07 2007-08 2008-09 2009-10 YTD Sep'10
PBT Avg Assets ROTA ( PBT)
CAR & Credit Rating
55Confidential
CREDIT RATINGS:
The Company carries a credit rating of ICRA (A1 +) and CRISIL (P1+) for Short Term Instruments
For long term instruments the Company is rated with CARE (AA),ICRA (LAA - / Stable) Fitch (FAA - / Stable) and
CRISIL (AA - / Stable)
For Perpetual Debt, the Company is rated with CARE (A+) and ICRA (A+)
2005-06 2006-07 2007-08 2008-09 2009-10 YTD Sep'10YTD Sep'10
Post Infusion
Tier I 14.84 8.22 8.43 10.17 9.54 9.98 13.31
Tier II - 3.90 3.92 4.95 5.26 5.40 6.87
Total 14.84 12.12 12.35 15.12 14.80 15.38 20.18
Minimum 12.00 12.00 10.00 10.00 12.00 12.00 12.00
14.84
12.12 12.35
15.12 14.80 15.38 20.18
(3.00)
2.00
7.00
12.00
17.00
22.00
Borrowing Profile
56Confidential
Rs in Mn.
• Majority of CIFCL assets qualify under priority sector classification as per RBI•Consistent investment grade rating of debt instruments since inception•Long term relationships with banks / financial institutions ensured continued lending • A consortium of 17 banks with approved limits of ~ Rs.16000 Mn.
Mar 08 Mar 09 Mar 10 Sep 10
ICD & Fixed Deposits 286 71 8 128
Subordinated Debt 2,800 2,915 5,415 7,030
Bank Term Loans 12,603 19,735 34,034 34,368
Commercial Papers 10,500 13,389 9,688 11,783
Debentures 27,787 17,800 4,800 10,250
Total 53,976 53,910 53,945 63,559
53,976 53,910 53,945
63,559
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
ALM Statement as of Sep 2010
57Confidential
Rs in Mn.
Positive cumulative mis-match in all time buckets – in a rising interest rate scenario this is preferable
Outflows Inflows Mismatch
Cum
Mismatch
1-14 days 2,552 9,932 7,380 7,380
15-30/31 days 909 2,176 1,267 8,647
Over 1 to 2 months 2,048 2,386 338 8,984
Over 2 to 3 months 2,038 2,251 213 9,197
Over 3 to 6 months 3,280 5,610 2,330 11,528
Over 6 mths to 1 year 20,450 11,898 (8,552) 2,976
Over 1 to 3 years 29,800 27,001 (2,799) 177
Over 3 to 5 years 3,958 8,317 4,359 4,536
Over 5 years 11,880 7,344 (4,536) -
Total 76,916 76,916 - -
As on 30th September 2010
Period
Business Strategy
Confidential 58
Vehicle Finance
Product & Customer
Geography
Increase Wallet share
59
Market footprint
Focus on improving
profitability
Increased focus on new Agri and Priority Sector Asset customer segments
Focus on niche – Pre-owned truck financing with the use of expert valuation skills, personal rapport with fleet operators
Improve penetration, especially in the West, Eastern and Northern parts of India
Leverage the preferred financier agreements with Volvo Eicher Motor Limited, Tata Motors, Mahindra & Mahindra Limited and Force Motors
Increase repeat business by penetration to existing customers through loan enhancements and top ups.
Focus on building/leveraging cross sell capacity at branches to drive cross sell of other financial products to these customers.
Augment revenue through upfront income
Focus on improving productivity at all levels
Consistently improve portfolio behavior
Maintain a tight control over costs, and improve cost to income ratios
Confidential
Home Equity
60
Build Scale
Build a sizeable stable portfolio
Fee Income to be brought in Line with market
Competitive lending rates to attract quality customers
Maintain Asset Quality
Strengthen collections & legal expertise
Building back-end
Infrastructure
Customer service capabilities to be improved
Invest and enhance IT capabilities
Confidential
Business Finance
61
Product Remain focused on the promoter financing book as key profit driver
Build Scale Continue to scout for profitable lending opportunities in this space to a moderate
book size
Geography Focus on south markets to grow the retail space in a small way and along with
margin funding for HNI clients – these will be exploited for additional growth
Building back-end
Infrastructure
The IT back end will be strengthened by improving functionalities of NLADS - the operating platform on which the back end is being maintained
Confidential
New Product Initiatives
62Confidential
a) Plan to enter one new line of business next year
b) Will also add up to two extensions in the existing lines of business
New line of business being evaluated are:
1)Gold
2)Asset backed Agri financing
3)Construction equipment
Line extensions being evaluated are:
1)Tractors
2)Utility Vehicles
3)Housing Loans
Wealth Management
Confidential 63
Our Products
24*7 Access to reports Online at www.choladirect.com
STOCKSDERIVATIVES
INTERNET BROKING
DEMAT / DPSERVICES
PORTFOLIOMANAGEMENT SERVICES
LOANS AGAINST SHARES*
ETFs & MUTUAL FUNDS
Products and services rendered to large number of HNIs and more than 30 institutions
* Sourced via Cholamandalam Investment and Finance Co. Ltd.
Securities Broking Services
64Confidential
Presence across 13 of India’s metros and mini metros
Started the business in 2000
AUM in excess of Rs.10600 Mns
National presence - 9 offices around the country with a team of 25 highly qualified and certified
advisors in IRDA and AMFI
Multi Product Platform – Mutual Funds, Shares, Bonds, Corporate Debt, Structured
Products, General Insurance and Life Insurance
Adequate research support with a team of dedicated Mutual fund analysts
Services Offered
Discretionary Portfolio Management Services – SIGMA
Non-discretionary Portfolio Management Services – EASE
Transaction based Service Offering – EZ Invest
Confidential 65
Cholamandalam Distribution Services Limited
Confidential 66
Financials
Income and PBT - YoY (Rs. Mn)
Income and PBT - QoQ (Rs. Mn)
Cholamandalam SecuritiesCholamandalam Distribution Services
Income and PBT – YoY - Rs. In Mn.
Income and PBT – QoQ – Rs. In Mn.
Note : H1 – 11 nos are for a period of 6 months
222
82114
59
-81
-183
6936
-250
-200
-150
-100
-50
0
50
100
150
200
250
FY - 08 FY - 09 FY - 10 H1 - FY - 11
Income
PBT
21
28 29
36
28 31
9
17 17
26
17 19
-
5
10
15
20
25
30
35
40
Q1 - FY - 10 Q2 - FY - 10 Q3 - FY - 10 Q4 - FY - 10 Q1 - FY - 11 Q2 - FY - 11
Income
PBT
197
129 122
46
(32)
(90)
35
3
(150)
(100)
(50)
-
50
100
150
200
250
FY - 08 FY - 09 FY - 10 H1 - FY - 11
Income
PBT
36 34
29
23 23 23
10 9 6
10
2 1 -
5
10
15
20
25
30
35
40
Q1 - FY - 10 Q2 - FY - 10 Q3 - FY - 10 Q4 - FY - 10 Q1 - FY - 11 Q2 - FY - 11
Income
PBT
T H A N K Y O U
Confidential 68
Financial of Last 10 YearsRs in MN
Financial Year ended 2001 2002 2003 2004 2005 2006 2007 2008 2009* 2010
9 Months
Income
Total Income 11 70 20 69 23 57 22 76 21 50 22 15 40 91 89 17 1 12 06 92 95
Expenditure
Finance Charges 5 53 8 94 9 74 8 36 8 45 9 94 18 89 37 83 59 41 50 36
Salary cost 45 73 1 04 1 29 1 46 1 81 3 81 7 52 8 38 7 65
Other Operating Exp 3 58 7 51 6 57 6 05 4 18 3 70 9 91 21 89 18 75 12 38
Provisions & Loan Losses 38 79 1 66 2 46 2 25 2 08 3 58 12 84 23 81 19 14
Exceptional items - 15 29
Profit Before Tax 1 77 2 72 4 55 4 76 5 16 4 60 4 73 9 09 1 71 3 13
Taxes 57 85 1 74 1 55 1 75 1 08 1 63 3 16 - 2 57 1 59
Profit After Tax 1 21 1 88 2 81 3 21 3 41 3 52 3 10 5 94 4 28 1 54
Dividend Payout (In Rs.) 4.50 5.00 5.00 5.00 5.00 5.00 4.00 4.00 - 1.00
Average Dividend payout of last 10 Years (In Rs.) 3.85
As a % on Face Value 38.50%
*No Dividend was paid during the year 2009.
12 Months
Profit & Loss Account
