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M Consulting G
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M Consulting G
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Giving Mahindra Finance a new strategy 2020
Mahindra Finance Services LTD Ramesh Iyer
MGLP Consul8ng Kaiserslautern
Christopher Puetz, Sophie Mentges, Anuschka Gummel, Aamir Lakdawala 09/09/2015
M Consulting G
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P Main Challenge
9/9/2015 MGLP ConsulFng Kaiserslautern 2
How to ensure sustainable growth in the future?
M Consulting G
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P Execu;ve summary
9/9/2015 MGLP ConsulFng Kaiserslautern 3
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
1. Focus on rural India 1. Stabilize rural market by conFnuously provide exisFng soluFons & experFse
2. Stepwise adding new villages 3. Study feasibility for providing technological soluFons
2. Expanding the business 1. Entering the African rural market
2. Following waterfall strategy 3. Financing
1. Selling Mahindra Insurance Broking Ltd.
M Consulting G
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P Agenda
9/9/2015 MGLP ConsulFng Kaiserslautern 4
Current Issues
Analysis
Conclusion
Implementa8on
Alterna8ves
M Consulting G
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P Key Issues
9/9/2015 MGLP ConsulFng Kaiserslautern 5
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Slowdown rural economy
Lagging behind
compeFtors
DeterioriaFon in asset quality
Weak loan growth in India
Losses in market share
in core segment
High compeFFon in urban markets
longterm
shorWerm
M Consulting G
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P Objec;ves
9/9/2015 MGLP ConsulFng Kaiserslautern 6
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Increase revenue by 26 % every year
Increase customer base
Increase brand awareness
Geographic penetra8on
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P Mahindra business structure
9/9/2015 MGLP ConsulFng Kaiserslautern 7
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Mahindra
ANer-‐market
Real Estate
Financial Service Partners IT Hospi-‐
tality
Farm Eqip-‐ment
Auto-‐mo8ve
Aero-‐space & defence
Two Whe-‐elers
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P Mahindra business structure
9/9/2015 MGLP ConsulFng Kaiserslautern 8
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Mahindra
ANer-‐market
Real Estate
Financial Service Partners IT Hospi-‐
tality
Farm Eqip-‐ment
Auto-‐mo8ve
Aero-‐space & defence
Two Whe-‐elers
Use of Synergies
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P Business model
9/9/2015 MGLP ConsulFng Kaiserslautern 9
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Value proposiFon
Key Resouces
Key Partnerships
Revenue Streams
Core Competencies
Human
Human
Human
Human
14,200 Employees
1,100 offices
Assets: INR 368.8 billion
Strong synergies to key business
Enhance the quality of ciFzens lives
Financial inclusion through technology
Deliver financial soluFon
• MaruF (manufacturer of passenger cars) • Hyundai • Toyota • Tata Motors • General Motors • Ford • Automobile manufacturer dealers
0
20
40
60
80
2011 2012 2013 2014 2015
Revenues from OperaFons
Tripled within 5 years
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P Business model
9/9/2015 MGLP ConsulFng Kaiserslautern 10
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Providing people
perspecFves
Key Resouces
Key Partnerships
Revenue Streams
Core Competencies
Human
Human
Human
Human
14,200 Employees
1,100 offices
Assets: INR 368.8 billion
Strong synergies to key business
Enhance the quality of ciFzens lives
Financial inclusion through technology
Deliver financial soluFon
• MaruF (manufacturer of passenger cars) • Hyundai • Toyota • Tata Motors • General Motors • Ford • Automobile manufacturer dealers
0
20
40
60
80
2011 2012 2013 2014 2015
Revenues from OperaFons
Tripled within 5 years
M Consulting G
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P Customers
Global potenFal in rural area
9/9/2015 MGLP ConsulFng Kaiserslautern 11
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Customers
Rural Urban Semi rural
• Focus on agriculture • lower class and lower
middle class • Typically not having
bank accounts • 3 % return on assets
• Focus on technology and agriculture
• Middle class
• Focus on technology • Middle and upper
class • 0.5 % return on assets
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P Rural-‐Urban Popula;on Divide by area
High potenFal especially in India and Africa
9/9/2015 MGLP ConsulFng Kaiserslautern 12
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
69%
31%
India
Rural
Urban
25%
75%
South Korea
Rural
Urban 80%
20%
Africa
Rural
Urban 51% 49%
China
Rural
Urban
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P Macro-‐Environment
9/9/2015 MGLP ConsulFng Kaiserslautern 13
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Africa China South Korea India
Poli8cal • In some states strong regulaFons
• Strong poliFcal regulaFons
• Difficult to enter
• Low poliFcal regulaFons
• No possibility to enter North Korea
• Changing regulaFons
• BeWer communicaFon with government
Popula8on • Strong rural and semi-‐urban areas
• Focus on agriculture
• Strong urban areas • Strong middle class
• Increasing middle class in rural areas
Technology • Focus on agriculture
• Government concentrates on developing technology
• Decreasing focus on agriculture
• Focus on developing technology
• Decreasing focus on agriculture
• Focus on agriculture in rural areas
• Focus on developing technologies in urban areas
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P Wrap Up
9/9/2015 MGLP ConsulFng Kaiserslautern 14
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
• Leveraging group-‐wide synergies
• Strong brand name in India
• High compe88on in urban markets
• Weak loan growth in India • Slowdown rural economy
• Risk in health insurance sector • Lagging behind compeFtors
• Increasing middle class in rural areas
• InternaFonal market • Low compeFFon in rural
markets
internal
external
Strength
OpportuniFes
Weaknesses
Threats
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P Feasible Alterna;ves
9/9/2015 MGLP ConsulFng Kaiserslautern 15
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
1. Alterna8ve: Back to the roots!
2. Alterna8ve: Urbanize yourself!
3. Alterna8ve: Africa is coming!
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P Feasible Alterna;ves
9/9/2015 MGLP ConsulFng Kaiserslautern 16
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
1. Alterna8ve: Back to the roots!
2. Alterna8ve: Urbanize yourself!
3. Alterna8ve: Africa is coming!
• Got out of the semi-‐urban business in India and concentrate on rural
• AdverFse the growing middle class in rural area
• Provide only half-‐year and quarterly payment to reduce administraFon costs
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P Feasible Alterna;ves
9/9/2015 MGLP ConsulFng Kaiserslautern 17
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
1. Alterna8ve: Back to the roots!
2. Alterna8ve: Urbanize yourself!
3. Alterna8ve: Africa is coming!
• Go to the urban area in India
• Sell all the parts of rural area to compeFtor to gain money to invest
• Go with the Smart Home investments
• Very risky and a potenFal of high loss of profit
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P Feasible Alterna;ves
9/9/2015 MGLP ConsulFng Kaiserslautern 18
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
1. Alterna8ve: Back to the roots!
2. Alterna8ve: Urbanize yourself!
3. Alterna8ve: Africa is coming!
• Concentrate on expansion in Africa
• Waterfall strategy in the African states
• Especially loans for tractors and agricultural devices
• Only small investments in rural area in India
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P Objec;ves
9/9/2015 MGLP ConsulFng Kaiserslautern 19
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Increase revenue by 26 % every year
Increase customer base
Increase brand awareness
Geographic penetra8on
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P Evalua;on
9/9/2015 MGLP ConsulFng Kaiserslautern 20
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Increase revenue by 26 % every year
Geographic penetraFon
Increase brand awareness
Increase customer base
Back to the roots!
Urbanize yourself!
Africa is coming!
M Consulting G
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P Evalua;on
9/9/2015 MGLP ConsulFng Kaiserslautern 21
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Increase revenue by 26 % every year
Geographic penetraFon
Increase brand awareness
Increase customer base
Back to the roots!
+ 0 ++ +
Urbanize yourself! 0 0 + +
Africa is coming!
++ ++ + ++
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P Dimension
9/9/2015 MGLP ConsulFng Kaiserslautern 22
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Cluster Main Challenge
Domes8c market
• Slowing down economy in India
• Low loan growth • Missing access to 400,000 in
India
Expanding globally
• Low presence in global markets • Missing governmental
approvals
Financing & restructuring
• High risk health insurance business
• No health checks
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P Implementa;on schedule
9/9/2015 MGLP ConsulFng Kaiserslautern 23
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Cluster 2016 2017 2018 2019 2020
Domes8c market
Expanding globally
Financing & restructuring Due diligence
Contact IB
Collect offers 1
Collect offers 2
NegoFaFons
Deal
Governmental approvals
Analyze markets
Extend South Africa
Enter Namibia
Enter Kenya
Enter Tanzania
Study technological feasibility
Increase adverFsement offers
Stabilizing poliFcal issues
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P Domes;c market
9/9/2015 MGLP ConsulFng Kaiserslautern 24
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
• WaiFng for stabilizaFon of new government
• ConFnue to provide soluFons to rural government & go village by village
• Target: addiFonal 5000 villages each year in central India
• Support it though adverFsement
• Town hall, radio and door-‐door publicity
• Study technological feasibility to cover rural populaFon
India
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P Implementa;on schedule
9/9/2015 MGLP ConsulFng Kaiserslautern 25
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Cluster 2016 2017 2018 2019 2020
Domes8c market
Expanding globally
Financing & restructuring Due diligence
Contact IB
Collect offers 1
Collect offers 2
NegoFaFons
Deal
Governmental approvals
Analyze markets
Extend South Africa
Enter Namibia
Enter Kenya
Enter Tanzania
Study technological feasibility
Increase adverFsement offers
Stabilizing poliFcal issues
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P Expand globally
9/9/2015 MGLP ConsulFng Kaiserslautern 26
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Mahindra Finance
• Provide loans to finance Mahindra equipment & houses
Mahindra Equipment
• Agricultural equipment vehicles & tractors
• Access to African market
Rural Customer
• Need of tractors • Need of financial
support to afford tractors
• Your happy
customer
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P Expand globally
9/9/2015 MGLP ConsulFng Kaiserslautern 27
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
• Concentrate and expand operaFons on South Africa
• Set up new offices in Rural areas
• Study the market and adapt to provide new soluFon
• Work with M&M group
• Provide agricultural equipment's and tractors
• Develop new soluFons in loans and banking services
• Expand by waterfall strategy
à Namibia à Kenya à Tanzania
Africa
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P Expand globally
9/9/2015 MGLP ConsulFng Kaiserslautern 28
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
• Provide loans for vehicle, home and supporFng SME’s
• Customized loans with less tenure
• OpFons for monthly and quarterly payment
• Provide 80-‐20 soluFons for home loans
• Rural customer to pay 20 % upfront and 80 % through loans
• Set up system to recover loan (Warning systems)
• FaciliFes for early payments
• Use referral systems to retain customers.
Loans
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P Implementa;on schedule
9/9/2015 MGLP ConsulFng Kaiserslautern 29
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Cluster 2016 2017 2018 2019 2020
Domes8c market
Expanding globally
Financing & restructuring Due diligence
Contact IB
Collect offers 1
Collect offers 2
NegoFaFons
Deal
Governmental approvals
Analyze markets
Extend South Africa
Enter Namibia
Enter Kenya
Enter Tanzania
Study technological feasibility
Increase adverFsement offers
Stabilizing poliFcal issues
M Consulting G
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P Finance & restructuring
9/9/2015 MGLP ConsulFng Kaiserslautern 30
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
• Customers are not willing to purchase health insurance
• No proper health checks performed.
• Sell Mahindra Insurance Broking Ltd
• Contact IB and collect offers
• Consider Leap frog , Singaporean company for selling insurance unit
• Company has 15 % stake and wants to expand
Mahindra Insurance Broking Ltd
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P Implementa;on summary
9/9/2015 MGLP ConsulFng Kaiserslautern 31
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
Cluster Main Challenge Solu8on
Domes8c market
• Slowing down economy in India
• Low loan growth • Missing access to 400,000 in
India
• Stabilize exisFng posiFon in rural market
• Look out for future trends • AnFcipate governmental
regulaFons
Expanding globally
• Low presence in global markets • Missing governmental
approvals
• UFlize exisFng experFse & knowledge in rural markets
• Expand in African markets by waterfall strategy
Financing & restructuring
• High risk health insurance business
• No health checks
• Reducing risk in financial background
• Increase financial power for global expansion plans
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P Financials
9/9/2015 MGLP ConsulFng Kaiserslautern 32
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
• Expanding to Africa: • Opening of offices: INR 980 million • HR expenses: INR 210 million • Approvals: INR 340 million • AdverFsement: INR 200 million
• Selling Mahindra Insurance Broking Ltd.: • Revenues: INR 1.26 billion • Selling 85% stake à INR 1.607 billion (mulFple 1.5)
Investment overview
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P Revenue development
9/9/2015 MGLP ConsulFng Kaiserslautern 33
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
60.6 67.8 76.7
88.2 107.6
125.2
60.6
63.2 67.6 74.4
86.7
98.9
0
20
40
60
80
100
120
140
2015 2016 2017 2018 2019 2020
INR billion +106 %
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P Financial Projec;ons
9/9/2015 MGLP ConsulFng Kaiserslautern 34
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
2015 2016 2017 2018 2019 2020 Revenues from OperaFons 60,211 67,467 76,075 87,367 106,662 124,021
Other Income 398 405 620 833 945 1,244
Total Revenue 60,609 67,872 76,695 88,200 107,604 125,265
Employee Expenses 5,671 5,959 6,724 7,732 9,433 12,263
Finance Costs 26,430 29,940 34,550 38,540 38,210 39,050
Dep. And AmorFzaFon 455 523 591 679 829 1,620
Provisions and Write Offs 8,491 9,09 10,270 11,092 11,979 14,938
Others 5,563 6,230 6,978 7,815 8,753 10,803
Total Expenses 46,610 45,922 59,113 65,858 69,204 66,534
Profits Before Taxes 13,999 21,950 17,582 22,342 38,400 46,591
Tax Expenses 4,750 7,463 5,977 7,596 13,056 15,841
Profits ANer Taxes 9,249 14,487 11,602 14,746 25,344 30,750
Minority Interest 120 200 220 240 250 270
Net Profit 9,129 21,4287 11,385 14,506 25,094 30,480
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P Risk & con;ngencies
9/9/2015 MGLP ConsulFng Kaiserslautern 35
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
II I III
Probability
Impact Non-‐acceptable area ALARP area Acceptable area
I. Low acceptance rate within African market II. Emerging Indian urban market III. Failure of 80-‐20 loan model
Risks
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P Risk & con;ngencies
9/9/2015 MGLP ConsulFng Kaiserslautern 36
Current SituaFon Analysis AlternaFves ImplementaFon Conclusion
II I III
Probability
Impact Non-‐acceptable area ALARP area Acceptable area
I. Low acceptance rate within African market II. Emerging Indian urban market III. Failure of 80-‐20 loan model
Risks
I. Market research & projecFons II. Develop technological soluFons with Mahindra
Tech to reach the urban market III. Provide insurance soluFons in Africa
Con8ngencies