C

Savings = Prosperity

October 2011

C

Our Vision

Sub-K makes day-to-day transactions

accessible, affordable and trust-filled,

to facilitate inclusive growth of the

under-reached and create a

more prosperous society

C

What Sub-K Means (or why we are ‘Sab kay liye’ and ‘less than 1000’)

• < 1000 m from the customer Accessibility

• Cost of < 1000 paisa(Rs. 10) per transaction Affordability

• Each transaction up to Rs. 1000 Adequacy

• Each BCO to serve up to 1000 customers Outreach

C

The Evolution

BASIX Group / IGS (a Section 25 company of the group) since 2007

• Pioneer in FI; SHG-Bank linkages

• Executed Project Bhamasha – a rapid scale-up; enrolled over 4 million people

• Operated FI on a pilot scale with State Bank of India and Central Bank of India

• Currently operating a successful Business Correspondent operation with KBS Bank

• Awarded a pilot project in June 2010 with Syndicate Bank (leading Indian nationalized bank having 2494 branches; Global Business at Rs.243,436 crore as on June 2011) to do financial inclusion in 117 villages in and around Anantapur district in Andhra Pradesh

Changes in RBI guidelines and the environment in 2010

• For-profit companies permitted entry as Business Correspondents

• Government focus on Aadhaar (UID) and Swabhimaan

• Formation of National Payments Corporation of India (NPCI) for interoperability in banking – brining in ability to for customer to transact at any bank’s BC outlet

• Sub-K incorporated as an independent company offering full-spectrum services

• Created and patented a robust transaction engine – ViTranSP – addressing issues in all current processes

C

The Evolution - continued

Sub-K : Incubation Phase (August 2010 – March 2011) • Built a scalable technology platform for multiple banking services extension

• Designed and established ground processes – piloted in 3 districts in India

• Established BC relationship with Ratnakar Bank (a scheduled commercial bank in India, in growth mode aiming to double its network by setting 100 more branches in next two years)

• Continued service to IGS on Syndicate bank implementation

• Sub-K cut its teeth operationally; 47,000 customers across 216 BCOs in 5 districts across 3 States

• Inducted senior leadership team and tested systems, certified ISO 9001:2008

• Experimented with alternative revenue sharing and operating models

Sub-K : Stabilization Phase (April 2011 - July 2011) • Syndicate Bank awarded contract for 172 additional villages based on success of pilot

• Optimized business model for being a true banking services extension for partner banks

• Launched mobile top-ups as an additional revenue for the BCSA

• Expanded customer base to approximately 65,000 across 320 BCSAs as of June 30th

• Signed up nationwide contract with Axis Bank

• Currently pursuing relationships with 12 additional banks

Sub-K launch – 1, August 2011 – 12 months from inception

C

Sub-K’s Strategy

• Bring banking and other services to the under-reached through a Sub-K Agent who connects them to the larger world using a simple mobile / Internet-based technology device

• Why the strategy works:

– There is a large a growing need in semi-urban and rural households to save… and easy banking access through Sub-K makes it possible

– Sub-K appoints general stores as Agents. They are omnipresent so reach is large and a trust-relationship with customers is prebuilt

– Transactions are on an online platform making them affordable. They are reconciled instantly using all-pervasive mobile connectivity and Sub-K’s patented technology, to the delight of service providers

C

Mobile,

Satellite Top-ups

Utility Bill Payments

Electronic Benefits Transfer*

Saving Facilitation

Subsidy Management

Remittances

Micro Insurance, Pensions

Credit (Home loans, Edu

loans)

Cater to Financial Needs++

Under-

Reached HH

Sub-K

* Government employment guarantee

and social payments, does electronically

C

8

With a Customer Centric Approach

Financial

Inclusion

Universally Integrated

Services • Subsidy payments

• Welfare schemes

• NREGA Payments

• Social Security

payments

• Other Social transfers

such as SGSY, Indira

Awas Yojana, etc.

Non Banking

• Mobile Top-ups

• Utility Payments

• Micro-Insurance

Banking

• Savings Banks

accounts

• RD, GCC, KCC, etc.

Sub-K’s

goal is to

serve the

needs of a

rural

household

starting

with

Financial

Inclusion,

EBTs and

ultimately

UID

Services

EBT Payments

Sub-K

Banks

BCOs

Govt.

C

… Experienced Leadership Team

Mr. Vijay Mahajan, Co-Founder Sub-K, Chairman BASIX Group

• Vijay Mahajan is a social entrepreneur and Chairman of BASIX. He was also the Chairman of CGAP for 2010-11

• He started work in rural economic development in 1981.In 1983, he founded an NGO – Pradan. In 1996, realizing the need to attract mainstream financial resources, he conceptualised Basix, institution devoted solely to promoting rural livelihoods

• He was a member of the Committee on Financial Sector Reforms, chaired by Raghuram Rajan and also of the C. Rangarajan Committee on Financial Inclusion. He also serves on the board of Insurance Regulatory Development Authority (“IRDA”), and the Micro Finance Development and Equity Fund

• On numerous boards and advisor to several State Governments and Planning Commission of India

• Author and industry icon; winner of numerous awards and recognitions

Mr. Amit Mehta, Co-Founder Sub-K, Managing Director & CEO Sub-K

• Head sales and Marketing – VAS , SDP, and Mobility at Tata Consultancy Services , In charge of promoting and developing the VAS solutions,, was also responsible for launching and promoting RFID based solutions for various industry segments

• Founder and Conceptualizer, Intelligent Security Solutions SBU at Danlaw Technologies India Ltd

• Vice President and Co founder of Bartronics India Limited, he was a part of the founding team at Bartronics and was responsible for identifying partners, building and promoting bar code based solutions

• Chief Technology Officer, IRIS Smart Cards, the first Smart Card Manufacturing Company in India (later acquired by Bartronics India Ltd

C

& Experienced Leadership

Sandeep Nath Head, Marketing &

Empowerment

• 22 years in Branding

& Marketing as

consulting company

CEO

• Engineer from IIT

Varanasi; MBA from

IIM Kozhikode

Dinesh Sarvodey Head, Projects & Quality

• 11 years in quality

management

(certified black belt),

six-sigma, process

outsourcing

• Graduate in

Computer Science &

Statistics

Ratnakumar M Head, BC Acquisition

• 20 years in Sales

& Distribution,

Merchant Banking

& Insurance

Girish Narkhede Head, Strategic Planning

• 13 years in FI,

Telecom VAS,

Software System

Products, Telecom

OSS, and Retail

domains

• PG in Mathematics

from IIT Mumbai

Ramesh Baswa Head, Technology

• 15 years in IT

industry involving

Telecom and

Financial domains

• Electronics and

Communications

Engineer from

REC/NIT, Warangal

Babla Sharan ED & Head, Transactions

& Operations

• 21 years of IT

experience including

as founder and head

of Mobility Solutions

& VAS at TCS

• Engineer from BIT

Mesra

Visweswar V Head, Bank Relations

• 30 years as Senior

Banking Executive

spearheading

Technology

Implementation and

CBS Integration

• B.Sc, B.Tech, AMIE,

Cert.Course IPR

(WIPO-Geneva)

Binu Raj Pillai Head, Human

Resources

• 18 years in HR

Management and

Recruitment at

Airtel & TCS

Suryanarayana S Head, Accounts

• 25 years in

Accounts, Internal

Audit and Finance

in BSFL and other

organizations

C

Key Achievements

Parameters YTD 1st Quarter For the Month Since

Inception till Sep-2011

Till Mar-2011 Apr – Jun

2011 Jul-2011 Aug-2011 Sep-2011

No of banks /telcos/service providers signed up 2+1 1 1 1 - 5+1

No of Districts Sub-K went active in during the given period 5

2 1 10

4

22

TRANSACTIONS No of BCSA appointed 253

85 11 43

36

428 No of BCSA transaction enabled 102

75 36 16

26

257 No of BCSA that have transacted within the given period

51 123 144 166

172

200

No of Customer applications submitted to the Bank

46,439 11,880 3,206 5,833

9,043

76,401

No of Customers registered by Sub-K 40,372 8,773 7,505 4,125

2,753 63,528

No of Transaction enabled Customers 16,014 17,571 2,486 6,464

3,772 46,307

Total Deposits Rs. 587,682 Rs. 937,028 Rs. 820,343 Rs. 1,242,036 Rs. 1,536,700 Rs. 5,123,789 Total Withdrawals Rs. 239,252 Rs. 472,598 Rs. 340,688 Rs. 523,782 Rs. 743,650 Rs. 2,319,970 Amount of savings collected (INR) (Tot Deposits – Tot Withdrawals)

Rs. 348,430 Rs. 464,430 Rs. 479,655 Rs. 718,254 Rs. 793,050 Rs. 2,803,819

Total Amount of banking transactions (INR) Rs. 826,934 Rs. 1,409,626 Rs. 1,161,031 Rs. 1,766,138 Rs. 2,280,350 Rs. 7,443,759 Mobile Top-Up Transactions (INR) Rs. 424,503 Rs. 224,411 Rs. 4,479 Rs. 45,452 Rs. 49,526 Rs. 748,371

C

Key Achievements

Parameters

YTD 1st Quarter For the Month Since Inception

till Sep-2011 Till Mar-2011 Apr – Jun 2011 Jul-2011 Aug-2011 Sep-2011

FINANCIALS & HR

Income for Sub-K (INR) Rs. 3,127,010 Rs. 2,501,320 Rs. 394,772 Rs. 1,366,274 Rs. 1,880,294 Rs. 9,290,670

Expenditure for Sub-K (INR) Rs. 10,837,522 Rs. 14,831,534 Rs. 4,325,151 Rs. 5,652,569 Rs. 4,963,000 Rs. 40,557,776

Net profit / (loss) for Sub-K (INR) Rs. -7,710,512 Rs. -12,330,214 Rs. -3,930,379 Rs. -4,286,295 Rs. -2,957,706 Rs. -31,267,106

CAPEX on Sub-K (INR) Rs. 646,732 Rs. 1,106,188 Rs. 12,991 Rs. 0 Rs. 23,023 Rs. 1,788,934

No of employees in Sub-K (Cumulative)

69 67 66 85 103 103

C

Trends in Registered Customers Vs BCOs Appointed

40,372

45,636 47,741 49,145

56,650

60775 63528

253

288 300

338 364

392

428

0

100

200

300

400

500

600

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11

Registered Customers BCOs Appointed

C

Trends in Transactions

26 114 643 954 499 602 921 1092

3349

6903

10925 11706

0150030004500600075009000105001200013500

0150300450600750900

10501200135015001650

Cash Deposit

Transaction Amount (`000) No of Transactions

1 3 42 59 52 77 107 153 213

341

524

744

030060090012001500180021002400

0100200300400500600700800

Cash Withdrawal

Transaction Amount (`000) No of Transactions

88 291 1,507

3,503 3,999 4,457 3,673 4,466 4,444

9,281

16192 16903

- 1,500 3,000 4,500 6,000 7,500 9,000

10,500 12,000 13,500 15,000 16,500 18,000 19,500 21,000 22,500 24,000 25,500

No of Transactions

No of Transactions Expon. (No of Transactions)

48

83

129

88 74

87

130 106

155 126 136

165

Avg Transaction Amount

Avg Transaction Amount

C

Business Plan Dashboard Key Assumptions

PAT Analysis Break-even Payback

Sub-K break-even month 30 43

Sub-K break-even month name Dec-12 Jan-14

Pilot till end

Jul 2011

FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15-16

Number of Operative Units Number 3 37 149 317 401 473

Number of BC Sub-agents Number 253 4,410 25,180 66,800 1,06,790 1,35,110

Number of Customers served In Millions 0.05 4 20 53 85 107

Number of Employees Number 69 470 1,897 4,381 6,312 7,831

Total Income In Millions 3 99 721 2,150 4,073 6,079

Total Expenditure In Millions 7 181 763 1,894 3,010 3,731

Profit Before Dividend and Tax (PBDT) In Millions (4) (82) (41) 256 1,062 2,348

Dividend - - - - - -

Provision for Tax - - - 45 372 822

Profit After Tax (PAT) In Millions (4) (82) (41) 211 691 1,526

Cumulative PAT In Millions (4) (87) (128) 83 774 2,300

Profit After Tax (PAT) % -134% -83% -6% 10% 17% 25%

Fund Requirement

Equity from BASICS In Millions 31 20

Equity In Millions 0 55 60 - - -

Debt In Millions 0 35 30 6 - -

C

Current Operations

C

Bank Relationships

The foundation for scale

C

Bank’s Point of View on FI

• Public Sector

– Primarily looking to meet government mandate to reach out to all citizens

– Account opening key agenda to provide coverage

– Support Government payments through the network setup

– Some of them are looking at building business models around the same

– Is compensating TSPs and BCs on a fixed price basis to sustain the mandatory criteria

• Private Sector

– Has understood the business opportunity in villages

– Is looking at providing services in villages, thereby also charging customers for the same

– Multi-product crosssell/upsell being looked at for each micro-transaction

– Profitability is key – but building the network at the moment is most critical

– Eventually are looking at creating presence and outreach

– Incentive is purely service based

C

S.No Charge – Parameter: FI Frequency Public Sector Pvt Sector

1 BCSA – Appointment One Time No Yes

2 Account Opening One Time Yes Yes

3 Monthly Maintenance Per BCSA Monthly Yes No

4 Fee for maintaining Monthly Average Balance Per Account

Monthly No Yes

5 Fee for Transaction Per Transaction Yes Yes

6 Remittance Per Transaction Yes Yes

S.No Charge – Parameter: EBT Frequency Public Sector Pvt Sector

1 BCSA – Appointment One Time No Yes

2 Account Opening One Time Yes Yes

3 Customer Transfer – For Existing Customers Only

One time Yes Yes

4 % Money Disbursed Monthly Yes Yes

Pricing for FI & EBT

C

S. No

Bank Financial Inclusion

Remi-ttance

Asset Generation

Micro Products

TSP Only EBT/Social Payments

1 Syndicate Bank Yes No IIP IIP No No

2 Ratnakar Bank Yes No IIP IIP No No

3 AXIS Bank Yes Yes IIP IIP Yes Proposed

4 ING Vysya Yes No No No No Proposed

5 Citibank Yes - - - - -

New Relationships Being Pursued 1. ICICI Bank: Countrywide partnership for FI + NPI + EBT

2. Bank of Maharashtra: PSU Bank. Looking at alternate technology for FI implementation in Maharashtra

3. IndusInd Bank: Integrated banking services rollout. Potential in UP, Rajasthan and Tamil Nadu

4. Allahabad Bank: PSU Bank looking at urban FI in Hindi belt

5. Punjab National Bank: FI implementation partnership for Punjab

Current Bank Relationships

C

Sub-K Approach for Banks • Identify best suited Kirana outlets in a village to act as Human ATMs (BCOs)

– in Urban, Semi-urban and Rural Areas

– Outreach, local area trust, “business-savvy”, and convenient access

• Enable, Equip and m-Power BCOs to provide hassle free service – Micro-ATM kit is “invested” by BCOs

– Prefunding by Sub-K and BCOs against which all transactions are settled; no cash management and reconciliation by Banks

– Train the BCOs to position various banking services

• Sub-K is a Full Services provider for BC model – Technical Integration between CBS, Sub-K system, & Micro-ATM kit

– BCO Identification & setup, Training and Go-live

– Customer Acquisition, Savings Promotions

C

Sub-K Approach for Banks

• Low-cost Transactions using any real-time online connectivity

– Vernacular Voice based user-friendly mobile interface

– GSM/GPRS connectivity on mobile

– No cards, no wallet, no bike, no rentals, no cash-carrying

• Provide a broad spectrum of services with BCO as a one-stop shop with simple point-of-sale device

Deposits

Withdrawals

RDs / FDs

Remittances

Funds Transfer

Bill Payments

EBT / NREGA

C

Key Differentiators

Sub-K

• High Customer Service in Village

– “24X7” accessibility – the Agent lives in the village/nearby

• Zero Risk for Bank

– Pre-funding (e.g., float management) by BCOs and Sub-K

• Hassle Free Operations

– Online real-time transaction & settlement; no cash management by Bank

• Low cost of Transaction, Infrastructure and Operations

– No cards, no wallet, no bike, no rentals, no cash-carrying

• One stop shop for multiple Services to Consumer

– Ensures loyalty and lasting customer relationship

Traditional FI

• “Agent” not available every day, when needed

• Bulk cash of Bank handled by mobile agent - high risk

• Offline operations, no view on current status of floats with agents

• High cost of smart card and service delivery. High failure rate of cards

• Only Cash in/Cash out services available; limited use investment

C

Sub-K Transaction Platform - ViTranSP

• ViTran means distribution in Hindi. Patent in progress for ViTranSP

• Patent in progress for “Integrated Transaction Fund Management”

C

Help Desk in 5 Languages

1. English

2. Hindi

3. Telugu

4. Kannada

5. Marathi

3 Banks Integrated Syndicate Bank

Ratnakar Bank

Axis Bank

Services Supported Cash Deposit

Cash Withdrawal

Balance Enquiry

Mini Statement

Fund Transfer

Mobile Topups

95% ViTranSP Availability

95% Reconciled Transactions

Enhancing User Options

C

Tech-Delivery Matrix

Channel

GSM

GPRS

Internet

Authentication

Voice

Fingerprint

PIN

Txn Guidance Method

Server Resident

IVRS

Mobile Resident

IVRS

Server Resident

GUI

Physical Outlet

Kirana Shop

IT Kiosk

Self (Consumer)

Legal Status

BCO

CSC

Non-BCO, Non-CSC

Kiosk

Txns from home (under development)

C

Financial Savings accounts

Deposits/Withdrawals

Remittances/Transfers

Micro credit

Micro pensions

Micro insurance

Cash / Credit cards

Social

Mobile / DTH top-ups

Weather updates

M-agriculture

M-health

M-education

Emotional (the dependency factor)

Utility / Tax payments

DEMAT / Investments

Travel reservations

EBT Payments like NREGA

Pension disbursement

G2C Services

The services in GREEN are currently on offer. Services in BLUE will be provided shortly. PURPLE are at CSCs only

Service Portfolio: BCO/CSC

C

Collects cash and walks away

Transaction Process

Sub-K User visits BCO / CSC to transact (make a withdrawal)

OR

Equipment at Outlet

Time: 90 secs

Outlet invokes Sub-K application on his phone or desktop

Sub-K Txn Engine

ViTranSP

Authen-tication

Database

Bank CBS and / or

other service

provider server

Vernacular IVR comm

SMS ping confirms txn. Bluetooth triggers receipt

Signs Outlet ledger book

Customer takes signed receipt Seeks FP/Voice

Authentication

1.Verifies Sub-K pool 2.Checks BCO float 3.Validates cust a/c

C 29

• Our Platform ‘ViTranSP’ is recognized amongst the Top 100 ICT innovations of the year by SKOCH at SKOCH Digital Inclusion 2011

• Sub-K has an ISO audit and it has been recommended for ISO 9001:2008 certification for our processes

• Sub-K also had undergone a pre-assessment of Information Security Standards confirming to ISO 27001

• Planning for SAS 70 audit towards financial reconciliations and settlement processes

Awards and Accolades

C

BCO as the Go-To Point

Train the BCO – at store and

on field

Educate the customer on hows and whys

Audit both audiences and

understand community

needs

Help the BCO earn more and

become the apex

Create promotions

and incentivize

desired behavior

Develop and launch products that consumers

need

1

2

3

6

4

5

C

Let’s Work Together…

SAMRUDHHI KE LIYE

Towards prosperity for all