Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
October 2021
Edelweiss Securities Limited
Sector Report
BFSI
Fintech Fortunes-BNPL: Credit where it's due
fcus
Prakhar Agarwal+91 22 6620 [email protected]
Santanu Chakrabarti+91 22 4342 [email protected]
Parth Sanghvi
Vinayak Agarwal+91 22 6620 [email protected]
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset Edelweiss Securities Limited
BFSI
BNPL: Credit where it’s due
Buy Now Pay Later (BNPL) is making a splash as the hottest financial segment in India’s consumer-driven market. To be sure, BNPL adds a new dimension to traditional credit. At the same time, hyperbole is evident. We bring in a reality check.
A consumer’s delight, BNPL has been adopted rather quickly across the ecosystem—marketplaces (Amazon, Flipkart, etc), fintechs (PayTM, Mobikwik among 30-plus firms) and lenders (HDFC, ICICI, etc).
Here’s the deal: our global/domestic analysis reveals: i) BNPL is set to log a 45%-plus CAGR, snowballing into USD15bn by 2024 and forming 9% of e-commerce payments. ii) It targets the largest addressable market (mid-income), but India is fraught with unknowns and idiosyncrasies. Growth trajectory, while probable, is thus not given. iii) International precedents show partnerships and M&A define the
space—Square buying Afterpay, PayPal buying Paidy, and Amazon, Walmart and Apple jumping onto the BNPL bandwagon (global TAM USD22tn). iv) Overhang on credit cards is more rhetoric than reality, particularly for SBI Cards (refer to Calling Card).
We argue BNPL is not a slice but a loaf: there’s enough. Biggest banks are already digging in, and substantial investments in fintechs (20-plus players) testify to the opportunity at hand. Indeed, fintechs are the first movers, but banks have been agile to jump in, and we expect NBFCs to begin to feel the heat sooner rather than later. Far-fetched though, a credit layer atop UPI could be a game changer. That said, regulatory and customer debt management risks are key variables.
Adding new dimension to retail credit—a USD15bn opportunity
BNPL is making promising progress (USD3–3.5bn disbursals in FY21), and is touted
as a secular trend and not just a flash in the pan. Underlying vectors comprising i)
largest addressable market (huge mid-income, demographic dividend etc), ii)
proliferation of e-commerce, with expected consumer internet market of USD00bn
by FY26 (~USD90bn, 27% CAGR), iii) changing financial behaviour–consumption
oriented mindset; and iv) lower retail credit penetration form a perfect cocktail
driving uptake of BNPLs. We see BNPL solutions clocking >45% CAGR, thereby
forming 9% of e-commerce and 1.3% of payments (from sub-40bps in FY21).
Business model: Evolving; profitability build-up still sometime away
There are many evolving variants of BNPL offerings; the two basic ones prevalent in
India are: i) deferred payments; and ii) shopping EMI loans. Revenue levers for BNPL
providers are: i) take rates from merchants (depending on GMV, ranging from 2–6%);
or ii) fee from customers (late fee, monthly fee, interest rates, subscription fee, etc).
In terms of costs, customer acquisition cost is critical. While impairment cost is
uncertain given the lower ticket size, faster churn and higher fee income
dependence, the cross-cyclical impact is relatively low. Our analysis suggests that
high acquisition cost makes it more of a scale game (fee income forms a larger
chunk) and hence building up profitability can be time-consuming.
BFSI
Edelweiss Securities Limited
2 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Globally successful but Indian idiosyncrasies warrant higher scrutiny
Internationally, BNPLs are heating up with Square buying out Afterpay in a USD29bn
deal and PayPal buying Paidy for USD2.7bn, thereby creating a buzz that Affirm,
Klarna, Sezzle, and Zip could be next in line. Moreover, Amazon, Walmart and Apple
are all looking to jump onto the bandwagon and creating a halo around BNPL.
India has seen quick adoption across the ecosystem – marketplaces (Amazon,
Flipkart, etc), fintechs (20-plus players) and lenders (HDFC, ICICI, etc). That said, we
see a key difference in Indian context: i) the basic working model is different – sales
facilitator versus payment options; ii) challenges in acquisition and merchant
monetisation; and iii) a very nascent market positions India differently. And thus
expect BNPL’s touted growth trajectory to be fraught with unknowns.
Bank versus Fintech: Partnership and M&A to define the space
Slow to warm up to the idea, banks have now started embracing BNPL offerings
either via modified product offerings (own-in house product offerings) or through
partnership models (viz., via white-label BNPL players).
A quick comparison of the pioneer BNPL offerings and traditional banking products
shows the difference is likely to narrow as BNPL playesr try to eventually morph into
retail banking (internationally, this has begun with Klarna), whereas banks would try
to leverage their lower capital cost to wade through challengers.
We argue there is enough to partake for each type of player: biggest bank already
foraying into it, substantial investment in fintech plays (20-plus) is an
acknowledgment of the sizeable opportunity, not to mention that payment
platforms are valued even higher than some of the biggest banks.
While we expect fintechs to leverage their first-mover advantage, banks have been
quick to spot and appreciate the opportunity. NBFCs meanwhile are likely to get
challenged much more.
Credit cards cannibalisation is hard to crystalise; overhang rhetorical
We believe that cannibalisation is hard to crystalise given the inherent difference in
customer segment, product offerings, wider usage and stage of evolution. In fact
BNPL products can expand market for credit cards given its potential to widen
addressable market as customers graduate.
Moreover, we have seen credit cards companies evolving into similar product
offerings—trends already apparent in mature markets. Evolving partnership with
while-label fintechs, viz., Pine Labs will ensure – in our view – that market expands.
Edelweiss Securities Limited
BFSI
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 3
Key risks: Not all sunshine and rainbow
Two of the biggest challenges that we believe would play out for BNPL players are
regulation and controlling customer debt.
Potential customer base, product offerings and high growth with widening
unnoticed debt burden form a perfect cocktail for regulatory intervention over
period of time. Internationally, regulators have started taking note.
Looking at the target base of younger population and mass market appeal, the high
growth with lack of aggregated view of all pending BNPL payments at different BNPL
players will essentially pull regulatory attention.
A survey (by RBA) suggests 20% of consumers went without essentials (e.g. meals)
given potential overleveraging (more prevalent among consumers with multiple
BNPL offerings). It is indicative of dire consequences of over-indebtedness arising
out of BNPL offerings.
BFSI
Edelweiss Securities Limited
4 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
The Story in Charts
India consumer GTV is expected to grow >27%…
..propelling BNPL to a USD15bn market by 2024
Frenzy on perceivable benefit across ecosystem…
…but profitability build-up is actually far off
Global experience, local wisdom: the real deal is…
…valuation aspiration (payment > banks seen)
Source: Company, Edelweiss Research, RBI, NPCI
90+
125+
300+
0
70
140
210
280
350
FY21 FY22E FY26E
(USD
bn
)
India consumer Internet GTV - Overall market
3
15
0.0
3.6
7.2
10.8
14.4
18.0
2020 2024(
USD
bn
)
Customer Instant Credit
Cheap Credit
Soft CIBIL score
Merchant Higher AOVHIgher
conversionHigher
retention
Lenders Better reach
Higher cross sell
Higher profitability
2-6%
+/-5%
1-2%
1-5%
2-6%
0
2
4
6
8
10
Merchantfees
Late fees Impairmentcost
other(CAC/Tech
etc)
Net
(%)
0
1
3
4
5
7
Jun-19
Jun-20
Jun-21
CY19 CY20 Jun-19
Jun-20
Jun-21
AfterPay (AUD mn) Klarna (SEK mn) Affirm (USD mn)
Loss
% o
f G
MV
480
380
293
120
475
327
120
46 34 29
0
120
240
360
480
600
Vis
a
MC
Pay
Pal
Am
ex
JP M
org
an
Bo
FA GS
Kla
rna
Aff
irm
Aft
erP
ay
MC
ap U
SD b
n
Critical to contain and thus need investments
Reflects the need for scale & frequency
Edelweiss Securities Limited
BFSI
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 5
Adding new dimension to retail credit
Rapidly evolving payment ecosystem and financing behaviour are adding new
dimensions to traditional credit. Convergence of evolving technology and innovative
businesses has metamorphosed the unsecured consumer credit landscape in India,
with fintechs acting as a fulcrum. Given several catalysts and perceivable benefits
across the value chain, there has been strong proliferation of one such alternative
payment method dubbed as Buy Now- Pay-Later (BNPL).
Underlying drivers intact to drive growth if managed well
BNPL is making promising progress (USD3–3.5bn disbursals in FY21), and is touted
as a secular trend and not just another flash in the pan. Underlying vectors
comprising i) growth of e-commerce, with expected consumer internet market of
USD300bn by FY26 (~USD90bn, 27% CAGR), ii) changing financial behaviour, and
iii) lower retail credit penetration are the ingredients of the cocktail driving BNPLs.
And it essentially reflects the step change in consumers’ mindset—from being
savings-focused to consumption. Consumer lending from banks/NBFCs across use
cases was estimated to be ~USD267bn in FY17; it ballooned to USD437bn by FY20.
Growing consumption behaviour, particularly among millennials and Gen-Z, will
further expand the need for credit.
Accordingly, tech-based credit solutions will be better placed to target this credit
need than traditional credit institutions, especially considering pervasive adoption
of smartphones and mobile payments among such consumers.
Riding digital penetration and…
Source: Company, SEBI
…>27% potential growth in India’s consumer GTV…
Source: Company, SEBI
…imply target categories are poised for rapid growth…
(USD bn) FY21 FY26E CAGR
Online retail 41 140-160 28-31%
Online travel 9-11 35-40 30%
e-Grocery 3.7 22-27 43-49%
Food delivery 2.7-3 13-14 30%
E-Health 1.5 12-16 50-60%
Source: Company, SEBI
650-70049% 500-550
38%
250-30020%
950-100068% 800-850
48% 700-75050% +
0
250
500
750
1000
1250
Access tointernet
Smart phoneusers
Onlinetransactors
(mn
)
2020 2025E
90+
125+
300+
0
70
140
210
280
350
FY21 FY22E FY26E
(USD
bn
)
India consumer Internet GTV - Overall market
BFSI
Edelweiss Securities Limited
6 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
…driven by India’s demographic dividend…
Source: Company, SEBI
…and lower retail penetration
Source: Company, SEBI
Expect >45% CAGR growth story, forming 9% of e-com payments by 2024
Based on Global Payments Report (GPR) 2021, BNPL’s market share in e-commerce
is closer to 3%. Moreover, one of the largest BNPL players indicates that overall
disbursements via BNPL were USD3–3.5bn in FY21.
Putting these together, BNPL market share in PoS financing is currently very small.
Considering CAGRs of 17% in e-commerce and 9% in PoS over FY20–24E (as per
Global Payments Report) and assuming BNPLs’ e-commerce market share of 9%, we
expect BNPL disbursement to balloon at >45% CAGR to USD15bn-plus by FY24. It
would thus form 1.3% of payments (from sub-40bps in FY21).
BNPL’s market share at 3% in e-commerce payment landscape
Source: Global Payments Report 2021
1710
23
30
22
25
29
33
27
2335
25
0
20
40
60
80
100
China India USA
0-19 yrs 20-39 yrs 40-59 yrs 60+
84
75
5955
11
65 66 68
21
3.5
0
20
40
60
80
100
UK USA Japan China India
(%)
HH debt as GDP (%) CC penetration
15 30 21
12
58 45 32 32
45 55 57
3 2 5 -
3
3 10 10
- - -
0
20
40
60
80
100
India USA UK China Japan Singapore Australia NZ HK Canada SK
(%)
Digital/ Mobile Wallet Credit Card Bank Transfer Debit Card COD Charge & Deferred DC PrePay card BNPL Postpay Other
Edelweiss Securities Limited
BFSI
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 7
BNPL to grow at > 45% CAGR into USD15bn disbursements by 2024
USD bn FY20 FY24E CAGR (%)
eCom turnover 60 111 16.6
POS 737 1035 8.9
Total 797 1146 9.5
BNPL – Ecom 1.8 10.0 53.5
BNPL - POS 1.2 4.3 38.6
BNPL - Total 3 14 48.1
BNPL – Ecom. - Mkt shr. (%) 3 9
BNPL - Total - Mkt shr. (%) 0.4 1.3
Source: GPR, Edelweiss Research
Perceivable value across the value chain
Looking at the product characteristics, BNPL variants seems to be a win-win for all
stakeholders with creation across value. This is one of the main reasons for the
product’s speedy uptake.
Benefits for customers
Source: Edelweiss Research
Benefits for merchants
Source: Edelweiss Research
Benefits for lenders
Source: Edelweiss Research
Chaep credit -No fee, No
interest
Soft credit score
Instant Credit
HIgher Average Order Value
Higher Retention
Higher Conversion
Improved profitability
and valuations
Higher cross sell potential
Wider market
BFSI
Edelweiss Securities Limited
8 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Global success; Indian trials warrant scrutiny
Certain global markets showcase significant success stories
Internationally, there has been significant proliferation of BNPL players, of which few
have scaled up significantly and with global addressable market size estimated at
USD22tn (source: Zip), there are expectations of sustained growth.
Consequently, internationally the market is beginning to heat up with Square buying
out Afterpay in a USD29bn deal, PayPal buying Paidy (Japanese) in USD2.7bn,
creating a buzz that Affirm, Klarna, Sezzle, and Zip could also go under. Moreover,
that Amazon, Walmart and Apple are all looking to jump onto BNPL bandwagon has
created a halo around the BNPL business model.
Significant proliferation of BNPL players with few scaling up notably well
Source: Company
Global TAM estimated to be USD22tn
Source: Company, GPR
GPR estimates BNPL proportion to double by 2024
Source: Company, GPR
Rest of World, 15,887
US, 5,000
UK, 630 Australia,
320 NZ, 96
SA, 67
2.1
7.4
0.61.6
4.2
13.6
1.3
4.5
0.0
3.5
7.0
10.5
14.0
17.5
Global Europe APAC NorthAmerica
(%)
2020 2024
Edelweiss Securities Limited
BFSI
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 9
By geography, we see Europe, Australia and New Zealand high on BNPL acceptance
levels – largely attributable to players such as Klarna and Afterpay. That said, BNPL
has seen discrete market leaders emerging in different countries / regions while
other regions catch up.
Europe, Australia and NZ high on BNPL acceptance levels
Source: GPR
India seeing promising trend, but key differences may restrict similar scalability
BNPL is emerging in India with the presence of several fintech platforms - In addition
to pure-play BNPL start-ups such as Simpl, Lazypay, Zestmoney, ePayLater, and e-
commerce marketplaces such as Flipkart and Amazon, India also offers their own
BNPL products, while even fintech and payments companies such as PhonePe (via
Flipkart) and Paytm have ventured into this territory.
Snapshot of some of BNPL providers in India
FinTech/ BigTech Lending partners Category BNPL product
ZestMoney Various NBFCs Cardless EMI ZestMoney EMI
Amazon Capital Float and IDFC FIRST Bank Cardless EMI Amazon Pay Later
Flipkart IDFC FIRST Bank BNPL Flipkart Pay Later
LazyPay In-house NBFC (PayU Credit) BNPL Pay Later
ePayLater Fullerton India Credit BNPL ePayLater
Simpl Various NBFCs BNPL Simpl
Kissht In-house NBFC Cardless EMI & instant cash loans Kissht EMI Scan & Pay Later
CASHe Bhanix Finance and Investment Instant cash loans and EMI card CASHe
Snapmint In-house NBFC Cardless EMI Snapmint
EarlySalary Northern Arc Capital Instant cash loans EarlySalary
KrazyBee In-house NBFC Cardless EMI for student KrazyBee
OlaMoney Various NBFCs BNPL OlaMoney postpaid
NanoPay P C Financial Services BNPL NanoPay
Mi.com Various NBFCs Cardless EMI Cardless EMI
Bajaj Finserv In-house NBFC EMI card Bajaj Finserv EMI card
Slice Various NBFCs EMI card Sliceit
MakeMyTrip BNPL partners Cardless EMI MMT pay later
Paytm Postpaid Bank partner BNPL PayTM EMI
HappyEMI Unstructured loan offering Cardless EMI HappyEMI
Sezzle Unstructured loan offering Cardless EMI Sezzle
Source: Medici
23
19
1512
10 10 9 8 75 4 3 3 3 3 2 2
0
5
10
15
20
25
Swed
en
Ge
rman
y
No
rway
Fin
lan
d
Au
stra
lia NZ
Ne
the
rlan
Den
mar
k
Bel
giu
m UK
Fran
ce
Ind
ia
Ind
on
esia
Jap
an
Sin
gap
re
Ital
y
USA
(%)
BNPL proportion in e-com payment method
BFSI
Edelweiss Securities Limited
10 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Credit limit and repayment period vary widely
Credit Limit (INR'000) Repayment period
Simpl 20 20
Lazypay 20 15
ePayLater 20 14
amazon pay 10 20
PayTm 100 30
Ola Money 25 20
Flipkart 5 35
Flexipay 60 15
Paylater 20 45
Source: Inc42
Not only this, India’s biggest banks are already testing this arena – HDFC Bank’s
“FlexiPay” and ICICI Bank’s “PayLater” among others.
Paylater offerings by HDFC Bank and ICICI Bank
HDFC Bank - "FlexiPay' ICICI Bank’s “PayLater”
Credit limit 1k to 60k 5k to 20k
Interest free period 15days upto 45days
Eligibility criteria Pre-approved internal customers Pre-approved internal customers
Interest rate
15 days - No Extra Cost
30 days - INR70 per month on
purchase of INR3k
60 days - INR70 per month on purchase
of Rs.3k
90 days - INR70 per month on purchase
of Rs.3k
Penal interests
Auto Debit return penal interest: 2% +
GST
Late Payment Fee: 3% + GST
Pre Closure Charges: 4% + GST
Late Payment Fee: 3% + GST
Source: Company
That said, we see a key difference in the Indian context: i) basic working model is
different – sales facilitator versus payment options in India; ii) challenges in
customer acquisition & merchant monetisation; and iii) very nascent market, which
positions India differently.
Different business model at play: One of key differences in global and Indian context
is the inherent difference in underlying business models. Players with scale in
international market have morphed into sales facilitators from being a payment
option (as is the case in India).
Just to elucidate, leading BNPL providers have built integrated shopping platforms
that engage consumers through the entire purchase journey, i.e. from pre-purchase
to post-purchase. While in India, they are solely seen as payment and pure financial
offerings.
Edelweiss Securities Limited
BFSI
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 11
Sales facilitation reflects in merchant benefits
Source: Company
Rise in AOV across players
Source: Company
Challenges in acquisition and merchant monetisation: One of the key
differentiators in global-scale BNPL players and those aimed at Indian diaspora is the
ability to acquire merchants and simultaneously monetise them.
Looking at international peers >70% of revenue comes from merchants (take rates
are higher at 4–6%), however, in Indian context the ability to charge merchants is
lower given proliferation of payment platforms riding UPI (a non-monetisable public
digital architecture).
Acquiring merchants base and thereby monetising is critical
Player Country GMV (USD bn) Merchants (mn)
Klarna Sweden 53 250
Afterpay Australia 11 55.4
Affirm USA 4.6 6.5
Zip Australia 2.1 24.5
Sezzle USA 0.4 29
Split USA 0.2 1.8
Openpay Australia 0.2 2.2
Source: Company, RBA
53
47
4136
32
4
0
12
24
36
48
60
HigherOCR
Incbasket
size
Exp. tonewcust.
Inc.brand
Repeatpurchase
Other
(%)
% of merchants surveyed by AfterPay
85
2020-30
45
0
20
40
60
80
100
Affirm Splitit AfterPay Klarna
(%)
% Rise in AOV
BFSI
Edelweiss Securities Limited
12 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Over 70% of revenue comes from merchants
Source: Company, RBA
MDR higher in BNPL versus other instruments
Source: RBA
Nascent market: BNPL in Indian context is a very recent phenomenon, and we
believe the entire value chain from lenders, merchants, consumers and technology
providers will take time to graduate.
Also, looking at scaled-up businesses such as Klarna, Affrim and AfterPay, it took all
of them (around a decade) to graduate and build acceptability. One of the key
aspects is customer graduation/ credit culture development. We herein highlight a
few aspects that played out globally (from consumers’ viewpoint) that will need to
be monitored from Indian context as the industry grows.
1# Customer charges: Globally there has been a lot of apprehensions/concerns on
higher customer late fees/interest rates BNPLs charge. This trend has been reducing,
with customer fees coming off gradually (across major larger players—although not
a pervasive trend still. We expect a similar dynamic to play out in India gradually, but
the problem magnifies given non-monetisable nature of merchants, which,
cumulatively, will put pressure on revenue.
Klarna – Customer late fees coming down…
Source: Company, RBA
…and now forms a lower proportion of revenue
Source: Company, RBA
8075
96
7382
0
25
50
75
100
125
Afterpay Klarna Brighte Certegy Payright
(%)
revenue contribution from merchants
20
25
4
27
18
0
6
12
18
24
30
Afterpay Klarna Brighte Certegy Payright
(%)
Late fee or other customer fees
Edelweiss Securities Limited
BFSI
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 13
2# Younger age to have higher cost given missed payments: In one of the surveys
by RBA, 21% of BNPL customers missed payments in FY19. In fact, most completed
transactions were made by consumers under the age of 35, and for completed
transactions that had missed payment fees, the same age cohort accounted for 67%
of these transactions.
All of this implies that missed payment is more prevalent in younger population and
thus will have a higher cost attached to them.
Younger population tends to miss payments more often
Source: RBA
3# Over-indebtedness leading to financial difficulties: One of the critical aspects
that needs to be managed well is over-indebtedness caused by BNPLs. A survey
conducted by RBA) suggests: i) 20% of consumers cut back on or went without
essentials (e.g. meals); and ii) 15% said they had taken out an additional loan. These
trends (more prevalent among consumers using multiple BNPL offerings) indicates
dire consequences of over-indebtedness arising out of BNPL offerings.
This over-indebtedness also seemingly pulls along other credit options—a similar
survey finds that a consistently higher proportion of BNPL credit card users incurred
interest charges on their credit cards (between 66% and 73%). While, in the same
period, only 42% to 46% of other credit card users incurred an interest charge on
their credit card.
23 27
3840
2220
12 1041
0%
20%
40%
60%
80%
100%
All completed transactions Completed transactions that incurredat least
one missed payment fee
18-24 25-34 35-44 45-54 55-64 65+
BFSI
Edelweiss Securities Limited
14 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
High charges for people that use credit cards for BNPLs over others
Source: RBA
Moreover, the same survey revealed that between 38% and 43% of BNPL credit card
users used up > 90% of their allocated credit limit on their credit cards versus only
16% to 18% for other credit card users – indicating higher propensity for lapping up
leverage.
Higher propensity for lapping up leverage in BNPL users
Source: RBA
Edelweiss Securities Limited
BFSI
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 15
Business model: Still evolving
Buy Now Pay Later (BNPL) offerings are evolving. The two basic variants that are
prevalent in India are: i) deferred payments; and ii) shopping EMI loans.
Deferred payment models are adopted mostly in online transaction services such as e-commerce, food delivery, e-grocery, online ticketing and utility bill payments. Deferred payment models work like credit cards, offering a 15/30 day repayment period without any interest or charges while allowing customers to revolve by paying a fee.
Players in the shopping EMI loans model offer higher loan amounts with a longer repayment periods (3/6/12 months).
Stylised financial flows in a BNPL transaction
Source: Edelweiss research
Revenue model – Largely contingent on fee income
The revenue model for BNPL is contingent on the business model, viz., customer-
centric (no charge to customers) or merchant-centric (bundled with other product
offerings). Consequently, revenue levers for BNPL providers are: i) merchant fees
take rates from merchants (depending on GMV, generally ranging from 2–6%) and
subvention income; or ii) fees from customers (late fee, monthly fee, interest rates,
subscription fee). The revenue model only works when the integration between the
customer and merchant exists, i.e flywheel effect does get created.
Card-issuing financial
Institution (“issuer”)
BNPL provider’s financial
Institution (“Acquirer”)
BNPL provider
Consumer Merchant
Interchange fee
Issuer & Acquirer settle
3 Installment payments
Goods/service
1. Upfront payment
2 BNPL merchant fee
Merchant service fee
BFSI
Edelweiss Securities Limited
16 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Revenue drivers of BNPL providers
Source: Edelweiss research
Cost model: Customer acquisition and impairments large proponent
The three key cost line items that BNPL providers need to control are: i) customer
acquisition cost (most critical- at-least at a sub-par scale); ii) technology cost; and iii)
business cost (comprising net transaction losses, cost of capital and intercharge
fees).
Customer acquisition cost: We see this as the most critical proponent – at least
at a sub-par scale. The marketing to acquire not only customers but merchants
also is important to create a flywheel effect and thus drive scalability.
Net transaction losses: Net transaction losses is defined as the amount that
hasn’t been paid back in 30/60/90 days. Given evolving credit culture and a
large proportion of first-time users, this becomes critical. While impairment
cost is uncertain given the lower ticket size, faster churn and higher fee income,
the cross-cyclical impact is relatively low.
Technology costs: Taking the above into account, technology is a critical cog in
success of BNPL providers. We see a clear need to invest heavily into
technology (data analytics) to better predict consumers’ ability and willingness
to repay.
Cost of capital: Most fintechs’ cost of capital ranges from 20–25% per annum.
It is essential to focus on increasing transaction frequency , which will mitigate
this cost.
Intercharge fees: This depends on the type of instruments used for
repayments – higher cost for credit cards (MDR of 2% levels) over debit cards
over UPI.
Service cost: Apart from this, business cost also comprises operating costs such
as repayment reminders, servicing and call centre costs, among others.
Our analysis suggests that high acquisition cost makes it more of a scale game (fee-
income forms larger part), and hence profitability build-up is some time away.
Revenue
Customer fees
Late fees
Monthly fees
Subscription fees
Merchant fees
Take rate
GMV
Conversion rate
Retention
Average Order Value
Subvention
Edelweiss Securities Limited
BFSI
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 17
Cost drivers of BNPL providers
Source: Edelweiss research
Taking the above dynamics into consideration, we have tried to put together
profitability models for BNPL offerings (these are just broader ranges based on
insights for industry players and various public documents). It indicates two
important aspect for economics to work: i) high frequency of transactions; and ii)
scale build-up – viz. flywheel effect.
Indicative profitability metrics for BNPL players
% of GMV Comments
Revenue
Merchant Fee 2 - 6%
Based on our interaction, the number is on lower end
of the range. This will rise as flywheel effect gets
created
Late Fee 1 - 2% This is on higher side currently, we expect this to trend
down as credit culture improves
Total revenue 3-8%
Expenses
Impairment
costs 1 - 5%
This is most uncertain and can go north of 10% as well.
Thus curtailing this is utmost important
Other costs 2-6% This includes marketing (CAC), recovery costs etc
-of which
Intercharge 0.5-2%
If credit card is used then tilted towards 2% else closer
to 1% levels
-of which cost
of capital 0.5 - 1% For most Fintechs the cost of capital is 20-25% range.
Total expense 4 -15% Range reflects the importance of scale and transaction
frequency
Source: Edelweiss Research
Our analysis of global players vindicates the above fact, wherein higher customer
acquisition cost and uncertain impairment cost (range of 0.5–6% for three major
players) has impacted profitability despite improving revenue profile. The focus is
thus to build on merchant and customer base with the aim of creating a flywheel
effect.
Putting this in Indian context, with limited levers on revenues, profitability build-up
seems a little far away.
Cost
Customer acquisition cost
Marketing, promotion, cash
back
Technology Cost
Systems and Team builup
Data Analytcis
Business costs
Interchange fees
Impairement cost
Capital costs
Churn/Balance
Average Order Value
Service cost
BFSI
Edelweiss Securities Limited
18 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
International experience lends credence to claim of time-consuming nature of profitability build-up
AfterPay (AUD mn) Klarna (SEK mn) Affirm (USD mn)
Jun-19 Jun-20 Jun-21 CY19 CY20 Jun-19 Jun-20 Jun-21
GMV 5,247 11,114 21,087 3,32,000 4,84,000 2,620 4,637 8,292
Active Customers (mn) 4.6 9.9 16.2 87 2 4 7
Active Merchants ('000s) 32.3 55.4 98.2 250 3.1 5.7 28.995
AfterPay (AUD mn) Klarna (SEK mn) Affirm (USD mn)
Jun-19 Jun-20 Jun-21 CY19 CY20 Jun-19 Jun-20 Jun-21
Total income 264 519 925 7,999 11,175 264 510 870
Cost of sales -60 -134 -250 -844 -1,175 -59 -82 -126
Receivables impairment expenses -59 -94 -195 -1,863 -2,531 -151 -267 -313
Operating and other expenses -189 -317 -674 -6,381 -9,098 -175 -273 -865
Loss before tax -4`3 -27 -194 -1,089 -1,629 -120 -112 -433
Loss after tax -44 -23 -159 -902 -1,376 -120 -113 -431
AfterPay (AUD mn) Klarna (SEK mn) Affirm (USD mn)
Key ratios (calculated) Jun-19 Jun-20 Jun-21 CY19 CY20 Jun-19 Jun-20 Jun-21
Revenue (%) of GMV 5.0 4.7 4.4 2.4 2.3 10.1 11.0 10.5
Cost (%) of GMV -4.7 -4.1 -4.4 -2.2 -2.1 -8.9 -7.7 -12.0
Impairement (%) of GMV -1.1 -0.9 -0.9 -0.6 -0.5 -5.8 -5.7 -3.8
Cost/income (%) -94.0 -87.0 -99.9 -90.3 -91.9 -88.3 -69.7 -113.9
Credit cost (%) of recievables -13.0 -12.1 -13.4 -5.9 -5.7 -21.3 -26.7 -15.7
PAT (Loss)/ GMV -0.83 -0.21 -0.76 -0.27 -0.28 -4.60 -2.43 -5.20
Source: Company
Edelweiss Securities Limited
BFSI
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 19
BNPLs versus credit cards: Big hot debate
The sizzling growth of BNPL offerings is casting a shadow over credit cards, even their
potential cannibalisation.
We argue: i) total cannibalisation is hard to play by given the inherent difference in
customer segment, product offerings and wider usage; ii) in fact BNPL products can
expand the market for credit card players; iii) credit cards companies are getting into
similar product offerings – trends already seen in mature markets; iv) evolving
partnership with while-label fintech companies, viz., Pine Labs; v) penetration level
in India for credit card market is still lower, offering a steady growth runway despite
losing payments market share; and vi) regulatory challenges might emerge on BNPL
(which is clearly very loosely regulated versus credit cards, which has undergone a
large change in regulatory frameworks).
Nuances of BNPL and credit card offerings
BNPL Credit Cards
Product Offerings Option to split payments - Offers consumers a line of credit
Usage Specific one-time purchases Open line , used for bill pay, etc as well
Credit limit Much lower High, generally goes into multiples of earnings
Interest rate 0%, no processing fees 0%, with processing fees
Late fee Yes Yes
Late payment interest charges No Variable rates based on revolving balances
Fexibility Choose payment terms as per need,
cant digress from payment schedule then
Flexibility in payment schedule within grace period to avoid
late charges
Application Process Instant, generally for untested (new to
credit) customers
Takes time and stricter eligibility, generally with credit tested
customers
Acceptance Improving across merchants Has very high acceptance, even for services
Credit bureaus reporting Rare instances Gets reported
Perks Not much, low on perks Reward points which can be used
Merchant charges Variable, generally high viz. 2-6% Variable generally 1.5-2.5% range
Regulations Loosely bound Stricter regulation
Source: Edelweiss Research
Incumbent players’ new product offerings to capitalise on the trend
Company New product initiatives
American Express Card members can choose to create monthly payment plans with a fixed fee and no interest, carry a monthly balance
with interest or pay their bill in full
Chase My Chase Plan is available for purchases over USD100 and enables customers to select a recent transaction and
choose a repayment timeframe and personal monthly payment amount that can range from 3 to 18 months
Nab
NAB launched the NAB StraightUp Card, Australia’s first no-interest credit card. The StraightUp Card gives customers
access to credit of up to USD3k for a flat monthly charge, and customers don’t pay the monthly fee if the card is not
used and there are no other fees or charges
Royal Bank of Canada Royal Bank of Canada moves into BNPL market through partnership with Alliance Data’s Bread
Visa Kicks off BNPL pilots in the US to help its issuer clients give eligible consumers more flexibility to pay by using their
existing Visa credit cards at checkout
Source: FT partners
BFSI
Edelweiss Securities Limited
20 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
International markets suggest that BNPL products become meaningful at later
lifecycle options. With India at an early stage, we don’t see a meaningful impact.
Even in other prominent geographies, BNPL is fragmented and would take time to
develop.
BNPL products becomes meaningful at later lifecycle options
Source: Company
23
19
15
1210 10 9 8 7
5 4 3 3 3 3 2 2
0
5
10
15
20
25
Swed
en
Ge
rman
y
No
rway
Fin
lan
d
Au
stra
lia NZ
Ne
the
rlan
Den
mar
k
Bel
giu
m UK
Fran
ce
Ind
ia
Ind
on
esia
Jap
an
Sin
gap
re
Ital
y
USA
BNPL proportion in e-com payment method
Edelweiss Securities Limited
BFSI
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 21
Bank or Fintech: Alliance, alliance and more
Slow to warm up to the idea, banks have now started to move towards BNPL
offerings either via modified product offerings (own-in house product offerings) or
through partnership models (via white label BNPL players). The rationale: it not only
captures wide growth opportunity given changing customer behaviour, but also
enables them to capture them young and leverage them through the lifecycle.
Looking at the pioneer BNPL offerings and traditional banking products, the
difference is likely to narrow as BNPL players will try and gradually increase credit
limits (which will be their trial by fire for sustainability) and eventually morph into
retail banking (internationally, this has started with Klarna getting a banking licence)
while banks will leverage their lower capital cost to wade through challengers.
Looking at the evolving dynamics, the market is in hyper-growth mode (albeit at low
base) with competition rising (pioneer BNPL players, payment companies, super
apps, and now banks). Strategies are evolving across players to gain more market
share.
The key differentiator would be ability to build brand and leverage that (banks
already ahead on this) and build a flywheel effect starting from building merchant
relationships (this we believe will require deep pockets).
Partnerships between incumbent players and BNPL providers
Companies Partnership details
Stripe Quadpay
QuadPay customers can select up to USD500 of goods to purchase instantly, which QuadPay pays for using a virtual
card issued through Stripe Issuing and customers then repay QuadPay in four interest-free instalments over six
weeks
Mastercard Splitit Splitit will integrate its instalment solution with Mastercard’s suite of technology as a network partner to enable
merchants to deliver seamless and secure consumer experiences at both online and offline checkout
Amazon Citi
Citi announces launch of Citi Flex Pay on Amazon that gives existing card members who’ve recently
shopped on Amazon with an eligible Citi card the option to pay off large purchases with an equal monthly payment
plan with no formal application, fees or credit check required
Afterpay Stripe Afterpay and Stripe join forces to offer Afterpay’s payment service to Stripe merchants through an easy
and seamless integration without any application, on-boarding, or underwriting process
Source: Company
BFSI
Edelweiss Securities Limited
22 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Risk: Not all sunshine and rainbow
Regulatory supervision likely to mount
One of the biggest challenges for BNPL players is regulation. The potential customer
base, product offerings, and high growth with widening unnoticed debt burden form
a perfect cocktail for regulatory intervention over a period of time—we have seen
regulators around the world sitting up and taking notice.
Looking at the target base of younger population and mass market appeal, the high
growth of BNPLs with lack of an aggregated view of all pending BNPL payments at
different BNPL players will essential pull regulatory attention - as customers start to
face financial difficulties to pay back cumulative instalments.
Competitive pressure to pave way for consolidation
Banks have started to move towards BNPL offerings. Their key advantage is the
ability to offer fully integrated services while leveraging their inherently lower cost
of capital.
We believe while fIntechs have the first-mover advantage and are evolving
innovative and leaner business models, this advantage is unlikely to persist for long.
Given the upcoming number of players, we expect consolidations over time.
Edelweiss Securities Limited
BFSI
Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset 23
DISCLAIMER Edelweiss Securities Limited (“ESL” or “Research Entity”) is regulated by the Securities and Exchange Board of India (“SEBI”) and is licensed to carry on the business of broking, Investment Adviser, Research Analyst and related activities.
This Report has been prepared by Edelweiss Securities Limited in the capacity of a Research Analyst having SEBI Registration No.INH200000121 and distributed as per SEBI (Research Analysts) Regulations 2014. This report does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. Securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 includes Financial Instruments and Currency Derivatives. The information contained herein is from publicly available data or other sources believed to be reliable. This report is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this report should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in Securities referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment. The investment discussed or views expressed may not be suitable for all investors.
This information is strictly confidential and is being furnished to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject ESL and associates / group companies to any registration or licensing requirements within such jurisdiction. The distribution of this report in certain jurisdictions may be restricted by law, and persons in whose possession this report comes, should observe, any such restrictions. The information given in this report is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information is subject to change without any prior notice. ESL reserves the right to make modifications and alterations to this statement as may be required from time to time. ESL or any of its associates / group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. ESL is committed to providing independent and transparent recommendation to its clients. Neither ESL nor any of its associates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including loss of revenue or lost profits that may arise from or in connection with the use of the information. Our proprietary trading and investment businesses may make investment decisions that are inconsistent with the recommendations expressed herein. Past performance is not necessarily a guide to future performance .The disclosures of interest statements incorporated in this report are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The information provided in these reports remains, unless otherwise stated, the copyright of ESL. All layout, design, original artwork, concepts and other Intellectual Properties, remains the property and copyright of ESL and may not be used in any form or for any purpose whatsoever by any party without the express written permission of the copyright holders.
ESL shall not be liable for any delay or any other interruption which may occur in presenting the data due to any reason including network (Internet) reasons or snags in the system, break down of the system or any other equipment, server breakdown, maintenance shutdown, breakdown of communication services or inability of the ESL to present the data. In no event shall ESL be liable for any damages, including without limitation direct or indirect, special, incidental, or consequential damages, losses or expenses arising in connection with the data presented by the ESL through this report.
We offer our research services to clients as well as our prospects. Though this report is disseminated to all the customers simultaneously, not all customers may receive this report at the same time. We will not treat recipients as customers by virtue of their receiving this report.
ESL and its associates, officer, directors, and employees, research analyst (including relatives) worldwide may: (a) from time to time, have long or short positions in, and buy or sell the
Securities, mentioned herein or (b) be engaged in any other transaction involving such Securities and earn brokerage or other compensation or act as a market maker in the financial
instruments of the subject company/company(ies) discussed herein or act as advisor or lender/borrower to such company(ies) or have other potential/material conflict of interest with
respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance. ESL may have proprietary long/short
position in the above mentioned scrip(s) and therefore should be considered as interested. The views provided herein are general in nature and do not consider risk appetite or investment
objective of any particular investor; readers are requested to take independent professional advice before investing. This should not be construed as invitation or solicitation to do business
with ESL.
ESL or its associates may have received compensation from the subject company in the past 12 months. ESL or its associates may have managed or co-managed public offering of securities for the subject company in the past 12 months. ESL or its associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. ESL or its associates may have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months. ESL or its associates have not received any compensation or other benefits from the Subject Company or third party in connection with the research report. Research analyst or his/her relative or ESL’s associates may have financial interest in the subject company. ESL and/or its Group Companies, their Directors, affiliates and/or employees may have interests/ positions, financial or otherwise in the Securities/Currencies and other investment products mentioned in this report. ESL, its associates, research analyst and his/her relative may have other potential/material conflict of interest with respect to any recommendation and related information and opinions at the time of publication of research report or at the time of public appearance.
Participants in foreign exchange transactions may incur risks arising from several factors, including the following: ( i) exchange rates can be volatile and are subject to large fluctuations; ( ii) the value of currencies may be affected by numerous market factors, including world and national economic, political and regulatory events, events in equity and debt markets and changes in interest rates; and (iii) currencies may be subject to devaluation or government imposed exchange controls which could affect the value of the currency. Investors in securities such as ADRs and Currency Derivatives, whose values are affected by the currency of an underlying security, effectively assume currency risk.
Research analyst has served as an officer, director or employee of subject Company: No
ESL has financial interest in the subject companies: No
ESL’s Associates may have actual / beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report.
Research analyst or his/her relative has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No
ESL has actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of research report: No
Subject company may have been client during twelve months preceding the date of distribution of the research report.
There were no instances of non-compliance by ESL on any matter related to the capital markets, resulting in significant and material disciplinary action during the last three years except that ESL had submitted an offer of settlement with Securities and Exchange commission, USA (SEC) and the same has been accepted by SEC without admitting or denying the findings in relation to their charges of non registration as a broker dealer.
A graph of daily closing prices of the securities is also available at www.nseindia.com
Analyst Certification:
The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
BFSI
Edelweiss Securities Limited
24 Edelweiss Research is also available on www.edelweissresearch.com, Bloomberg - EDEL, Thomson Reuters, and Factset
Additional Disclaimers
Disclaimer for U.S. Persons
This research report is a product of Edelweiss Securities Limited, which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.
This report is intended for distribution by Edelweiss Securities Limited only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act, 1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any U.S. person, which is not the Major Institutional Investor.
In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major Institutional Investors, Edelweiss Securities Limited has entered into an agreement with a U.S. registered broker-dealer, Edelweiss Financial Services Inc. ("EFSI"). Transactions in securities discussed in this research report should be effected through Edelweiss Financial Services Inc.
Disclaimer for U.K. Persons
The contents of this research report have not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000 ("FSMA"). In the United Kingdom, this research report is being distributed only to and is directed only at (a) persons who have professional experience in matters relating to investments falling within Article 19(5) of the FSMA (Financial Promotion) Order 2005 (the “Order”); (b) persons falling within Article 49(2)(a) to (d) of the Order (including high net worth companies and unincorporated associations); and (c) any other persons to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). This research report must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this research report relates is available only to relevant persons and will be engaged in only with relevant persons. Any person who is not a relevant person should not act or rely on this research report or any of its contents. This research report must not be distributed, published, reproduced or disclosed (in whole or in part) by recipients to any other person. Disclaimer for Canadian Persons
This research report is a product of Edelweiss Securities Limited ("ESL"), which is the employer of the research analysts who have prepared the research report. The research analysts preparing the research report are resident outside the Canada and are not associated persons of any Canadian registered adviser and/or dealer and, therefore, the analysts are not subject to supervision by a Canadian registered adviser and/or dealer, and are not required to satisfy the regulatory licensing requirements of the Ontario Securities Commission, other Canadian provincial securities regulators, the Investment Industry Regulatory Organization of Canada and are not required to otherwise comply with Canadian rules or regulations regarding, among other things, the research analysts' business or relationship with a subject company or trading of securities by a research analyst.
This report is intended for distribution by ESL only to "Permitted Clients" (as defined in National Instrument 31-103 ("NI 31-103")) who are resident in the Province of Ontario, Canada (an "Ontario Permitted Client"). If the recipient of this report is not an Ontario Permitted Client, as specified above, then the recipient should not act upon this report and should return the report to the sender. Further, this report may not be copied, duplicated and/or transmitted onward to any Canadian person.
ESL is relying on an exemption from the adviser and/or dealer registration requirements under NI 31-103 available to certain international advisers and/or dealers. Please be advised that (i) ESL is not registered in the Province of Ontario to trade in securities nor is it registered in the Province of Ontario to provide advice with respect to securities; (ii) ESL's head office or principal place of business is located in India; (iii) all or substantially all of ESL's assets may be situated outside of Canada; (iv) there may be difficulty enforcing legal rights against ESL because of the above; and (v) the name and address of the ESL's agent for service of process in the Province of Ontario is: Bamac Services Inc., 181 Bay Street, Suite 2100, Toronto, Ontario M5J 2T3 Canada.
Disclaimer for Singapore Persons
In Singapore, this report is being distributed by Edelweiss Investment Advisors Private Limited ("EIAPL") (Co. Reg. No. 201016306H) which is a holder of a capital markets services license and an exempt financial adviser in Singapore and (ii) solely to persons who qualify as "institutional investors" or "accredited investors" as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore ("the SFA"). Pursuant to regulations 33, 34, 35 and 36 of the Financial Advisers Regulations ("FAR"), sections 25, 27 and 36 of the Financial Advisers Act, Chapter 110 of Singapore shall not apply to EIAPL when providing any financial advisory services to an accredited investor (as defined in regulation 36 of the FAR. Persons in Singapore should contact EIAPL in respect of any matter arising from, or in connection with this publication/communication. This report is not suitable for private investors.
Disclaimer for Hong Kong persons
This report is distributed in Hong Kong by Edelweiss Securities (Hong Kong) Private Limited (ESHK), a licensed corporation (BOM -874) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to Section 116(1) of the Securities and Futures Ordinance “SFO”. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The report also does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of any individual recipients. The Indian Analyst(s) who compile this report is/are not located in Hong Kong and is/are not licensed to carry on regulated activities in Hong Kong and does not / do not hold themselves out as being able to do so. Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved.
Aditya Narain
Head of Research
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai 400 098Tel: +91 22 4009 4400. Email: [email protected]