Presentation on New Banking License – Roadmap for NBFCs

XIMB, PGDM (II year)Gokul V Subhradeep Mitra Sukant Bisoi

Profit and Marketing

• Profits expected to reach Rs. 1361 crores• The year on year growth graph is shown and details

mentioned in the excel sheet provided.• The marketing plan would be essentially to play upon ABCFL

which already is a trusted brand name in the market. • The emphasis would be to market it through channels visible

in rural markets which in future slides we’ll see as the primary market for the firm

• The mediums of IMC include leaflets, Radio ads, Road Shows, and to a lower extent through State based TV channels as the viewership for the same would be higher.

Marketing(Cont)

• The service levels and easiness of operation would lead to greater viral publicity which in future would be the bread and butter of the firm’s marketing.

• Lastly to initiate ATMs into hitherto unknown markets, specifically rural areas will also increase visibility

• Though the bank would look for a rural emphasis, it would also make sure its technologically competent.

Distribution Plans• The branch penetration should

be 40:60 skewed towards the rural segment.

• Reasons:– The Existing cities where ABCFL

is present can be used as hubs to cater to spokes that will be rural in nature

– Most established players have a huge presence in the urban segment

– RBI guide lines require that 25% of new branches open in rural segment. Year

1Year

2Year

3Year

4Year

50

100200300400500600700

Branches Increase

Branches Increase

Branches

Urban MixRural Mix

Loan Book after 5 Years• Rural Penetration will provide greater

deposits as the SB a/c from rural markets are in general terms greater than Urban Areas.

• A greater emphasis will move towards housing, personal and commercial vehicle loans as these will be in greater demand in the rural areas

• Infrastructure finance, currently the bread and butter should move to a lesser percentage as the risks associated with the same are very high with respect to options that would be available.

• Mortgages would also play a major role even in the future as risk to return ratios are higher.

18%

15%

8%

13%8%

12%

14%

12%

Loan Book Split

Corporate Finance SMEs

Mortgages Commercial

Automotive Personal

Housing Infrastructure Finance

Financial Strategies

• In brief– CASA to be maintained at around 25% at the end of five

years.• Reasons:

» 1. Rural populace will have huge SB a/c» 2. Large penetration focused on rural areas.» 3. Fast paced growth in existing markets and lessening dependency on

infra loans

– Deposits to grow at 30% year on year.• Reasons:

» 1. The target would be to create capital in rural areas that can be dispersed in the semi urban and rural areas itself.

» Hence greater viral publicity in the markets increasing deposits and thereby sustaining the 30% growth.

Financial Strategies• Loan Growth Rates:

• Though loans are going to rise, the rise will be skewed towards retail loans for the customers• Lesser intensified towards infrastructure, as the risk is

greater in this area.• Assumed to be 14% based on global trends and existing

growth rate of business

Risk Anticipated and Mitigation Strategies

• New Entrant into the market; would over come this shortcoming through aggressive marketing.

• Possibility of losses in the future: Plans established to prevent the same from happening; plans flexible to entertain the same.

• Branch network building would determine the growth: If branch growth does not work out as anticipated, projected financials can drop to a great extent.

• NPAs: Rural penetration means greater chances of NPAs as well; Securities will be ensured to mitigate the same.

Balance sheet Mar-12 Mar-13 Mar-14 Mar-15 Mar-16total share capital 246.16 246.16 246.16 246.16 246.16equity share capital 246.16 246.16 246.16 246.16 246.16share application money 0 0 0 0 0preference share capital 0 0 0 0 0reserves 6,737.84 6,956.15 7,222.98 7,547.08 7,938.41 revaluation reserves 0 0 0 0 0networth 6984.00284 7202.313607 7469.136299 7793.238507 8184.574963Deposits 10.00 15 26.25 52.5 105Borrrowings 15433.0736 17285.04243 19359.24752 21682.35723 24284.24009total debt 15,443.07 17300.04243 19385.49752 21734.85723 24389.24009total liabilities 22427.0764 24502.35604 26854.63382 29528.09573 32573.81506 Application of fund

Cash and balances with reserve bank of india 0.60 0.90 1.58 3.15 6.30

balances with banks, money at call and short notice 75.52 76.02 77.15 79.77 85.02 investments 8,748.99 8,752.74 8,759.30 8,772.43 8,798.68 advances 13018.225 14840.7765 16918.48521 19287.07314 21987.26338fixed assets 192.73 267.73 342.73 417.73 492.73other assets 391.01 564.19 755.40 967.95 1,203.82 Total 22,427.08 24,502.36 26,854.63 29,528.10 32,573.82 contingent liabilities 448.54 490.05 537.09 590.56 651.48

P& L Rs crores Mar-12 Mar-13 Mar-14 Mar-15 Mar-16Interest earned 2864.01 3264.97083 3722.066746 4243.156091 4837.197943other income 874.90 875.27 875.93 877.24 879.87 interest expended 1,853.17 2,076.01 2,326.26 2,608.18 2,926.71 operating expenses 934.7271 1035.061208 1149.499249 1280.09971 1429.266423

provisions and contingencies 0 0 0 0 0 net profit 951.01 1,029.18 1,122.24 1,232.12 1,361.09 profit brought forward 0 177.56 395.87 662.70 986.80

transfer to capital reserve 2.38 2.57 2.81 3.08 3.40

transfer to statutory reserve 237.75 257.29 280.56 308.03 340.27

transfer to investment reserve 0.19 0.21 0.22 0.25 0.27 dividend paid and its tax 318.2 318.2 318.2 318.2 318.2Tax 214.93 232.59 253.63 278.46 307.61

Carry to next balance sheet 177.56 395.87 662.70 986.80 1,378.13

Thank you