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Fullerton India Home Finance Co. Ltd.
Investor Presentation
Sep-19
AGENDA
Industry Landscape
About Grihashakti
Business Highlights
Risk Management
Liquidity Management
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Industry Landscape
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India Growth StoryBuoyed by demographics, unmet credit demand
"We always over-estimate the Change that will occur in the next two years & underestimate the change that will occur in the next ten.“ – Bill Gates
36%
48% 51%
64%69%
2015 2019 2020 2025 2027
India's Millennial as % of Workforce**
Incremental demand
199 171 151 134
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-
50
100
150
200
1980 1990 2000 2010 2015 2018
Credit-to-GDP ratio*
KR UK US MY IN
Underpenetrated Market
Source –** Morgan Stanley ^PwC – GDP at purchasing power parity (PPP) adjusts for price level differences providing a better measure of the volume of goods and services produced. *BIS (KR: Korea UK: United Kingdom US: United States MY: Malaysia IN: India)
India's economy is poised to become third-largest by 2027 with $6 trillion GDP**
8.7
11.8
15.7
2016 2020 2025
GDP in PPP^ (US$ trillion)
Growth potential
5Source: *Mirae Asset Management **McKinsey ~ORF ^CRISIL [Housing portfolio of HFC’s total outstanding] ~Morgan Stanley #AnarockMcKinsey Global Institute defines India’s middle class as households with real annual disposable incomes between 200,000 and 1 million rupees.
• Housing sector has impact on construction, cement, steel sectors driving up employment and income levels
• Housing Finance Companies can capture the increasing demand for credit buoyed by favourable demographics and urbanization
India’s 9% Mortgage-to-GDP ratio in 2016 estimated at ~17% by 2026 (Morgan Stanley)
Housing - Catalyst for India’s DevelopmentLarge opportunity for HFCs
430 mio in 2015 600 mio by 2030Rapid urbanization*
64 mio in 2018 114 mio by 2022Housing shortage~
250 mio in 2015 583 mio by 2030Growing middle class**
Key Drivers for Housing Sector Growth Housing Sector Multiplier Effect
INR 6.3 tn in 2018 INR 14.8 tn by 2023HFC Housing Loans^
Household size# 4.85 in 2006 4.44 in 2016
Hou
sing
Sec
tor*
Service Sector
Skilled Labour
Architects, Designers & Engineers
Banking & Finance
Primary Sector Raw Materials
Manufacturing Sector Construction Materials
Fiscal Impact Higher Income
Increased Tax Revenue
• Housing for all (Pradhan Mantri Awas Yojana) scheme – deliver 20 million houses by 2022
• Home buyers recognized as financial creditors • CLSS scheme extended till March 2020
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Government/ Regulator SupportCo-ordinated policy measures to spur growth
Home Buyers
Real Estate Developers
HFCs
• RERA regulation to enhance developer performance, improve buyer confidence• GST rates slashed for under-construction flats to 5% and affordable homes to
1%, effective from April 1, 2019• Smart City Project - plan to build 100 smart cities
• Relaxation in LTV norms and risk weight guidelines• Grant of infrastructure status to affordable housing • Better access to funds with revised ECB regulation• Enhanced Home Loan limit under Priority Sector Lending (PSL)• NHB refinancing limit for HFCs increased to INR 300 billion• Reduction in the minimum holding period for assets to be securitised • Asset purchase under government guarantee scheme
About Us – The Group
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Temasek Holdings (Private) Ltd.
Fullerton Financial Holdings Pte. Ltd.
Fullerton India Credit Company Ltd.
Fullerton India Home Finance Company Ltd.
Wholly owned subsidiary
Wholly owned subsidiary
Wholly owned subsidiary
GrihashaktiHousing Finance arm of Fullerton India
Fullerton Financial Holdings, Singapore (FFH) is a wholly owned subsidiary of Temasek Holdings
• Temasek is a global investment company, headquartered in Singapore
• FFH invests in and operates financial institutions in emerging markets
Fullerton India Credit Co. Ltd. (FICCL) is a wholly-owned subsidiary of FFH
• Incorporated in 2005
• Pan-India presence established across 22 states and 3 union territories
• Retail finance products for urban and rural households as well as SMEs
Grihashakti, Fullerton India Home Finance Co. Ltd. is a wholly-owned subsidiary of FICCL
• Commenced operations in December 2015
FFH operates financial institutions in emerging markets Focused on SME and mass market customer segments
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DUBAI, UAE12 outlets53k Cust
INDIA648 Branches3600k Cust
Central CHINA4 Provinces,40 Outlets, 80k Cust
CHINA127 Community Banks1800k Customers
MYANMAR32 Branches200k Cust
CAMBODIA POST BANK50 Branches122k Cust
MALAYSIA82 Branches1,040 k Cust
Fullerton Financial Holdings (FFH) has 8 operating financial services entities located across 6 countries.
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Fullerton India Credit CompanyA wholly-owned subsidiary of Fullerton Financial Holdings
Multi-product offerings support a range of customer needs
Consumer
Urban MSME
Rural
Cross-Sell
Personal Loans, Loans Against Property
Commercial Vehicle Loans, Business Loans, Loans Against Property
Personal / Group Loans, Loans Against Property, Vehicle Loans
Life / General Insurance
Established Customer Connect across Urban and Rural India
21,542 CrAUM (INR)
28 LakhCustomers
626Branches
13,000Employees
58,000Villages
AAARating*
Data as at FY19. *Rating CRISIL, ICRA, CARE. (Temasek rated 'AAA/Stable' by S&P Global)
The Foundation For our Strategy and Culture
VisionBe the Company of choice in financial services for our customers, employees, communities and stakeholders, recognized for innovation and high ethical standards.
Values
Agility
Diversity
Collaboration
Integrity
Innovation
Excellence
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Board & Management TeamStrong Oversight and Guidance
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Anindo MukherjeeChairman – Grihashakti, Non-Executive Director - Fullerton India Credit Co. Ltd
Rakesh MakkarCEO - Grihashakti, Whole-time Director
Milan ShusterIndependent Director
Rajashree NambiarNon-Executive Director,MD & CEO – Fullerton India Credit Co, Ltd
Board of Directors
Management Team
Pankaj MalikChief Financial Officer
Parag ShahChief Risk Officer
Shyam Reddipalli GM – Head Business & Product
Rakesh MakkarCEO - Grihashakti, Whole-time Director
FFH has senior level representation on the Board and various committees of Board
Sudha PillaiIndependent Director
About Us - Our Journey
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Our Journey So FarSteady asset growth, geographical expansion
Jul-15
Dec-15
Nov-16
Sep-17
Mar-19
Jan-18
Rated AA+ by CARE
Received HFC license with equity infusion of INR 1 Bio
Started operations with 20 branches
Sep-16 Crossed AUM of INR 10 BioTeam size of 425
Nov-17
SARFAESI ApprovalCrossed AUM of INR 15 Bio
Crossed AUM of INR 30 Bio
Expanded – Added 20 more branches
Expanded network to 60 Branches
Jun-19
Crossed AUM of INR 35 BioEnhanced network of 78 branches
Jul-19
Equity infusion of INR 2 Bio
Aug-19
CRISIL ‘AAA’ RatedClosed securitization deal worth INR 2 Bio
Sep-19
Crossed AUM of INR 40 Bio
Grihashakti is a wholly-owned subsidiary of FICCL
• Customer segment – Primarily salaried, self-employed professionals, and MSME firms
• Product suite – loans for new/resale home, home improvement & extension, home construction, loan against property, loans for commercial property, construction finance, Lease Rental Discounting
• Presence – 78 locations; leveraging parent infrastructure
• Geographies – Focus on Tier 2 and 3 cities with a strong network of associates and direct selling agents
• Average Ticket Size in the range of 20-25 Lakhs
• Employee strength ~800
• Pro-active and continuous monitoring based on external environment, customer data, bureau trends
Established customer connect in 78 branches across India
RAJASTHAN• Branches # – 6
GUJARAT• Branches # – 7
MUMBAI• Branches # – 4
REST OF MAHARASHTRA• Branches # – 10
KARNATAKA• Branches # – 7
MADHYA PRADESH• Branches # – 5
AP & TELANGANA• Branches # – 11
UTTAR PRADESH • Branches # – 6
TAMIL NADU• Branches # – 9
PUNJAB• Branches # – 3
HARYANA• Branches # – 4
DELHI• Branches # – 1
WEST BENGAL• Branches # – 3
UTTARAKHAND • Branches # – 2
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Where Are We TodayBusiness Overview
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Our USPDeepening customer relationships in underserved markets
Strong Parentage
Experienced Management Team
Strong footprint in Tier 2/3 towns
Established niche in self-employed segment
Expertise in handling new-to-credit/ borrowers from informal segment
Strong Risk Governance Framework
Comfortable Liquidity Position
AAA rated. Steady infusion of capital
Industry veterans form part of Board and Senior Leadership team
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Geographically diversified, sizeable play basis network of 78 branches and ~600 active channel partners
Leverage parent’s understanding of credit and distribution in underserved markets, product programs customized for SENP
Pro-active monitoring based on external environment, customer data, bureau trends. Robust delinquency management – from early warning signals to effective SARFAESI implementation
7 Diversified lender base, low reliance on short term funding, well-managed ALM
Region specific specialty teams on board – underwriting, collateral management, valuation policy. Sturdy portfolio across market cycles - demonetization, RERA, GST, liquidity crisis
Business Highlights
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Building Strong FranchiseSince inception performance
242 4,735
19,022 30,645
40,590
FY16 FY17 FY18 FY19 H1FY20
AUM (INR Mio)
147 2,348
9,664
16,853 21,048
FY16 FY17 FY18 FY19 H1FY20
Customer Base
311.7%
141.1%68.1% 68.2% 50.6%
FY16 FY17 FY18 FY19 H1FY20
Cost/Income Ratio
23 180
770
1,459 1,288
FY16 FY17 FY18 FY19 H1FY20
Net Revenue (INR Mio)
-49 -74
246465
636
FY16 FY17 FY18 FY19 H1FY20
Operating Profit (INR Mio)
0.2%
0.9%1.2%
2.0%
FY16 FY17 FY18 FY19 H1FY20
NNPA
Note - FY16 and FY17 nos. are as per IGAAP while, FY18 and FY19 are as per IndAS
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Meeting Diverse Customer NeedsTrusted partner for customers, DSA channels
Product ShareProduct Suite
Fulfil dream of owning a home
• Home Loans (HL) – Purchase of New and Resale
• Home Improvement
• Home Construction
• Residential Plot and Home Construction Loans
• Home Extension Loans
Expand Business /Working Capital
• Loan against Property (LAP)
• Lease Rental Discounting
• Loans for commercial property - New and Resale
• Loans for construction of commercial property
Access to developers• Approved Project
Financing• Construction
Finance (CF)
Programs customized for self-employed segment
• Liquid Income Program
• Gross Turnover Program
• Income Multiplier Program
• Banking Product• High Equity
Program• EMI Equalizer
Program
HL58%
LAP40%
CF2%
Closing AUM (Sep-19)
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Fit For GrowthFocused on expansion, efficiency & customer centricity
RuralUrban
DigitalProcess
• Focus on salaried profile for balanced growth• Low channel dependency with increased focus on
direct sourcing• Go wide into newer regions and deepen presence
in current regions• Build scale in Tier 2-3 locations
• Leveraging our network franchise in rural India• Tie-up with Banks, MFIs for Priority Sector Lending• Drive Government schemes – PMAY, CLSS• Target: Periphery of Tier 2-3 locations• Refinance under NHB schemes – Rural Housing
Fund
• More products per customer; cross-sell and up-sell• Tech-enabled sourcing and credit appraisal • Digitally-driven, simplified, scalable loan processing • Rule based engine for FTR (First-Time-Right)
underwriting and better turnaround
• Lean, streamlined processes for enhanced efficiency, faster customer response rate
• Investments into data & analytics for risk monitoring, customer service and control
• Targeted collections process
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Alliances with online loan aggregators and FinTechs
Tap existing customer base
Up-sell to quality FIHFC customers
CIBIL watch, Bureau scrub for HL
Retention base selling
Staff Loans & Referrals
Deriving Customer Lifetime Value for Retention
Strengthening the Alternate ChannelDigital Platform
• Lead generation from third-party online marketplaces
• Digital Marketing, advt. on partner websites
• Explore risk-sharing model with Fin-Techs
• API integration / CRM access to partners
Paperless Processing Mobile Sourcing Solution Growing the pie
• Perfios integration for bank statements
• Finfort integration for income tax returns
• Scorecard based business rule engine
• Fully functional web-portal
• Interface enabled with digital sanction capabilities
• Integrated lead management system• Frontline sales can digitally source
cases and provide instant financial sanction to salaried segment
• Online fraud checks
• No documents for sanction to salaried cases; minimal documentation for self-employed• Reduce human error, improve overall TAT through automated underwriting• Improve productivity and customer satisfaction • Widen revenue streams with digital alliances and sourcing
Digital CapabilitiesBuilding integrated platform for business generation
Risk Management
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Risk principles and standards
Definitions of roles and responsibilities
Governance structure
Key Components
Establish common principles and standards for the management and control of all risks across the
organization and entities
Provide a shared framework to improve awareness of risk management processes
Provide clear accountability and responsibility for risk management
Key ObjectivesKey Principles
Balancing risk and return
Responsibility and Accountability
Anticipation of Future Risks
Standards Ensuring Portfolio Quality
Management Information System
Credit Bureau Policy
Credit Exposure Norms
Credit Assessment and Eligibility
Norms
Provisioning and Asset Classification
Stress Tests and Periodic Reviews
Portfolio on Bureau Watch Triggers
Collections and Recovery Norms
Data Analytics
Board of Directors
Risk Oversight Committee
Chief Executive Officer
Policy Approvals
Portfolio Purchases & Sell-Offs Risk Credit FCU, Legal
Chief Risk Officer
Collections Analytics
Risk Governance FrameworkHighly Experienced Senior Management Team
Policy Technical
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Robust Risk ManagementInitiatives to mitigate and monitor risks
Managing Risk
Formation of Credit Committee
Improvised Credit PolicyIntroduced BRE – automated rules for underwriting for critical deviations
Enhanced Credit Underwriting -Geography specific collateral management, city-specific limits on ticket size
Framework to identify and track delinquencies, followed by remedial action, Strengthened Collections team with senior hiring
Risk-based Analytics Scorecard, Customer Risk Segmentation for Collections
SARFAESI initiated on 100% eligible cases
Initiated QA: Hind-sighting activity, Focussed PDD tracking
Strengthened Fraud Control Unit and property appraisal process
Liquidity Management
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Borrowing Profile
Stable Funding profile (INR bio)AAA rated
Long term stable and diversified funding base, with adequate liquidity cover
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29 19
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7
7
4
1
1
1
Sep 19 Mar 19 Mar 18
Bank Term Loan NCD CP
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Basel III oriented, Board approved policies guide liability management
Rigorous monitoring via ALCO
Compliance oversight by independent verticals
Three pillars of conservative liquidity risk management:
Diversification (across instruments lender category)
Matching asset-liability tenors
Maintenance of adequate buffers
DisclaimerThis presentation has been prepared by Fullerton India Home Finance Company Limited (the “Company”) solely for your information. This presentation is for information purposes only and should not bedeemed to constitute or form part of any offer or invitation or inducement to sell or issue any securities, or any solicitation of any offer to purchase or subscribe for, any securities of the Company, nor shallit or any part of it or the fact of its distribution form the basis of, or be relied upon in connection with, any contract or commitment therefor. The financial information in this presentation may have been re-classified and reformatted for the purposes of this presentation. You may also refer to the financial statements of the Company available at https://www.grihashakti.com/home.aspx, before making anydecision on the basis of this information.
This presentation contains statements that may not be based on historical information or facts but that may constitute forward-looking statements. These forward looking statements include descriptionsregarding the intent, belief or current expectations of the Company or its directors and officers with respect to the results of operations and financial condition of the Company. Such forward-lookingstatements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in such forward-looking statements as a result of various factors andassumptions which the Company presently believes to be reasonable in light of its operating experience in recent years but these assumptions may prove to be incorrect. Any opinion, estimate orprojection constitutes a judgment as of the date of this presentation, and there can be no assurance that future results or events will be consistent with any such opinion, estimate or projection. TheCompany does not undertake to revise any forward-looking statement that may be made from time to time by or on behalf of the Company.
No representation, warranty, guarantee or undertaking, express or implied, is or will be made as to, and no reliance should be placed on, the accuracy, completeness, correctness or fairness of theinformation, estimates, projections and opinions contained in this presentation. Potential investors must make their own assessment of the relevance, accuracy and adequacy of the information containedin this presentation and must make such independent investigation as they may consider necessary or appropriate for such purpose. This presentation does not constitute and should not be considered asa recommendation by the Company that any investor should subscribe for, purchase or sell any of Company's securities. By viewing this presentation you acknowledge that you will be solely responsiblefor your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential futureperformance of the business of the Company. None of the Company, book running lead managers, their affiliates, agents or advisors, the placement agents, promoters or any other persons that mayparticipate in any offering of any securities of the Company shall have any responsibility or liability whatsoever for any loss howsoever arising from this presentation or its contents or otherwise arising inconnection therewith. This presentation and its contents are confidential and should not be distributed, published or reproduced, in whole or part, or disclosed by recipients directly or indirectly to any otherperson. Viewing this information may not be lawful in certain jurisdictions. In other jurisdictions only certain categories of person may be allowed to view this information. Any person who wishes to view thissite must first satisfy themselves that they are not subject to any local requirements which prohibit or restrict them from doing so. Please exit this webpage if you are not permitted to view this presentationon this website or are in any doubt as to whether you are permitted to view these materials.
This presentation has been prepared by the Company based on information and data which the Company considers reliable, but the Company makes no representation or warranty, express or implied,whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness and reasonableness of the contents of this presentation. This presentation may not be all inclusive and may notcontain all of the information that you may consider material. Any liability in respect of the contents of, or any omission from, this presentation is expressly excluded.
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