Co M n us lt ni G g* L P Giving&Mahindra&Finance&a&new ... · strategy&2020...

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Giving Mahindra Finance a new strategy 2020

Mahindra Finance Services LTD Ramesh Iyer

MGLP Consul8ng Kaiserslautern

Christopher Puetz, Sophie Mentges, Anuschka Gummel, Aamir Lakdawala 09/09/2015

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P Main Challenge

9/9/2015 MGLP ConsulFng Kaiserslautern 2

How to ensure sustainable growth in the future?

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P Execu;ve summary


Current SituaFon Analysis AlternaFves ImplementaFon Conclusion

1.   Focus on rural India 1.  Stabilize rural market by conFnuously provide exisFng soluFons & experFse

2.  Stepwise adding new villages 3.  Study feasibility for providing technological soluFons

2.   Expanding the business 1.  Entering the African rural market

2.  Following waterfall strategy 3.   Financing

1.  Selling Mahindra Insurance Broking Ltd.

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P Agenda


Current Issues

Analysis

Conclusion

Implementa8on

Alterna8ves

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P Key Issues



Slowdown rural economy

Lagging behind

compeFtors

DeterioriaFon in asset quality

Weak loan growth in India

Losses in market share

in core segment

High compeFFon in urban markets

longterm

shorWerm

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P Objec;ves



Increase revenue by 26 % every year

Increase customer base

Increase brand awareness

Geographic penetra8on

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P Mahindra business structure



Mahindra

ANer-‐market

Real Estate

Financial Service Partners IT Hospi-‐

tality

Farm Eqip-‐ment

Auto-‐mo8ve

Aero-‐space & defence

Two Whe-‐elers

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P Mahindra business structure



Mahindra

ANer-‐market

Real Estate

Financial Service Partners IT Hospi-‐

tality

Farm Eqip-‐ment

Auto-‐mo8ve

Aero-‐space & defence

Two Whe-‐elers

Use of Synergies

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P Business model



Value proposiFon

Key Resouces

Key Partnerships

Revenue Streams

Core Competencies

Human

Human

Human

Human

14,200 Employees

1,100 offices

Assets: INR 368.8 billion

Strong synergies to key business

Enhance the quality of ciFzens lives

Financial inclusion through technology

Deliver financial soluFon

•  MaruF (manufacturer of passenger cars) •  Hyundai •  Toyota •  Tata Motors •  General Motors •  Ford •  Automobile manufacturer dealers

0

20

40

60

80

2011 2012 2013 2014 2015

Revenues from OperaFons

Tripled within 5 years

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P Business model



Providing people

perspecFves

Key Resouces

Key Partnerships

Revenue Streams

Core Competencies

Human

Human

Human

Human

14,200 Employees

1,100 offices

Assets: INR 368.8 billion

Strong synergies to key business

Enhance the quality of ciFzens lives

Financial inclusion through technology

Deliver financial soluFon

•  MaruF (manufacturer of passenger cars) •  Hyundai •  Toyota •  Tata Motors •  General Motors •  Ford •  Automobile manufacturer dealers

0

20

40

60

80

2011 2012 2013 2014 2015

Revenues from OperaFons

Tripled within 5 years

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P Customers

Global potenFal in rural area



Customers

Rural Urban Semi rural

•  Focus on agriculture •  lower class and lower

middle class •  Typically not having

bank accounts •  3 % return on assets

•  Focus on technology and agriculture

•  Middle class

•  Focus on technology •  Middle and upper

class •  0.5 % return on assets

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P Rural-‐Urban Popula;on Divide by area

High potenFal especially in India and Africa



69%

31%

India

Rural

Urban

25%

75%

South Korea

Rural

Urban 80%

20%

Africa

Rural

Urban 51% 49%

China

Rural

Urban

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P Macro-‐Environment



Africa China South Korea India

Poli8cal •  In some states strong regulaFons

•  Strong poliFcal regulaFons

•  Difficult to enter

•  Low poliFcal regulaFons

•  No possibility to enter North Korea

•  Changing regulaFons

•  BeWer communicaFon with government

Popula8on •  Strong rural and semi-‐urban areas

•  Focus on agriculture

•  Strong urban areas •  Strong middle class

•  Increasing middle class in rural areas

Technology •  Focus on agriculture

•  Government concentrates on developing technology

•  Decreasing focus on agriculture

•  Focus on developing technology

•  Decreasing focus on agriculture

•  Focus on agriculture in rural areas

•  Focus on developing technologies in urban areas

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P Wrap Up



•  Leveraging group-‐wide synergies

•  Strong brand name in India

•  High compe88on in urban markets

•  Weak loan growth in India •  Slowdown rural economy

•  Risk in health insurance sector •  Lagging behind compeFtors

•  Increasing middle class in rural areas

•  InternaFonal market •  Low compeFFon in rural

markets

internal

external

Strength

OpportuniFes

Weaknesses

Threats

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P Feasible Alterna;ves



1. Alterna8ve: Back to the roots!

2. Alterna8ve: Urbanize yourself!

3. Alterna8ve: Africa is coming!

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•  Got out of the semi-‐urban business in India and concentrate on rural

•  AdverFse the growing middle class in rural area

•  Provide only half-‐year and quarterly payment to reduce administraFon costs

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•  Go to the urban area in India

•  Sell all the parts of rural area to compeFtor to gain money to invest

•  Go with the Smart Home investments

•  Very risky and a potenFal of high loss of profit

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•  Concentrate on expansion in Africa

•  Waterfall strategy in the African states

•  Especially loans for tractors and agricultural devices

•  Only small investments in rural area in India

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P Objec;ves






Geographic penetra8on

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P Evalua;on




Geographic penetraFon



Back to the roots!

Urbanize yourself!

Africa is coming!

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P Evalua;on




Geographic penetraFon



Back to the roots!

+ 0 ++ +

Urbanize yourself! 0 0 + +

Africa is coming!

++ ++ + ++

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P Dimension



Cluster Main Challenge

Domes8c market

•  Slowing down economy in India

•  Low loan growth •  Missing access to 400,000 in

India

Expanding globally

•  Low presence in global markets •  Missing governmental

approvals

Financing & restructuring

•  High risk health insurance business

•  No health checks

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P Implementa;on schedule



Cluster 2016 2017 2018 2019 2020

Domes8c market

Expanding globally

Financing & restructuring Due diligence

Contact IB

Collect offers 1

Collect offers 2

NegoFaFons

Deal

Governmental approvals

Analyze markets

Extend South Africa

Enter Namibia

Enter Kenya

Enter Tanzania

Study technological feasibility

Increase adverFsement offers

Stabilizing poliFcal issues

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P Domes;c market



•  WaiFng for stabilizaFon of new government

•  ConFnue to provide soluFons to rural government & go village by village

•  Target: addiFonal 5000 villages each year in central India

•  Support it though adverFsement

•  Town hall, radio and door-‐door publicity

•  Study technological feasibility to cover rural populaFon

India

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Cluster 2016 2017 2018 2019 2020

Domes8c market

Expanding globally


Contact IB

Collect offers 1

Collect offers 2

NegoFaFons

Deal


Analyze markets

Extend South Africa

Enter Namibia

Enter Kenya

Enter Tanzania




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P Expand globally



Mahindra Finance

•  Provide loans to finance Mahindra equipment & houses

Mahindra Equipment

•  Agricultural equipment vehicles & tractors

•  Access to African market

Rural Customer

•  Need of tractors •  Need of financial

support to afford tractors

•  Your happy

customer

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P Expand globally



•  Concentrate and expand operaFons on South Africa

•  Set up new offices in Rural areas

•  Study the market and adapt to provide new soluFon

•  Work with M&M group

•  Provide agricultural equipment's and tractors

•  Develop new soluFons in loans and banking services

•  Expand by waterfall strategy

à Namibia à Kenya à Tanzania

Africa

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P Expand globally



•  Provide loans for vehicle, home and supporFng SME’s

•  Customized loans with less tenure

•  OpFons for monthly and quarterly payment

•  Provide 80-‐20 soluFons for home loans

•  Rural customer to pay 20 % upfront and 80 % through loans

•  Set up system to recover loan (Warning systems)

•  FaciliFes for early payments

•  Use referral systems to retain customers.

Loans

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Cluster 2016 2017 2018 2019 2020

Domes8c market

Expanding globally


Contact IB

Collect offers 1

Collect offers 2

NegoFaFons

Deal


Analyze markets

Extend South Africa

Enter Namibia

Enter Kenya

Enter Tanzania




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P Finance & restructuring



•  Customers are not willing to purchase health insurance

•  No proper health checks performed.

•  Sell Mahindra Insurance Broking Ltd

•  Contact IB and collect offers

•  Consider Leap frog , Singaporean company for selling insurance unit

•  Company has 15 % stake and wants to expand

Mahindra Insurance Broking Ltd

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P Implementa;on summary



Cluster Main Challenge Solu8on

Domes8c market

•  Slowing down economy in India

•  Low loan growth •  Missing access to 400,000 in

India

•  Stabilize exisFng posiFon in rural market

•  Look out for future trends •  AnFcipate governmental

regulaFons

Expanding globally

•  Low presence in global markets •  Missing governmental

approvals

•  UFlize exisFng experFse & knowledge in rural markets

•  Expand in African markets by waterfall strategy

Financing & restructuring

•  High risk health insurance business

•  No health checks

•  Reducing risk in financial background

•  Increase financial power for global expansion plans

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P Financials



•  Expanding to Africa: •  Opening of offices: INR 980 million •  HR expenses: INR 210 million •  Approvals: INR 340 million •  AdverFsement: INR 200 million

•  Selling Mahindra Insurance Broking Ltd.: •  Revenues: INR 1.26 billion •  Selling 85% stake à INR 1.607 billion (mulFple 1.5)

Investment overview

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P Revenue development



60.6 67.8 76.7

88.2 107.6

125.2

60.6

63.2 67.6 74.4

86.7

98.9

0

20

40

60

80

100

120

140

2015 2016 2017 2018 2019 2020

INR billion +106 %

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P Financial Projec;ons



2015 2016 2017 2018 2019 2020 Revenues from OperaFons 60,211 67,467 76,075 87,367 106,662 124,021

Other Income 398 405 620 833 945 1,244

Total Revenue 60,609 67,872 76,695 88,200 107,604 125,265

Employee Expenses 5,671 5,959 6,724 7,732 9,433 12,263

Finance Costs 26,430 29,940 34,550 38,540 38,210 39,050

Dep. And AmorFzaFon 455 523 591 679 829 1,620

Provisions and Write Offs 8,491 9,09 10,270 11,092 11,979 14,938

Others 5,563 6,230 6,978 7,815 8,753 10,803

Total Expenses 46,610 45,922 59,113 65,858 69,204 66,534

Profits Before Taxes 13,999 21,950 17,582 22,342 38,400 46,591

Tax Expenses 4,750 7,463 5,977 7,596 13,056 15,841

Profits ANer Taxes 9,249 14,487 11,602 14,746 25,344 30,750

Minority Interest 120 200 220 240 250 270

Net Profit 9,129 21,4287 11,385 14,506 25,094 30,480

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P Risk & con;ngencies



II I III

Probability

Impact Non-‐acceptable area ALARP area Acceptable area

I.  Low acceptance rate within African market II.  Emerging Indian urban market III.  Failure of 80-‐20 loan model

Risks

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P Risk & con;ngencies



II I III

Probability

Impact Non-‐acceptable area ALARP area Acceptable area

I.  Low acceptance rate within African market II.  Emerging Indian urban market III.  Failure of 80-‐20 loan model

Risks

I.  Market research & projecFons II.  Develop technological soluFons with Mahindra

Tech to reach the urban market III.  Provide insurance soluFons in Africa

Con8ngencies

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Co M n us lt ni G g* L P Giving&Mahindra&Finance&a&new ... · strategy&2020...

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