M&M:$ Roadmap$to$2018 - mbacasecomp.com · gorural&s emiu rban$:opportunities$$ period’’...

M&M: Roadmap to 2018

JMSB Consulting Presented to Board Members of Mahindra

Samie L.S. Ly Nadim Shamseddine Catherine Sumague Rachel Abourbih

How can M & M Financial Services continue it’s growth in the Indian

market?

RECOMMENDATION ANALYSIS FINANCIALS ALTERNATIVES ACTION PLAN

STRATEGIC RECOMMENDATION

REMAIN THE LEADER IN THE RURAL AND SEMI-‐URBAN MARKETS

• Not saturated with market knowledge • Lack of compeEEon-‐Stay in India

Focus on Rural and Semi-‐Urban

• Payment Banks •  Infrastructure, home, crops, educaEon

M&M’s Products

• Mobility plaMorms (APP) • Online payment, Direct deposits Technology






M&M’s Products



Cost : 10 Billion Rs 46 Billion Rs by 2018

Profit Margin 23% 3Years

Analysis


GO RURAL & SEMI-‐URBAN : OPPORTUNITIES

URBAN IS HIGHLY COMPETITION WITH NO VALUE PROPOSITION: STAY RURAL & SEMI URBAN

0

200

400

600

800

1000

1200

1400

2001 2011

Rural Urban

PopulaEon Divide

Rural Urban

833 Million


GO RURAL & SEMI-‐URBAN :OPPORTUNITIES

PERIOD AGRI -‐ GDP (RS)

WORKERS EMPLOYED (MILLION)

SHARE OF AGRICULTURE GDP (%)

SHARE OF WORKERS

ENGAGED IN AGRI (%)

1952-‐53 162,112 97 56.5 69.8

1972-‐73 258,070 126 43.5 68.7

1992-‐93 406,404 185 29.3 64.8

2012-‐13 745,385 263 14.3 54.6

WORKERS EARN MORE , BUT OPPORTUNITIES ARE RISING


GO RURAL: OPPORTUNITIES

IT IS NOT TIME TO SPREAD YOURSELF, THERE IS STILL A LOT TO CAPTURE

250,000 villages are sEll available (50% of the market)

Low compeEEon

Good Understanding of the Market

Growing Middle Class in Rural India

High Debt Countries (GDP) South Korea, China, South Africa

Highly leverage , strong compeEEon

Lack of Understanding of the market

Plan for long term , not now

STAY IN INDIA INTERNATIONAL – NOT NOW


THE CUSTOMER PROFILE

BUSINESS PRODUCTS TOWARD SEGMENT

Live in widely scaFered villages

Seasonal Income

Cash-‐Based Economy

Under 30 Years Old EducaPon

Payment Bank

No Future Investment Plan

Technology Oriented

Working Class

Family Businesses – Farming crops


PAYMENT BANK IS IS THE FUTURE

PRODUCTS CAN USE PAYMENT BANKING

Vehicle Financing

SME Financing

Pre-‐Owned Vehicles

Rural Personal Loans –

EducaPon

Technology Focused

Housing Finance

Mobile Money

10 potenPal compePtors received Licenses

FIRST MOVER ADVANTAGE


STRATEGIC OVERVIEW

THESE ARE ELEMENTS THAT WILL ENSURE YOUR SUCCESS

Focus on Rural and Semi-‐

Urban M&M Products Technology

Unsaturated Market that you understand

EducaEon, Home, Crops Payment Banks

Mobility Work Force

Financial Analysis


FINANCIAL OVERVIEW

Current Market SaturaEon

Increasing cost

Declining Profit margins

Profit has been steadily declining

Profit margin has decreased to 15% in 2015

Employee expense and finance cost has outpaced revenue growth


29% CAGR REVENUE GROWTH OVER LAST 10 YEARS

41 46

13 14

28

42 41

29

14

0

5

10

15

20

25

30

35

40

45

50

2008 2009 2010 2011 2012 2012 2013 2014 2015

Annual Revenue Growth

REVENUE GROWTH HAS DECLINED STEADLIY OVER LAST COUPLE OF YEARS


PROFIT MARGINS HAVE BEEN DECLINING

YOU NEED TO REINVENT YOURSELF WITH A NEW STRATEGY

18 16 15 15.6

22 24

22 22

18 15

0

5

10

15

20

25

30

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Net Profit Margins


EMPLOYEE EXPENSES & FINANCE COST HAVE OUTPACED REVENUE GROWTH

YOUR MARGINS ARE BEING SQUEEZED, TIME TO RETHINK YOUR STRATEGY

29

33

31

27

28

29

30

31

32

33

34

CAGR over last 10 years

RENEVUE EMPLOYEE EXPENSES FINANCE COSTS


CURRENT RATIO HAS BECOME CRITICALLY LOW

NEED TO MOVE BEYOND CURRENT MARKET TO LOOK FOR GOOD LOAN OPPORTUNITIES

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

2011 2012 2013 2014 2015

CURRENT RATIO


HIGH NUMBER OF EMPLOYEES COMPARED TO COMPETITORS

YOU HAVE AN OPPORTUNITY TO IMPROVE THROUGH THE USE OF TECHNOLOGY

0

2

4

6

8

10

12

BAJAJ FINANCE SUNDARAM FINANCE SHRIRAM TRANS. RELIANCE CAPITAL MAHINDRA FINANCE

REVENUE PER EMPLOYEE -‐ M Rs -‐ 2015

BAJAJ FINANCE SUNDARAM FINANCE SHRIRAM TRANS. RELIANCE CAPITAL MAHINDRA FINANCE

Alternatives


STRATEGIC POSITIONING ASSESSMENT

RURAL & SEMI-‐URBAN MARKETS

Not saturated Market knowledge Under 30

CONTINUE TO GROW!

Explosion of digital technology Payment bank iniEaEve Rural & semi-‐urban areas

COMPETITIVE ADVANTAGES

Geographic penetraPon Pioneer & leader Trusted brand Current customer

profile saturated





CONTINUE TO GROW!

Explosion of digital technology Payment bank iniPaPve Rural & semi-‐urban areas



profile saturated



ROOM TO GROW!



CONTINUE TO GROW!

Explosion of digital technology Payment bank iniPaPve Rural & semi-‐urban areas



profile saturated


OPTIONS OpEon 1:

Leverage technology, push payment bank & penetrate urban areas

Med

Med

High

Difficult

OpEon 2:

Leverage technology, push payment bank & penetrate internaEonal

markets

High

Low

High

Difficult

OpEon 3:

Leverage technology, push payment bank & conEnue focus in rural & semi-‐urban areas

Low

High

Low

Accessible

Capital Expenditure

Market Knowledge

CompeEEon

Market PenetraEon


OPTIONS OpEon 1:

Leverage technology, push payment bank & penetrate urban areas

Med

Med

High

Difficult

OpEon 2:

Leverage technology, push payment bank & penetrate internaEonal

markets

High

Low

High

Difficult

OpEon 3:

Leverage technology, push payment bank & conEnue focus in rural & semi-‐urban areas

Low

High

Low

Accessible

THE RIGHT FOCUS & LEVERAGING TECHNOLOGY IS KEY

Capital Expenditure

Market Knowledge

CompeEEon

Market PenetraEon


RISK & MITIGATION STRATEGIES

CompeEEon moves in

Protect market by conEnuing to

customize products

Strong markeEng push

Seasonality (ex. dry season)

Seasonal contracts for employees

Employee Eme-‐share

Revenue growth misses projecEon

Lower loan rates

Look for internaEonal opportuniEes

RISKS MITIGATION CONTINGENCY






M&M’s Products



Action Plan


TIMELINE AT A GLANCE SHORT TERM (1 YEAR)

MEDIUM TERM (2 YEAR)

LONG TERM (3 YEAR)

MAHINDRA’S PATH TO CONTINUED GROWTH

Mahindra Payment

Mobile Technology

MarkeEng Campaign

Rural Market PenetraEon


M&M ORGANIZATIONAL STRUCTURE

M&M Mahindra Finance Mahindra IT

Mahindra Automobile

Mahindra Aerospace

CAPITALIZE ON NEW OPPORTUNITIES IN PAYMENT BANK MARKET

Mahindra Payment


NEW MARKETS THROUGH TECHNOLOGY

Mahindra Payment

Mobile App

MoboMoney

Tap N Pay

Direct Deposit

LEVERAGE M&M GROUP SYNERGIES AND LEAD THE CHARGE OF DIGITAL INDIA


MAHINDRA PAYMENT TARGET CUSTOMER Average age under 30

Access to communicaEons technology

No access to financial products

Present on social media

Rural or semi-‐urban dweller

UNDERSTAND YOUR CUSTOMER TO ANTICIPATE THEIR DEMANDS


REACHING YOUR TARGET CUSTOMER

•  Celebrity influencers (eg. Star cricket player) •  Sponsor sports teams •  Instagram, Twioer, Facebook

Social Media

•  Sports and news apps •  Gaming devices

Web Ads

•  University events •  Favorable rates for educaEon loans

EducaEonal InsEtuEons

WORD OF MOUTH IS KEY TO REACHING TARGET CUSTOMER


MAHINDRA PAYMENT FINANCIAL SERVICES

SATISFY THE NEEDS OF YOUR RURAL CUSTOMERS

Direct Deposit

Agricultural loans & subsidies

EducaEon loans

Bill Payment

TuiEon Fees

Mobile Fees

Mahindra Loan

Repayments


CHANGES TO ENABLE MAHINDRA’S DIGITAL INDIA

• CreaEon, development and maintenance •  Training • Cultural changes

InformaEon Technology

• ReducEon in manpower •  Part-‐Eme employee for seasonality

Human Capital

• Uniform technology plaMorm •  Knowledge sharing •  Technology Taskforce integraEng Mahindra Finance & Mahindra Payment

Corporate Governance


RURAL VILLAGE PENETRATION

PENETRATE THE RURAL MARKET THROUGH TECHNOLOGY

250,000 Villages

Current Year 1:

40,000 villages

Year 2: 65,000 villages

Year 3: 105,000 villages

Goal


MAHINDRA FINANCE FUTURE OPPORTUNITIES

Infrastructure Loans

Home Loans

Crop Insurance

EducaEon Loans

GOVERNMENT INVESTMENT PRESENTS SIGNIFICANT MARKET OPPERTUNITIES

Financial Projections


FINANCIAL OVERVIEW

Market PenetraEon

Cost Improvement

Profit OpEmizaEon

210,000 villages in 3 years

Profit to reach Rs. 46B in 2018 Profit Margin has been improved

to 23%

Revenue growth to outpace employee expenses and finance

costs


COST ANALYSIS Cost Item

Year 1: CreaEon of Mahindra Payment Mobile App MarkeEng Training

1.5B 1.5B 0.5B 0.5B

Year 2: Mobile App New Markets MarkeEng

1B 2B 0.5B

Year 3: Technology New markets MarkeEng

1B 1B 0.5B

TOTAL COST 10 BILLION INVESTMENT OVER 3 YEARS


ADDITIONAL REVENUE SOURCES ADD TO TOP-‐LINE

SAVINGS IN EMPLOYEES AND FINANCIAL COSTS IMPROVE BOTTOM LINE

Year 2015 2016 2017 2018 Revenue From Current OperaEons 60211 66232 72855 80140

Revenue from new villages -‐ 166082 43575 87150

Revenue from new services -‐ 10000 15000 20000

Total Revenue 60211 92840 131430 187351

Employee Expenses 5671 7071 9000 11585

Finance Cost 26430 34359 45000 58066

All other cost 14509 18613 24260 31292

Total Expenses 46610 60043 78260 100943

Profit before tax 13999 32797 53170 86340

Tax 4750 10823 21170 40349

Profit 9129 21974 32000 46000


REVENUE GROWTH OUTPACE EXPENSES

POWERFUL OPPORTUNITY TO IMPROVE BOTTOM LINE

40

28 30

0

5

10

15

20

25

30

35

40

45

CAGR over next 3 years

RENEVUE EMPLOYEE EXPENSES FINANCE COSTS

Question & Answers Thank you!

M&M:$ Roadmap$to$2018 - mbacasecomp.com · gorural&s emiu rban$:opportunities$$ period’’...

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