Specialized NBFCs
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1 L&T Infra Infra Project Finance Financial Advisory Services Structured Products Specialized NBFCs Suneet Maheshwari, Chief Executive L&T Infrastructure Finance Company Ltd. September 4, 2010
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Specialized NBFCs. Suneet Maheshwari, Chief Executive L&T Infrastructure Finance Company Ltd. September 4 , 2010. Agenda. Specialized NBFCs Types of NBFCs Valuations – Specialized NBFCs do better at the market USP: Build Niche in Domain Business Areas Focus is the Mantra - PowerPoint PPT Presentation
Transcript of Specialized NBFCs
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L&T Infra
Infra Project Finance Financial Advisory ServicesStructured Products
Specialized NBFCs
Suneet Maheshwari, Chief ExecutiveL&T Infrastructure Finance Company Ltd.
September 4, 2010
Infra Project Finance Financial Advisory ServicesStructured Products
L&T Infra
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Agenda
Specialized NBFCs
Types of NBFCs
Valuations – Specialized NBFCs do better at the
market
USP: Build Niche in Domain Business Areas
Focus is the Mantra
Opportunities in Niche markets
Regulation – level playing field benefits IFCs
Leaner Operating Cost structure
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Specialized NBFC
Specialized NBFCs can be broadly classified into three
Groups
Infrastructure Finance Companies (IFCs)
Focused on Infrastructure financing
Asset Finance Companies (AMCs):
Commercial vehicle financing
Tractor financing
Asset Financing
Microfinance companies with focus on:
Rural Low income household financing
Cottage enterprise financing
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Specialized NBFC - Types
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Specialized NBFC do better at the Market
Particulars P/B P/EMarket Cap
(Rs mln)Share Price (Rs/Share)
Specialized NBFCs IDFC 3.3 21.9 262,399 180 PFC 3.0 16.7 396,037 345 REC 2.9 12.1 322,850 327 Shriram Transport Finance 4.3 17.9 165,891 736 Mahindra Finance 3.3 16.1 57,845 597 SKS Microfinance 8.7 39.1 92,812 1,290 General NBFCs Sundaram Finance 1.9 10.3 28,368 511 Shriram City Union 2.8 13.9 28,290 574 Bajaj Finserv 2.9 13.6 75,178 520 Indiabulls 1.0 14.4 44,537 144 Banks ICICI 2.2 23.9 1,148,337 1,001 PNB 2.0 9.5 378,616 1,201 SBI 2.1 15.0 1,761,104 2,773 IDBI 0.9 9.1 93,190 129 AXIS 3.5 21.3 563,539 1,380
Focused/Specialized NBFCs command better valuations
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USP: Build Niche in Domain Business Areas
Strong domain knowledge and business understanding
L&T Infra: Strong knowledge support from parent company, L&T
STFC: More than 3 decades of expertise in loan generation, CV
valuation and collection
PFC and REC: Nodal agencies for UMPPs and RGGVY
Strong expertise housed in respective NBFCs through
presence of experienced personnel
Years of experience and skill sets in the business areas
Better understanding of the needs of clients
A bouquet of supplementary products and services
One stop solutions provider
Niche Expertise in Specialized NBFCs > Diversified interests of Banks
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Focus is the Mantra
Strong focus in the areas of operation unlike Banks
Banks have a wider area of interests and hence not focused
Strong grip of the respective market
Strong relationships with Clients: Based on faith and
confidence
Quick response and freedom from red-tape
Greater emphasis on team building and appropriate resource
planning
Ability to retain and attract experienced talent
Better asset quality Delinquencies in infrastructure financing by L&T Infra/IDFC are
considerably low STFC and MMFS have gradually developed sound methods of
evaluating loan proposals and assets
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Opportunities in Niche markets
Huge Infrastructure investments planned to benefit
NBFCs/IFCs focused on infrastructure lending
5-Yr Plan-11 & 12 infra spend is targeted at US$514bn & US$1trn
Banks have internal exposure limits for infrastructure lending
Average maturity of banks’ liabilities is less than two years which
restricts substantial exposure to longer term infrastructure
assets
Higher GDP, better rural economy benefits CV & tractor
financing NBFCs
GDP to drive freight capacity
Better monsoons & higher rural disposable income
Micro finance companies
Financial inclusion - Rural areas yet to get covered
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Regulation – level playing field benefits IFCs
IFC status to L&T Infra, IDFC, PFC, PTC Fin
Increase in Single & Group exposure limits
Access to longer tenor finance in a cost effective manner (Infra Bond)
Easier access to ECBs under automatic route (upto 50% of Networth)
Lower risk weights for IFC’s funding
Higher exposure limits for bank borrowings
Absence of SLR/CRR requirements for ND-NBFCs
No regulatory requirement to keep 31% of funds (CRR + SLR) in
low/no-return generating assets
Keep funding costs competitive despite higher cost liabilities
Regulatory benefits give them a level playing field
vis-à-vis banks on liability side
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Leaner cost structure
Lower Operating costs as compared to Banks
Cost to income for IDFC is ~25% as compared to 40-45% for
Banks
Absence of Liability franchises
Presence of concentrated lenders
Smaller employee base
STFC and MMFS, have operating costs of 23% and 30%
respectively
Large scale operations create economies of scale
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THANK YOU
Suneet Maheshwari, Chief Executive
L&T Infrastructure Finance Co. Ltd.
3-B, Laxmi Towers, 2nd Floor
Bandra Kurla Complex, Bandra (E),
Mumbai – 400 051, India
Tel: +91-22- 4060 5301
Fax: +91-22-4060 5353
[email protected] www.ltinfra.com
