corporate presentation fy 2019-20 - fullerton india

Corporate Presentation FY 2019-20

Company Background

Key Differentiators

Business resilience under Lockdown

Fullerton India Standalone Financials

Management Team

CSR and Accolades

Housing Finance Standalone Financials

Consolidated Financials

Contents

Company Background

DUBAI, UAE 6 outlets 34k Cust

INDIA 648 Branches 3,200k Cust

Central CHINA 4 Provinces, 41 Outlets 100k Cust

CHINA 127 Community Banks 2400k Customers

MYANMAR 51 Branches 223k Cust

CAMBODIA POST BANK 103 Branches 129k Cust

MALAYSIA 82 Branches 957 k Cust

Fullerton Financial Holdings (FFH) has 8 operating financial services entities located across 6 countries.

4

INDIA Digital MSME 55K Cust

FFH operates financial institutions in emerging markets Focused on SME and mass market customer segments

*FFH is a wholly owned subsidiary of Temasek ^Fullerton Home Finance is a wholly owned subsidiary of Fullerton India

Fullerton Home Finance^

Early construction

Mid stage

Growth stage

FFH, parent entity of FICCL is incorporated as a wholly-

owned subsidiary of Temasek Holding (P) Ltd

2003

FICCL was acquired by FFH in December 2005

2005

Commercial Launch of NBFC operations.

Pan-India presence established.

2006-08

Commercial Vehicle business launched.

Network consolidated.

2010

Portfolio reshape and segmental shift to mass affluent.

LAP, SME business re-launched. Achieved operational breakeven

2011

Capital infused for growth Rural network expanded.

Funding diversified.

2012-13

Accelerated secured business, Rural network

Operations process revamp

2014

Capital Infused for growth. Home Fin business launched.

Rural franchise expanded. .

2015-17

RoE of 17%+ delivered. INDAS implemented. Fullerton Direct

launched. Branches exceeded 640, AUM crossed INR 220bn.

2018-20

5

Fullerton India Credit Company Corporate Evolution

Branches

6

Fullerton India Credit Company Ltd Quick statistics FY20

Reach Scale Momentum

648

Towns 600

Thousand villages covered

58

46

207

14

INR bn

Average Monthly business writing

14

INR bn

Asset Under Management

248

mn

Customers 3.2

Thousand average accounts opened every month

INR bn Net worth

Thousand employees

Key Differentiators

Fullerton India has created significant competitive advantage

8

1 Deep inter-linkages, strategic and operational

oversight Strong Parentage and Governance

2 Granular Pan India portfolio, addressing the

under-banked segment with limited access to

formal channels

Unique Business Model in Retail

Finance

3 Prudent ALM practices, resilient credit and

operational risk mitigation

Conservative Liquidity and Risk

management

4 End to end process digitization

Best in class technology ,data infrastructure and

strong analytics

Future ready through Investment in

Digitization, Technology and Analytics


9





formal channels


Finance




management



strong analytics



Board deeply involved in the strategy development, financial planning and oversees business execution

Joint agreement on business strategy and annual targets including investment slates and compensation

ALCO is represented by two FFH executives who provide regular inputs, similarly for Finance and Risk

Strong oversight and Risk Governance by Board & Independent Directors

10

Close and Continuous Engagement with Parent Strategic and operational guidance, in addition to oversight

Risk Oversight Committee

Audit Committee Nomination & Remuneration

Committee CSR Committee

IT Strategy Committee

Oversees credit, market and operational risk Reviews risk appetite and credit policies Monitors portfolio performance and approves mitigation actions

Reviews the financial statements and financial reporting process Reviews scope, findings, reports, etc. of Internal and external audit Oversees Internal controls framework

Oversees overall Human Capital mission and strategy. Oversees key appointments and compensation matters Reviews structure and composition of the Board and recommends for changes

Recommends CSR policy, budgets, projects, etc. Monitors implementation of the CSR activities

Oversees IT governance, strategies, policies, spends, etc. Reviewing cyber security matters


11





formal channels


Finance




management



strong analytics



12 UT-refers to union territory

Strong Pan-India distribution network 648 branches cover 25 states/UT in the Country

*As per Census 2011 Centre Definition- Metropolitan: population >10 lakh; Urban: >1 lakh and <10 lakh; Semi-Urban: >10,000 and <1 lakh; Rural: <10,000

Branch Coverage*

12

5%

53%

42%

Metro Urban Centre Semi Urban & RuralCentre

21%

34%

32%

13%

North

South

West

East

40

3

648

Geographically diversified

Customer Segment Annual Household Income No. of Households Serviced By

Strugglers < INR 150K

82 mio ( 31%) MFI Lenders Microfinance

Affluent > INR 1,100K

17 mio (7%) Foreign &

Private Banks

Servicing the segment below the Foreign and

Private banks

Addressable market of 140 mio households by

2025 – 50% is underserved

Next Billion INR 150K –500K

Aspirers INR 500K – 1,100K

121 mio (45%)

40 mio (16%) FICC

Positioning

Source : Euro Monitor and BCG

13

Focused on a bankable, underserved segment Serving customers with limited access to formal banking channels

FICC targets underserved segment not covered by large banks and MFIs 3.2 mio live customers provide a large cross sell and upsell opportunity

14

A Well-diversified asset portfolio Multiple product, customer and geographic segments create durability

Geographically diversified (AUM)..

..across multiple asset classes

Loans against Property, 32%

Personal Loans - Business, 14%Personal Loans

- Salaried, 19%

Commercial Vehicle, 6%

Digital , 6%

Rural Loans, 15%

Rural Business Loans, 7%

Others, 1%

Providing customized, large suite of financial solutions

in affluent markets

Catering to consumer, retail businesses and MSME/SME across customer value chain

Direct to customer, faster and convenient

Tapping diversified segment of customer directly or

through Fintech partnership led model

Urban Fullerton Point

Neighborhood financer generating employment &

income and partnering growth

Serving the underserved largely in under penetrated geographies

Rural Gramshakti

15

Lines of business Addressing a wide spectrum of customers, across needs and Affluence

Digital Fullerton Direct

Wide spread network

236 branches across 25 states and UT’s ;

leveraging existing cross business infrastructure

Broad customer segment

Serving wide variety of customers across

consumer,retail business and SME/MSMEs for all kinds of personal and

business end use

Digital focus

Digitizing each step of customer loan life cycle to

process efficiencies

Retail focus largely present in tier 2

downwards, focus on low ticket, high yield business

and ability to upsell/ cross-sell

Product suite

Customized offering across value chain with clearly defined product

strategies and geographical presence inclusive of insurance

Distribution channels

Tapping all customer touch points – direct,

channel based, lead based channels and alternate

channels

16

Urban Business Wide network, resilient business model addressing Individuals and Small business

Personal Loans -

Salaried, 32%

Personal Loans -

Business, 25%

Loans against Property, 31%

Commercial Vehicle, 11%

Others, 1%

Portfolio Distribution

Comprehensive product suite with insurance throughout the life cycle of customers

Life & Health Insurance

Livelihood Micro Enterprise Aspirations

• Sell & collect

• Offered to

Women’s

Livelihood group

• Business Loans

• Two Wheeler Loans

• Loan against Property

‘Fullerton Gramshakti’ Registered Brand Name of Fullerton India’s Rural Business

Woman’s Hand mnemonic Symbolizing elements of rural business operations Empowering women small scale entrepreneurs Close proximity & deep understanding of the customers Last mile door step service Widely spread network with 412 branches in 15 states

• Offered to Small enterprises or rural self employed

• Available in different ticket sizes

• Diverse end use ranging from capital expenses, local transportation or working capital needs

• High ticket size

loans

• Offered to small

and medium scale

enterprise

• End use may vary

from Capital

expenses to

working capital

needs

• Rural Loans

• Merchandise Loans

17

Rural Business Multiproduct proposition across customer lifecycle

Digital Business Fullerton Direct - Strategy

18

Direct to customer

• Online acquisition (PL & MSME) • Direct tie-ups with OEM (Go-To-

Market) • Leveraging customer franchise

through X-sell

• Branchless & centralized processing • Lean team structure • Investments in Digital as a separable

single thread yielding results • Seamless “Do it yourself” journeys built

in-house for greater customer experience

E-aggregators Partnerships

• Online aggregators as a distribution arm

• Competing with other banks and NBFCs

• Qualified, warmed leads pushed to FICC for underwriting & disbursal

• Plug and Play model • Pseudo “Business rule engines” • Saathi App: Faster onboarding, Instant

payouts for lead generators • Forged partnerships with 20+ top e-

aggregators

• Collaborating with Fin-techs for: • Consumer Segment • MSME Segment

• Live 20+ Partnerships

• Customer acquisition engine • Plug and Play model • FLDG & risk sharing arrangement • Testing contemporary products for Next-

gen • Develop insights into use of alternate

data/ transaction data

Model

Core Competency


19





formal channels


Finance




management



strong analytics



Three pillars of conservative liquidity risk management

Diversification (across instruments, lender category)

Matching asset-liability tenor

Contingency funding via adequate liquidity buffer

Basel III oriented, Board approved policies guide liability management

Bank style Treasury management with Rigorous monitoring via monthly ALCO

Compliance oversight by independent verticals

20

AAA AAA AAA

“Diversified Lender Base”

“Comfortable liquidity cushion”

“Low reliance on short term funding”

“Well managed ALM”

Strong external endorsement

Conservative approach to Liability management Deep focus on raising renewable and durable resources

21

Well diversified funding book Maintaining headroom in each source

Diversification across instruments …

Funding mix (%)

… and Investors

Sourcing mix (%)

Assignment 5%

CP 9%

Overseas 13%

Sub Debt 4%

Bonds 38%

Term Loan 31%

FII 1%

Corporates 2%

DFIs 8%

Overseas 11%

Insurance & Pension

13% Mutual

Fund 13%

Bank Instrument

17%

Bank Loan 35%

22

Well Managed ALM Yearly Cumulative Mismatch of +66%

Structural liability remains positively biased Liabilities maturity aligned with asset profile

-78 -60 -68-27

-59

130

5524 32

52

66%

34%

1% 3% 0%

Upto 1Y 1-2Y 2-3Y 3-5Y Over 5Y

Liabilities Assets Cumulative mismatch (RHS)

30 29 3032 33

39 38 38 3942

Mar 19 Jun 19 Sep 19 Dec 19 Mar 20

Borrowings Assets

Operational and Business Units

1st line of defense

Independent Review by Internal Audit , Co-Sourcing by EY

3rd line of defense

ORMC

ROC/ Board Oversight External Auditors

Regulators

Operational Risk, Fraud Risk, InfoSec and Compliance

2nd line of defense

OR framework components Implementation/ execution

Risk Governance framework

• Regular Operational Risk Management Committee (ORMC) meetings to review OR issues • Quarterly Risk Oversight Committee meetings to assess OR profile

Policy/ Procedures • Robust Operational Risk policies and standards • Internal Financial Controls (IFC) standards as mandated by Companies Act

Risk Identification • Comprehensive Risk library • Regular process walkthroughs and reviews

Risk Assessment & Measurement

• Periodic Risk Assessments • Loss Data management

Control & Mitigation • Periodic control assessment • Timely corrective actions

Monitoring & Reporting • Key Risk Indicators monitoring • Regular reporting to ORMC and ROC 23

Enterprise level Risk Framework Agile framework, multilayer controls

Underwriting Risk Policy

Risk Analytics Collections

• On-ground approach for controlled risk

• Partial centralization for efficiencies • Automated decision support

• Digitization tools such as perfios etc.

Risk oversight committee of the Board

Op

erat

ion

al R

isk

fram

ewo

rk

Fraud

Co

ntro

l sup

po

rt

1 2

3 4

• Well defined product boundaries • Usage of 10 years customer data

leanings for evolution of scorecards and EWS models

• Portfolio management

• Clear structure of collections, legal and recoveries

• In-house & agency led models • Propensity models for recovery • Early warning decision trees

• Over 20 scorecards and propensity models across customer loan life cycle

• Business rules engines for automation of scorecards

• Managing portfolio volatility through RLM

24

Credit Risk Framework First line of defense, robust and tested


25





formal channels


Finance �




management



strong analytics


Digitization, Technology and

Analytics

Customer App & Portal

API based Sourcing

Multi Bureau Integration

Robust Verification Platform

eConsent

API Based eNach

Collection Tie-ups

Customer Payment Options Multi-lingual Customer App & Portal

Chatbot, IVR

ON BOARDING UNDERWRITING DOCUMENTATION COLLECTION SERVICING

26

CREDIT BUREAU

INCOME DOMAIN

EMPLOYMENT

ANTI FRAUD FIELD

DIGITAL FIRST | MULTI CHANNEL | PRODUCT AGNOSTIC | CUSTOMER CENTRIC

Digitizing customer lifecycle

In-house Sales Apps & Portals Collection App & E-receipts Robust Rule Engine Digital Repositories Customer 360 View

27

Business resilience under Lockdown

Full-fledged wellness program called FullerLife, supporting employees with Health Care issues

including Covid-19

We provide “Doctor On Call”, “Counselor On Call”, “Home Isolation Care” Training, Wellness Portal

Employee Safety

Entire loans portfolio assessed for industry / sector impact due to COVID. Bureau trends being watched and recalibration of application and behavioral score cards underway

Focus on up-sell and cross-sell across the spectrum of over 3.0 million active customers

Leverage and focus on MSME segments backed by Govt. of India initiatives (Guarantee backed)

Strong focus on portfolio and

business resumption

Capital Infusion of INR 7.5bn in May ; CAR at ~23% as of June 2020

Maintained over INR 40bn liquidity consistently since March

Borrowed in every month through lockdown across various instrument

Holding a robust pipeline across domestic and overseas sources

Capital & Liquidity Buffers

Business Continuity Action Plan

WFH has been enabled for all employees and required IT infrastructure support is being provided

All offices / branches were opened in phase manner. Attendance roster is being maintained

Employee training, Induction and on-boarding are being done virtually

98% of our branches are operational in June 2020

Fullerton India Standalone Financials

* Equity Infusion of INR 3bn in FY 20

FY 20 Performance Headlines

INR 11 bn

Profit before tax

-6% -1.0%

3.2%

ROA (post tax)

17.6%

Return on Equity*

-7.2%

INR 248 bn AUM

15% 1.4%

Cost to Income

INR 166 bn Disbursal

9%

35.4%

29

FY18E Highlights - YoY

INR mn FY 19 FY 20 YoY YoY%

Net Revenue 26,972 33,858 6,887 25.5%

Expenses 9,924 11,994 2,070 20.9%

Working Profit 17,048 21,864 4,817 28.3%

Cost of Credit* 5,105 10,614 5,509 >100%

Profit Before Tax 11,943 11,250 -693 -5.8%

Profit After Tax 7,752 7,473 -279 -3.6%

Customer AUM (INR bn) 215 248 33 15.1%

Shareholders' Funds 36,519 46,476 9,957 27.2%

RoA (Post Tax) (%) 4.2% 3.2% - -1.0%

RoE (Post Tax) (%) 24.8% 17.6% - -7.2%

Branches (#) 626 648 - 22

Financial Results

30 * FY20 includes ECL overlay of INR 1.7 bn

Assets Under Management (INR mn) Net NPA (%)

Stable Credit Quality

31

215,419 229,812

240,679 248,047

Mar 19 Jun 19 Sept 19 Mar 20

1.0% 1.0% 1.1% 1.0%

Mar 19 Jun 19 Sep 19 Mar 20

36,519

38,665

43,879

46,476


Capital Infusion

3,000

14.2% 14.5%15.3% 15.4%

19.6% 19.7% 20.2% 19.8%


Regulatory Minimum for CAR (15%)

CAR %

Tier 1 %

Regulatory Minimum for Tier1 (10%)

Capital Adequacy (%) Shareholders’ funds (INR mn)

Capitalization

32 Capital Infusion of INR 7.5bn in May 20

Management Team

Business & Franchise Development

Integrated Risk Management

Capital and Finance Infrastructure

• Extensive local experience in Product development and Distribution in large branch networks in Rural & Urban India.

• Subject matter expertise in Retail Lending and Housing Finance

• MNC Banking and International Markets exposure

• In depth experience in Risk Management in Consumer businesses in MNC Banks and in large Indian NBFC including Housing Finance

• Specialised teams focused on Risk Policy, Underwriting, Operational Risk , Collections, and Legal management

• Strong experience in Global Markets in leading MNC Banks

• Rapidly growing relationships with large Indian & MNC Banks and FIs

• Strong Financial Control experience in MNCs

• Strong international experience HR management in large MNC retail Financial experience

• Strong Operations capability with six sigma Process Reengineering expertise

• Advanced technology deployment and change management skills

Combined senior team experience

200+ years

200+ years

100+ years

100+ years

Depth of management experience Bankers with deep domain experience and multinational orientation

34

Rajashree Nambiar CEO & Managing Director

Sanjeet Dawar Head – Urban Business

Vishal Wadhwa Head – Rural Business

Rakesh Makkar CEO - FIHFC

Nishant Jasapara Head – Digital Business

Pavan Kaushal Chief Risk Officer

Anil Noronha Head – Human Resources

Pankaj Malik CFO & Chief Compliance

Officer

Ekhlaque Bari Chief Technology Officer

Arvind Sampath Head – Treasury

Sanjiv Gyani Head – Operations

35

Management Team Industry stalwarts with combined experience of over 200 years

Shirish Apte Chairman, Independent Director

Hong Ping Yeo Deputy Chairman, Non - Executive Director

Rajashree Nambiar Chief Executive Officer & Managing Director

Anindo Mukherjee Non - Executive Director

Premod P Thomas Independent Director

Milan Shuster Independent Director

Sudha Pillai Independent Director

Radhakrishnan B. Menon Independent Director

Board of Directors

Promeet Ghosh Non - Executive Director

36

CSR and Accolades

38

Fullerton India Credit Company Corporate Social Responsibility

2. Health • Jyoti - Save The Eye : Vision care centers and

outreach camps • Niramaya - Healthcare for women & children

• Mobile heath care vans, focussed on malnutrition & TB

• Disaster relief

4. Environment Krishi Mitra

Organic Farming Maintaining Ecological Balance

Focus sectors &

Key Initiatives

3. Education

Sakhi: Digital Financial Literacy for Women

Akshar : Digital Education, Scholarships &

Science Centres.

1. Livelihood

• Jeevika: Vocational training program for women

• Yuva Kaushal: Skill development for Youth

• Pashu Vikas

• Cattle care camps & • Integrated Livestock Development

39

Fullerton India Credit Company COVID -19 Response

• Over 1lakh kits distributed across 250+ Gramshakti Branch catchment area, covering more than 1600 villages across 12 states.

• 9 NGOs and local Gramshakti teams were part of the 45 day long activity.

Hygiene kits distribution

• Over 675 health camps aimed at creating COVID-19 awareness & providing basic health care were organized

• More than 47,000 people across 7 states were benefitted by the initiative

Health & Awareness camps

• Personal protective kits (PPE Kits, Sanitizers & N-95 masks) were distributed across 20 Gramshakti branch locations covering 20 hospitals & COVID centers.

• 50 personal protective kits were distributed to Police personnel & Local administration officials.

Personal Protection kits distribution

CSR budget allocated for COVID-19 relief – INR 20 mio

40

Fullerton India Credit Company Awards Winning Brand

ISO 27001 Certification March 2020

The Golden Peacock Innovative Product & Service Awards

March 2019

Finnoviti Awards January 2019

Best of India Records (CSR) January 2019

World Book of Records (CSR)December 2019

Companies with Great Managers

November 2019

Great Place to Work Certified Aug 2019 – Jul 2020

41

Fullerton India Credit Company Awards Winning Brand

Future of Marketing Summit & Awards –

October 2018

“Digital Marketing” Ad Tech India”Awards

March 2018

Retail NBFC of the Year Outlook Money Magazine

March 2018

Mumbai’s Hot 50 Brands Mumbai Brand Summit

March 2018

Best PR Campaign” ACEF Awards – October 2018

mCube Conference & Awards August 2018

Best Digital Campaign” Digital Industry Awards

October 2017

Housing Finance Standalone Financials



Net Revenue 1,459 2,369 910 62.4%

Expenses 995 1,305 310 31.2%

Cost of Credit 435 851 416 95.6%

Profit Before Tax 30 214 184 >100%

Profit After Tax 5 139 134 >100%

Customer AUM 31 43 12 40.4%

RoA (Post Tax) (%) 0.0% 0.4% - 0.4%

Leverage 5.5x 5.1x -0.4x

Branches (#) 82 78 -4

Housing : Non Housing mix 59% : 41% 58% : 42% -1% : +1%

HFC Financial Results


Consolidated Financials



Net Revenue 28,431 36,228 7,797 27.4%

Expenses 10,918 13,299 2,380 21.8%

Cost of Credit 5,540 11,465 5,925 >100.0%

Profit Before Tax 11,973 11,464 -508 -4.2%

Profit After Tax 7,743 7,604 -139 -1.8%

Customer AUM (INR bn) 246 291 45 18.3%

RoA (Post Tax) (%) 3.7% 2.8% - -0.9%

RoE (Post Tax) (%) 25.0% 18.0% - -7.0%

Branches (#) 649 674 - 25

Consolidated Financial Results


Contact: Fullerton India Credit Company Ltd. Floor 6, B Wing, Supreme Business Park Powai, Mumbai 400 076 INDIA Phone: +91 22 4224 1234

www.fullertonindia.com

http://www.fullertonindia.com/

mailto:[email protected]

THANK YOU

corporate presentation fy 2019-20 - fullerton india

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