pg 29. interview: mangu singh pg 32. interview: harsh

1ST - 3OTH June 2016 . Vol 3 Issue 5. For Private Circulation Only

pg 29. INTERVIEW: Mangu Singh

pg 32. INTERVIEW: Harsh Dhingra

pg 35. Indian Economy – Trend indicators

pg 37. PhillipCapital Coverage Universe – Valuation Summary

3GROUND VIEW GROUND VIEW 1 - 30 JUNE 2016 1 - 30 JUNE 2016 2

1st May 2016 Issue 4 1st Apr 2016 Issue 3

1st Mar 2016 Issue 2 1st Jan 2016 Issue 1

1st Dec 2015 Issue 9 1st Dec 2015 Issue 8

VOL 3 . ISSUE 5 . 1ST - 30TH JUNE 2016

Vineet Bhatnagar- Managing Director and CEO

EDITORIAL BOARDNaveen Kulkarni, Manish Agarwalla, Kinshuk Bharti Tiwari

COVER & MAGAZINE DESIGN Chaitanya Modak, www.inhousedesign.co.in

EDITORRoshan Sony

RESEARCHBanking, NBFCsManish Agarwalla | Pradeep Agrawal | Paresh JainConsumerNaveen Kulkarni | Jubil Jain | Priyam ToliaCementVaibhav AgarwalEconomics Anjali Verma Engineering, Capital Goods Jonas BhuttaInfrastructure & IT ServicesVibhor Singhal | Shyamal DhruveLogistics, Transportation & MidcapVikram SuryavanshiMidcap Amol RaoMedia Manoj Behera | Naveen KulkarniMetals & AutomobilesDhawal Doshi | Nitesh Sharma | Yash DoshiOil & Gas Sabri HazarikaPharmaceuticals Surya Patra | Mehul ShethTelecomNaveen Kulkarni | Manoj Behera

PORTFOLIO STRATEGYAnindya Bhowmik

TECHNICALSSubodh Gupta

PRODUCTION MANAGERGanesh Deorukhkar

MID-CAPS & DATABASE MANAGERDeepak Agrawal

SR. MANAGER - EQUITIES SUPPORTRosie Ferns

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SALES & DISTRIBUTION Ashvin Patil, Shubhangi Agrawal, Kishor Binwal, Bhavin Shah, Ashka Gulati, Archan Vyas

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[email protected]

Ground View - Previous Issues


4. COVER STORY: Digitisation in banks – Collaboration, not competition

Most banks in India believe that tie ups or collabo-ration with fin-tech firms would be an appropriate strategy to embrace digitisation

29. INTERVIEW: Mangu Singh

Managing Director of Delhi Metro Rail Corporation (DMRC) talks to us about the evolution of the Delhi metro network

32. INTERVIEW: Harsh Dhingra

Chief Country Representative, India, Bombardier Transportation takes us through the journey of the company in India

35. Indian Economy – Trend indicators

37. PhillipCapital Coverage Universe: Valuation Summary

CONTENTS

Most people in the banking industry agree that ‘digital

banking’ is the wave of the future. While digital banking is

often equated with mobile or online banking, in the banking

context, digitisation is mainly the process that all banks

need to go through in order to provide better services to

customers. Banking customers have been changing their

behaviour in line with technological developments and

increasing their demand for digital channels. Customers’

disloyalty to banks continues to increase. All of these have

created enabling conditions for fin-tech firms to target the

traditional financial sector.

The big questions are – will fin-tech firm steal a large part of

the businesses from traditional banks? Will their efforts result

in margin compression across the sector? What strategy

would banks adopt to counter the fin-tech onslaught? Will

virtual branches replace the traditional brick and mortar

branches?

Our cover story on “Digitisation in banks – collaboration not

competition” evaluates the impact of digitisation wave on

banks and analyses the strategies of various banks to combat

the new wave of digital disruption. Our analyst, Manish

Agarwalla, interacted with leading technology consultants in

the BFSI space, met up with digital heads of banks, fin-tech

firms, and regulators, to understand how prepared banks

are to take on fin-tech companies, their strategy in terms

of service delivery and product offerings, and their current

technology capability. Given the onslaught of fin-tech firms in

the world of financial services, banks run the risk of becoming

redundant if they do not adopt new technology. Most banks in

India believe that tie-ups or collaborations with fin-tech firms

would be an apt strategy to embrace digitisation. Adoption

of efficient technology will not only reduce operating costs

for banks, but would even open up new streams of revenue.

Also in this issue – an interview with Mr. Harsh Dhingra, Chief

Country Representative, India, Bombardier Transportation,

where he talks of his company’s journey in India and the

opportunity he sees in the India railways and the metro

segment, and an interview with Mr Mangu Singh, the

Managing Director of Delhi Metro Rail Corporation (DMRC),

where he talks about evolution of the Delhi Metro network,

execution challenges, and about other metro projects in the

country.

Best Wishes

Vineet Bhatnagar

Letter from the MD


E-CASH THE ‘NEW CURRENCY’

PAYMENT VIA QR CODES

COVER STORY

BY MANISH AGRAWALLA


pg. 6 Digitisation in banking - Brick to click

____________________________pg. 7 Fin-tech companies -

Unbundling financial services

____________________________pg. 10 Banks preparedness to combat Fin-tech

- Geared to challenge new waves

of digital disruption

____________________________pg. 22 Digitisation strategy of banks -

Collaboration with Fin-tech and co-existence

of physical with virtual

____________________________pg. 25 Challenge – Evolving the digitisation culture

The fierce invasion of fin-tech companies in the banking space shook up its very foundations. These companies brought about such a global revolution in the sector that the way people bank underwent a drastic change in the last 10 years or so. Banking continues to evolve under the advent of the technological and psychological changes that these fin-tech companies compelled the market to make. While banks quickly adopted digital technologies transactions and payments, they have lagged behind in incorporating these advancements in lending. Several young fin-tech companies have stepped into this gap and made quite a place for themselves by offering efficient lending solutions. However, in general, the trend seems to be more towards collaboration rather than rivalry, especially from the fin-tech companies. They realise that with the support of banks, they can rise to phenomenal heights. Banks will have to forge relationships with these fin-tech companies in order to innovate, and will continue to even invest in some of them. Most banks in India believe that tie-ups or collaboration with fin-tech firms would be an apt strategy to embrace digitisation.For now, multiple payment technologies will coexist in India, as it is a diverse market with different customer segments. Even globally, cards have not completely replaced cash transactions. There will be enough space and opportunity for different players – whether it is mobile wallets, payment banks, or a universal bank. Collaboration between banks and fin-tech companies would enrich customer experience while healthy competition is also necessary to evolve technology.It is clear that the digitisation journey will not be easy. However, by breaking it down into stages and taking a disciplined approach, Indian businesses can go beyond merely doing better. Ultimately, they can transform their businesses by activating new sources of revenue that take full advantage of India’s rapid digital growth.

DIGITISATIONIN BANKS –

PAYMENT VIA QR CODES

Collaboration,not competition


Brick to click

D I G I T I S A T I O N I N B A N K I N G

Most people in the banking industry agree that ‘digital banking’

is the wave of the future. Indeed, many would contend that

it is not at all a future wave, but that it is already here. While

digital banking is often equated with mobile or online banking–

and these do involve digital applications of some sort –in the

banking context, digitisation is mainly the process that all

banks need to go through in order to provide better services

to customers. Digitisation also empowers customers with self-

sufficiency. Digital banking is so important because it allows

banks to become virtually omnipresent.

Challenges often give birth to opportunities –the major

challenge that Indian banks face today is digitisation, and

this process has given birth to many opportunities such as

netbanking, mobile banking, and insta-pay. Digitisation is

enabling banks to meet the needs of its customers across the

spectrum of age and gender.

Banking customers have been changing their behaviour in line

with technological developments and increasing their demand

for digital channels. Customers’ disloyalty to banks continues

to increase. All of these have created the enabling conditions

for start-ups to target the traditional financial sector. Backed

by venture funds, many of these start-ups, which in banking

parlance are called fin-tech companies, are providing banking

products at much lower costs and with a greater degree of

convenience. Today, fin-tech businesses are creating on-

demand credit, using self-learning models to analyse risk, or

making it easier for businesses and individuals to transact.

Globally, the financial industry is seeing unbundling of services.

The big question is – will fin-tech firm steal a large part of the

businesses from traditional banks? Will their efforts result in

margin compression across the sector? What strategy would

banks adopt to counter the fin-tech onslaught? Will the virtual

branch replace the traditional brick and mortar branch? Mr

Mahesh Makhija (Partner, Ernst &Young) believes that every

part of the financial value chain is under threat from fin-tech

companies; entire payment ecosystems have exploded and

banks are trying hard to match fin-tech offerings. Even on

the lending side, banks are trying to partner with fin-tech

on the front-end for customer engagement programmes

(need analysis, generating leads). On CASA (current account

and savings account) fin-tech companies can be a threat. He

does not see a risk to banks in the near term, but in the long

term, challenges from fin-tech companies will force banks to

collaborate with, acquire, or build these fin-tech companies.


Unbundling the financial services

What are Fin-tech Companies?

F I N -T E C H C O M PA N I E S

Fin-tech is a short form of financial technology. These kinds

of companies, usually start-ups, use software to provide fi-

nancial services. Typically, their purpose is to disrupt incum-

bent financial systems and corporations that rely less on

software. These firms provide specialised services in areas

of payment and remittances, lending, personal finance and

retail investment, and business infrastructure. The breeding

of these companies is a manifestation of strong customer re-

quirements for specialised and customised services. In 2015

worldwide, fin-tech firms received a total financing of US$

22.3bn while Indian fin-tech companies received US$ 1.6bn.

USD BN Deal Volume

2016 (Q1) 5.7 468

2015 22.3 1108

2014 12.7 871

2013 4.6 772

2012 3.2 610

2011 2.5 459

2010 1.8 338

Source: Accenture & KPMG

Global Fin-tech financing activity

BankBazaarApna Paisa

OxigenRemit2India

Mwipe

RemitguruFreechargeCitrus

ScripboxPerfios

Creditseva

AdvicesureMedimanage

Bluechip

PayTMMobikwikPayU

Capital floatLendingKart

Idifi

i-lendingFaircent

Neogrowth

ApnapaisaSwitchmeHomeloan

CoverfoxPolicybazaar

FundsIndia


Lending Banking infrastructure

Payment and remittance

Personal finance and retail investment

These companies allow individuals and businesses to accept payments over the web and mobiles. These start-ups aim to integrate payment processing into websites and mobile apps without having to maintain merchant accounts. To minimise fraud, transfers are made directly into the bank accounts linked to the payee.

Many lending-services companies have recently sprung up to service the demand for access to finance from consumers and businesses alike. These lending-service start-ups aim to outwit traditional lending mechanisms and use alternative credit models and data sources to provide faster access to capital.

Another breed of fin-tech companies help individuals save money and manage and invest their finances. These kinds of companies generally help people to compare different options and enable them to make more informed decisions based on their personal needs.

New-age fin-tech companies are solving infrastructure issues for traditional banks, institutions, and start-ups by effectively using technology. These companies have drastically improved access to information, analytics, and digitised data sources – in short, they have done things that weren’t even thought of until a few years ago.

TYPES OF FIN-TECH COMPANIES


Source: MXV Consulting

“The major segments that fin-tech companies have disrupted include mobile payments (PayTM), money transfers(Western Union), loans(Capital Float), and wealth management(Policy Bazar).”

Various financial products offered by fin-tech firms are at different stages of their product life cycles. Concepts such as crowd funding and consumer lending are at a nascent stage. These products would need legitimacy and recognition by the regulator and acceptance by customers. RBI’s recent consultation paper on peer-to-peer lending provides legitimacy to the consum-er-lending marketplace model. With increased acceptance by customers, P2P lending could gain traction. Ease of transaction and enhanced customer experience has attracted potential buyers of life insurance and general insurance to fin-tech companies like Policy Bazaar and Bank Bazaar. Payment services of fin-tech companies such as Paytm, PayU, or Citrus are widely used to avail services like cabs, utility bill payments, money transfer, shopping, and movie tickets. Payment and remittance gained wide acceptance among customers due to the ease of use and low transaction costs.


Payment solutions: Continuous innovation; nothing is sacrosanct

B A N K S P R E PA R E D N E S S T O C O M B A T F I N -T E C H

Safe, secure, sound, and efficient payment

systems for the country have been the mission

of every regulator. In order to expand the reach

of the payment system and encourage product

innovation, the Reserve Bank of India (RBI) estab-

lished an umbrella organisation called National

Payment Corporation of India (NPCI) in 2009

for all retail payment systems in India. There has

been a shift in payment mode to clicks from cards

– mainly due to new technology, improved IT

infrastructure, and high smartphone penetration.

Data indicates that the trend is towards paperless

transactions.

The proportion of these (which includes retail

electronic clearing, mobile banking, and pre-

paid payment instruments or PPIs)has increased

rapidly to 28.1% in FY16 vs. just 7.4% in FY09.

Paper-clearing and even the usage of cards are

in a decline-mode. Within cards, the fall is mostly

in debit card usage at ATMs largely because of

increased acceptance of e-money by merchant

establishment and efficient and secure payment

systems. Emerging trends suggest that the pro-

portion of mobile banking and PPI will increase

significantly, largely substituting ATM transac-

tions.

Payment solution provided by banks in India are comparable to the best of fin-tech firms


120

RTGS Retail Electronic ClearingCards Prepaid Payment Instruments (PPIs)Mobile Banking Paper Clearing

60

80

100

20

40

02015-16 2014-15 2013-14 2012-13 2011-12

Transaction volume through various payment instruments

Payments are paramount

Payments dominate the average consumer’s banking

relationship. Providing strong payment solutions

(as a part of a larger strategy for digital banking) is

imperative for banks. As per McKinsey’s report, the

average customer interacts with his or her bank at

least twice a day for payments-related matters, such as

buying a financial product, checking on a payment, or

paying a bill. These interactions represent more than

80% of customer interactions with the banks. Making

an excellent payments platform is necessary for cross-

selling other financial services.

Digital payments offer good solutions

Digital payments provide banks with a platform to boost

fee and interest income, reach out to the underserved

segment, and extend the value proposition.

• On the retail side: Mobile-payments solutions

(mobile peer-to-peer (P2P) money transfers,

international remittances, small-merchant mobile

card readers) not only increase the frequency of

consumer interactions but also boost the number of

charged transactions and the cash flowing through

the banking system (through prepaid, current

accounts, and consumption-related lending).

• On the corporate side: Transaction banks that

execute well on digital cross-selling can increase

their market share of corporate deposits and lending.

By tailoring payments solutions to the under-served

segments (small and informal merchants, youth,

international travellers, migrants, and low-income

customers), banks can shift a bigger share of

payments to bank-owned channels.

Banks should leverage data

Banks own rich reserves of raw behavioural data. Mobile

channels enhance this data pool with location and

search data, which can provide valuable insights into

future customer choices. Banks could leverage their

data strengths to create new services along the full span

of the consumer decision journey, reaching beyond

payments transactions to manage their customers’ entire


digital wallet (for example, by optimising loyalty awards

and special offers, payments terms, and instruments).

If banks cling to their traditional, narrow view of the

payments ecosystem, fin-tech firms will not only take

the additional revenues from these channels, but will

also enjoy prime access to a customers’ ‘digital trail’,

including essential transaction information and direct

traffic to preferred service providers within the digital

sphere.

Payment solutions have seen a sea change

The Indian market has seen the advent of fin-tech

companies – Paytm, Mobikwik, Oxigen, and Citrus Pay

– and the market share of pre-paid payment instrument

(PPIs) in total payment transactions in terms of volume

has increased to 4.8% from virtually nothing five years

ago. Increasing penetration of smartphones have

increased customers’ expectations from their bankers –

they demand efficient, safe, and cost-effective payment

solutions. Realising the gravity of the situation, most

banks now offer mobile and digital payments.

CY13 CY14 CY15

China 43 48 51

North America 57 64 69

India 9 13 17

Penetration of smart phone %

CY12 CY13 CY14 CY15

Smartphone shipment (mn) 16.3 44.0 81.5 102.6

Wireless subscriber (mn) 864.7 886.3 944.0 1010.9

Data Usage MB/user

Idea 140.0 257.0 490.0 635.0

Bharti 152.0 317.0 584.0 793.0

Smartphone shipment and data usage in India

Private banks are leaders, as alwaysPrivate banks have initiated their digital banking

transformation processes much ahead of their PSB peers.

Today, the products and features offered by private banks

are very much in line or even better than some of the

products offered by fin-tech companies. Mobile banking

commands close to double-digit share (10% of overall

transactions) for private banks while for PSB giants such

as SBI, it is just 3%. PSBs are definitely lagging behind

in their digital initiatives – the share of mobile banking

transactions is almost nil for PNB and BoI.

Not all is lost– cash is still king

At this point, not having a strong digital setup is not

necessarily the worst thing in the world. Mr. PareshRajde

(Chairman, Suvidha) pointed out in a GV conference

that in India, only 8% of the population transacts

electronically and the rest transacts in cash. Even for

a developed country like the US, 50% of transactions

still happen through cash. In India, around 90% of the

population earns their livelihood in cash. Hence, self-

service smartphone-based models cannot replace

brick-and-mortar banking models entirely, at least not

immediately.

To conclude, payment and remittance solutions

provided by private banks in India – either through net,

mobile, or phone banking platforms– are comparable

to the best of fin-tech firms. These banks have either

built technology or partnered with fin-tech firms.

Moreover, NPCI’s unified payment interface (UPI)

platform is all set to provide a payment solution based

on a virtual address, thus overcoming the need for

cumbersome bank account numbers or IFSC codes. Mr

Rajesh Prashad (Head, Rupay – NPCI) believes that card

transactions will continue in India for some more time,

“Collaboration between banks and fin-tech companies would enrich customer experience while healthy competition is also necessary to evolve technology.”


AXIS BANK HDFC BANK ICICI BANKKOTAK MAHINDRA BANK

SBI

Digital Banking Axis Mobile - mobile banking; Ping Pay - wallet; Lime - social wallet

Mobile banking - PAYZAPP / HDFC Bank APP

iMobile/ PocketsMobile banking; Hash-tag Banking; kaypay

State Bank freedoM

No. of transactions 60 in axis mobile 100 in PAYZAPP 150 services in iMobile 70+ services na

Share of mobile banking in overall transaction volume

12% 6% 9% 14% 3%

Common Features1. View account details & transact - deposit / loan / credit card. 2. Money transfer Mobile. 3. DTH connection recharge. 4. Utility bill payment. 5. Wealth management products. 6. Demat account payment. 7. Merchant payment. 8. Account service request.

Special features Non bank customer can use PingPay to receive / request money & recharge

Lime is a social wallet - can be used to send / receive money through social media

Expense manager

Chillr is a mobile wallet can be used by bank and non bank customer

Apart from standard ser-vices, iMobile provides features like “Now block a card, stop a cheque, track your deliverables,“

Forex services, Invest-ment & Insurance

Manage payees, link accounts, cancel instructions

Pocket is a mobile wallet which can be used by bank customer as well as non bank customer also

Hashtag Banking - Banking though social media

Buddy is a wallet

Digital Solutions by Banks

even though people are moving to mobile technology.

Multiple payment technologies will coexist, as India is a

diverse market with different customer segments. Cash

transactions have not been completely replaced by cards,

even in the most advanced countries. There will be enough

space and opportunity for different players – whether it is

mobile wallets, payment banks, or a universal bank.

Unified payment interface can be a challenge to mobile

wallets

National Payment Corporation of India (NCPI) is set

to make transactions easier by introducing the Unified

Payments Interface (UPI). This interface will allow a user

to transfer money to another user in a single step. UPI

users will not need to use their credit/debit cards or net-

banking credentials to make/authenticate payments

through UPIs. Instead, users will be able to transact on

the UPI platform using a virtual address. A mobile-pin will

then be needed to authenticate the transactions. There is

NO separate or special app for UPI. It will be an update

to existing net banking apps of banks that would provide

UPI services. Initially, banks will be allowed to provide UPI

services through its net banking apps, but based on that

experience, PPIs may be included in the UPI ecosystem.

There is lot of debate about survival of wallets with the

advent of UPI services. Mr YadvendraTyagi (Director

Business development, Citrus) says that the unified

payment interface will actually help wallets, as customers

across banking channels would be able to use them.

However, their survival would depend on the product

quality and customer experience. The survival of a ‘wallet’

company would be at risk if its business model is based

around only money transfers. Fin-tech companies that are

building their business model around payment solutions


The unique selling propositions of fin-tech companies

include:

1. Convenience: Anywhere, anytime banking

2. Faster turnaround times: Disbursement in less than a

week.100% online application. Minimum documentation

(KYC, bank statement, income tax return, VAT return).

Use algorithms and sift through data to find hidden

insights in order to make lending decisions quickly. This

ensures fast turnaround.

3. Superior credit evaluation: Use analytics and big data

scoring to evaluate client’s business. Have supply-

chain partnerships, which bring access to borrowers.

Transactional data to aid underwriting.

4. Lower operating costs: From application to collection

(through electronic repayment) the entire process is

digitised.

5. Flexible loan structure: Repayments are structured, which

suits the cash flow of the borrowers.

Digitisation in lendingPartnering can create a sea of change

Lending Business model Product loan size duration interest rate Revenue stream

Capital float

NBFC / SME loan market place

Working capital loan to online seller

1lac to 10mn 90-180 days 16-24% Spread & fee

Term finance 1lac to 5mn 6 months to 3 years 16-24% Spread & fee

Invoice finance 1lac to 10mn 30-180 days 16-24% Spread & fee

lendingkart SME loan market place Working capital loan

indifi SME loan market place Working capital loan

i-lending P2P personal loan market place

Personal loan 25k to 0.5mn 6-36 months 12%-24% Registration fee from borrow-er. Transaction fee from both borrower and lender

Faircent P2P personal loan market place

Personal loan 50k to 0.5mn 6-36 months 12% -24% Registration fee from borrow-er. Transaction fee from both borrower and lender

Neogrowth

NBFC Working capital loan to online seller

starting from 2lac

Retailer with EDC/ POS machine

Lending Solutions by fin-tech Companies

Customers have taken to digital channels like ducks

to water, compelling financial institutions to provide

the convenience of anywhere, anytime banking. While

digitisation has transformed transactional banking, it

has not made as big a mark in lending. This has led

to the rise of many online lending companies and non-

bank lenders (Lendingkart, Indifi, Iending, Faircent, and

New growth) that capitalise on the inefficient lending

process of banks.

The growth of these companies also demonstrates that

customers are looking for more convenience, which

digitisation can provide. The significant rise of non-

bank lenders has led banks to invest more in digital

technology, and form partnerships with them to retain

their positions as leading operators in the lending

market. Fin-techs are increasingly gaining legitimacy,

even with regulators, and are expected to gradually

gain customer trust.


Axis bank HDFC Bank ICICI Bank SBI

Loan products

Home loan Home loan Home loan Home loan

Two Wheeler/Car loan Two Wheeler/Car loan Car loan Auto loan

Credit Card Credit Card Credit Card Credit Card

Personal Loan Personal Loan/ Loan against securities Personal Loan Personal Loan

Loan against property

Education loan

Retail loan provided online by various banks

Fin-tech companies believe in symbiosisMost fin-tech companies and banks in India do not believe the disruption theory. They believe that banks and fin-tech companies need each other’s support to encourage product innovation and provide commercially viable solutions to customers.

• Banks need fin-tech companies to improve product delivery and customer experience, and enable them to not only manage increasing compliance costs, but also the risk of non-compliance.

• Fin-tech companies need banks for better customer understanding, to manage regulatory risks, and to support continuous innovation.

Mr K A Babu (Head Digital Banking, Federal Bank) calls his bank’s digital strategy 3As – Anywhere-Anytime-Any Device. He views digitisation as not just a cost-saving strategy, but also as a new revenue stream. He believes that in order to innovate, banks will collaborate with fin-tech companies and even invest in some of them in a quest to innovate.

• Introduced in India in 2006.• Hailed as an innovative way of serving the ‘un-

banked’ by allowing banks to reach them through a network of external agents. This model is very different from the conventional brick-and-mortar branch-based banking framework.

• It has seen varying degrees of success in India.

The business correspondent model

Lending game-changersThe size of fin-tech companies in the Indian lending

market may be insignificant, but the offerings they

have are noteworthy. Going forward, these offerings

could be game changers. NBFCs have already

adopted this changing face of lending into their

operations. Even banks have started disbursing some

of their retail products online, which offer twin benefits

of convenience to customers and lower underwriting

costs for the lender. Incrementally, more than 50%

of personal loans and credit cards are disbursed

online and the underwriting costs are 70-80% lower

than branch banking. Even the turnaround time has

dropped – to a few hours from a few days in the past.

Non-traditional data gatheringConsumer behaviour and marketing analytics are

driving a sustainable competitive advantage in an era

of eroding product differentiation, waning customer

loyalty, and exploding volume and variety of data.

Apart from pulling data from traditional sources

such as civil data, bank statements, and verification,

fin-tech companies are also gathering data in

non-traditional ways – such as shopping patterns,

academic records, and online footprints. Such data

is going to make credit decisions more mainstream;

banks will embrace this approach soon.


Banking with the underbanked – technology can disrupt micro financeThe growing influence of technology provides

a secure, efficient, and cost-effective solution

to the financial world. The much talked-about

‘underserved’ segment at the bottom of the pyramid

is still excluded from formal banking channels as

costs do not justify returns – the mathematics of high

product-delivery costs and low volumes makes the

risk-reward unfavourable. This model can provide

strong competition to micro-finance businesses,

where lending rates are very high. In fact, banks are

exploring this opportunity in a big way, as the yields

in traditional banking products are continuously

under pressure. The business-correspondent-

assisted unsecured loan distribution may not steal

a large chunk of the micro-finance market, but will

result in margin compression, which can be negative

for micro finance businesses. Data analytics and

customer’s financial transaction behaviour provides

insights into business opportunities for loan products.

Technology assistance can improve banks’ outreach

to hinterlands and create disruption in some of the

established models such as micro finance.

Suvidhaa point offering payment services


Suvidhaa

Suvidhaa, a PPI, acts as a business correspondent

for loan products for some large banks such

as Axis Bank. Its Chairman, Mr Paresh Rajde,

strongly advocates a collaborative approach with

banks, which can revolutionise loan products for

the underserved. This model provides last-mile

connectivity through the agent-assisted model.

Strong customer database and state-of-the-art

technology helps to underwrite unsecured loan

products much faster.

Sahaj

Just like Suvidhaa, Sahaj (an associate company

of Srei Infrastructure) provides digital services to

rural India through its 6,344 IT-backed common

service centres (CSC) across West Bengal, Bihar,

Odisha, Assam, Uttar Pradesh and Tamil Nadu.

Sahaj’s aim is financial inclusion; about 696 of its

CSCs act as business correspondents for banks.

“Average cost of each transaction at a branch is around Rs 60 while with self-service it is as low as Rs 10”


“Banks run the risk of becoming redundant if they do not adopt new technology”

Deposits and borrowings are any banks’

raw material and a strong franchise in

these determines its ability to withstand

competition. Providing a strong payments

plan, as part of a comprehensive strategy for

digital banking, is therefore an imperative

for any efficient and cost-effective deposit

franchisee.

Three factors have driven CASA growth of

late – electronic payments, internet banking,

and cards. The next wave of growth will

be driven by mobile banking. Banks have

embraced digitisation in their deposit

products very well. Opening a savings

account, to transactions in deposit accounts

anytime, anywhere is a reality. Demand from

customers for anytime anywhere banking

has necessitated the inclusion of self-service

features in a deposit account, which has

tremendously increased branch productivity

and reduced costs. As per Federal bank,

the average cost of each transaction at a

branch is around Rs 60 while with self-service

(internet,mobile,or phone banking), it is as

low as Rs10. As per State Bank of India, “A

mobile banking transaction costs about 2%

of the bank branching cost, 10% of ATM-

based transaction and 50% of the Internet

banking cost”

Important question –do banks require

so many branches?

Branches are vital touch points for

customers. It acts as a point to on-board

the customer, cross-sell new products,

and provides a sense of reliability to

the customer. Globally too, there are

contrasting examples – banks follow

varied strategies when it comes to building

customer touch-points. On one end of

the spectrum we have banks like Atom

and Fidor, whose strategy is branchless

banking; on the other, we have examples

of Wells Fargo in the USA, which believes

in the coexistence of both formats, even in

a country where financial literacy is much

higher. In the Indian context, banking

penetration is still underdeveloped,

customer ignorance about financial

product is high, and physical presence

provides a great sense of reliability. In

such a scenario, coexistence of branch and

digitisation seems to be an ideal strategy,

especially for mid- to small-sized banks.

Digitising depositsDefending core competence


As the banking industry goes

through a digital evolution, there is

a great shift in the way services are

rendered to the customers. From

only branch banking at brick-and-

mortar locations, banks are now

transforming to a digital platform

in order to save on personnel and

infrastructure costs and to reduce

reliance on service staff.

In the US, large banks were, up

until recently, consciously reducing

the number and size of their

branches, as they were adapting

to the changing behaviour of

their customers, who started

increasingly using digital channels

for banking. Despite large banks

such as Bank of America, Merrill

Lynch, JP Morgan Chase, and HSBC

rationalising and reducing their

branches, recent Federal Deposit

Insurance corporation (FDIC) data

reveals that per-capita number of

branches in the US have actually

been growing, given that these

large banks are setting up branches

in unrepresented metropolitan

cities. This is in contrast to the

generic view that digitisation in the

financial services industry would

make branch-banking services

redundant.

This San Francisco-based giant

believes that banks need to leverage

on branch-banking services along with

digital channels in order to effectively

reach out to customers and increase

the effectiveness of financial inclusion.

Wells Fargo is trying to achieve this

by integrating technology between

branches, mobiles, online banking

apps, ATMs, and call centres.

Wells Fargo holds the view that branch

banking continues to be an integral

part of the services value-chain. In

order to make rational decisions

about branch expansion, it has

been continuously monitoring data

related to traffic/footfalls and branch

performance. This data suggests that

in any given six months, 75% of its

customers visit a branch; this shows

that branches continue to add value

to the overall banking experience.

Another interesting aspect of these

footfalls is that a large chunk of them

are from ‘millennials’, who are usually

perceived to be tech savvy; but

apparently, they still visit branches to

initiate their financial relationship with

the bank. Most of its competitors have

been encouraging their customers

to open an account through mobile

applications, but Wells Fargo has a

neutral approach as 85% of its new

account sales have been through

From branch-banking to neo-bankingThe changing phases of the industry

Wells Fargo’s balanced strategy, based on data


A few examples of the revolution in the industry

Atom Bank is an example of a

revolution in the banking industry

and it is challenging the conventional

set up of existing banks. The bank

received its license in June 2015 and

became UK’s first bank to operate

completely through mobiles. The bank

has already introduced residential

mortgages and by the end of 2016,

it will roll out more products such

as fixed savings, current accounts,

overdrafts, and debit and credit cards

in a phased manner, which will all be

serviced through the app.

Another example of newbanks is Fidor

Bank in Germany, which redefines

traditional banking from the ground

up. Started from scratch, it aims

to provide a truly innovative and

differentiating customer experience

that offers a comprehensive suite of

financial products and services by

owning the entire infrastructure. The

bank adheres to two main principles

of financial innovation: openness and

community. Openness is the flexibility

and agility that enables banks to create

an extensive ecosystem of partners

and capabilities, while also leveraging

APIs to develop differentiating

applications. Community is about

bringing users together and solidifying

a bond between the bank and its

customers, as well as between

customers themselves.

The bank is the primary entity in

the Fidor Group, which holds two

additional entities: FidorTecS and

Fidor Payment Services. FidorTecS

is the development branch of Fidor

Group, developing, implementing,

and maintaining the fidorOS platform

and its library of APIs. It employs

around 30 developers and has been

a standalone organisation under

Fidor Bank since 2013. Fidor Payment

Services, as a strategic business unit

within Fidor Bank, provides payment

services for more than 40 payment

methods worldwide. It is the exclusive

enabler of Fidor payment products

and transaction business. FidorPays

leverages the network to allow users

to make payments between accounts,

transact with ‘crypto-currency’, and

make real-time payments across the

globe.

branches.

Wells Fargo builds and refines its

digital channels and uses them in

conjunction with branch banking. It

does not treat this as an ‘alternate’

platform. For example, the bank

provides its branch employees with

tablets, which communicate with

nearby ATMs – the purpose of this is

to serve customers in case they run

into any problem while transacting at

the ATM. Although customers have

been using the digital channel for

banking, branches continue to play

a pivotal role in rendering the entire

range of services.

Neo-banking surges aheadThe banking space is now seeing

a remarkable transformation in

terms of neo-banking, in which

banks are just a click away, as

there are no brick-and-mortar

locations. One of the key driving

forces for neo banking would be

tech-savvy customers who prefer

not to visit branches, a higher

number of millennials in the

customer composition, and greater

penetration of smart devices.

Neo-banking aims to simplify

online transactions, while reducing

overhead costs and passing on

these benefits to customers in the

form of lower interest rates or

lower fee charges. On the flip side,

neo-banking poses few challenges

in terms of large complex

transactions, which may require to

be carried out through a branch,

which neo banks do not have.


Higher customer expectations, unsatisfactory

wealth management services from banks, poor

after-sale services, and lack of expertise has

warranted the need for a specialised wealth

manager. Globally, financial services saw de-

bundling due to a need for specialisation. This

led to grooming of wealth management fin-tech

companies in India such as Policy Bazar, Coverfox,

FundsIndia and Scripbox.

Wealth and asset managers have, so far, enjoyed

a level of insulation from fin-tech disruption

due to two key factors – first, wealth and asset

managers operate in a highly regulated, formal

market. As regulators apply continued pressure

on increasing fee transparency across the industry,

organisations with higher operating costs will

become less attractive to consumers. Winners will

be wealth managers who are adaptable, agile,

and have low-cost models. Wealth management

products are ‘push products’ where customer

interaction is quite essential. A mere digital

platform may not suffice in a market like India.

Moreover, the penetration level of life insurance

is just 3.9% and share of mutual funds / equity

funds is just 2.7% of household savings.

Fee income on bancassuance, Rs bn

% to PBT

Axis 8.9 7.2

HDFC BANK 8.2 4.4

ICICI 10.2 8.4

Induidns 1.5 4.3

KOTAK 2.9 5.8

SBI 4.6 3.4

YES 0.6 1.5

Cross-selling revenue of banks

Nature of business USP

Coverfox Insurance aggregator Expert advice and an informed, unbiased opinion

Post sale service - renewal to claim process

Policybazar Insurance aggregator Expert advice and an informed, unbiased opinion

Post sale service - renewal to claim process

Fundsindia Mutual fund and deposit product aggregator Advisory services & post sale service

Personal finance and retail investment by fin-tech

Wealth management: Fin-tech not yet disrupting, but making inroads

It is too early for fin-tech companies to disrupt

banks’ wealth management businesses. The greatest

likelihood in the near-term is the southward movement

in fees and commissions on these products. Wealth

management and cross-selling account for 5% of

profit before tax for private banks. Falling rates

may force banks to look out for more cost-effective

alternate models to remain relevant. Banks that rely

heavily on cross-selling as part of their overall fee,

could have a tough time.


“Most banks in India believe that tie ups or collaboration with fin-tech firms would be an appropriate strategy to embrace digitisation”

Collaboration with fin-tech, coexistence of physical and virtual

D I G I T I S A T I O N S T R A T E G I E S O F B A N K S

As banks revaluate their core value propositions

and contemplate their digital strategies, they

essentially have a choice between three strategic

postures:

1. Followers

They have the choice to track other banks’

progress and develop service models that can

react to customers’ needs when a new concept

stabilises. These banks can invest in competitive

innovation centres, picking up ideas after they hit

the banking market.

2. Catalysts

Under this strategy, banks can invite others

to innovate while they ensure client security,

account management, and system stability. One

way of doing this is by opening the bank’s IT

platform to a select community of developers, or

by allowing others to provide services under their

client platform.

3. Innovators

In this strategy, banks can seize the opportunity

to be leaders, competing on innovation not only

with other banks but also with digital leaders, on

banking and non-banking services. Such leaders

would stand out as delivering comprehensive

digital solutions, and while they would bear the

risk of market adoption, they would garner a

reputation for innovation and industry leadership.

Most banks are comfortable adopting the ‘catalysts’ role…

Traditionally, most financial services incumbents

have been comfortable partnering or playing the

role of catalyst in their own industry – especially

where there is an opportunity to share processes

or services that are considered ‘non-core’, and

which help all collaborators either reduce their

costs or create new market opportunities. There

are many examples of such partnerships in India

– such as CIBIL, where various banks collaborated

to create an entity that provides data about a

borrower’s credit history. It helps loan providers

manage their businesses or help consumers

secure credit faster and at better terms. The use

of CIBIL’s products has led to a massive change in

the way the credit lifecycle is managed by both

loan providers and consumers. ARCIL is another

example – it helps banks by acquiring stressed

assets, subsequently reaching a resolution or

undertaking a recovery exercise.


“Most banks in India believe that tie ups or collaboration with fin-tech firms would be an appropriate strategy to embrace digitisation”

Banks Fin-tech Companies Key functions

HDFC Bank Senseforth Technologies Artificial Intelligence

Tagnpin Customer engagement)

Net Vigil Software QR code based payments)

Bugclipper Technologies Quality assurance

Tapits Technologies Biometric payments

Axis Bank MSWIPE Mobile POS solutions provider

MPAY Mobile POS solutions provider

NOVOPAY Consumer payment application

Prizm Payments Mobile POS solutions provider

Vayana Network End-to-end digital invoicing and payment solution

Fastacash Multi-social payment app

HDFC Bank Chillr Smartphone application for P2P money transactions

Safe 2 Pay A point of sale-free payment system

Taptis Technology A biometric payment company

Tagnpin Marketing and customer engage-ment tool

List of bank tie up with fin-tech companies

Coexistence of physical and virtual branches in India

Due to financial and social reasons, the con-

cept of branch banking in India cannot be

done away with. While setting up and running

a physical branch is undoubtedly expensive,

the situation in India is not as bad as it is in

the US or Europe. In the last few years, Bank

of America has reduced its branch strength

to 4,789 from 5,328 while JPMorgan Chase

slashed its branch count by 2% to 5,504. For

both organisations, the savings were sub-

stantial. While BofA’s workforce came down

by roughly 15%, JPMorgan Chase pruned

its staff strength by 6,000, leading to savings

worth US$500mnin H1 2015.

…but in the future, collaboration will need to go a step furtherIn order to maintain and grow value in these

times of change, established players will have

to keep looking at collaborating more closely

with those in different industries and outlooks.

Most banks in India believe that tie ups or

collaboration with fin-tech firms would be an

appropriate strategy to embrace digitisation.

There are several examples: ICICI Bank has

tied up with FinoPaytech, State Bank has tied

up with Reliance JIO, Kotak Mahindra Bank

has tied up with BhartiAirtel. The increasing

number of traditional banks tying up with

payment banks or fin-tech companies is a

testament to the collaborative approach.

SBI EZETAP Mobile POS solutions provider

Paytm Online and Mobile wallet

Bank Bazzar Online financial product aggregator

PayPal Digital payments company

ICICI Bank Paytm Online and Mobile wallet

Eko India Financial Services

Prepaid wallet service

Yes Ultracash Technologies Payments processing through sound waves.



Click & Pay Mobile-based payment solutions enterprise

IndusInd Bank



PayU Online payment solution


Banks in the US or in Europe are facing the heat of dwindling spreads in their

intermediation businesses. Moreover, high penetration of smartphones and financially

literate customers provide opportunities for fin-tech companies to disrupt the system.

This is not the case in India. Another important differentiator is social – in India, people

would not be inclined towards trusting a ‘faceless’ bank. They would want to know who

their banker is. Therefore, the idea of not having branches and physical presence for

assisting customers may not be a wise strategy for this country.

However, despite India’s peculiar predispositions, the fact is – the face of traditional

branch banking is already seeing a change and will continue to evolve. There can be

several innovative formats – from being ‘pure digital’ or ‘pure traditional’, branches

could end up being mixed models– where they offer the best of both. For instance,

a ‘single-employee’ branch model could work (especially for smaller coverage areas)

where most services would be digital, but a person would always be available for

support and assistance. Bank branches are not going to totally disappear – but they are

going to transform. Multi-formats would most certainly be the way ahead.

Here are two examples of co-existence strategies:

• New-age private bank IndusInd believes in the co-existence of the physical and

virtual. Physical branches are essential to ‘on-board’ a customer and cross-sell a

product, while virtual branches take care of the transactional needs of a customer

by providing them the option of anytime and anywhere banking.

• DCB Bank has initiated an aggressive branch expansion drive. It plans to add 150

branches in two years, thus doubling its network. This bank believes that a physical

footprint is essential to on-board customers and cross-sell new products. From a

customer’s perspective, DCB believes that the physical branch’s presence provides

a sense of reliability and trust, which is a key factor in banking.

“Bank branches are not going to totally disappear – but they are going to transform. Multi-formats would most certainly be the way ahead”

“As per State Bank of India, “A mobile banking transaction costs about 2% of the bank branching cost, 10% of ATM-based transaction and 50% of the In ternet banking cost”


Banks can attract the digital talent needed to evolve their offerings, but do they really have the culture?

C H A L L E N G E – E V O L V I N G T H E D I G I T I S A T I O N C U L T U R E

Internal structures and processes can often

prove to be restrictive, making it hard to

innovate from within. Instead, many banks are

looking at how they can work in conjunction

with external companies by using ‘lab’-type

formats – empowering digital teams to develop,

experiment, and evolve propositions before

integrating them back into the larger corporate

structure in a manner that is aligned with the

wider digital strategy of the business.

Rather than piloting a project and then facing

insurmountable obstacles, these experiments

provide ‘risk-free play grounds’ to try out new

technologies and provide the company with

the option of mainstreaming them only if they

become viable. This significantly reduces the

risks associated with large-scale changes and

increases the chances of delivering a favourable

outcome.

Major consulting firm Accenture suggests

following this ‘path’ to profitable digitization:

1. Awareness and ownership around

digitisation.

Throughout the organisation, people should

understand what digitalisation is and what

advantages it offers – this fosters a sense of

ownership about this process.

2. Design a digitisation roadmap.

Customers should be at the centre of this

roadmap. The design should include tactics for

using digital technologies to strengthen a bank’s

understanding of existing and future customers.

In this model, fostering participation of leaders

from all ranks, by designing a ‘digital business

value tree’ and considering potential digital

operating models is important. In this roadmap,

technology and skills required to harness the

true power of digital assets to deliver the desired

customer value has to be demonstrated.

3. Digitise the business model.

In this approach, it is necessary to make the

right choices about customer-value proposition,

resources, profit formula, and performance

metrics, and to nurture capabilities and culture

needed to support the business model and

transform digitisation into a driver of profitable

growth.

It is clear that the digitisation journey will not

be easy. However, by breaking it down into

stages and taking a disciplined approach, Indian

businesses can go beyond merely doing better.

Ultimately, they can transform their businesses by

activating new sources of revenue that take full

advantage of India’s rapid digital growth.


I N A B O X : A P P - O N L Y B A N K S

• This mobile-only bank was set up in 2009 in the middle of the financial crisis. It quickly established a very different approach to conventional banking, encouraging a two-way conversation about what features to offer and how to improve things.

• It was very early into the whole social finance thing too.

• Customers can sign in to their accounts via Facebook, but Fidor stresses that the social interaction is all about listening, and not just a gimmick. It’s even launched a ‘like’ interest rate: the more likes the bank gets on its Facebook pages, the higher the interest rate goes.

• Last year, Fidor proved its innovative quality again when it teamed up with Ripple to use blockchain-type protocol to power money transfer. The bank has about 300,000 users in Germany, and is also live in Russia. It’s now going to new markets like the UK and US.

• Entirely digital, but not entirely independent, Hello bank!was created by Europe’s BNP Paribas Group in 2013 at a reported cost of €80mn, and is now live in France, Italy, Belgium and Germany.

• The mobile-only bank provides a range of dedicated apps supported by extended-hours access to an account manager by video call, online chat, or phone. It offers a fee-free current account and even a savings account that comes with an Amazon voucher for €100.

• The app also includes a lot of social and gamification elements – savers can receive contributions from friends and family members through social networks; and there are tools that provide visual representations of an individual’s financial situation.

• The bank has said that it want to acquire 1.4 million customers by 2017.

• Simple was one of the first pioneers of digital-only banking. It made such an impact that it was sold to Spain’s second-largest bank, BBVA, in February 2014, for a US$117mn.

• By that point, US-based Simple had 100,000 users.

• Some of its eye-catching ideasincluded the ‘Goals’ tool, which lets users designate money for desired purchases, and Safe-to-Spend, which reveals how much is available to spend without affecting long-term goals.

• US-based GoBank competes closely with others such as Moven and Simple, but with one big difference – cus-tomers can deposit cash at branches of Wal-Mart.

• The bank was jointly created by prepaid card pioneer Green Dot Corporation and retail giant Wal-Mart, and launched last year. Shoppers can sign up for the bank in a branch, and deposit cash there too. Otherwise, the bank is entirely mobile.

• There are no minimum balance fees, monthly fees, or overdraft charges, provided customers have a minimum of US$500 in the account. Account holders can also use 42,000 ATMs without incur-ring any fees.

• As with other mobile banks, users can send P2P payments, set up alerts, manage their money and gauge spend against income in a user-friendly ‘Balance Bar’.

• France’s AXA Banque responded to the rise of mobile-only banks by starting its own – Soon – in June 2013.

• The new bank revolves around a radically re-imagined interface. The main emphasis is on past and future spending, which is illustrated by a vertically scrolling dial. In this way, the app also encourages users to think responsibly about their outgoing.

• It also embraces the social side of finances, giving users the chance to take pics of what they’ve brought and reveal them to friends via social media.

• This Berlin-based mobile-only bank received US$2mn in funding last year and is now live (by invitation) in Germany and Austria. It started out as a pre-paid card for kids, but changed its approach when it saw just how many adults sought it out.

• Its service is based around an app with a linked Mastercard.

• It also supports P2P payments to other mobile users and displays charts to help regulate spending.

• Everything is customisable – a user can set limits or even disable payments. Interestingly, it charges no extra fees for paying for overseas goods in foreign currencies.

• Its banking partner is Wirecard Bank, which holds all the appropriate licences.

• US-based BankMobile’s parent, Customers Bank, have 1.2 million student checking accounts.

• BankMobile aims to go after Millennials and be the ‘Uber’ of banking. Everything is done through the app, which is powered by Malauzai Software.

• Signing up for an account can be done in five minutes with a photo capture of official ID. Bills and cheques can also be photo scanned.

• There’s a Venmo-style P2P transfer feature, and customers get an ATM card they can use at 55,000 locations, but they can switch it off from their app as an added security measure.

• BankMobile doesn’t charge any fees on checking and savings accounts and offers a personal line of credit (max value of US$5,000).

• The firm says it’s targeting 25,000 customers in a year and 250,000 in five.

Bank-Mobile


Name Sector Key People Description

Funding Circle (US)

Founded in 2010

SME lending market place

Samir Desai • Funding Circle was created with one big idea – to revolutionise the out-dated banking system and secure a better deal for everyone

• With offices in the UK, US, Germany, Spain and in the Netherlands, it is the world’s leading marketplace exclusively focused on small businesses, providing a platform where investors can browse businesses that Funding Circle has credit-assessed and approved for lending.

• Once approved, businesses post their loan request on the Funding Circle marketplace. Here, investors choose which type of business to lend to, the amount of money they wish to lend, and the interest rate they want to earn.

Wealthfront (US)

Founded in 2011

Wealth management

Adam Nash • An automated investment service that combines financial expertise and technology to provide sophisticated investment management at prices that are affordable for everyone.

• Wealthfront makes it easy for anyone to get access to excellent, long-term investment management without the high fees or steep account minimums.

• Its mission is to provide access to the same high-quality financial advice offered by major financial institutions and private wealth managers (such as tax-loss harvesting), without high account minimums or costs.

Kreditech (Germany)

Founded in 2012

Retail banking Alexander Graubner Muller

• Kreditech is a technology company that delivers a range of custom-tailored financial services with a focus on under-banked consumers across the globe.

• It uses big data, proprietary algorithms, and automated workflows to acquire, identify and underwrite customers within seconds.

• Automated processes combined with self-learning algorithms ensure fast and convenient customer service, minimising cost and human error, while continually improving by incorporating new customer data.

Some of the flourishing fin-tech companies globally

• The mobile-only bank was launched in 2011, well ahead of the competition, and soft launched in mid-2013.

• Its features include some of the ideas that every mobile-only bank now deploys – real-time spending alerts, budget visualisations, and linked debit card. Last year, Moven bagged an US$8mn‘Series A’ led by SBT Venture Capital. It is now targeting an international rollout.

• In January, Moven confirmed it would roll out wearable banking on the Moto 360 smart watch. It was an example of the US firm’s desire to lead from the front in disruptive banking.

• UK-based Atom was formed in 2014 by Anthony Thomson, the man behind Metro Bank, and Mark Mullen, the former boss of First Direct.

• Atom is a low-cost app-based bank. It uses biometric security: face and voice recognition (with fingerprint ID coming soon) to log-in to its app.

• Based in Durham, Atom Bank has no branches or vast call centres. All contact with this bank is via an app, through which customers are able to talk to its 30-member service team.

• It plans to launch current accounts, loans, and mortgages by the end of 2016.

• A little different from the other banks in the list:Osper is a UK start-up targeted at children. This mobile-only bank service is built around an app and linked prepaid debit card (from MasterCard).

• Parents can top up the app with funds and set parameters for how it is used. They can use separate logins too. Kids can use the card for physical spend and the app for digital.

• Osper was a ‘graduate’ of the TechStars accelerator and closed a US$10mn (£6mn) funding round last year, led by London’s Index Ventures. The firm has some competition – it is very similar to another UK startup, GoHenry.


Name Sector Key People Description

Avant (US)

Founded in 2012

Consumer lending market place

Al Goldstein • Avant is a fast-growing marketplace-lending platform that is lowering the costs and barriers of borrowing for consumers.

• Through big data and machine-learning algorithms, the company offers a unique and highly customised approach to streamlined credit options.

• At its core, Avant is a tech company that is dedicated to creating innovative and practical financial products for all consumers.

ZhongAn (China)

Founded in 2013

Property Insurance

Jack Ma / Pony Ma

• ZhongAn is an innovative online property insurance company. It uses big-data technology to assist product design, automatic underwriting, auto claims, precision marketing, and risk management.

• It is the first company in China to be issued an internet (online) insurance license. The company is a joint venture between Alibaba Group Holding (an e-commerce company), Tencent Holdings (an online gaming and social networking company), and Ping An Insurance.

• ZhongAn offers a wide range of online insurance services to the Chinese market, catering to all socio-economic groups, with a major focus on travel, accident, and health.

Oscar (US)

Founded in 2013

Health insurance Joshua Kushner

• Oscar is focused on using technology to simplify the entire healthcare experience.

• A team of technology and healthcare experts looked at the current state of the US healthcare system and were frustrated by the horrible consumer experience. In response, they decided to reinvent how healthcare is delivered.

• They are reinventing how to manage care, process medical claims, control healthcare costs, and provide transparency.

• All this complexity will be hidden behind an easy experience for its members.

• Oscar is making the healthcare system simple, smart, and friendly.

Qufenqi (China)

Founded in 2014

Consumer durable finance

Min Luo(Co-founder and CEO)

• Electronics retailer that offers monthly instalment payment solutions to students and professionals in China.

• Primarily offers smartphones, laptops, and other consumer electronics online, allowing customers to choose their own down-payment option and the period for making regular monthly instalments.

• Customers have to close instalments within two years of the purchase.

• The business model is tailored for students and young white-collar workers, with the final price and monthly required payments shown transparently on the product page.

Some of the flourishing fin-tech companies globally


Mangu SinghMANAGING DIRECTORDelhi Metro Rail Corp

In an extensive interview with Mr Mangu Singh, the Managing Director of Delhi Metro Rail Corporation (DMRC), he talks about the evolution of the Delhi metro network, the executionchallenges it faced, and also about other metro projects in the country.

BY VIBHOR SINGHAL

Q: DMRC is currently implementing phase-3 of the

Delhi Metro, which will make it the fifth largest metro

network in the world. For a network that started just

15 years ago, it has come quite far. What are the key

features of this phase?

Phase-3, with its extensions, involves constructing about

160km of metro network in one go – something that

probably nobody anywhere in the world has done before.

If you remember, phase-1 was executed over seven years

and three months while phase-2 took less than five years

and covered 125km. In Phase 3, apart from just catering to

central Delhi, we have taken a quantum jump in technology

– we have used new coaches, signalling systems, and

automated driverless trains. (Phase-3 is essentially phase

1 + 2 put together.)

In phase 3, 90km will be ‘unattended train operations’ –

where there is no human intervention. Trains operating on

phase-1 and 2 lines cannot be shifted to driverless trains

because that will require technology upgradation. Phase

3 will decongest stations like Rajiv Chowk and Kashmere

Gate. With this phase providing more interchange options,

congestion at these stations will reduce significantly.


Q: What is the current passenger traffic and where do

you expect it to go after phase-3 is complete?

Current passenger traffic is 2.8mn per day. In 2015, we had

crossed 3.2mn in a day. After phase-3 is done, we expect it

to rise to 4mn.

Q: What will phase - 4 be about and what is its current status?

The DPR for phase - 4 is ready; it will comprise of 103km and

will be concentrated in the central part of the city. It will consist

of (1) Azadpur to RK Ashram – covering Sadar Bazar, Karol

Bagh – the third line for Old Delhi and (2) criss-crossing from

Inderlok to Indraprastha via Paharganj and ITO among others.

These two lines will be completely underground and there

will be two more lines. Phase-4 will provide more interchange

stations. Execution on this phase will start anytime now. We

will begin the preliminary work even before funding is secured.

Q: We have seen DMRC slipping into the red over the last

two years even though it is still profitable operationally.

While this is because of the expansion, do you see DMRC

returning to profit after phase-3 is over?

As you said, we are still profitable at the operational level;

however, our margins are shrinking. DMRC has always been

a lean organisation; earlier, we had set a target of employing

40 people per kilometre, which we are further tightening

to 34. We are constantly trying to improve this parameter.

Staff cost (salary) is not in our hands as it is decided by the

government, but we can control the number of people that

we employ. We are also concentrating on operational- and

energy-efficiency to reduce costs.

Q: DMRC has always been at the forefront of adopting

new technologies (incremental launching method, NATM).

Would you like to highlight anything on these lines in

phase 3?

Tunnelling is one subject where bookish knowledge doesn’t

work. Every project has something new. For example, in

phase-3, TBMs (tunnel boring machines) were not working

in a few places, hence we improvised. We don’t expect

any significant new technology adoption ahead; it is more

learning-based, gained through experience.

Let me give you another example – in phase 3, we used ‘U

girders’. We realised that girders that were being cast in

casting yards, in a factory environment, were superior to ones

assembled at the site. So we transported pre-fabricated ‘pier

to pier - U girders’ that were fabricated in casting yards, to

the site and just placed them on the piers.

In phase-3 our focus was primarily on reduction of labour

as skilled labour availability is very limited. In the harvesting

season, especially, we did not get any labour; so, we

mechanised many processes.

Q: DMRC has also been a consultant to all metro projects

in the country. How has your experience been with those

projects in terms of interference by state governments,

pace of execution, etc.?

DPRs and first-section tenders of all metro projects were

finalised by DMRC. We also built some of these metros

(Jaipur and Kochi). We built Jaipur within three years and

Kochi in less than four years – we have recently started trials

in Kochi. DMRC’s track record has been great. We are also

in the process of building Vijaywada and Mumbai Metro 2A.

Whenever DMRC takes a new project, we take full

responsibility for all the decisions about finalisation of

tenders, management of contracts, and decision about

developers. State support is always needed in areas such as

land acquisition, and law and order. The DPR is also prepared

in consultation with the state government authorities. Our

reputation has resulted in full support from government

agencies. Be it Jaipur or Kochi, we have had a complete free

hand. We expect this in Mumbai and Vijaywada too.

Q: The DPRs for Chandigarh and Ludhiana prescribe the

use of LRT (Light Rail Transit). How do you see that as an

option, especially for tier-2 cities in India?

Fundamentally, there is no difference between LRT and MRT.

In Europe, LRT means trams that run on surface. LRT is nothing

but a metro – if you run trains at lower frequencies or with

lesser coaches, it becomes an LRT. All these terminologies are

interchangeable.

If you expect lighter traffic, you can have lighter civil structures

– to run fewer trains with lesser coaches. Stations become

small, but it is still a metro – there is no fundamental difference.

Everything else including power supply remains the same.

Only if coach sizes are different, then you have a fundamentally

different model, but that will give you a maximum saving of

10%, not more than that. However, these coaches are not

upgradable to a higher capacity in the future. So, you cannot

run a five-coach train on infrastructure that was designed to

run a three-coach one – this is because the power supply and

station size would not be adequate. You can only increase the

frequency.


Q: What about monorail?

Monorail is completely different. Its only selling point is that

you can build it along sharper curves, and connect places

that have narrow roads. But the experience is highly inferior

because of single wheel. Another argument is that since the

structures needed for monorail are sleek, they do not obstruct

the skyview. However, the modern concept of life saving

/ rescue system for passengers means that the certifying

authorities will insist on a walkway along the monorail

corridors for passenger evacuation, thereby defeating the

skyview argument – and we are back to square one. We do

not consider monorail a proper solution for urban transport.

The biggest problem with monorail is the proprietary

technology. Therefore, if you want to extend a monorail even

by 5km, you have to go to the same rolling-stock vendor who

has supplied the earlier phase. Even for existing rolling stock,

spare parts can be procured only from the same vendor. On

the other hand, metro technology is so open that you can

add as many vendors as you like with the same specifications.

Q: Our interaction with many rolling stock manufacturers

suggests that the tender-award process in India is quite

different from global norms. Globally, tenders are

awarded on LCC (lifecycle cost), but in India we seem to

use only upfront purchase price as the bidding criterion;

the fear is that this renders companies with superior-

quality coaches (which would be initially expensive, but

with lower maintenance costs later) unable to win many

contracts. What are your views on this?

This is not 100% true. Different practices exist worldwide.

For the first five years, rolling stocks do not require any

major maintenance, largely because specifications are very

stringent. Metros like those in Russia go for complete lifecycle

cost, but having five or ten years does not make sense

We do not include maintenance cost, as we believe that the

vendors’ costs will be much higher than our departmental

cost. Our maintenance would be much cheaper.

In the last tender for Phase 3 – we included energy consumption

in the bidding process for rolling stock. Anybody proposing

inferior energy consumption was loaded with a penalty on

the submitted bid, and the winner was decided on this basis.

This is going to result in significant cost saving as energy cost

is 40% of our total operational costs.

Q: How has your experience been with developers

– foreign and domestic? Do Indian developers have

sufficient delivery capabilities? What is a concern in this

area according to you?

The Delhi metro project was so large that players from

over the world worked on it; we never had any problem of

capability deficiency. The problem is that the window of work

is very small – we are building 160km over 3-4 years – they

ALL have to work in that time frame.

Since the employment of contractors is for a limited period

only, once execution on a specific stretch is over, the

developer has to wait for the next contract to be awarded.

Resources are limited. Even if we want contractors to grow

and become big in this domain, it is difficult, as this is not a

regular job for them. They cannot be asked to bring in huge

resources in terms of the viability of their contracts.

Most of the tunnelling work is done by international players.

In phase-2, we saw Indian players taking on important

roles, although in JVs with international players, mainly for

consumables and spare parts for TBMs that are not available

in India and therefore easier to procure with a partner.

Q: In your opinion (personal or professional), does

investment of this magnitude in metro projects make

sense, especially for tier-2 cities that do not require

metros today?

If you have the scope to widen roads, there is no question,

right? You should do it! Most of our cities – even tier-2 cities

– have populations of more than 4-5 million. They are not

tier-2 cities in the global sense of the definition. My point

is, if you delay making metros for these cities today, and

start building them after 10 years, it is just going to be more

costly and more difficult to build. I think it is more prudent

to plan a better public transport system today, as the return

to society is much higher in terms of man-hours saved, and

lesser pollution and fuel consumption.

You see, we need to move to an ecosystem where public

will not mind paying for high-quality infrastructure. However,

we have made a system where we don’t charge people

adequately for obvious reasons. Still, our cost of construction

is 50% lower than most metro projects across the world, even

Kuala Lampur and Shanghai Beijing. While the investment

might appear huge in absolute terms, it is still much less

when compared globally.

Overall, I believe that investment in metro projects has many

more tangential benefits than the ones that are easily visible.

If you include them all, these investments are a very small

price to pay.


BY VIBHOR SINGHAL

Q: Could you talk a bit about Bombardier’s global

operations?

Bombardier is a Canadian company, headquartered in

Montréal. In FY15, we posted revenues of US$ 18.2bn. We

are the best in class in the transportation industry with 61

production and engineering sites in 28 countries, and a one-

stop solutions provider for sustainable modern mobility in

the 21st century. We move millions of people every day in

countries around the world; today, over 110,000 Bombardier

rail vehicles operate globally.

As a global leader in rail technology, we have significant

international experience in manufacturing, engineering,

technological innovation, services and fleet management –

and we plan to bring all of these aspects to India.

Q: How about Bombardier’s India operations? Could you

tell us about those?

India is one of the world’s most important railway markets

for us. In India, we have a well-established manufacturing

operation. Additionally, we have engineering capabilities and

a supplier and employee base, which consists of over 1900

highly skilled employees. We see huge opportunity in India

what with Mass Transit systems planned in over 50 cities by

2050, the modernisation of the Indian Railways’ network, and

plans for semi high-speed and high-speed trains.

In India, we have a railway vehicle manufacturing site and

bogie assembly hall at Savli near Vadodara in Gujarat state.

Our propulsion systems manufacturing facility is also in

Vadodara at Maneja. We have a rail control solutions centre for

project delivery and product engineering, and an information

services hub near Gurgaon. And we also have an Engineering

Centre in Hyderabad.

In 2007, we invested ~€ 33mn in a state-of-the-art railway-

vehicle manufacturing facility at Savli in Gujarat. Overall, we

have invested ~US$ 100mn over the last two decades in

Indian manufacturing sites, people, engineering, the local

supplier network, and in proven technologies.

We are actively contributing to the ‘Make in India’ program

by delivering rail vehicles, products, and solutions that are

developed locally, for both Indian and foreign markets. We

also support the Indian government’s vision on ‘Skill India’ with

locally-grown talent now delivering projects, as well

as the ‘Clean India Movement’ by regularly

arranging clean up drives in Vadodara.

Bombardier truly incorporates “Make

in India for India” and “Make in India

Mr. Harsh Dhingra, Chief Coun-

try Representative, India, Bom-

bardier Transportation, takes GV

through his company’s journey

in India, its operations here, and

talks about the opportunity he

sees in the Indian rail segment

(railways and metros).

Harsh DhingraCHIEF COUNTRY REPRESENTATIVE, INDIA

Bombardier Transportation


for the World”.

Q: How has your relationship been with Delhi Metro

Rail Corporation (DMRC)?

Bombardier is the Delhi Metro’s largest supplier of

signalling systems and one of its largest suppliers of rolling

stock with more than US$ 1.2bn worth of orders placed

since 2007. We have delivered 614 BOMBARDIER MOVIA

metro cars and recently we have received an additional

order of 162 cars from DMRC – this makes it one of the

largest operating fleets in the world for Bombardier. We

have also delivered signalling solutions for more than

120km track length for Lines 5, 6 and 7.

Q: What has your relationship been with Indian

Railways (IR)?

Bombardier’s long-standing relationship with IR began

in 1993, with a design-and-build contract for electric

mainline passenger and freight locomotives. We now

supply propulsion equipment to IR for locomotives. In

June 2016, we completed in-house production for the

supply of propulsion and electrical equipment to Mumbai

Railway Vikas Corporation (MRVC) for 72 twelve-car trains.

Q: What is the potential opportunity in India, in the

metro segment, over the next five years?

Over the next 5-7 years, various cities in India will procure

approximately 3000 metro cars and 20 signalling lines. The

Indian government expects 50 cities to have a population

of over 2mn each by 2050, and is encouraging them to

develop mass transit systems. This will generate demand

for urban transit solutions, in which we excel.

We are focused on projects that we consider strategic

with long-term prospects for our operations in India. We

are closely pursuing various metro projects in the cities of

Delhi, Ahmedabad, Mumbai, Nagpur, Pune, Vijayawada,

Vizag, and Bengaluru, along with light rail projects in

Kerala state.

Q: How much localisation of technology have you

achieved at your India plant?

Bombardier’s investment in Gujarat has attracted global

“I appreciate the efforts of Bombardier Transportation to invest in India through the FDI route. We acknowledge the contribution of Bombardier in supporting India’s “Make in India” and “Skill India” programme by producing trains for India and for exports from India” – Mr. Narendra Modi, Honourable Prime Minster, India. at a meeting with Bombardier officials in May 2016

vendors to set up production facilities, within Gujarat

around our sites. This has increased the local content

considerably from the time manufacturing started at the

site in 2008. Currently the local content is at around 70%.

This means an increasing amount of our product is truly

Indian, with components available in INR, and not subject

to the volatility of international currency markets.

Q: What is the competitive landscape like in this

segment?

In terms of manufacturing facilities, three companies

have a base in India – Bombardier, BEML, and Alstom.

Along with these companies, we compete with Korean,

Japanese, Chinese and a host of other European players

in the Indian rail market.

Q: How have exports been from your Indian factories?

Our Savli site has developed extensive export-oriented

activities. We are currently supplying bogie components

for Adelaide EMUs, Victoria trains, Riyadh Metro and

São Paulo monorail and 75 six-car trains with bogies

for Queensland New Generation Rolling stock (QNGR)

project. Vehicle assembly and bogie manufacturing for

QNGR is taking place at the Savli facility while the Maneja

facility is supplying a portion of the propulsion equipment.

Three six-car trains have been delivered to date and they

are undergoing testing at our Wulkuraka Maintenance

Facility in Ipswich, Australia. These trains have travelled

more than 10,500km by road and sea from Savli to the

Port of Brisbane.

Q: Have you seen any changes with the new government

at the centre taking charge since 2014?

The Indian government, formed after the 2014 general

election, is actively pursuing a long-term vision for

sustainable and stable railways in India. Its ambitions are

huge and focused, with emphasis on improving safety,

expanding rail infrastructure, increasing track capacity,

reducing congestion, raising passenger comfort levels,

technological innovations, and faster train speeds.

Rail is considered a significant engine of inclusive growth


for India, with the potential to contribute up to 2% of

GDP, compared to current 1% levels. To maintain historic

levels of national growth at 7-8%, railway needs to grow by

~9.5% every year. This will create new jobs, save energy,

and improve the environment, while moving people, raw

materials, and goods more efficiently nationwide.

Q: Where will the money to transform India’s rail

transportation come from?

The Ministry of Railways has outlined its vision of railways

becoming a key provider of connectivity and enablers

of economic development, with a proposed US$ 125bn

investment over the next five years (2014-2019).

During its initial days in office, the government introduced

a plan for 100% FDI in the railways. In all, 17 areas have

been identified where industry players can invest up to

100% from which IR expects to collect around US$ 13bn.

In funding mass-transit systems, both the state and central

governments contribute ~20-25%, while the rest is funded

by outside agencies such as Japan’s JICA, Germany’s KfW,

the French AFD, European Investment Bank, and Export

Import Bank of India.

Q: Are you looking to bid for Mumbai Line 3 (MM3);

what is the timeline that you’re expecting for it?

We are interested in bidding for MM3 for Rolling stock

and Signalling contracts. We understand civil contracts for

MM3 will be awarded soon. The RFQ for rolling stock is

already out and we expect RFQ for signalling shortly. We

expect contract finalisation by Q2/2017, with supplies to

be made in 2019.

Q: Have tenders been invited for Phase 2 for the Jaipur

metro?

There are ongoing feasibility and alignment studies for

Phase 2 of Jaipur. Once we have more clarity on Phase 2

with detailed specifications, we will be able to comment

further.

Q: What is the scope of driverless trains, which will

be used in DMRC Phase 3? Does it require superior

technology? Who, apart from Bombardier, has that

technology?

The driverless technology goes back 40 years – Bombardier

was among the first companies to start implementing

this technology in 1983. The key advantage of driverless

technology is that it brings down the headway to 90

seconds from the current levels of around 2 minutes,

which is a welcome introduction for the commuters.

Driverless technology has two parts – rolling stock and

signalling, which have to be properly interfaced. For the

Phase-3 of the Delhi Metro, 60% of signalling has been

done by Bombardier, whereas trains are supplied by Rotem.

Q: It has been often cited that standardisation of

contracts/specifications is required in India – do you

agree with that?

Yes, standardisation helps in reducing costs. The

Indian market is maturing; things are moving towards

standardisation, and we strongly support this. We have

also been recommending that the authorities change the

bidding parameter to LCC (life-cycle cost) from acquisition

cost – this will help bring in international practice of

procurement.

Q: In its last Phase 3 bids, DMRC included a penalty

for energy efficiency. How was that received by the

industry?

Yes, the DMRC had proposed levying a penalty in the bid

on energy efficiency. Energy efficient products are always

preferred and I am sure that the industry welcomes it.

The understanding on evaluation methodology amongst

supplier and buyer is a key.

Q: What is opportunity for a player like Bombardier

from freight corridors, being developed by Indian

Railways?

If you see the current Indian Railways network, the average

speed of passenger trains on “A” routes (7,000-8,000km,

connecting important cities), is very low, due to movement

of freight trains. Freight trains move at ~25km/hr while

passenger trains move at ~40 km/hr (max 75km/hr). With

DFC in operation, the freight traffic will migrate to DFC

from the “A” routes. This will increase freight movement

speeds to 80km/hr and decongest the “A” routes. Hence,

IR can not only introduce more passenger trains on the “A”

routes, but can also increase their average speeds. This

migration will create demand for locomotives, coaches,

semi high-speed trains, as well as wagons.


Indian Economy – Trend Indicators

Monthly Economic Indicators

Quarterly Economic Indicators

Growth Rates (%) Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16

IIP 4.8 2.5 3.0 2.5 4.2 4.3 6.3 3.7 9.9 -3.4 -0.9 -1.5 2.0 0.1

PMI 51.2 52.1 51.3 52.6 51.3 52.7 52.3 51.2 50.7 50.3 49.1 51.1 51.1 52.4

Core sector 2.3 -0.7 -0.4 4.4 3.0 1.1 2.6 3.2 3.2 -1.3 0.9 2.9 5.7 6.4

WPI -2.1 -2.3 -2.4 -2.2 -2.1 -4.0 -5.1 -4.6 -3.7 -2.0 -0.7 -0.9 -1.0 -0.9

CPI 5.4 5.3 4.9 5.0 5.4 3.7 3.7 4.4 5.0 5.4 5.6 5.7 5.3 4.8

Money Supply 11.2 10.8 10.8 11.0 11.0 11.5 11.3 11.0 10.9 10.7 11.0 11.1 11.3 10.3

Deposit 11.2 10.7 10.7 11.5 11.4 11.8 11.9 11.3 11.1 10.4 10.9 11.1 11.0 9.9

Credit 7.2 8.7 9.2 8.8 9.5 9.4 9.0 7.5 9.0 9.8 11.1 11.4 11.6 11.3

Exports -13.3 -20.8 -14.0 -20.2 -15.8 -10.3 -20.7 -24.3 -17.5 -24.4 -14.7 -13.6 -5.7 -5.5

Imports -14.7 -14.2 -7.5 -16.5 -13.4 -10.3 -9.9 -25.4 -21.2 -30.3 -3.9 -11.0 -5.0 -21.6

Trade deficit (USD Bn) -6.7 -11.4 -11.0 -10.4 -10.8 -12.8 -12.5 -10.5 -9.8 -9.8 -11.7 -7.6 -6.5 -5.1

Net FDI (USD Bn) 3.2 2.7 3.3 3.8 1.7 1.7 2.2 2.8 4.9 2.7 3.6 4.1 2.8 1.5

FII (USD Bn) 3.8 2.0 3.1 -2.8 -2.0 -0.7 -3.5 -2.4 4.5 -3.8 -2.6 -1.5 -2.4 4.3

ECB (USD Bn) 2.3 2.7 7.3 2.4 3.2 2.1 0.8 2.6 2.1 3.2 3.0 1.4 1.4 1.5

NRI Deposits (USD Bn) 61.8 62.5 63.4 63.8 63.7 64.1 66.5 65.6 65.3 66.7 66.2 67.8 68.4 66.2

Dollar-Rupee 338.1 341.4 344.6 352.5 355.2 353.3 355.4 350.0 353.6 351.6 352.1 349.2 346.8 355.6

FOREX Reserves (USD Bn) 295.8 291.9 293.4 296.4 287.9 284.6 280.2 275.5 276.3 283.0 291.3 295.7 292.2 294.4

Balance of Payment (USD Bn) Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16Exports 79.8 83.7 81.7 85.3 79.0 70.8 68.0 67.6 64.9Imports 112.9 114.3 116.3 123.9 118.3 102.5 102.2 105.0 98.9Trade deficit -33.2 -30.7 -34.6 -38.6 -39.3 -31.7 -34.2 -37.4 -34.0Net Invisibles 29.1 29.3 26.7 28.5 30.9 30.2 28.0 29.2 26.9CAD -4.1 -1.3 -7.9 -10.1 -8.4 -1.5 -6.1 -8.2 -7.1CAD (% of GDP) 0.9 0.3 1.6 2.0 1.7 0.3 1.2 1.6 1.3Capital Account 23.8 9.2 19.2 16.5 23.6 30.7 18.1 7.2 10.5BoP 19.1 7.1 11.2 6.9 13.2 30.1 11.4 -0.9 4.1

GDP and its Components (YoY, %) Q3FY14 Q4FY14 Q1FY15 Q2FY15 Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16Agriculture & allied activities 3.8 4.4 2.6 2.8 -2.4 -1.4 1.6 2.0 -1.0Industry 5.5 5.5 8.1 6.2 3.4 7.2 7.1 8.4 11.0Mining & Quarrying 4.2 11.5 4.3 7.0 9.1 2.3 8.6 5.0 6.5Manufacturing 5.9 4.4 8.4 5.8 1.7 8.4 7.3 9.0 12.6Electricity, Gas & Water Supply 3.9 5.9 10.1 8.8 8.8 4.2 4.0 7.5 6.0Services 8.3 5.6 8.4 9.9 11.7 8.0 8.5 8.3 8.6Construction 3.8 1.2 6.5 5.3 4.9 1.4 6.0 1.2 4.0Trade, Hotel, Transport and Communications 12.4 9.9 12.1 8.4 6.2 14.1 10.5 8.1 10.1Finance, Insurance, Real Estate & Business Services 5.7 5.5 9.3 12.7 12.1 10.2 9.3 11.6 9.9Community, Social & Personal Services 9.1 2.4 2.8 10.3 25.3 0.1 6.1 7.1 7.5GDP at FC 6.6 5.3 7.4 8.1 6.7 6.1 7.2 7.5 7.1


Annual Economic Indicators and Forecasts Indicators Units FY8 FY9 FY10 FY11 FY12 FY13 FY14 FY15 FY16E FY17E

Real GDP growth % 9.3 6.7 8.6 8.9 6.7 4.5 4.7 7.2 6.8 7.5

Agriculture % 5.8 0.1 0.8 8.6 5.0 1.4 4.7 0.2 2.0 4.0

Industry % 9.2 4.1 10.2 8.3 6.7 0.9 -0.1 6.6 5.7 6.7

Services % 10.3 9.4 10.0 9.2 7.1 6.2 6.0 9.4 8.5 8.8

Real GDP Rs Bn 38966 41587 45161 49185 52475 54821 91698 98271 104953 112825

Real GDP US$ Bn 967 908 953 1079 1096 1008 1517 1611 1615 1684

Nominal GDP Rs Bn 49864 56301 64778 77841 90097 101133 113451 126538 137626 153212

Nominal GDP US$ Bn 1237 1229 1367 1707 1881 1859 1876 2074 2117 2287

Population Mn 1138 1154 1170 1186 1202 1219 1236 1254 1271 1302

Per Capita Income US$ 1087 1065 1168 1439 1565 1525 1518 1655 1666 1757

WPI (Average) % 4.7 8.1 3.8 9.6 8.7 7.4 6.0 2.0 -2.0 4.0

CPI (Average) % 6.4 9.0 12.4 10.4 8.3 10.2 9.5 6.0 5.0 5.0

Money Supply % 22.1 20.5 19.2 16.2 15.8 13.6 13.5 12.0 12.0 13.0

CRR % 7.50 5.00 5.75 6.00 4.75 4.00 4.00 4.0 4.0 4.0

Repo rate % 7.75 5.00 5.00 6.75 8.50 7.50 8.00 7.50 6.75 6.25-6.5

Reverse repo rate % 6.00 3.50 3.50 5.75 7.50 6.50 7.00 6.50 5.75 5.25-5.5

Bank Deposit growth % 22.4 19.9 17.2 15.9 13.5 14.4 14.6 11.4 12.0 13.5

Bank Credit growth % 22.3 17.5 16.9 21.5 17.0 15.0 14.3 9.5 10.0 12.0

Centre Fiscal Deficit Rs Bn 1437 3370 4140 3736 5160 5209 5245 5107 5351 5339

Centre Fiscal Deficit % of GDP 2.9 6.0 6.4 4.8 5.7 5.2 4.6 4.1 3.9 3.5

Gross Central Govt Borrowings Rs Bn 1681 2730 4510 4370 5098 5580 5641 5920 5850 6000

Net Central Govt Borrowings Rs Bn 1318 2336 3984 3254 4362 4674 4536 4531 4406 4252

State Fiscal Deficit % of GDP 1.5 2.4 2.9 2.1 1.9 2.0 2.5 2.4 2.0 1.5

Consolidated Fiscal Deficit % of GDP 4.4 8.4 9.3 6.9 7.6 6.9 7.1 6.6 5.9 5.0

Exports US$ Bn 166.2 189.0 182.4 251.1 309.8 306.6 318.6 316.7 270.0 283.5

YoY Growth % 28.9 13.7 -3.5 37.6 23.4 -1.0 3.9 -0.6 -14.8 5.0

Imports US$ Bn 257.6 308.5 300.6 381.1 499.5 502.2 466.2 460.9 406.0 428.3

YoY Growth % 35.1 19.7 -2.5 26.7 31.1 0.5 -7.2 -1.1 -11.9 5.5

Trade Balance US$ Bn -91.5 -119.5 -118.2 -129.9 -189.8 -195.6 -147.6 -144.2 -136.0 -144.8

Net Invisibles US$ Bn 75.7 91.6 80.0 84.6 111.604 107.5 115.2 116.2 118.8 121.1

Current Account Deficit US$ Bn -15.7 -27.9 -38.2 -45.3 -78.2 -88.2 -32.4 -27.9 -17.2 -23.7

CAD (% of GDP) % -1.3 -2.3 -2.8 -2.6 -4.2 -4.7 -1.7 -1.4 -0.8 -1.0

Capital Account Balance US$ Bn 106.6 7.8 51.6 62.0 67.8 89.3 48.8 90.0 50.4 75.5

Dollar-Rupee (Average) 40.3 45.8 47.4 45.6 47.9 54.4 60.5 61.2 65.0 67.0

Source: RBI, CSO, CGA, Ministry of Agriculture, Ministry of commerce, Bloomberg, PhillipCapital India Research


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18.

3 2

7.6

23.

3 3

.7

3.3

1

4.9

12.

6 1

6.6

14.

6 1

.9

1.8

Repc

o Ho

me

Finan

ce

Finan

cials

648

4

0,55

2 2

,508

1

0,98

7 2

,508

3

,196

1

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1

,901

2

4 3

0 2

0.7

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7.2

21.

4 4

.3

0.1

1

6.2

16.

1 1

7.0

18.

4 2

.2

2.2

Punj

ab N

atio

nal B

ank

Finan

cials

79

155

,811

1

72,7

75

195

,620

1

27,1

47

140

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3

1,25

9 4

3,19

5 1

6 2

1 -3

.9

31.

7 5

.0

3.8

0

.5

0.5

1

.2

1.1

7

.9

9.8

0

.5

0.6

Bank

of I

ndia

Fin

ancia

ls 8

7 7

1,04

0 1

13,0

51

127

,049

6

3,90

2 7

4,17

6 -3

1,88

7 1

1,07

6 -2

1 1

7 -1

82.5

-1

78.1

-4

.1

5.3

0

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0.5

1

.1

1.0

-1

1.5

3.8

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.5

0.2

Corp

orat

ion

bank

Finan

cials

38

38,

343

43,

730

49,

080

32,

989

36,

350

-1,9

21

2,6

48

22

26

28.

4 1

5.1

1.7

1

.5

0.1

0

.1

1.2

1

.1

-1.8

2

.3

-0.1

0

.1

Bank

of B

arod

a Fin

ancia

ls 1

58

363

,251

1

23,9

08

144

,969

8

5,90

3 1

03,2

71

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488

35,

224

10

17

-33.

2 6

5.5

15.

4 9

.3

1.1

0

.9

4.2

3

.5

-4.0

8

.8

-0.2

0

.5

Stat

e Ba

nk o

f Ind

iaFin

ancia

ls 1

89

1,4

63,2

84

761

,480

8

65,2

03

504

,778

5

04,6

29

126

,779

1

45,0

77

24

28

4.2

1

5.1

7.9

6

.8

1.0

0

.9

2.9

2

.9

7.3

7

.6

0.4

0

.7

Unio

n Ba

nk

Finan

cials

118

8

1,15

2 8

2,19

4 9

0,63

5 5

8,33

3 6

3,77

4 1

2,76

2 1

1,36

5 3

4 4

3 1

9.7

26.

8 3

.5

2.8

0

.5

0.5

1

.4

1.3

6

.6

5.4

0

.3

0.3


CMP

Mkt

Cap

Ne

t Sal

es (R

s mn)

EB

IDTA

(Rs

mn)

PAT (

Rs m

n)EP

S (R

s)

EPS

Grow

th (%

) P

/E (x

) P

/B (x

) EV

/EBI

TDA

(x)

ROE

(%)

ROCE

(%)

Nam

e of

com

pany

Sect

orRs

Rs m

nFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

E

ABB

Indi

aCa

pita

l Goo

ds 1

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2

72,1

65

81,

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92,

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7,1

25

8,6

33

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99

3,8

85

14

18

15.

8 2

9.6

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8 7

0.1

9.0

8

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38.

2 3

1.5

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1

1.0

Lars

en &

Toub

roCa

pita

l Goo

ds 1

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1

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1

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,884

1

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1

19,2

64

138

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4

4,07

9 5

4,79

3 4

7 5

9 -0

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24.

3 2

7.9

22.

5 2

.8

2.6

1

8.5

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7 1

0.0

11.

4 4

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4.9

KEC

Inte

rnat

iona

lCa

pita

l Goo

ds 1

31

33,

563

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242

93,

074

6,7

69

7,5

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7

9

59.

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6 1

4.7

2.3

2

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7

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3.8

9.5

1

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Ther

max

Capi

tal G

oods

768

9

1,52

4 5

4,82

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2

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Inox

Win

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37

52,

539

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332

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20

26

71.

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6 9

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2

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8.9

7

.0

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Alsto

m In

dia

Capi

tal G

oods

618

4

1,53

6 2

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7,90

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1

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9

18

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70

14

22

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8 6

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45.

2 2

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3.6

2

5.5

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8

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25.

8

Dalm

ia B

hara

t Ltd

Cem

ent

880

7

8,17

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5,28

8 8

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5

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1

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9 1,

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6 2

97.7

5

9.7

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.7

1.7

1

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7.1

2

.9

11.

6 5

.0

7.7

Shre

e Ce

men

tCe

men

t13

469

469

,221

6

0,80

3 8

8,59

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0 2

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1

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6 2

04

320

6

6.5

57.

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42.

1 8

.2

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3

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Man

gala

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emen

tCe

men

t 2

64

7,0

55

8,4

61

9,6

55

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8

n

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1 1

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1.3

2

4.5

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4.2

0

.9

4.6

OCL I

ndia

Cem

ent

507

2

8,82

0 2

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1 2

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5

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1

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3

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3

3 5

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7

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5

JK La

kshm

i Cem

ent

Cem

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344

4

0,52

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5

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7

05

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16

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JK C

emen

tCe

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t 5

90

41,

226

34,

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40,

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96

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9

2

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199

.5

64.

6 2

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2

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14.

9 1

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6

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Heid

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men

tCe

men

t 9

9 2

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n

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.8

Indi

a Cem

ent

Cem

ent

92

28,

322

58,

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65,

319

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24

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966

2

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3

8

n

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151

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3 1

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Ambu

ja C

emen

tCe

men

t 2

21

342

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2

17,5

73

257

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2

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9

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37.

2 3

2.5

23.

7 2

.3

2.3

1

1.2

7.7

7

.2

9.5

1

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10.

7

ACC

Cem

ent

1,4

62

274

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1

14,3

28

126

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1

1,73

0 1

5,91

7 7

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9

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4

0 5

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5.3

25.

2 3

6.5

29.

2 3

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3.1

2

2.3

16.

7 8

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10.

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9.7

Ultra

tech

Cem

ent

Cem

ent

3,2

28

885

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2

69,1

93

323

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4

8,32

1 6

5,05

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22

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5

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7 2

6.4

4.2

3

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20.

0 1

4.3

10.

6 1

4.1

8.2

1

1.0

LIC H

ousin

g Fin

ance

Finan

cials

469

2

36,7

88

124

,490

1

47,1

47

25,

186

29,

807

16,

280

19,

248

32

38

17.

4 1

8.2

14.

6 1

2.3

2.6

2

.2

9.4

7

.9

19.

2 1

9.4

1.3

1

.3

DCB

Bank

Finan

cials

92

26,

122

6,2

08

7,6

81

3,5

53

3,2

10

1,6

23

1,2

98

6

5

-15.

1 -2

0.0

15.

9 1

9.9

1.7

1

.5

7.4

8

.1

10.

0 7

.4

0.9

0

.6

Indu

sind

Bank

Finan

cials

1,0

66

634

,375

4

5,34

7 5

4,52

6 4

2,49

3 5

0,35

2 2

2,78

3 2

6,94

8 3

9 4

6 1

4.1

18.

3 2

7.6

23.

3 3

.7

3.3

1

4.9

12.

6 1

6.6

14.

6 1

.9

1.8

Repc

o Ho

me

Finan

ce

Finan

cials

648

4

0,55

2 2

,508

1

0,98

7 2

,508

3

,196

1

,492

1

,901

2

4 3

0 2

0.7

- 2

7.2

21.

4 4

.3

0.1

1

6.2

16.

1 1

7.0

18.

4 2

.2

2.2

Punj

ab N

atio

nal B

ank

Finan

cials

79

155

,811

1

72,7

75

195

,620

1

27,1

47

140

,053

3

1,25

9 4

3,19

5 1

6 2

1 -3

.9

31.

7 5

.0

3.8

0

.5

0.5

1

.2

1.1

7

.9

9.8

0

.5

0.6

Bank

of I

ndia

Fin

ancia

ls 8

7 7

1,04

0 1

13,0

51

127

,049

6

3,90

2 7

4,17

6 -3

1,88

7 1

1,07

6 -2

1 1

7 -1

82.5

-1

78.1

-4

.1

5.3

0

.6

0.5

1

.1

1.0

-1

1.5

3.8

-0

.5

0.2

Corp

orat

ion

bank

Finan

cials

38

38,

343

43,

730

49,

080

32,

989

36,

350

-1,9

21

2,6

48

22

26

28.

4 1

5.1

1.7

1

.5

0.1

0

.1

1.2

1

.1

-1.8

2

.3

-0.1

0

.1

Bank

of B

arod

a Fin

ancia

ls 1

58

363

,251

1

23,9

08

144

,969

8

5,90

3 1

03,2

71

-15,

488

35,

224

10

17

-33.

2 6

5.5

15.

4 9

.3

1.1

0

.9

4.2

3

.5

-4.0

8

.8

-0.2

0

.5

Stat

e Ba

nk o

f Ind

iaFin

ancia

ls 1

89

1,4

63,2

84

761

,480

8

65,2

03

504

,778

5

04,6

29

126

,779

1

45,0

77

24

28

4.2

1

5.1

7.9

6

.8

1.0

0

.9

2.9

2

.9

7.3

7

.6

0.4

0

.7

Unio

n Ba

nk

Finan

cials

118

8

1,15

2 8

2,19

4 9

0,63

5 5

8,33

3 6

3,77

4 1

2,76

2 1

1,36

5 3

4 4

3 1

9.7

26.

8 3

.5

2.8

0

.5

0.5

1

.4

1.3

6

.6

5.4

0

.3

0.3

Phill

ipC

apita

l Ind

ia C

over

age

Uni

vers

e: V

alua

tio

n Su

mm

ary

CMP

Mkt

Cap

Ne

t Sal

es (R

s mn)

EB

IDTA

(Rs

mn)

PAT (

Rs m

n)EP

S (R

s)

EPS

Grow

th (%

) P

/E (x

) P

/B (x

) EV

/EBI

TDA

(x)

ROE

(%)

ROCE

(%)

Nam

e of

com

pany

Sect

orRs

Rs m

nFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

EFY

16E

FY17

E

Cana

ra B

ank

Finan

cials

188

1

02,2

72

91,

757

99,

117

69,

458

71,

508

10,

027

14,

946

48

65

-15.

4 3

5.3

3.9

2

.9

0.5

0

.4

1.5

1

.4

3.7

5

.1

0.2

0

.2

Indi

an B

ank

Finan

cials

86

41,

401

44,

674

48,

420

31,

614

33,

215

7,3

86

9,1

03

22

28

5.3

2

8.6

3.9

3

.0

0.4

0

.4

1.3

1

.2

5.7

6

.7

0.4

0

.4

Orie

ntal

Ban

k of C

omFin

ancia

ls 8

4 2

7,09

4 5

3,53

8 5

9,12

6 3

8,91

3 4

1,59

6 5

47

4,2

62

31

43

86.

7 3

8.7

2.7

2

.0

0.3

0

.2

0.7

0

.7

0.4

3

.0

0.0

0

.2

ICIC

I Ban

kFin

ancia

ls 2

32

1,3

48,0

40

211

,212

2

43,0

27

250

,632

2

56,0

01

120

,868

1

30,5

80

21

22

7.9

7

.8

11.

1 1

0.3

1.7

1

.6

5.4

5

.3

14.

3 1

4.0

1.8

1

.7

Shrir

am Tr

ansp

ort F

inFin

ancia

ls 1

,120

2

54,0

29

50,

117

58,

103

36,

904

43,

284

13,

587

14,

911

60

66

9.8

9

.7

18.

7 1

7.0

112

.0

112

.0

6.9

5

.9

13.

9 1

3.5

2.1

2

.0

Shrir

am C

ity U

nion

Fin

Finan

cials

1,6

44

108

,358

2

3,84

5 2

7,16

9 1

3,95

0 1

5,98

7 6

,154

6

,884

9

3 1

04

10.

3 1

1.9

17.

6 1

5.7

2.4

2

.2

7.8

6

.8

14.

3 1

4.4

3.2

3

.2

AXIS

Ban

kFin

ancia

ls 4

93

1,1

74,5

97

163

,255

1

92,6

98

159

,084

1

81,8

27

85,

465

99,

622

34

37

10.

6 7

.5

14.

3 1

3.3

2.5

2

.2

7.4

6

.5

17.

7 1

7.8

1.7

1

.7

CIFC

Finan

cials

894

1

39,5

63

20,

710

24,

084

12,

220

14,

700

5,3

04

7,2

24

34

46

12.

5 3

6.2

26.

2 1

9.2

3.8

3

.2

11.

4 9

.5

15.

6 1

8.2

2.1

2

.4

HDFC

Lim

ited

Finan

cials

1,1

96

1,8

89,2

52

311

,386

3

53,6

56

100

,235

1

14,4

00

69,

114

79,

030

32

38

17.

4 -

37.

1 3

1.4

5.4

4

.7

18.

8 1

6.5

21.

0 2

1.1

2.6

2

.6

Mah

& M

ah Fi

naFin

ancia

ls 2

99

169

,919

3

1,75

5 3

5,66

6 2

0,16

0 2

2,75

2 5

,509

7

,602

1

0 1

3 -3

3.8

38.

0 3

0.6

22.

2 2

.8

2.6

8

.4

7.5

9

.5

12.

3 1

.5

1.9

HDFC

Ban

kFin

ancia

ls 1

,149

2

,906

,343

2

74,1

49

324

,937

2

23,3

51

263

,567

1

24,1

09

147

,056

5

0 5

9 2

1.5

18.

5 2

3.2

19.

6 4

.1

3.5

1

3.0

11.

0 1

8.6

19.

1 1

.9

1.9

SKS

Micr

ofina

nce

Finan

cials

598

7

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CMP

Mkt

Cap

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NTPC

Utili

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141

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PBGROUND VIEW GROUND VIEW 1 - 30 JUNE 2016 1 - 30 JUNE 2016 44

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pg 29. interview: mangu singh pg 32. interview: harsh

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