Transcript Current Infra Finance

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