Indian Construction Equipment and Infra Finance Sector Overview

Market Study and Growth Outlook

2017

Maple Growth Partners

0
Project Objective and Focus of the Document

• One of our Singapore-based impact investing fund client had asked us to conduct a detailed study within the
Indian NBFC market to identify growth segments based on their investment criteria
• They were looking for tech-oriented companies with an investment ticket size of less than $1 million
• This full report is a 300 pager document providing a detailed overview of the Indian NBFC industry
• We first provided a broad overview of the Indian NBFC market and identified 12 service segments such as
SME, education, healthcare, auto, housing, infra finance, construction equipment finance, loan against
property (LAP), affordable housing, microfinance, gold, and wholesale finance
• Of these identified segments, we carried out a detailed study on the following 9 segments our client was
broadly interested into: SME, auto, healthcare, education, housing, affordable housing, construction
equipment finance, infra finance, and LAP
• Then, we compared and evaluated all these segments based on a strict investment parameter
framework to come up with a more fact-based (rather than intuitive) investment rationale and go-to-
market strategies
• We later presented our sector insights, value creation game plan, actionable targets for each of the
attractive segments, along with a directory of industry experts and influencers so that our client had the
primary first-hand resource to assess the investment opportunities within the identified attractive service
segments

• While the entire report is exclusive for the said client, we have provided our piecemeal analysis on the two
least interested sectors (from the client perspective) i.e. infrastructure financing and construction equipment
finance in order to showcase our research and analytical skillsets and capabilities

1
Table of Contents

• Indian NBFC Market Overview

1. Infrastructure Financing Market Overview
• Infra Finance Market Dynamics and Key Growth Drivers
• Critical Success Factors
• Major Challenges / Issues / Investment Concerns
• Key Companies and Financials Overview
• Selected M&A Deals
• Investors Focused on the Sub-Sector

2. Construction Equipment Finance Market Overview

• Construction Equipment Finance Market Dynamics and Key Growth Drivers
• Critical Success Factors
• Major Challenges / Issues / Investment Concerns
• Key Companies and Financials Overview
• Selected M&A Deals
• Investors Focused on the Sub-Sector

2
A. NBFC Market Overview and Segmentation

3
Structure of Non-banking Financial Institutions in India and Primary Focus Areas

Non Banking Financial Institutions

Non-Banking Financial All India Financial

Company (NBFC) Institutions (RBI)

Stock e/x,
NBFC- NBFC - Non Housing Nidhi
Insurance brokers,
Deposit Deposit Finance Companies /
Company merchant
taking Taking Company Chit fund
(IRDA) banking etc.
(RBI) (RBI) (NHB) (GOI)
(SEBI)

Loan Investment Loan Investment

Company Company Company Company

Asset Asset Infra

Residuary
Finance
NBFC
Finance Finance Primary Focus
Company Company Company Areas of this
Document
Core
Infra Debt
Investment
Fund
Company

Micro-
Factoring
finance

Note: The regulatory authority for the respective institution is indicated within the brackets 4
Source: CRISIL Research; RBI; MGP Research
Classification of NBFCs into Deposit and Non-Deposit Taking Categories

• NBFCs are classified on the basis of liabilities into two broad categories:
1. Deposit-taking (NBFC-D)
• Number of NBFC-D registered with RBI has declined from 776 in 2001 to 202 in 2016
2. Non-deposit-taking
• Deposit-taking NBFCs (NBFC – D) are subject to requirements of capital adequacy, liquid assets maintenance, exposure norms
• In recent years, NBFC sector has seen a fair degree of consolidation, leading to emergence of larger companies with diversified
activities. Consolidation and acquisition have increased number of NBFCs with asset base in excess of Rs 5bn. To ensure
sound development of these companies given their dominant share in NBFC assets, large size, and dependence on public
funds, the regulatory response has been to introduce exposure and capital adequacy norms for NBFCs with assets of Rs 5
billion and above (termed as NBFC – ND – SI)
• Further, in 2015, non-deposit-taking NBFCs with asset size of Rs 5 billion and above were labelled as ‘systemically important
non-deposit taking NBFCs’ (NBFC-ND-SI) and separate prudential regulations were made applicable to them
• The rest (NBFC-ND) which fall below this limit account for the majority proportion of the NBFC entities

Classification of NBFCs based on Liabilities

NBFCs
(11,682)

Deposit taking (NBFC –D) Non-Deposit Taking NBFCs

(202) (11,480)

Systemically important
NBFC –ND
(NBFC -ND-SI)
(11,260)
(220)

Note: Figures in brackets represent number of entities registered with RBI 5

Source: CRISIL Research; RBI; MGP Research
NBFCs are Steadily Gaining Share of Credit and Their Outstanding Loans Grew at
a CAGR of ~20% Between 2012 and 2016

• Non-banking Financial Companies (NBFCs) help fill gaps in the availability of financial services with respect to
products as well as customer and geographic segments. They cater to the unbanked masses in rural and
semi-urban reaches and lend to the informal sector and people without credit histories, thereby enabling the
government and regulators to realise the mission of financial inclusion
• Financing requirements in India have risen in sync with the economy’s notable growth over the past
decade. Non-banking financial companies (NBFCs) have played a major role in meeting this need,
complementing banks and other financial institutions.
• The outstanding loans of NBFCs grew from ~Rs. 8,300bn (~$129.6bn) in 2012 to ~Rs. 17,200bn (~$268.3bn)
in 2016 at a CAGR of ~20%
• As of March 2016, they accounted for 15% of the overall systemic credit
• NBFCs are expected to continue to gain market share and explore new markets given the positive operating
conditions, better operational efficiency, and public sector banks struggling on asset quality front
Growth in NBFCs Outstanding Loans (Rs. billion) NBFCs Share in Systematic Credit is Growing
20,000 30% 100%
CAGR 2012-2016: 19.9%
18,000 17,195 17% 18% 20%
25% 80%
16,000 21% 14,683 14% 14% 15%
25%
14,000
12,143 20%
23% 60%
12,000 10,398
10,000 17% 17% 15%
8,308 40%
8,000 69% 68% 65%
10%
6,000
20%
4,000
5%
2,000
0%
0 0% 2012 2014 2016
2012 2013 2014 2015 2016
Capital Market Borrowing and ECB NBFCs Credit Bank Credit
NBFCs Outstanding Growth y-o-y
6
Source: DHFL Annual Report 201-17; MGP Research and Analysis
Regulatory Distinction Between Banks and NBFCs

Key Regulatory Distinction Between NBFC and Banks

7
Source: CRISIL Research
Macro-Economic Indicators Highlight Significant Underdevelopment of Credit
and NBFC Segments in India When Compared to Major Economies

• Credit penetration in India is very low as compared to the major economies

• On similar benchmarks, NBFC penetration in India is even lower
• Economists believe that credit usually grows rapidly as economic growth gathers pace, thus it is safe to
assume that NBFCs will likely grow even faster, considering the growth rates seen over the past few years

While credit and NBFC penetration in India is very low as compared to the major economies, positive business
sentiments, favourable government policies, and ongoing growth in the economy will likely facilitate rise in
demand for credit and NBFCs going forward

Lower Credit Penetration in India vs Other Economies NBFC Size Substantially Lower vs Other Economies

Total credit as a percentage of GDP NBFC credit as a percentage of GDP

500 300
447 264
450
250
400 374
350
200
300
244
250 150 130
200 165
149 100
150 127 127 74
97
100
50 33 29 27 26
50 13
0 0

Germany
Japan

Malaysia

Japan

Malaysia
UK

Germany

India

UK

China

India
US

Thailand

US

Thailand
China

Source: BCC Research – Enormous Potential in Non-Bank Finance and

8
Ways to Make it Happen in India, December 2015
NBFC Market Segmentation and Focus on the Selected Sub-Sectors for this
Document

1. MSME Loans

2. Education

3. Affordable / Low-Cost Housing

4. Healthcare Financing

5. Housing

Non Banking
6. Auto Finance
Financial
Companies Market These highlighted
7. Infrastructure Financing sub-sectors will be
Segmentation discussed in detail
8. Construction Equipment Finance in the subsequent
sections

9. Gold Loan

11. Wholesale Finance

10. Microfinance

12. Loan Against Property

9
 1. Infrastructure Finance

A. Infra Finance Market Dynamics and Key Growth Drivers

B. Critical Success Factors
C. Major Challenges / Issues / Investment Concerns
D. Key Companies and Financials Overview
E. Selected M&A Deals
F. Investors Focused on the Sub-Sector

10
NBFC Loan Outstanding to Infra Projects is Projected to Increase at a Moderate
Growth of ~10-11% in the Near Term; Overall Loans to Infra Projects Also Rising

• While NBFC loan outstanding to infra projected have doubled over the past five years, annual growth has moderated
significantly from 20-25% levels seen earlier to 10-12% in the last two years
• Delays in road projects, lower-than-expected investments in telecom and hurdles in securing fuel linkages for power
projected have resulted in deceleration
• NBFC loan outstanding to infra projected is expected to reach ~ Rs. 7,100bn by FY2018, primarily led by brownfield
projects along with government focus on specific segments such as transmission and distribution in the power sector and
roads and infra among others
• Loans to infrastructure projects provided by both NBFCs and banks grew from Rs. 9.97tn in 2012 to Rs. 15.9tn in 2016 at a
CAGR of 12.6%

Outstanding Loans to Infrastructure Projects NBFC Loans to Infrastructure Projects

18,000
CAGR 2012 – 2016: 16.6% CAGR 2012 – 2016: 12.6%
15,920
8,000 CAGR 2016 – 2018E:11.0% 25.0% 16,000 14,963
21.9% 7,099
7,000 17.8% 14,000 13,383
6,282
20.0%
6,000 5,764 11,662
12,000
15.5% 5,169
9,905

(Rs. Billion)
5,000 10,000
(Rs. Billion)

4,387 13.0% 15.0%

4,000 3,799
8,000
3,116
11.5% 10.0%
3,000
6,000
9.0%
2,000
5.0% 4,000
1,000
2,000
- 0.0%
2012 2013 2014 2015 2016 2017E 2018E -
2012 2013 2014 2015 2016
NBFC Outstanding Loans Y-o-Y Growth

Source: CRISIL Research; MGP Research 11

Infra-Focused NBFCs Market Share has been Growing Steadily

• NBFCs market share is rising marginally on an annual basis since 2012 to currently stand at ~36% which is expected to further
continue this upward trend to reach ~38% by 2018
• While public sector banks are not that aggressive lenders to infra projects given their deteriorating asset quality and weak
capital position, they still account for ~80% of infrastructure loans among banks
• On the other hand, private corporate lenders are more focused on strengthening their retail franchises. Banks have been
cautious to lend the high value infra projects in the past few years and is expected to continue to do going forward
• Going forward, NBFCs are likely to continue to increase their share in the overall infra financing in India
• Most of the loans provided by NBFCs are long-term in nature with very minimal proportion accounting for short-term loans

Share of NBFCs v/s Banks Tenure Wise Portfolio Split for Banks and NBFCs (2015)
100% 100%

80% 80%

65% 64% 63% 62%

69% 67% 67%
60% 60% 78%
92%

40% 40%

20% 37% 38% 20%

33% 33% 35% 36%
31%
22%
8%
0% 0%
2012 2013 2014 2015 2016 2017E 2018E NBFCs Banks

NBFC Banks Short Term Loans Long Term Loans

Source: CRISIL Research; MGP Research 12

Growing Infra Spending and Investments Coupled With Rising Public Private
Partnerships (PPPs) Will Likely Drive Demand for Infra Financing (1/2)

• India’s investment in infrastructure is estimated to double to about ~$1 trillion during the 12th Five Year Plan
(2012-17) compared to the previous Five Year Plan
• Investment in infrastructure is the main growth driver of the construction equipment industry
• The NITI Aayog estimates total infrastructure spending to be about of 9% of GDP during the 12th Five
Year Plan (2012-17), up from ~7% during the previous plan (2007-12)
Infrastructure Spending During 11th and 12th Five-Year Infrastructure Spending as Percentage of GDP
Plan ($ billion)

12th Five Year Plan 9.0%

300 12th Five
Year Plan 11th Five Year Plan 7.0%
260
FY2017 9.0%
250
FY2016 8.4%
11th Five 211
Year Plan FY2015 7.9%
200
181
174 FY2014 7.6%
157
($ billion)

FY2013 7.4%
150
FY2012 8.4%

102 102 FY2011 7.9%

100 90
76 FY2010 7.5%
69
FY2009 7.2%
50
FY2008 6.4%

10th Five Year Plan 5.2%

0
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
13
Source: IBEF Construction Equipment Report, June 2017
Growing Infra Spending and Investments Coupled With Rising Public Private
Partnerships (PPPs) Will Likely Drive Demand for Infra Financing (2/2)

• Of total investment of ~$1 trillion during the 12th Five-Year 12th Five Year Plan – Fund Allocation to Infrastructure
Plan, over 20% each is estimated to have been allocated for Sub-Segments ($ billion)
roads and power sub-segments
400.0
• India has the world’s second largest road network – 356.4
spanning 4.7 million kilometres 350.0

• The Government intends to increase the paved road 300.0

to total road ratio and build more national highways
250.0 227.8
• China submitted a five year trade and cooperation
plan to India offering its willingness to finance 30 per 200.0
cent of government’s $1 trillion investment target
150.0 119.4 126.8
• Japan has also pledged USD35 billion investment
100.0 86.3 84.5
over the next five years
• India is second only to China in terms of the number of 50.0
Public Private Partnership (PPP) projects. The government
is promoting PPP models to help achieve its investment 0.0
Transport Power Telecom Irrigation Water Others
targets and to build 100 smart cities Supply

Rising Private Investments for Infrastructure Development PPP and Non PPP Project Distribution in Smart Cities
90% 80%
75% 67% 70%
75% 65% 57%
60%
60% 53%
47% 43%
45% 35% 40% 33% 30%
30% 25%
20%
15%
0% 0%
10th plan 11th plan 12th plan Phase I Phase II Phase III

Public Private PPP Projects Non - PPP Projects

14
Source: IBEF Construction Equipment Report, June 2017
Bonds and Banks, FIs are the Primary Source of Funding for Infra-Focused NBFCs

• NBFCs typically meet their funding requirements through market borrowings, particularly bonds
• Bond issuances accounted for ~77% of funds raised by NBFCs in 2016 and share of bonds exceeded ~84%
in total borrowings by PWC and REC
• Excluding PWC and REC, funding mix of other NBFCs is skewed towards banks and financial institutions,
which accounted for ~56% of the funding mix, with bonds and non-convertible debentures accounting for more
than 35% share
• The flow of bank credit to infra-focused NBFCs other than public sector infra-focused NBFCs can decline
going forward due to lower risk appetite and weak balance sheets of banks arising from large exposure to
NBFCs
• Moreover, due to a weaker rupee, domestic market borrowings will likely remain the largest source of finance
for NBFCs as of now
Funding Mix of All Infra-Focused NBFCs
90.0%
77.1%
75.0%

60.0% 56.2%

45.0%
35.8%

30.0%

15.0% 11.7%
7.8%
2.9% 1.9% 3.0% 3.2%
0.5%
0.0%
All Infra NBFCs Infra NBFCs - Excluding PWC and REC

Bonds Banks, FIs Foreign Currency Loans/ECBs Commercial Paper Others

Source: CRISIL Research, MGP Research 15

For the Projects Assisted by FIs in India, Power has been the Most Dominant Sub-
Sector with 56.7% Share of Total Industries and ~80% Share of Infra Projects

• Among the investments of the total projects (other sectors including textiles, mining, construction, hotels, food products, cement,
etc.), power sector accounted for about 56.7% share. Of the infra industry, power sector accounted for ~80% share
• Infrastructure industry includes power; roads and bridges; ports and airports; SEZ, industrial, biotech and IT park; storage and
water management; and telecom sectors. Infra accounted for ~73 share of the total projects assisted by financial institutions

Sector-Wise Share of Infrastructure Projects Assisted by Financial Institutions, 2015-16

100% 80.0%
1.6% 4.1%
5.7% 3.2% 5.6% 1.5% 4.9%
2.1% 73%
90% 6.5% 4.1%

(Infrastructure industry proportion to total industries)

10.9% 70.0%
(Share of sectors in the Infrastructure Industry)

5.4% 16.4% 7.3%

80%
4.6% 60.0%
3.2% 49% 54%
70%
49%
3.1% 2.8% 47% 49%
45% 50.0%
60%
3.9% 39%
50% 40.0%
40%
42.4% 35.1% 42.2%
46.2%
40% 37% 39.4%
29.4% 56.7% 30.0%

30% 27.9% 30.7%

18.3% 20.0%
20%

10.0%
10%

0% 0.0%
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Power Roads and Bridges Ports and Airports SEZ, Industrial, Biotech and IT Park Storage and Water Management Telecom

Source: Reserve Bank of India 16

In the Power Sector, Transmission and Distribution Segment has been Gaining
Share in the Overall Disbursements

• The share of disbursements in the transmission and distribution (T&D) segment in the overall power sector
grew from 17% t 28% in the last two years on account of strong support from the government in terms of
higher budgetary allocations whereas the share of disbursements in the generation segment have declined
from ~54% in 2014 to ~44% in 2016 due to poor financial health of private players and dearth of new projects
• While banks lent 60% of their infrastructure portfolio to the power segment (generation and T&D companies),
~92% of NBFCs outstanding infra loans were extended to the power sector. This ~92% is partly skewed by
the presence of government backed specialized institutions such as Power Finance Corporation (PFC) and
Rural Electrification Corporation (REC)

Power Sector Disbursements Breakdown by Segments Infrastructure Finance Portfolio Proportion

100% 100%
92%
17%
25% 30% 28%
30%
80% 80%
24%

60% 17% 60%

30% 24% 28% 60%

45%
40%
40% 35%
59%
54%
45% 46% 44%
20%
16% 18%
20%
12%
9%
0% 5% 4%
2012 2013 2014 2015 2016 1% 2%
0%
Others (Includes Transitional Finance, STL, BLC, etc) NBFC NBFC Excluding Banks
PWC and REC
Transmission and Distribution
Power Roads Telecom Other Infra
Generation
Source: CRISIL Research, MGP Research 17
While the Cost of Infra Projects Sanctioned by Financial Institutions has been
Declining Since the Previous Few Years, 2016 Reported a Solid Growth Y-o-Y

• Infrastructure investments grew at a CAGR of ~45% between 2006 and 2010 backed by the economic boom. However, global
recession of 2008-09 pulled India into the vortex of the global crisis and investments decelerated sharply between 2011 and
2015 as many companies cancelled/postponed their expansion plans in the anticipation of slower growth
• However, in FY2016, cost of infrastructure projects sanctioned by financial institutions surged by ~63% y-o-y with number of
projects increasing from 73 in 2015 to 114 in 2016
• Over the past year, the government has announced several policy changes to speed up project execution and address
issues related to fuel availability, economic feasibility of projects, and and financial health of discoms
• Over the next couple of years, according to CRISIL Research, infra investment growth will likely be in the range of 9-14%
• Continued efforts by government to improve ease of doing business coupled with slight improvement in performance of
the corporate sector will likely drive demand going forward

Institutionally Assisted Infrastructure Project Investments (Project Cost in the Year of Sanction)
2,500

Continued
2,002 2,015
government efforts,
2,000 2006-2010 CAGR of ~45% improved business
backed by the economic boom environment..

1,500 1,403
(Rs. Billion)

CAGR of
1,005 ~9-14%
1,000 905 908 932

695
507
500 445 426

-
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Reserve Bank of India, CRISIL Research 18

 1. Infrastructure Finance

A. Infra Finance Market Dynamics and Key Growth Drivers

B. Critical Success Factors
C. Major Challenges / Issues / Investment Concerns
D. Key Companies and Financials Overview
E. Selected M&A Deals
F. Investors Focused on the Sub-Sector

19
Critical Success Factors for NBFC Infrastructure Financing

• While sectoral exposure of banks is capped internally, such limitations are not applicable to NBFCs
1. No Caps on being specialized institutions
Sectoral
Exposure for • Banks have been cautious in lending the high value infrastructure projects and are focused in cleaning-
up their balance sheets. This has resulted NBFCs to gain infra finance market share from ~31% in
NBFCs
2012 to ~36% in 2016

• Public sector banks are not aggressive lenders to infra projects, given their deteriorating asset quality
2. Less and weak capital position
Competition From • On the other hand, private banks have been focusing more on building retail franchises
Banks
• This will likely result in increasing demand and better prospects for infra-focused NBFCs

• Long tenure infra loans typically widen the asset-liability mismatch for financiers
• Banks, for instance, rely almost exclusively on retail deposits to fund their advances. While the
average tenure of individual retail deposits does not exceed a year, infrastructure project
3. Long Tenure advances have significantly longer tenures
Infra Loans Better
for NBFCs • To narrow asset-liability mismatch and incentivise banks to fund infra projects, RBI released
guidelines on infra bonds and the 5/25 structure
• NBFCs do not typically have any asset-liability mismatch as its borrowings are also long term in nature.
Additionally, it does not have to abide to any RBI asset-liability related guidelines

4. Eased • As of April 2016, NBFCs can raise rupee-denominated ECBs with a minimum maturity of five years,
Overseas subject to 100% hedging
Borrowing Norms • Until then, RBI has allowed the infrastructure companies to raise only long-term external borrowings of
May Help in more than 10 years
Reducing Cost of • NBFCs get the benefit of this revised rule as they can borrow at a more competitive rate from
Funds the international rather than the domestic markets

Source: MGP Research and Analysis 20

 1. Infrastructure Finance

A. Infra Finance Market Dynamics and Key Growth Drivers

B. Critical Success Factors
C. Major Challenges / Issues / Investment Concerns
D. Key Companies and Financials Overview
E. Selected M&A Deals
F. Investors Focused on the Sub-Sector

21
Major Challenges / Issues / Investment Concerns for NBFC Infrastructure
Financing

• Overt the past few years, financiers have been finding it difficult to recover dues from developers and
contractors as borrowers were over-leveraged – making lenders very cautious in such environment
1. Difficulty in
Recovering Dues • ~17% of the overall loans were stressed finance (gross NPA + standard restructured assets) as
of March 201, though the stressed advanced ratio of the infra sector declined from ~22% in
September 2015 to ~175 in March 2016 for banks

• Cost of funds has been low for NBFCs given their significant dependence on the bond market – where
2. Significant
coupon rates are lower than bank rates
Dependence on
Bond Market • Bond issuances accounted for ~77% of funds raised by NBFCs in 2016 and share of bonds
exceeded ~84% in total borrowings by PWC and REC

3. NBFCs, • Bonds issued by PFC and REC have highest credit rating and are tax free, which allows them to keep
Excluding PFC their borrowing costs at a lower spread over government securities
and REC, Have • Compared to these two, NBFCs borrow at relatively higher rates, thus, aggregate net profit margins of
High Credit Cost NBFCs drops sharply when PFC and REC are excluded

• Risks associated with funding infrastructure projects are quite high. For example, in the power sector,
State Electricity Boards (SEBs) and state power utilities are large borrowers, whose financial health is
severely stressed
4. Stressed Asset
• High concentration of advances to these entities and their inability to meet debt obligations has led to
Level
higher than desirable levels of restricted loans on NBFCs books
• Share of restructured standard assets in total loan outstanding increased from 6% to 9%
to 12% in 2014, 2015, and 2016 respectively

4. High Borrowers • High sectoral exposure and borrower concentration heightened risks of large-ticket GNPAs
Concentration • Players like PFC and REC face high concentration risk as high as ~50% for top 10 borrowers
Risk

Source: MGP Research and Analysis 22

 1. Infrastructure Finance

A. Infra Finance Market Dynamics and Key Growth Drivers

B. Critical Success Factors
C. Major Challenges / Issues / Investment Concerns
D. Key Companies and Financials Overview
E. Selected M&A Deals
F. Investors Focused on the Sub-Sector

23
PFC and REC Together Account for ~75% Infra-Focused NBFCs Market Share

• Power Financial Corporation (PFC), the largest lender to the power sector, controls about ~41% share of the
total infrastructure NBFCs loan outstanding
• PFC and REC (Rural Electrification Company) together accounted for 76% market share of infra loan
outstanding by NBFCs
• While REC and PFC are specialized players, other NBFCs have a fairly diversified portfolio across power,
roads, telecommand urban infrastructure
Market Share Among Infra NBFCs (2016)

Others, 8%
L&T Infra, 4%

Power Finance
SREI Infra, 2% Corporation, 41%

IIFCL, 5%

IFCI, 4%

Rural Electrification
Corporation, 35%

Source: CRISIL Research 24

Power Finance Corporation Ltd (PFC)

Company Overview Key Performance Indicators

• Power Finance Corporation Limited provides financial
products and related advisory, and other services to the 2012 2013 2014 2015 2016 CAGR
power sector in India Loan Outstanding (Rs. bn) 1,301 104 1,888 2,172 2,375 16.2%
• The company offers fund based financial policies/products, Capital Adequacy Ratio 16.3% 18.0% 20.1% 20.3% 20.3% -
including asset acquisition; bridge, corporate, short term,
and rupee and foreign currency term loans; short term loan Tier - I Capital 15.4% 16.8% 16.4% 17.0% 17.1% -
for SPV; buyer’s line of credit; and credit facility for purchase Tier - II Capital 0.9% 1.2% 3.7% 3.4% 3.2% -
of power
Return on Equity 16.9% 19.7% 20.8% 19.6% 17.7% -
• It serves state electricity boards, state power utilities, state
electricity/power departments, other state departments, Return on Assets 2.5% 2.9% 3.0% 2.8% 2.6% -
central and joint sector power utilities, equipment Gross NPA 1.0% 0.7% 0.7% 1.1% 3.2% -
manufacturers, and private power sector utilities
Net NPA 0.0% 0.6% 0.5% 0.9% 2.6% -
• The company was founded in 1986 and is based in New
Delhi, India.

Profitability Ratio Other Miscellaneous

• Segment-wise Portfolio Mix (2016): Generation (72%);
2012 2013 2014 2015 2016
transmission (6%);distribution (3%); and others (19%)
Yield on Advances 10.97% 11.48% 12.03% 12.18% 12.02% • End-Market-wise Portfolio Mix (2016): State sector (69%);
Cost of Funds 8.83% 8.88% 8.89% 9.07% 8.66% central sector (9%); joint sector (6%); private sector (16%)
Gross Spread 2.15% 2.59% 3.13% 3.11% 3.36% • Borrowing Mix (2016): Bonds/NCDs (85.36%); Loans from
Banks and FIs (6.63%); Commercial Paper (2.64%); and
Operating Expenses 0.10% 0.09% 0.12% 0.12% 0.12% ECBs (5.37%)
Fee Income 0.11% 0.12% 0.11% 0.06% 0.04% • Geographic presence: pan-India (offers services in majority
Credit Costs 0.12% 0.05% 0.26% 0.41% 0.74% of the states throughout the country)
Net Profit Margins 2.03% 2.56% 2.86% 2.64% 2.54%

Source: Company Filings; CRISIL Research, MGP Research and Analysis 25

Rural Electrification Corporation Ltd (REC)

Company Overview Key Performance Indicators

• REC, a public financial institution, provides financing and
promotion services for power transmission, distribution, and 2012 2013 2014 2015 2016 CAGR
generation projects in India Loan Outstanding (Rs. bn) 1,014 1,274 1,485 1,796 2,013 18.7%
• It formulates, implements, and finances a range of power Disbursements (Rs. bn) 306 402 380 464 506 13.4%
projects. The company primarily offers long-term loans,
medium-term Loans, and short-terms loans, as well as other Capital Adequacy Ratio 16.0% 17.7% 19.4% 19.6% 20.4% -
products comprising debt refinance, bridge loans, equipment Tier - I Capital 15.1% 16.5% 16.0% 16.5% 17.5% -
lease, loans for power purchase through Indian energy
exchange, and transitional finance loans; and counter-part Tier - II Capital 0.9% 1.2% 3.3% 3.0% 2.9% -
funding for the integrated power development scheme Return on Equity 20.5% 23.6% 24.1% 22.7% 20.8% -
• The company serves Indian public sector power utilities, Return on Assets 2.8% 3.1% 3.2% 3.1% 2.8% -
such as central and state power utilities, as well as private
sector power utilities Gross NPA 0.5% 0.4% 0.3% 0.7% 1.7% -

• It was incorporated in 1969 and is based in New Delhi, India. Net NPA 0.4% 0.3% 0.2% 0.5% 1.2% -

Profitability Ratio Other Miscellaneous

• Segment-wise Portfolio Mix (2016): Generation (41%);
2012 2013 2014 2015 2016
transmission and distribution (58%); and others (1%)
Yield on Advances 10.82% 11.38% 12.14% 12.25% 12.35% • End-Market-wise Portfolio Mix (2016): State (82%);
Cost of Funds 8.04% 8.17% 8.58% 8.54% 8.92% central PSUs (3%); private (15%)
Gross Spread 2.78% 3.21% 3.57% 3.71% 3.43% • Borrowing Mix (2016): Bonds/NCDs (82.63%); Loans from
Banks and FIs (1.09%); Commercial Paper (3.31%); and
Operating Expenses 0.23% 0.18% 0.17% 0.18% 0.17% ECBs (12.96%)
Fee Income 0.07% 0.10% 0.06% 0.04% 0.03% • Geographic presence: pan-India (offers services in majority
Credit Costs 0.05% 0.11% 0.22% 0.48% 0.57% of the states throughout the country)
Net Profit Margins 2.57% 3.02% 3.24% 3.08% 2.72%

Source: Company Filings; CRISIL Research, MGP Research and Analysis 26

India Infrastructure Finance Company Ltd (IIFCL)

Company Overview Key Performance Indicators

• IIFCL operates as an infrastructure financing company
primarily in India 2012 2013 2014 2015 2016 CAGR

• It provides financial assistance to infrastructure sectors, Loan Outstanding (Rs. bn) 203.8 265.8 238.8 270.0 316.1 11.6%
such as road, power, airport, port, urban infrastructure,
Capital Adequacy Ratio - 19.0% 26.9% 25.1% 20.3% -
railways, and pooled municipal debt obligation facilities
• The company’s services include long term senior and Tier - I Capital - - - - - -
subordinate debt, takeout financing, credit enhancement, Tier - II Capital - - - - - -
and refinancing
Return on Equity 18.7% 24.6% 9.8% 12.0% 6.7% -
• It also provides advisory services, including project appraisal
and syndication services, as well as project development Return on Assets 2.3% 3.3% 1.4% 2.0% 1.2% -
services comprising conducting feasibility studies, project Gross NPA 0.0% 1.0% 3.8% 2.5% 3.1% -
structuring, financial structuring, and development of detailed
business cases Net NPA 0.0% 0.9% 2.8% 3.8% 2.2% -
• It was incorporated in 2006 and is based in New Delhi, India.

Profitability Ratio Other Miscellaneous

• Sector-wise distribution of cumulative disbursements
2012 2013 2014 2015 2016
(2016): Road (48%); Power (45%); Others such as ports,
Yield on Advances 9.91% 11.11% 10.87% 10.78% 12.03% railway, telecom, and urban infra (~7%)
Cost of Funds 7.08% 7.06% 8.61% 7.86% 9.26% • Types of financing - cumulative disbursements (2016):
Direct lending (73%); refinance (17%); and takeout finance
Gross Spread 2.83% 4.06% 2.27% 2.92% 2.78%
(11%)
Operating Expenses 0.18% 0.08% 0.08% 0.15% 0.17% • IIFCL is a wholly-owned Government of India company and
Fee Income 0.06% 0.09% 0.04% 0.07% 0.08% broadly caters to sub-sectors such as transportation, energy,
water, sanitation, communication, social and commercial
Credit Costs 0.19% 0.13% 0.91% 0.98% 1.77%
infrastructure
Net Profit Margins 2.52% 3.94% 1.31% 1.87% 0.91%

Source: Company Filings; CRISIL Research, MGP Research and Analysis 27

L&T Infrastructure Finance Ltd.

Company Overview Key Performance Indicators

• L&T Infrastructure Finance Ltd. (L&T Infra Finance) is
promoted by the engineering and construction conglomerate 2012 2013 2014 2015 2016 CAGR
Larsen and Toubro Limited (L&T) and L&T Finance Holdings Loan Outstanding (Rs. bn) 109.1 147.9 176.0 222.4 286.5 27.3%
Limited ( a subsidiary of L&T)
Capital Adequacy Ratio 16.4% 15.8% 17.8% 17.5% 19.9% -
• L&T Infra Finance was incorporated in 2006 and is
headquartered in Mumbai, India Tier - I Capital 16.0% 14.2% 15.8% 13.1% 14.0% -

• A NBFC, L&T Infra Finance provides various financial Tier - II Capital 0.3% 1.6% 2.0% 4.4% 5.9% -
products and services primarily for power, telecom, roads, Return on Equity 16.9% 16.6% 12.2% 9.0% 8.9% -
water, oil and gas, and other sectors in India.
Return on Assets 2.8% 2.6% 1.8% 1.2% 1.0% -
• The company offers debt financing solutions through various
products, such as term loans, debentures, securitized debt, Gross NPA 1.7% 1.5% 3.5% 1.9% 2.4% -
subordinated debt, mezzanine debt, convertible/non Net NPA 1.5% 1.2% 2.9% 1.3% 1.6% -
convertible debentures, and preference shares

Profitability Ratio Other Miscellaneous

• Loan Portfolio Mix (2016): Renewable power (33%); roads
2012 2013 2014 2015 2016
(22%); real estate (7%); thermal power (13%); power – Corp
Yield on Advances 12.48% 12.04% 11.61% 11.23% 11.19% + T&D (8%); telecom (4%); and others (13%)
Cost of Funds 9.48% 9.12% 9.32% 9.10% 9.23% • Borrowing Mix (2016): Bonds/NCDs (38.76%); Loans from
Banks and FIs (48.35%); Commercial Paper (5.75%); ECBs
Gross Spread 3.00% 2.92% 2.28% 2.13% 1.96%
(0.49%); Others (6.64%)
Operating Expenses 0.58% 0.58% 0.57% 0.49% 0.39% • It is one of the select few financial institutions classified as
Fee Income 0.32% 0.35% 0.21% 0.25% 0.01% an Infrastructure Finance Company (IFC) and as a Public
Finance Institution (PFI) by the Ministry of Corporate Affairs
Credit Costs 0.36% 0.58% 0.91% 1.43% 1.13%
• Geographic presence: pan-India
Net Profit Margins 2.38% 2.11% 1.01% 0.46% 0.46%

Source: Company Filings; CRISIL Research, MGP Research and Analysis 28

IFCI Ltd

Company Overview Key Performance Indicators

• IFCI, previously Industrial Finance Corporation of India,
2012 2013 2014 2015 2016 CAGR
cater to the long-term finance needs of the industrial sector
• Its financial products include Debt and Equity Segments Loan Outstanding (Rs. bn) 167 129 165 228 258 11.5%
• Its Debt Segment includes products, such as short- Capital Adequacy Ratio 21.3% 23.9% 21.3% 18.7% 16.9% -
term loans, medium-term loans and long-term loans
Tier - I Capital 12.8% 15.3% 13.9% 12.7% 11.5% -
• Its Equity Segment includes investment in IPO, right
issue, QIP and warrants, as well as in the secondary Tier - II Capital 8.4% 8.6% 7.5% 6.0% 5.4% -
markets for listed companies; strategic investment in Return on Equity 16.4% 9.2% 9.0% 8.9% 5.6% -
unlisted companies, and trading in the secondary
market, including equity derivatives Return on Assets 2.6% 1.7% 1.9% 1.7% 1.0% -
• The Company also provides infrastructure advisory Gross NPA 13.5% 22.2% 17.3% 10.3% 13.1% -
services and monitoring of public issues.
Net NPA 1.9% 10.2% 11.4% 7.2% 9.5% -
• IFCI Limited was founded in 1948 and is headquartered in
New Delhi, India

Profitability Ratio Other Miscellaneous

• Disbursement Mix (2016): Infra (25%); manufacturing
2012 2013 2014 2015 2016
(36%); services (25%); and others (14%)
Yield on Advances 10.99% 10.92% 11.34% 10.85% 11.34% • Borrowing Mix (2016): Bonds/NCDs (41.5%); Loans from
Cost of Funds 9.25% 9.25% 8.62% 8.99% 9.31% Banks and FIs (52.3%); Commercial Paper (0.9%); ECBs
(1.8%); Others (3.6%)
Gross Spread 1.74% 1.67% 2.72% 1.86% 2.03%
• Geographic presence: Pan-India
Operating Expenses 0.52% 0.45% 0.39% 0.30% 0.44%

Fee Income 0.20% 0.11% 0.14% 0.16% 0.07%

Credit Costs -0.47% 0.67% 2.07% 1.46% 2.66%

Net Profit Margins 1.89% 0.66% 0.40% 0.26% -1.00%

Source: Company Filings; CRISIL Research, MGP Research and Analysis 29

SREI Infrastructure Finance Ltd

Company Overview Key Performance Indicators

• Srei Infrastructure Finance Limited provides financial
services in India and internationally 2012 2013 2014 2015 2016 CAGR

• It operates through Financial Services and Loan Outstanding (Rs. bn) 91 101 114 122 134 10.3%
Infrastructure Equipment Services segments Capital Adequacy Ratio 20.2% 21.7% 17.8% 17.0% 17.5% -
• The company operates a portfolio of ~42,076 towers across Tier - I Capital 14.6% 14.3% 10.7% 11.2% 12.5% -
22 telecom circles in India; operates ~5,412 km of toll based
roads; rents infrastructure equipment for the construction, oil Tier - II Capital 5.6% 7.4% 7.1% 5.8% 5.0% -
and gas, and energy sectors; develops SEZ and industrial Return on Equity 2.3% 3.6% 2.2% 3.4% 2.1% -
parks; and invests in water and waste water management,
and solid waste management and recycling projects, as well Return on Assets 0.6% 0.7% 0.6% 0.6% 0.3% -
as engages in rural IT infrastructure business Gross NPA 0.9% 2.5% 2.4% 4.6% 4.5% -
• The company is a subsidiary of Adisri Commercial Private Net NPA 0.8% 2.2% 2.1% 3.8% 3.4% -
Limited. It was incorporated in 1985 and is based in Kolkata,
India.

Profitability Ratio Other Miscellaneous

• Loan Portfolio Mix (2016): Power (32%); transportation
2012 2013 2014 2015 2016
(26%); communications (12%); oil and gas (4%); social and
Yield on Advances 11.19% 12.15% 11.83% 11.55% 11.40% commercial infra (21%); and others (5%)
Cost of Funds 12.53% 12.91% 12.72% 11.41% 11.21% • Borrowing Mix (2016): Bonds/NCDs (20.75%); Loans from
Banks and FIs (72.01%); Commercial Paper (3.07%); ECBs
Gross Spread -1.33% -0.76% -0.90% 0.14% 0.20%
(4.04%); and others (0.13%)
Operating Expenses 0.97% 1.06% 0.93% 0.91% 0.98% • Geographic presence: pan-India (offers services in majority
Fee Income 0.67% 0.91% 0.91% 0.86% 0.21% of the states throughout the country)
Credit Costs 0.22% 0.24% 0.28% 0.69% 0.36%

Net Profit Margins -1.86% -1.15% -1.19% -0.60% -0.93%

Source: Company Filings; CRISIL Research, MGP Research and Analysis 30

IL&FS Financial Services Ltd

Company Overview Key Performance Indicators

• IL&FS Financial Services Limited (IFIN), a NBFC, provides a
range of financial and advisory solutions in India 2012 2013 2014 2015 2016 CAGR

• It specializes in infrastructure financing transactions, with a Loan Outstanding (Rs. bn) 74.2 98.7 98.9 98.0 125.2 14.0%
combination of investment banking skill sets, such as debt
Capital Adequacy Ratio 20.2% 22.0% 21.6% 21.6% 20.5% -
syndication, corporate advisory, and lending capabilities
• The company offers asset and structured finance products, Tier - I Capital 15.2% 14.2% 14.1% 14.4% 12.7% -
including acquisition financing, special situation financing, Tier - II Capital 5.0% 7.8% 7.5% 7.3% 7.7% -
mezzanine finance/quasi equity structure, operating lease,
structured debt and asset-based finance, and debt capital Return on Equity 15.5% 19.8% 14.0% 12.5% 9.2% -
markets; and project debt syndication services for Return on Assets 2.6% 2.9% 2.0% 1.7% 1.2% -
infrastructure, manufacturing, real estate, and other sectors
Gross NPA 0.6% 1.1% - 2.6% 2.8% -
• It was incorporated in 1995 and is based in Mumbai, India.
IL&FS Financial Services Limited is a subsidiary of Net NPA 0.4% 0.9% - 2.1% 2.2% -
Infrastructure Leasing & Financial Services Limited.

Profitability Ratio Other Miscellaneous

• Borrowing Mix (2016): Bonds/NCDs (19.65%); Loans from
2012 2013 2014 2015 2016
Banks and FIs (50.18%); Commercial Paper (18.05%);
Yield on Advances 13.16% 13.49% 13.25% 12.60% 11.08% Others (12.12%)
Cost of Funds 11.46% 11.63% 10.71% 10.31% 9.07% • Beyond the pan-India presence, IFIN has an international
presence through its fully-owned subsidiaries in Singapore,
Gross Spread 1.70% 1.87% 2.54% 2.30% 2.02%
UK, Hong Kong and Dubai
Operating Expenses 1.21% 1.13% 1.11% 0.98% 1.03% • From concept to commissioning, IL&FS houses the
Fee Income 2.08% 1.71% 0.94% 1.12% 1.09% expertise to provide the complete array of services
necessary for successful project completion: visioning,
Credit Costs 0.73% 0.43% 1.24% 1.20% 1.37%
documentation, finance, development, management,
Net Profit Margins 1.84% 2.01% 1.14% 1.24% 0.71% technology and execution

Source: Company Filings; CRISIL Research, MGP Research and Analysis 31

 1. Infrastructure Finance

A. Infra Finance Market Dynamics and Key Growth Drivers

B. Critical Success Factors
C. Major Challenges / Issues / Investment Concerns
D. Key Companies and Financials Overview
E. Selected M&A Deals
F. Investors Focused on the Sub-Sector

32
Major Deals in the Indian Infra Finance Sector; While There is Hardly any M&A
Activity in this Sector, Financial Buyers Primarily Invest in Public Companies

Date Target Business Description [Target/Issuer] Buyers Deal Value ($m) Eq. Value/ BV

L&T Infrastructure Finance Company Limited, a non-banking

International Finance
L&T Infrastructure financial company, provides various financial products and
Jul-17 Corporation, a PE/VC arm of 103 -
Finance Co. Ltd. services primarily for power, telecom, roads, water, oil and gas,
The World Bank Group
and other sectors in India.

India Infrastructure Finance Company Limited operates as an

India Infrastructure infrastructure financing company primarily in India. It provides
Dec-11 Finance Company financial assistance to infrastructure sectors, such as road, Government of India 176 -
Limited power, airport, port, urban infrastructure, railways, and pooled
municipal debt obligation facilities.

Financial Buyers Active in this Sector Invest in Sector-Focused Public Companies Through Private Placements. Infra and
Construction Equipment Financing (CEF) Markets are Dominated by Large Listed Firms, With Hardly any Sector-Focused
Small Private Players.

Source: Capital IQ; Above deals are private placements 33

 2. Construction Equipment Financing

A. Construction Equipment Finance Market Dynamics and Key Growth Drivers

B. Critical Success Factors
C. Major Challenges / Issues / Investment Concerns
D. Key Companies and Financials Overview
E. Selected M&A Deals
F. Investors Focused on the Sub-Sector

34
Construction Equipment Financing Overview

• Construction equipment financing (CEF) demand is primarily linked to the performance and growth prospects
of the overall urban infrastructure, roads, ports, irrigation, power, real estate, steel, cement, mining etc.
• In anticipation of potential growth, firms across various industries purchase new or used equipment, or opt for
equipment on lease. This results in an increase in demand for equipment which in turn drives demand for
construction equipment financing

Major End-Market Growth Components for Construction Equipment Financing

End-Use Industries

Construction (real
Mining and Quarrying Manufacturing (steel,
estate, roads, urban Power (coal-based)
(coal, iron ore, etc.) cement, fertilizers)
infrastructure, ports, etc.)

Mining shovel, walking Backhoe loader, cranes, Feeders, crushers,

Forklifts, cranes,
draglines, dumpers, excavator, compactor, conveyors, screeners,
conveyor, etc.
cranes, stacker, etc. stacker, reclaimers, etc. etc.

Growth in end-markets creates demand for construction equipment which in

turn facilitates demand for the related financing

35
Source: MGP Research
Indian Construction Equipment Revenue, Both in Terms of Volume and Value, is
Expected to Grow at a CAGR of ~13-14% Over the Next Few Years

• Sale of construction equipment in India in volume terms is expected to grow at a CAGR of __ between 2016
and 2018 to reach ~96,700 units by 2018
• Construction equipment industry revenue is expected to reach ~$5bn by 2020, growing at a CAGR of ~
between 2016 and 2020
• While industry revenue took a sharp fall in 2015 and 2016 amid a general weak sentiment in the Indian
economy coupled with slower industrial activity
• However, going forward, expected faster economic growth and the government’s efforts to accelerate
project clearances will likely drive demand for construction equipment in India, which will facilitate the
related financing demand

Total Number of Construction Equipment Units Sold Growth in Revenues From Construction Equipment
120.0 7.0 6.5
CAGR 2013 - 2016: 10.8% CAGR 2013 - 2016: -8.4%

CAGR 2016 – 2018E: 12.8% 96.7 6.0 CAGR 2016 – 2020E: 13.6%
100.0
5.1 5.0
5.0 4.6
80.0 76.0 4.3
72.2 4.2
(In thousands)

66.4 68.2 3.9 3.9

($ billion)
60.7 4.0 3.7
59.7
60.0 55.9
50.0 2.9 3.0
45.5 3.0
40.5
40.0
2.0

20.0 1.0

0.0 0.0
2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016
2018E

2020E
36
Source: IBEF Construction Equipment Report, June 2017
Construction Equipment Disbursement and Equipment-Financing NBFCs’ AUMs
are Expected to Grow at CAGR of ~9% and 12% Respectively, Between 2016-2018

• The government has announced several schemes, stepped up public investment, and re-started many stalled projects in order
to boost infrastructure spending. Policies were announced in sectors such as power and roads to spur investment
• Over the next few years, infrastructure projects will likely provide bulk of the construction opportunity, contributing ~92% of the
overall construction spending
• While construction growth is expected to be driven primarily by transportation infra (roads, rail, airports, ports); urban infra (mass
rail transit systems, water supply and sanitation, and urban housing), and rural infra (rural roads, irrigation, and rural housing),
spending on infra projects is expected to be low as firms in metals, petrochemicals, and cement slow expansion plans amid
muted demand and low utilization levels
• Indian construction industry market is expected to grow by ~7-9% in 2017, with growth averaging 11-12% annually over the next
five years. Indian CE disbursements is estimated to grow from ~ Rs. 243bn in 2016 to ~ Rs. 287bn by 2018 at a CAGR of ~9%
• NBFCs asset under management (AUMs) is expected to grow from Rs. 292bn in 2016 to Rs. 365bn by 2018, at a CAGR of
11.8%

Construction Equipment Disbursement Trend in India NBFC Asset Under Management (AUMs, Rs. bn)
350 400 20.0%
365
297 295 350
300 287 318 315 16%15.0%
275 299
257 255 253 285 287 292
243 300
250 12%
10.0%
250
(INR billion)

8%
200
200 5.0%
150 2%
150
0.0%
100 100
-4%
-5.0%
50 50 -6%

0 -10.0%
0
2012 2013 2014 2015 2016 2017E 2018E
2011 2012 2013 2014 2015 2016 2017E 2018E
NBFC AUM (Rs. Bn) AUM Growth y-o-y

37
Source: CRISIL Research
Growth Evolution of Construction Equipment Financing Market

Near Term Growth

2007 to 2012 2012 to 2016
Prospects
• Demand for construction equipment rose sharply • CEF market plunged as a • New government
between 2007 and 2012 led by infra and real slowdown in demand, fall in schemes, stepped-
estate development and NBFCs supporting small capacity utilization, policy up public
firms paralysis, delayed clearances, poor investment, and re-
financial health of infra companies, started many
• Robust sales of new equipment provided a boost ban on mining in some states, stalled projects in
to construction equipment financing limited access to long-term finance, order to boost
and high interest rates impacted infrastructure
• The size of the CEF industry in terms of
investments in infra sector spending over the
disbursements towards new equipment, posted a
next few years
CAGR of ~24% to Rs. 297bn during this period • Rising delinquencies prompted
financiers to turn cautious and • Construction
• The entry of new players increased finance
lower the LTV for new purchases equipment
penetration to ~80-85% from ~70-75% in the
financing for new
previous 7-8 years • Disbursements for purchase of equipment sales is
new equipment are estimated to projected to grow
• Rising competition pushed up LTV ratio to ~80%
have declined at a CAGR of ~5% at a CAGR of ~9%
for new sales
between 2012 and 2016 over the next 2
years

38
Source: CRISIL Research; MGP Research
Earth Moving Equipment is the Largest Construction Equipment Segment;
Crawler Excavators is Expected to be the Fastest Growing Equipment by 2018

Key construction Equipment Industry Segmental Breakup:-

• Earth Moving Equipment (ECE): Largest segment of the construction equipment sector in India and are primarily used in the
mining and construction industries. Equipment include backhoe leaders, excavators, wheeled loaders, dumpers/trucks, skid
steer loaders
• Material Handling Equipment: This segment has four categories: Storage and handling equipment, engineered systems,
industrial trucks, and bulk material handling
• Concrete Equipment: They are used to mix and transport concrete. Equipment include concrete pumps, aggregate crushers,
transit mixers, asphalt pavers, batching plants
• Road Building Equipment: They are used in various stages of road construction. Widely used ones are excavators, diggers,
loaders, scrapers, bulldozers, etc.
Crawler excavators is expected to be the fastest growing equipment by 2018, mainly on demand for mid-sized crawlers (20T) from
the construction segment and their versatile usage
Construction Equipment Revenue by Segments, 2015 Unit Sales of Equipment
100% 5.2% 3.0% 7.0% 5.9% 3.6%
Others (such as Material 4.0%
Processing), 6% 8.2% 7.2%
80% 4.5% 7.0% 6.0% 4.7%
10.7% 10.0% 10.3%
Road Construction
Equipment, 8% 60% 19.0%
23.0% 29.0%

40%
Material
Handling, 10%
49.5% 43.0%
20% 39.3%

0%
Earth Moving, 2014 2015 2018E
Concrete Equipment, 62% Backhoe Loaders Crawler Excavators
14%
Mobile Cranes Mobile Compressors
Compaction Equipment Wheeled Loader
Others
39
Source: IBEF Construction Equipment Report, June 2017
Increasing FDI Inflows in Earth Moving Equipment Segment and Potential Growth
in Concrete Equipment Sales Driven by RE Sector, to Stimulate Demand for CEF

• Fundamentals for the sector are set to remain strong on the back of increasing infrastructure investments
• Almost all global technology leaders in the construction equipment sector have a presence in India – either as joint
ventures or with their own manufacturing or marketing companies
• Cumulative FDI inflow (since April 2000) into market for earth-moving equipment increased to USD389.4mn till March 2017
• Joint ventures with global majors have provided domestic companies access to advanced technology and a whole gamut of
project management experience
• The burgeoning real estate industry in India gives a fillip to the demand for concrete and building construction equipment
• The residential real estate demand is driven by rising population and growing urbanisation; rising income levels leading
to higher demand for luxury projects; growing demand for affordable housing to meet lower income groups demand
• Commercial real estate demand will likely be driven by growth in IT/ITeS sector and organised retail
• India’s real estate market is anticipated to reach USD180 billion by 2020. Increasing construction is becoming more oriented
toward mechanisation to reduce project time and control costs – leading to higher demand for advanced construction equipment

FDI Inflows in Earth Moving Equipment ($ million) Concrete Equipment Sales Growth (Sales in ‘000s units)
450
Joint ventures with global majors have 389
400 provided domestic companies access to
advanced technology and a whole gamut 337
350
of project management experience
300
($million)

250 235
209
200 170 175
150 132 134 134 134

100 74 75
50
-
FY2012
FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2013

FY2014

FY2015

FY2016

FY2017

40
Source: IBEF Construction Equipment Report, June 2017
NBFCs Account for ~55% of the Total CEF Disbursements Towards New
Equipment; CEF Industry Enjoy High Finance Penetration of ~90%

• NBFCs dominate the organized funding segment in the CEF industry, accounting for ~54% share of total
disbursements towards new equipment
• Banks normally extend project finance (including disbursements for procuring equipment) and have
lower exposure to direct CEF
• Construction equipment industry has finance penetration of 80-85%, wit institutional sales or cash purchases
accounting for the balance
• Institutional sales include purchases by government institutions/corporation, such as Coal India, India
Army, Bharat Heavy Electricals Ltd, GAIL (India) Ltd, etc. and other such bodies procuring equipment
via tenders
• Imported machinery’s finance penetration is higher at about 90%

NBFC v/s Bank CEF Disbursements Construction Equipment Finance Penetration

100%
90% Institutional and cash
purchase, 15-20%
80%
55% 53% 54% 55% 55%
70%
60%
50%
40%
30%
45% 47% 46% 45% 45%
20%
10%
0% Financed, 80-85%
2013-14 2014-15 2015-16 2016-17P 2017-18P

Banks NBFC

41
Source: CRISIL Research; MGP Research
Used Equipment Account for ~30% of Total Equipment Financing; Retail Segment
Dominates CEF Industry

• Since 2012, low earning and dwindling number of new projects prompted a shift in customer preference towards used
equipment. In a bid to improve margins, financiers too stepped up funding for used equipment
• Disbursements towards used equipment accounted for 27-30% of overall construction equipment loans in 2015-16. In 2016-17,
used equipment disbursement is expected to comprise 25% as new equipment finance is expected to pick up
• First time buyers (FTBs) and retail customers account for ~65-70% share of the CEF industry
• While NBFCs focus mainly on retail customers, including first time buyers (FTBs), they also cater to large customers
• FTBs and retail customers generate higher margins for financiers as they are charged a higher rate of interest due to
lower credibility compared to large customers and lower bargaining power
• In terms of customer mix, banks mainly focus on large customers (contractors) because retail clients (hirers) rquirements are
generally small in size and have either limited documentation or take time in fulfilling the stringent criteria of the banks

Breakup Between Financing of New and Used Equipment CEF Financing Customer Mix

Contractor, 30%
Used equipment,
28%

New equipment, 72% Hirer and Retail

Segment, 70%

42
Source: CRISIL Research; MGP Research
Bank Funding is the Primary Source of Funds for NBFCs, Accounting for About
Two-Third Share of the Total Borrowings

• Bank funding (term and working capital loans) accounted for ~68% share of the total borrowing
• Post 2012, the Reserve Bank of India (RBI) securitization guidelines, the share of securitization in
overall borrowings of NBFCs declined to about 12% in 2014-15 from ~26% in 2011-12
• The RBI guidelines stipulated a holding period and minimum retention requirement for originating
NBFCs to securitise loans
• For SREI Equipment Finance, the share of securitization in overall borrowings increased to 20% in
FY2016 from 14% in FY2015

Borrowing Profile of NBFCs¹ – Skewed Towards Banks

100%
7% 8% 9% 8%
11%
15% 12% 12%
80% 20%
26% 5% 6%
11%
4%

60% 8%

40%
75% 73%
68% 68%
55%
20%

0%
2012 2013 2014 2015 2016

Bank Loans Debentures Securitization Others

Note:
1. The above chart is based on the borrowing profile of SREI Equipment Finance and Sriram Equipment Finance. 2016 Numbers are
only for SREI Equipment Finance 43
Source: CRISIL Research; MGP Research
Closer Look at SREI Equipment Financials, We Derive that Both RoA and Gross
NPAs Have Shown a Declining Trend in the Recent Period

• Return on asset (RoA) for SREI Equipment Finance as declined from the levels of 1.9% in 2012 to 0.7% in
2016. However, going forward, based on broker estimates, RoA for the company is expected to increase
marginally through 2019
• Delinquencies, which increased in the last few years, inched downwards in the second half of 2015-16. The
GNPA of SREI contracted to 2.8% in 2016 from 4.7% in 2015
• Industry experts believe that faster economic growth and the government’s efforts to accelerate project
clearances to improve utilization rates and earnings of equipment operators, will likely lead to flattish
NPAs in the near future

Return on Assets for SREI Equipment Finance Gross NPAs for SREI Equipment Finance
2.0% 1.9% 5.0%
4.7%
1.8%
1.8% 4.5%
4.0%
1.6% 4.0%

1.4% 1.3% 3.5%

1.2% 3.0% 2.8% 2.8% 2.8%

1.0% 0.9% 2.5%

0.8% 0.7% 2.0%

0.6% 1.5%

0.4% 1.0%

0.2% 0.5%

0.0% 0.0%
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Source: CRISIL Research; MGP Research 44

While Net Profit Margins in the Recent Past have Declined Due to Higher Credit
Costs, NPM is Projected to Improve Gradually Over the Near Term

• While financiers were able to reduce cost of funds in 2015, lower interest yield resulted in slightly lower gross
spread
• Net profit margin (NPM) showed a declining trends due to stable operating expenses and higher provisions
and write offs by financiers resulting in higher credit costs
• However, according to CRISIL Research, NPM is expected to improve in the near term due to
• Gross spreads to improve with a further decline in cost of funds
• Stable credit cost due to a shift towards 120-day NPA recognition, as improving economic growth and
faster project clearances limit delinquencies
• Operating expenses are also expected to decline as the number of repossessions are projected to
decline
Industry Profitability

2012 2013 2014 2015

Interest Yield 12.1% 12.6% 13.6% 13.2%
Cost of Funds 7.2% 7.7% 8.5% 8.2%
Gross Spread 4.8% 4.9% 5.1% 5.0%
Operating Expenses 1.6% 1.4% 1.4% 1.9%

Other Income 0.0% 0.0% 0.0% 0.0%

Credit Costs 0.7% 0.8% 1.5% 3.1%
Net Profit Margin 2.6% 2.7% 2.3% 0.1%

Source: CRISIL Research; MGP Research; Aggregate financials of SREI Equipment Finance and Shriram Equipment Finance

45
 2. Construction Equipment Financing

A. Construction Equipment Finance Market Dynamics and Key Growth Drivers

B. Critical Success Factors
C. Major Challenges / Issues / Investment Concerns
D. Key Companies and Financials Overview
E. Selected M&A Deals
F. Investors Focused on the Sub-Sector

46
Critical Success Factors for NBFC Construction Equipment Financing (1/2)

• Risks relating to asset quality are partially offset as NBFCs primarily lend to subcontractors and hirers.
1. Minimising These players can move their assets across projects, and are not dependent on specific projects to
Asset Quality generate cash flow
Risk • Good rentals and firm demand can help construction equipment owners recover cost faster, improving
their repayment capacity

2. Residual Value • While the average life of major construction equipment is 6-7 years, the loan tenure typically ranges
of Equipment only 3-4 years
Incentivises • Thus, the residual value of the equipment incentivises borrowers to repay sooner. Additionally, as the
Borrowers to Pay equipment forms the collateral, lenders are comfortable about loan recovery in case of defaults

• To minimize and manage risk, construction equipment owners are trying to grow a well-distributed
3. Global
business across many states and are also exploring diversification into other lines of businesses
Positioning
Systems (GPS) • Hence, to monitor such accounts, some lenders are using global positioning systems to see the
deployment of equipment to clients

• As compared to banks, NBFCs have better processes focused on target customers and wider reach –
4. Operational aided by direct selling agents and a faster documentation process
Efficiency • NBFCs have better recovery systems, which include warehouses at strategic locations to house the
repossessed equipment, in case of defaults

• In infrastructure projects, the big developers usually sub-contract part of their work to the small and
medium scale entrepreneurs who constitute the bottom of the infrastructure pyramid
5. NBFCs Know • However, these players do not enjoy access to institutional financing (like banks). Thus, it is the NBFCs
Their Target which cater to the credit needs of such players
Customers • The NBFCs have grass-roots knowledge of the credit needs of these players and have a fair idea of
their capability. NBFCs take a call on extending credit to these players based on the track record of
these players, their order books, cash flow, etc.

Source: MGP Research and Analysis 47

Critical Success Factors for NBFC Construction Equipment Financing (2/2)

• NBFCs have better understanding of customers’ businesses, associated risks and cash flows
• NBFCs recommend equipment selection, suggest prudent asset redeployment in the event of any
project becoming stressed or asset become idle
• Moreover, as leasing/rental of construction equipment is a fragmented industry, NBFCs also have
equipment rental/leasing offerings
6. Beyond the
Financing Role • Specialized financiers support clients across the lifecycle of the asset – procurement, deployment,
maintenance and disposal
• They offer a range of services such as new equipment loan, used equipment loan, leading solutions,
equipment rental, and disposal services
• They also facilitate trade-ins, exchange and financing of refurbished equipment in tie up with dealers
and manufacturers

• NBFCs have been preferred by customers due to their reach, services and structured product offerings
• NBFCs offer doorstep services, tailor made schemes to suit individual requirement, higher loan to
7.Others value, simple documentation process, flexible repayments, and various customer-friendly schemes
• A combination of these services enable NBFCs differentiate themselves with other competitors and
banks

Source: MGP Research and Analysis 48

 2. Construction Equipment Financing

A. Construction Equipment Finance Market Dynamics and Key Growth Drivers

B. Critical Success Factors
C. Major Challenges / Issues / Investment Concerns
D. Key Companies and Financials Overview
E. Selected M&A Deals
F. Investors Focused on the Sub-Sector

49
Major Challenges / Issues / Investment Concerns for NBFC Construction
Equipment Financing (1/2)

• The equipment finance industry is highly cyclical. Challenging macroeconomic environment adversely
affect cash flows to borrowers
1. Highly Cyclical
• A confluence of multiple macroeconomic problems, both at home and abroad, can create a situation
where liquidity is scarce and the cost of credit is high

• Delays related to forest and environment clearance and delay as a result of land not being acquired
escalate project costs, discourage lenders, and send negative signals to investors
2. Clearance and • This also results in an increased interest costs for the sector. This is impacting large infra companies
Land Acquisition and their project viability. Policy issues like land acquisition, environmental clearances and mining need
Delays to be addressed on priority basis.
• A sense of policy paralysis can slow down both project implementation as well as announcement of
new projects

• Loan recovery is a major challenge for NBFCs

• NBFCs do not enjoy a level playing field vis-à-vis banks and other financial institutions,
3. Loan Recovery especially when it comes to issues like making provisions for bad loans, while recovering assets
and Difficulty in once a loan goes bad or paying taxes on sticky advances
Repossession of • With the regulatory framework tilted heavily in favour of borrowers, this creates incentives for
Assets wilful defaults
• With most borrowers working in government / quasi-government projects, repossession of assets in
case of defaults becomes even more challenging for NBFCs

• The secondary market for used equipment in India is underdeveloped

4. Under- • While the financing penetration for used machines is small, there exists no proper trading platform for
developed Used used equipment
Equipment Market • Putting in place a proper registration procedure for infrastructure equipment is key to an orderly growth
of used equipment market as this can help in calculation of residual value of used equipment.

Source: MGP Research and Analysis 50

Major Challenges / Issues / Investment Concerns for NBFC Construction
Equipment Financing (2/2)

• Most heavy equipment are not registered and are without all-India permits

5. Taxation or • Inter-state movements of these equipment become a nightmare for operators. We anticipate that with
the Introduction of GST, some of these hindrances may come down
Regulatory Issues
• Lack of clarity and transparency in policy regulations is a major hindrance faced both by finance
seekers and providers in the CE spectrum

• Prime life of each equipment is around 3-4 years

6. Low • With rapid technological progress, the equipment life-cycle is progressively getting shorter
Depreciation Rate • In this backdrop, a depreciation rate of only 15% p.a. for an equipment asset acts as a major deterrent
for a healthy growth of the industry (compared with 30% for commercial vehicles)

7. Limited • Original equipment manufacturers (OEMs) in India offer limited financing options, and payment terms
Financing for first-time users are often unfavourable.
Options From • The result is that access to financing prevents many prospective users from buying
OEMs

• Organised players with large rental fleets are in limited numbers in India because they lack the capital
to expand. These organised players face huge pricing competition from the unorganised segment,
8. Low Rental where players are involved in off-the-book cash transactions and can therefore offer much lower rates
Penetration
• Renting penetration is India is much lower (7-8%) than in other large ECE markets (65% in the US and
35% in China) because of a tax regime that makes moving equipment across states unviable

• For interest paid to NBFCs on loans for equipment financing, tax is deducted at the source, which is
not the case with banks
9. Others
• According to AT Kearney, external commercial borrowing (ECB) as a source of funds is available only
when purchasing imported equipment; it is not available for domestic equipment

Source: MGP Research and Analysis 51

 2. Construction Equipment Financing

A. Construction Equipment Finance Market Dynamics and Key Growth Drivers

B. Critical Success Factors
C. Major Challenges / Issues / Investment Concerns
D. Major Companies
E. Selected M&A Deals
F. Investors Focused on the Sub-Sector

52
Organized Players Account for ~90% Share of the Overall CEF Industry; SREI
Equipment Finance is the Largest Player

• The CEF industry is largely organized given the high equipment prices, asset valuation expertise and
dependence on customer relationships, accounting for ~90% share of total construction equipment financed
(in volume terms)
• Major players are SREI Equipment Finance, Sriram Equipment Finance (Shriram Transport Finance
Company), Magma Fincorp, L&T Finance, DFC Bank, Kotak Mahindra Bank, and ICICI Bank
• Unorganized players include small financiers with local presence
• Specialized financiers support clients across the lifecycle of the asset, i.e. procurement, deployment,
maintenance, and disposal. They offer a range of services such as new equipment loan, used equipment loan,
leasing solutions, equipment rental, and disposal services. They also facilitate trade-ins, exchange and
financing of refurbished equipment in tie up with dealers and manufacturers

NBFCs/HFCs LAP Borrower Base Share of Collateralized Properties

Unorganized, 10% Others, 20%

L&T Finance, 4%

SREI Equipment
Magma Finance, 64%
Fincorp, 6%

Shriram Equipment
Organized, 90% Finance, 6%

53
Source: CRISIL Research; MGP Research
 2. Construction Equipment Financing

A. Construction Equipment Finance Market Dynamics and Key Growth Drivers

B. Critical Success Factors
C. Major Challenges / Issues / Investment Concerns
D. Major Companies
E. Selected M&A Deals
F. Investors Focused on the Sub-Sector

54
Major Deals in the Construction Equipment Finance Sector in India (1/2)

Date Target Business Description Buyers Deal Value ($m) Eq. Value/ BV

Money Masters Money Masters Leasing & Finance Limited, a non-banking

May-17 Leasing & Finance financial company, provides hire purchase and leasing services - 0.5 -
Limited (BSE:535910) for small and medium business enterprises in India.

Kwality Credit & Leasing Limited operates as a non-banking

Kwality Credit &
Sep-16 financial company in India. It offers hypothecation of vehicles - 0.0 -
Leasing (BSE:531206)
and equipment, and loans for machineries.

Sakthi Finance Sakthi Finance Limited, a non-banking financial company,

Aug-16 - 116.9 -
Limited (BSE:511066) primarily provides asset financing services in India.

Amarnath Securities is involved in the hire-purchase, leasing,

Amarnath Securities
May-16 and financing lease operations; and purchasing, selling, hiring, - 0.1 1.64x
Limited (BSE:538465)
or letting on hire plant and machinery, and equipment.

Amarnath Securities is involved in the hire-purchase, leasing,

Amarnath Securities
May-16 and financing lease operations; and purchasing, selling, hiring, - 0.2 0.931x
Limited (BSE:538465)
or letting on hire plant and machinery, and equipment.

Sakthi Finance Sakthi Finance Limited, a non-banking financial company, ABT Investments (India)
Apr-16 - -
Limited (BSE:511066) primarily provides asset financing services in India. Private Limited

Frontier Capital It engages in the financing of heavy commercial vehicles and Inimitable Capital Finance
Aug-14 3.3 -
Limited construction equipment for individual and corporate customers. Private Limited

Sakthi Finance Sakthi Finance Limited, a non-banking financial company,

Aug-14 - 3.2 -
Limited (BSE:511066) primarily provides asset financing services in India.
Frontier Capital It engages in the financing of heavy commercial vehicles and
Jan-14 - 0.0 0.19x
Limited construction equipment for individual and corporate customers.
Frontier Capital It engages in the financing of heavy commercial vehicles and Inimitable Capital Finance
Nov-13 4.2 -
Limited construction equipment for individual and corporate customers. Private Limited

Kwality Credit & Kwality Credit & Leasing Limited offers hypothecation of
Jan-13 - 1.5 -
Leasing (BSE:531206) vehicles and equipment, and loans for machineries.

Note: Deals in borders are M&As while others

are private placements
55
Source: Capital IQ; MGP Research and Analysis
Major Deals in the Construction Equipment Finance Sector in India (2/2)

Date Target Business Description Buyers Deal Value ($m) Eq. Value/ BV

Srei Equipment It offers financial Services and infrastructure equipment BNP Paribas SA; SREI
Aug-12 38.0 -
Finance Limited services in India and internationally Infrastructure Finance Ltd

DFL Infrastructure DFL Infrastructure Finance Limited offers financing for tractors
Mar-12 Auctus Holdings Pvt Ltd 0.0 -
Finance (BSE:511393) and farm equipment and construction equipment to customers.

Sakthi Finance Sakthi Finance Limited, a non-banking financial company, Avdhoot Finance; Sakthi
Feb-12 5.7 -
Limited (BSE:511066) primarily provides asset financing services in India. Financial Services

DFL Infrastructure DFL Infrastructure Finance Limited offers financing for tractors
Apr-11 Group of investors* 1.0 -
Finance (BSE:511393) and farm equipment and construction equipment to customers.

Frontier Capital It engages in the financing of heavy commercial vehicles and Inimitable Capital Finance
Dec-09 0.1 1.16x
Limited construction equipment for individual and corporate customers. Private Limited

GE Capital GE Capital Transportation Financial Services, Ltd. provides

GE Capital (Mauritius)
Jun-08 Transportation financial solutions for the transportation segment. It also 11.8 2.54x
Investment Company, Ltd.
Financial Services Ltd. provides construction and mining equipment financing.
DFL Infrastructure DFL Infrastructure Finance Limited offers financing for tractors
May-08 Zwirn Pragati Capfin Pvt. Ltd. 5.2 -
Finance (BSE:511393) and farm equipment and construction equipment to customers.

Frontier Capital It engages in the financing of heavy commercial vehicles and

Aug-07 - 0.0 1.02x
Limited construction equipment for individual and corporate customers.

DFL Infrastructure DFL Infrastructure Finance Limited offers financing for tractors
Feb-07 D.B. Zwirn & Co., L.P. 5.1 -
Finance (BSE:511393) and farm equipment and construction equipment to customers.

DFL Infrastructure DFL Infrastructure Finance Limited offers financing for tractors
Aug-06 D.B. Zwirn & Co., L.P. 8.0 7.96x
Finance (BSE:511393) and farm equipment and construction equipment to customers.

Note: Deals in borders are M&As while others

are private placements
Source: Capital IQ; MGP Research and Analysis 56
We haven’t included these investors in our ‘major investors in the sub-sector’ section, as this was a private placement deal
Investors Landscape for the Construction Equipment Financing Sub-Sector - Most
of these Investors are Strategic Buyers or Holding Companies

Most Recent Bite Size - Min &

Geographies # of Transactions, AUM Industries of Current and Pending Subs/
Company Name Fund Size ($m) Max Equity
of Interest Last 3 Years as - ($bn) Interest Investments List
and Closed Date Investment ($m)

Buyer Seller Size Date Min Max

BNP Paribas SA Long list of non-relevant Spanish
1 - 7 3 - - - - - -
(ENXTPA:BNP) companies
ABT Investments Sakthi Finance Limited
2 (India) Private - 2 - - - - - - - (BSE:511066); Sakthi Sugars
Limited Limited (BSE:507315)
Auctus Holdings DFL Infrastructure Finance Limited
3 - - - - - - - - -
Pvt Ltd (BSE:511393)
Avdhoot Finance and Investment
Avdhoot Finance
Private Limited, Asset Management
4 and Investment - - - - - - - - -
Arm; Sakthi Finance Limited
Private Limited
(BSE:511066)
D.B. Zwirn & Co.,
5 - - - - - - - - - -
L.P.
GE Capital
GE Capital Transportation Financial
(Mauritius)
6 - - - - - - - - - Services Ltd.; KSK Power Ventur
Investment
PLC (LSE:KSK)
Company, Ltd.
Inimitable Capital
7 - - - - - - - - - Frontier Capital Limited
Finance Pvt Ltd
Sakthi Financial Sakthi Finance Limited
8 - - - - - - - - -
Services (Cochin) (BSE:511066)
DFL Infrastructure Finance Limited
Zwirn Pragati
9 - - - - - - - - - (BSE:511393); Zwirn Pragati Capfin
Capfin Pvt. Ltd.
Pvt. Ltd., Asset Management Arm

Financial Buyers Active in this Sector Invest Directly in Sector-Focused Public Companies. Infra and CEF Markets are
Dominated by Large Listed Firms, With Hardly any Sector-Focused Small Private Players.

Source: MGP Research 57

Research Resources

• IBEF Construction Equipment Report, June 2017

• BCC Research – Enormous Potential in Non-Bank Finance and Ways to Make it Happen in India, December
2015

• DHFL Annual Report 201-17; MGP Research and Analysis

• CRISIL Research

• Reserve Bank of India

• Capital IQ

• Company filings

• MGP Research and Analysis

58
Disclaimer

• This document has been compiled by Maple Growth Partners (MGP) from sources believed to be reliable, but
no representation or warranty, express or implied, is made by MGP, its affiliates or any other person as to its
accuracy, completeness or correctness. Such information may be incomplete or condensed and/or may not
have been independently validated by MGP. MGP expressly disclaims liability for any direct or consequential
loss arising from any use or reliance upon this material or the information contained herein.

• Certain of the information contained herein represents or is based upon forward-looking statements or
information, which may include descriptions of anticipated market conditions and changes, and expectations
of future industry activity. Maple Growth Partners believes that such statements and information are based
upon reasonable estimates and assumptions. However, forward-looking statements and information are
inherently uncertain and actual events or results may differ from those projected. Therefore, undue reliance
should not be placed on such forward-looking statements and information.

MAPLE GROWTH PARTNERS

+91 9930-206-207
niraj.singhvi@maplegrowthpartners.com

59