2016-17 GAINING ANNUAL Report 2016-17MOMENTUM CAPITAL FIRST LIMITED Built on a strong foundation 2016-17 GAINING MOMENTUM Built on a strong foundation 3 CONTENTS 04 05 10 14 Corporate Capital First Chairman’s Directors and Information at a Glance Address Senior Management 17 24 28 59 Growing Improved Directors’ Management Responsibly Recognitions Report Discussion and Analysis 65 78 128 Report on Corporate Standalone Consolidated Governance Financial Statements Financial Statements CAPITAL FIRST LIMITED } ANNUAL REPORT 2016-17 Our Vision To be a leading financial services provider - Admired and respected for high corporate governance, ethics and values To support the growth of Self-employed enterprises and MSMES in India with debt capital through TECHNOLOGY-ENABLED platforms and processes To finance the aspirations of the Indian Consumers using new-age analytics and technology solutions 2 2016-17 GAINING MOMENTUM Built on a strong foundation Our Values Responsibility We respect the fact that our investors have entrusted us with their capital, our partners with their faith, our customers with their confidence and our employees with their aspirations. We will measure our success by the success of our stakeholders and will work diligently to ensure that we fulfil our fiduciary responsibility. Integrity We firmly believe that the difference between a good business and a great organisation is the integrity of its people. We will conduct ourselves ethically and transparently in all our dealings, both internal and external. Leadership We will maintain an environment which fosters creativity and encourages innovation and run an ethical organisation. We believe that this will enable us to attract, retain and nurture the best talent and contribute to their growth. Mutual Respect We will build an organisation which has a positive mindset. By conducting every interaction with respect and consideration, we will create a self-reinforcing culture of success. Community We believe that it is our responsibility to contribute to the environment in which we operate. By investing in our community, we will not only improve our surroundings today, but also provide better opportunities for future generations. 3 CAPITAL FIRST LIMITED } ANNUAL REPORT 2016-17 Corporate Information BOARD OF DIRECTORS HEAD - LEGAL, COMPLIANCE AND General Insurance Corporation of Punjab National Bank India Mr. V. Vaidyanathan COMPANY SECRETARY Reliance General Insurance Co. Ltd. Chairman & Managing Director Mr. Satish Gaikwad Gratuity Fund Reliance Mutual Fund DIN - 00082596 HDFC Ergo General Insurance Royal Sundaram General Co. Ltd. Mr. N. C. Singhal INVESTOR RELATIONS Insurance Co. Ltd. Independent Director Mr. Saptarshi Bapari HDFC Bank Ltd. DIN - 00004916 SBI General Insurance Co. Ltd. HDFC Standard Life Insurance SBI Mutual Fund Mr. Vishal Mahadevia LIST OF BANKING RELATIONSHIPS & Co. Ltd. Non-Executive Director SUBSCRIBERS TO DEBT ISSUES Small Industries Development DIN - 01035771 HSBC Bank Bank of India Allahabad Bank HSBC Mutual Fund Mr. M. S. Sundara Rajan Star Union Dai-ichi Life Insurance Andhra Bank Independent Director IDBI Bank Ltd. Co. Ltd. DIN - 00169775 Bank of Maharashtra IDBI Mutual Fund State Bank of Bikaner & Jaipur Mr. Hemang Raja Bank of Baroda IDFC Bank Limited State Bank of Hyderabad Independent Director DIN - 00040769 Bank of India IFFCO-TOKIO General Insurance State Bank of India Co. Ltd. Superannuation Funds Dr. (Mrs.) Brinda Jagirdar BNP Paribas Mutual Fund Indian Bank Syndicate Bank Independent Director Canara Bank DIN - 06979864 Indian Overseas Bank Taurus Mutual Fund Canara Robeco Mutual Fund Mr. Dinesh Kanabar Indusind Bank The Federal Bank Limited Independent Director Central Bank of India DIN - 00003252 International Finance Corporation The New India Assurance Co. Ltd. Cholamandalam MS General Invesco Mutual Fund UCO Bank Mr. Narendra Ostawal Insurance Company Ltd. Non-Executive Director Citibank Kotak Bank Ltd. Union Bank of India DIN - 06530414 L&T Liquid Fund Corporation Bank Union Mutual Fund Mr. Apul Nayyar LIC Mutual Fund United Bank of India Executive Director Dena Bank DIN - 01738973 Life Insurance Corporation of India UTI Mutual Fund Deutsche Bank Mr. Nihal Desai MUDRA Vijaya Bank DHFL Pramerica Life Insurance Executive Director Co. Ltd. National Bank for Agriculture and DIN - 03288923 Rural Development STATUTORY AUDITORS DHFL Pramerica Mutual Fund Oriental Bank of Commerce M/s. S.R. Batliboi & Co. LLP, CHIEF FINANCIAL OFFICER & Franklin India Mutual Fund Chartered Accountants HEAD - CORPORATE CENTRE Pension Fund Future Generali India Insurance (ICAI Firm Registration Mr. Pankaj Sanklecha Co. Ltd. Provident Funds No. 301003E/E300005) 4 2016-17 GAINING MOMENTUM Built on a strong foundation CAPITAL FIRST AT A GLANCE ` 198.24 Billion AAA ` 33,988 million AUM Credit Rating Total Capital 0.95% 0.30% 4.06 million Gross NPA Net NPA Customers Financed 20.34% 222 Capital Adequacy Locations covered across India Ratio 5 CAPITAL FIRST LIMITED } ANNUAL REPORT 2016-17 1. A Transformative Journey Capital First has transformed from a Wholesale Lending NBFC to a strong Retail Lending NBFC in the last 7 years Retail Loans Real Estate & Corporate Loans Total AUM ` 75.10 bn ` 61.86 bn 26% 74% ` 27.51 bn 44% 56% ` Capital First is founded by way of 9.35 bn a Management Buyout with equity 28% backing of ` 8.10 billion from 10% 72% Warburg Pincus • Existing Shareholders bought 90% out with these funds • New Board of Directors • Merged subsidiary NBFC with parent to release capital Constituted • Divested Forex business • ` 1 billion of equity raised • The management developed proof of concept of new retail by the Company through financing business by use of technology in catering to Preferential Allotment Wholesale NBFC + underserved segments and presented the same to many • Open offer for the minority Broking Subsidiary + Private Equity Players for their equity backing shareholders concluded Forex Business • New brand and entity “Capital First” created 2008-2010 2010 - 2012 2012 - 2013 March 31, March 31, March 31, March 31, 2010 2011 2012 2013 6 2016-17 GAINING MOMENTUM Built on a strong foundation ` 198.24 bn 7% ` 160.41 bn 14% ` 119.75 bn 93% ` 96.79 bn 16% 86% 19% 84% 81% Company continued its journey to grow its retail financing businesses catering to consumer and MSME segment and achieved many new milestones every year since then • “Capital First” is a lesser known brand in India since it is newly conceptualised. But it is gaining recognition in the marketplace of late. Reviews are generally very positive. • Number of customers financed grew from a few thousand to over four million within five years. • A number of marquee Domestic and International investors joined the Company as its shareholders along the way • Market Capitalisation of the Company increased from ` 7.81 billion (` 781 crores) as on March 31, 2012 (last date of the financial year immediately preceding the Management Buyout) to ` 76.23 billion (` 7,623 crores) as on March 31, 2017 2013 To DATE March 31, March 31, March 31, March 31, 2014 2015 2016 2017 7 CAPITAL FIRST LIMITED } ANNUAL REPORT 2016-17 2. Number of Lenders (Nos.) Banks Mutual Funds 220 + Provident Funds 6 Pension Funds 5 Gratuity & Superannuation Funds 11 Insurance Companies Financial Institutions 18 Others + Total 170 + 11 7 5 6 15 12 108 + 102 2 + 2 14 11 134 7 6 92 59 41 51 + 2 6 41 4 + 2 1 12 3 2 15 4 24 8 6 10 13 + 2 9 27 26 27 31 5 23 22 + 13 5 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 8 2016-17 GAINING MOMENTUM Built on a strong foundation 3. Dividend (%) 26 24 22 20 18 FY 13 FY 14 FY 15 FY 16 FY 17 4. Total Capital (` Mn) 33,988 27,385 22,388 17,869 15,107 10,316 7,471 6,909 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 9 CAPITAL FIRST LIMITED } ANNUAL REPORT 2016-17 Chairman’s Address Dear Stakeholders, It gives me great pleasure to present to you your Company’s Annual Report for FY17, share with you your Company’s progress thus far, and thoughts for the future. Clearly the most significant event of the year was the government’s decision to demonetise 86% of the high-value currency in circulation in one stroke. This government has implemented many significant reforms since it has assumed office three years ago, but demonetisation has to be counted as the boldest decision this government has taken. No matter what the contrasting opinions were, for all high-value currency to hit the system and wash itself for cleanliness, and to give a one-time jolt to promote digital India, this was amazing means. Data shows that economic activity is back to pre-November levels. Enquiries for loans are a lightning rod for economic activity. CIBIL reports show 10 2016-17 GAINING MOMENTUM Built on a strong foundation instead of buying from another state of India! When the bill was passed “Iron man Sardar in the Rajya Sabha in August 2016, I It’s more Vallabhbhai Patel tweeted “Iron man Sardar Vallabhbhai equitable - after all Patel unified India politically, GST unified India will unify India economically. It’s that why should small big a moment”. That sums up GST’s enterprises pay politically, GST significance for generations. will unify India the same tax slab The smartest decision by this economically. It’s government has to be accepting as the large ones? Aadhaar as the platform for a new that big a moment” India, even if it was initiated by the previous government. The Aadhaar we “also” provide subsidy benefits to platform has not only made a digital that retail loan enquiries fell 12% in people outside of such authentication India possible through e-kyc, November ‘16 over September ‘16, system, the ghosts will always hide e-signature, and e-payments, but has but by February ‘17, it was higher over under the “also” category, we can’t also helped reduce ghost beneficiaries September ‘16 by 9%.