3/21/2013

CRABS GOLD LOAN CO.

GROUP 4 - CRABS

Ashwin Trivedi - 52 Sachin Tilak - 51 Archana Prabhu - 38 Kejal Kothari - 28 Vicky Sheth - 47 Chandana Das - 9 Parag Babaria - 2

MAJOR PLAYERS

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WHY, WHEN, HOW

WHY- An individual / business in urgent need of money at competitive interest rates. Also a farmer in rural area is in urgent need of cash and does not have a bank account. When There is no collateral available to be pledged in banks and not all sources of funds can be disclosed. Cash is required immediately. HOW- Pledge available gold and get cash on the 75% (as per KUB Rao committee report) of gold valued (valuation) with variety of re-payment schemes and at interest rates lower than personal loans.

GOLD LOAN COMPANIES NBFC / BANKS

NBFCs 1. Primary Products, better service offering Banks 1. Gold Loan for agri, as safer bet for priority sector lending 2. Low on returns compared to NBFC and personal loans approx 14.5%

2. Command premium on interest upto 24%

3. Flexibility and Rapid disbursal, KYC norms 3. Stringent KYC norms and paper work not very stringent dissuade customer from approaching banks. 3. Low default percentage 3. High Defalut percentage

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GEOGRAPHICAL DEMAND OF GOLD

MASLOW'S LAW OF HIERARCHY

TARGET SEGMENT

Business need / Fund requirement

Loan for personal works /Family emergency To cover shortfall for home loan/ Repay old debts of higher interest/ To tackle crop failure etc

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WHY GLC

WHY GLC

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WHY GLC

Gold price increase CAGR 24% and GL by Banks and NBFCs increase by CAGR of 65%

BCG MATRIX
Stars Smart Gold Loans Question marks Forex Transfer

Cash cow Express 3 minutes Gold Loans

Dogs

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SWOT
Strength 1. Over the counter deals 2. Minimal paper work 3. Very low NPA levels 4. Flexibility of early repayment 5. No minimum limit. Weakness 1. Lean KYC procedures 2. Loan Concentration 3. Proper claim settlement procedures

Opportunity 1. Tap into 2 tier, 3 tier and Rural market 2. Tap markets of high real estate growth.

Threat 1. Drastic fall in Gold prices (weak threat) 2. Entry of organised banks into GL market.

THREAT TO BUSINESS

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PORTERS 5 FORCES
Medium Threat of new entrants, Existing banks

Suppliers power is High

Moderate competition

Buyers power is low

Moderate threat of substitute

GOLD LOAN FEATURES : WHY US

Secured Loan Multiple options available depending on payback period and amount of loan Low disbursal times: Banks : Few days ( strict KYC procedure) Disburse loans as low as three minutes to a few hours ( lean KYC norms) High loan-to-value (LTV) ratios: Banks <= 60% of the gold value as loan Our Value offer : 75% in case of high-purity gold

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GOLD LOAN FEATURES : WHY US

Shorter loan tenures: No minimum period, if need be, loan amount can be returned the very next day Varied interest rates:

Depends on the tenure and amount of loan Banks : Varies from 17% to 19% in the case of banks Our offer :Spanning from 21% to 24%. ( on daily reducing balance) Multiple repayment options:

Interest amount with principal being repaid at the end of the period in one lump Sum OR Repayment through EMI covering interest as well as principal on Daily reducing balance

STRATEGY
Create Awareness on ADVANTAGES

Avoids debt trap Simple procedures, fast disbursal No depreciation of underlying asset In practice, without recourse No questions asked Suited for the unorganised sector Moral pressure against default Gains for the wider economy
Economical Differentiator: Marginally low interest rates for various products and moderately low for long term products. Social Differentiator: To attract customers who go to local pawn brokers / co-opertative society for loans through effective marketing.

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TARGET MARKET
Satara Kolhapur Belt Initially 3 branches in Phase 1 Phase 2 Vai Shirwal Sangli Koregaon Satara Karad Kolhapur

High decibel promotion of products during yearly fairs( held in rural areas) or places of worship Then expansion to various districts in Maharashtra in phase wise manner if the products are successful

SOURCE OF FUNDS
Initial funding for setup expenses from Banks ( Loans against personal Guarantee) / WC for setup of office and administrative expenses Venture capital funding / PE investor
VC or PE investor will help provide the platform for growth and the capital required for rolling the business

Bank Borrowing
Banks lend at Base rate (i.e 13.75 %)

NCDd: GLC can raise loans via NCDs but since a new company this route is practically not workable.

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SOURCE OF FUNDS

USE OF FUNDS

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LOAN CONCENTRATION
10

On the spot Loan 30 60 Short term Long Term

PROPOSED INCOME PLAN

YEAR

2012-13
5,00,00,000

2013-14
11,00,00,000

ALLOCATION OF FUNDS

Sales

4 new branches opened

VC C FC PBIT Interest PBT Tax Net Profit

40000000 80% 10000000 2000000 20% 8000000 1040000 13% 6960000 20,88,000 30% 48,72,000 0.09744 9.7%

Salary, operating expenses, expansion cost, Marketing, promotions, Admin, 88000000 80% Interest payable on borrowed funds etc
22000000 4400000 20% Rent, Security 17600000 2420000 14% 15180000 4554000 30% 10626000 0.0966 9.66%

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REGULATORY ISSUES
To increase LTV ratio to 75% will help GLCs to increase business at rapid pace. A cap on lending rate (spread) would affect the profitability of GLCs Use of Pan card and cheque based disbursement for transactions over 2 lakhs. GLCs to reduce there dependence on NCDs as it will affect there long term performance. If the spread i.e. difference between borrowing rate and lending rate is regulated by RBI then profitability would be majorly hampered. Currently GLCs enjoy a spread of approx 9.75% to 11%.

WHY ITS FLOURISHING / OR WHY VERY LOW NPA

LTV is regulated at 60% and hence even the remotest possibility of gold prices decreasing by 10% would be hedged against the collateral available. Average repayment period of GL is in 3 to 6 months Gold is traditionally and asset which is kept as a hedge against inflation, war or market crash and emergency requirement.

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ASSET QUALITY AND GROSS NPA

TOP LINE AND BOTTOM LINE

Profitability:

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LONG TERM STRATEGY

To expand cautiously in Rural markets and ensure penetration specially in agricultural belts of Maharashtra. To continue the trend for approx 5 years and then with enough cash reserves buyout the VC funds stake and become a major partner.

Thank You
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