Peer-to-Peer Lending

Concept Presentation

1
 Commercial Banking Industry Size (Rs Bn)

100000 18%
94754

90000 16%
16%
15% 81943
80000
14%
71271
70000
12%
60000
10%
50000 47377 47377
40971 40971 8%
40000
35636 35636
6%
30000

4%
20000

10000 2%

0 0% 0%
Feb.25, 2011 Feb.24, 2012 Feb.22, 2013

Total Loan Size Nationalized Banks (Rs Bn) Total Loan Size Pvt & Other Banks* (Rs Bn) (E)
Total Loan Size of All Banks* (Rs Bn) (E) Loan Growth Rate (%)
Note:
1. The above data is from the RBI website, and has been extrapolated for private and other banks in the ratio of 50:50
2. The credit extended to Agriculture, Industries, Services & Personal loan has only been considered

2
Personal Loan Market Size (Rs Bn)

20000 16%
Agriculture; 11548 18000 17552
14% 14%
12.18% 16000 15360
18.52% 12% 12%
14000 13666
Personal; 17552 10%
12000
10000 8%
8000 6%
6000
Services; 4%
22007 Industry; 4000
43647
23.22%
2000 2%

46.06% 0 0% 0%
Feb.25, 2011 Feb.24, 2012 Feb.22, 2013

Total Personal Loan (Rs Bn) (E) Y-o-Y Growth Rate (%)

The personal loan category growing at 14% y-o-y

3
 Break up of Personal Loan Portfolio (Rs Bn)
Consumer Durables; 162

Other Personal Loans; 3366

Vehicle Loans; 2173 Housing (Including Priority Sector

Housing); 9066

Education; 1102
Credit Card Outstanding; 510

Advances to Individuals against share,

bonds, etc.; 63
Advances against Fixed Deposits (Including FCNR (B),
NRNR Deposits etc.); 1111

The Advance against FD’s, FCNR, NRNR is Rs 1111 Bn, which is the target market for
raising funds
4
 Current Immediate LASS Market size Funnel

• Rs 94754 Bn
Total Banking Loan • Public v/s Private and other
banks in the ratio of 50:50
• Rs 17552 Bn
Personal Loan Size • 18.52% of the Total Banking
Loan market size
• Rs 63 Bn
LASS Size • 0.3% of Personal Loan &
0.06% of Total bank credit

Note:
1. Some part of the loans in SME (Industries), and Other personal Loans will further increase the potential market size
2. The total of the SME (Industries), and Other personal Loans is Rs 11,290 Bn

The LASS is merely representing approx 0.3% of the size of the personal loan portfolio at
Rs 63 Bn, hence it is not a focus product offering for the banks and financial institutions
and hence is quite unorganized

5
 What is Peer-to Peer Lending

Lends @ 15%-18% p.a

Deposits @ 8% p.a in FD’s
against security like LASS etc

• An individual loans money to another individual using an intermediary as a

facilitator
• The facilitator also acts as a custodian/ escrow of the collateral security

6
How does Peer-to Peer Lending Work (1/2)

1. Borrowers & Lenders need to register on the site

2. Post verification, the listing is activated
3. List your requirement of Loan/ Funding
4. On matching a variance of 15%, alerts are sent
5. On agreeing to a marketplace, the documents are dispatched for signing, and
executed
6. Once executed, the collateral is verified and pledge
7. Once pledged, the loan is disbursed, and the interest starts
7
How does Peer-to Peer Lending Work (2/2)

8
Value Proposition of the Proposed Model

Borrowers:
• It is a way to get a loan that they might not be approved for otherwise.
• Additionally, the interest rates charged are often comparable to Corporate Papers or
lower than the unorganized money market, what is offered by many more traditional
institutions.
• Refinancing: If small and personal loans are involved, peer to peer lending can
provide a way to pay off debt without paying such high interest rates and reducing
the effect of compounding.
• Easy of Cash Flow, as monthly installment is only the Interest amount and not the
EMI

For investors:
• P2P lending provides an opportunity to earn a return on money that can be higher
than the bank FD and backed by collateral security
• Even the lower interest rates offer reasonable returns.
• It offers a chance for ordinary people to make money in a way that is similar to the
way banks make money off of loans.
• Ease of liquidity as and when required

9
SWOT
Strength
• Ability to offer loans at a lower rate than the
banks to the borrowers, and to offer a higher
rate to the lenders by eliminating the middleman
• No interest and credit risk
• Minimal brick and mortar presence required
• Higher interest rates in comparison to FD’s/
POS, etc, and as safe as FD’s/ POS, etc
• Easily liquidable
Threat
• High counterparty risk for lenders as compared
to bank deposits, due to the collateral security
going bust eg: Satyam Computers
• Acquisition threat from traditional banks due to
their size advantage/ New entrants
• Dependence on Stock brokers, and Wealth
Managers initially
Weakness
• Cannot cater to large corporates due to the loan
size regulation of RBI
• Commission and monthly processing charges
are the only sources of income
• Lacks the marketing muscle of large banks
Opportunity
• The growing dependence of web and social
media and high level of involvement of people in
social connectivity sites
• The growing need of money and the reluctant of
banks to finance along with longer TAT
• Large untapped market of investors planning to
invest in a different asset class.
• The abnormally high interest rates charged by
NBFC’s and other financial institutions
10
Porter’s 5 Forces: Analysis

Bargaining power of Customers Threat of New Entrants

The customer here would be the
individual who is salaried, owner/
partner of SME’s, etc. The purpose of the
loan would be to get access to cheaper
capital, or to avail some personal funding
problems, which could be repaid at the
maturity of the loan by ways of bonus/
profits. We see a very low bargaining
power as the product offered will serve
them @ 13%, in comparison to the
existing 18%.
Possibility: Low
There is a high risk of New Entrants, as
being on the web the entry barriers are
low, however a lot would depend on the
profile of the member of the board and
the advisory committee for the company.
There is a very high favorability for the
1st movers advantage, and the execution
skill set of the business.
Possibility: Medium

Bargaining power of Suppliers Threat of Substitute Products

The suppliers here would be the
investors in FD’s, POSS, Government
Bonds and other asserts which are
extremely safe, and promise an assured
return. We see a very low bargaining
power as the product offered will serve
all the requirements of the Investor of
safety, liquidity coupled with better
returns. The threat will come into play
only incase the supplier changes his risk
appetite.
Possibility: Low
There is a possibility of substitute
Competition Rivalry products being launched by other
Institutes/ Banks/ corporates, etc,
There is a possibility, that however with the high operational cost
other financial institutions in due to the offline presence, matching
the offline space would launch the rates will be difficult.
a similar service, however this
being a major deviation from Possibility: High
their existing business model
will have a cascading effect on
their existing business model.
Possibility: Low

11
Global Market Analysis

Particulars

Region of Ops USA USA UK UK, USA, Italy

Incorporation 2007 2006 2009 2005

Loan till date 1,580,376,775 400,000,000 98,973,593 444,168,313

(USD)
Interest paid till 135,129,740 NA NA NA
date (USD)
Registered 1,250,000 1,600,000 215,000 250,000
Users
No of Lenders 45000 NA NA NA

Funding Raised > USD $ 100 Mn USD $ 94.9 Mn NA > USD $ 40 Mn

Investors Foundation Capital,

Morgenthaler
Sequoia, Draper Fisher
Jurvetson, Crosslink
NA Bessemer Venture
Partners, Wellington
Ventures, Norwest Capital, Accel Partners, Partners, Tim Draper,
Venture Partners and CompuCredit, Omidyar Augmentum Capital,
Canaan Partners Network, Tomorrow Runa Capital
Ventures and Volition
Capital

12
Projected Market Share

LASS Market Size (Rs Bn) (E)

LASS Market Size (Rs Bn) (E)
111,006
100,915
91,741
83,400
75,819
68,926

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Market Share as a % of Market Size

0.57% 5.39% 11.62% 12.05% 14.90% 24.81%

27,545
Amount of Loans Powered ( INR - Mn)
Loan Powered 15,045
11,062
9,693

4,089
393
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 13
Operations Forecast (1/2)

800.00 Revenue in Rs Mn 757.48 10

941%
1 8
600.00
413.74 6
400.00 266.57 304.22
4
Revenues 200.00 112.45
137% 2
10.80 83%
- 0% 14% 36% 0
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Total Net Sales (Rs Mn) Y-o-Y Growth %

800.00 739.21
700.00 Contribution in Rs Mn
2 600.00
500.00 403.59
400.00 296.66
300.00 259.90
Contribution 200.00 109.63
100.00 10.53
-
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Contribution

250.00
207.93
200.00
Total Corporate Overheads 178.17
in Rs Mn 180.48 187.21
3 145.36
150.00
100.00 63.80
Operating Expenses 50.00
-
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Total Corporate Overheads

14
Operations Forecast (1/2)

140.00 Employee Cost Rs mn 127.00 127.00 127.00 127.00

120.00 107.29
4 100.00
80.00
60.00 46.26
Employee Cost 40.00
20.00
-
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Salaries

50.00 Marketing Cost Rs Mn

40.00 40.00 40.00 40.00 40.00
40.00
5
30.00
20.00
Marketing Cost 10.00 3.00
-
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Selling & Distribution Expenses

600.00 16% 25% 43% 65% 200%

500.00 EBITDA Rs Mn -67% 0%
6 400.00 491.28
300.00 -200%
176.39 -400%
200.00
100.00 -771% 41.73 76.18
EBITDA -600%
-
(100.00) 2013-14
(83.27) (75.73)
2014-15 2015-16 2016-17 2017-18 2018-19 -800%
(200.00) -1000%

EBITDA EBITDA Margin

15
Projected Cash Flow utilization

Expenses Break up ( 2 years) • The Net Total expenses for

Nodal
Account the 1st 2 years are estimated
Charges
3% at Approx INR 160 Mn
Server &
Software
Miscellanious
9% • The Contribution during the
3%
Lodging & same period is estimated at
Boarding
3% Approx INR 115 Mn, with a
Telephone
1% net Revenue of Approx INR
Electricity
1% 122 Mn
Rent
• In Year 3, it is estimated that
7%
the Revenue and
Contribution is going to be
INR 266 Mn & INR 259 Mn
respectively with a PAT of
Approx INR 40 Mn
Salaries
73% • We would process loans of
Approx INR 360 Mn and INR
3900 Mn in the 1st and the
Note: Expenses as a % of total expenses
2nd year respectively

16
Proposed Capital Structure

Proposed Capital Structure

Total number of Shares to investors 18,00,000 45%
ESOPS 4,00,000 10%
Promoters 18,00,000 45%
Total Number of Shares 40,00,000 100%
Note: Each share is of a face value of Rs 10/-, and is issued at Rs 100/- per share

A Pitch for Rs 18 cr, for a 45% share in the company

Non Performance Dilution by Promoters

Variance Additional Dilution Investor Holding Promoter Holding
>40% 45%*80% = 36% 81% 9%
30% - 40% 45%*60% = 27% 72% 18%
20% - 30% 45%*40% = 18% 63% 27%
10% - 20% 45%*20% = 9% 54% 36%
Note: The variance will be determined by the revenue numbers 17
Proposed Investment Tranches

• Setting up the • Within 3 months • Achievement of

company of operations of the 1st year
• Hiring of the Top the company milestone/
Management • Tieing up with 5 Revenue
• Starting Business brokerage houses
operations of the
company

Term
1st Tranch 2nd Tranch 3rd Tranch
Sheet
2 crores 8 crores 8 crores
• Written Legal
Opinion
• Opening of
Nodal Account
Facility
• Opening o
Trusteeship
Account Facility
• Bringing 2
people as board
of Advisors from
the list attached 18
Appendix

19
Organization Structure

MD/ CEO

-Sourcing – Sales Ops CHR CFO CMO CTO

Investor Lending

Support Support Support

E W N S B2C B2B
Analytics

Research
Call Center/ Logistics Legal Back End
Customer Support

Function Function Break up Break up Total

Sourcing Head/ Regional Ex 1+28 29
Sales Head/ B2B/B2C 1+9+3 13
Operations Head/ CS/Legal/ Backend / Log 1+15+2+9+5 32
Marketing Head/ Executive/ Digital 1+2+1 4
F&A Head/ Support 1+7 8
HR & Admin Head/ Support/ Office Runners 1+2+20 23
Technology Head/ Analytics/ Research 1+4+2 7
20
 Projected P&L (Rs Mn)

Particulars 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Capacity Utilisation 23% 63% 100% 100% 100% 100%

Revenue
Lender 5.52 57.50 136.31 155.57 211.57 387.35
Borrower 6.63 69.00 163.58 186.68 253.89 464.82
Total Gross Sales 12.15 126.51 299.89 342.24 465.46 852.16

Taxes
Total Taxes 1.35 14.06 33.32 38.03 51.72 94.68

Net Revenue
Total Net Sales 10.80 112.45 266.57 304.22 413.74 757.48

Variable Cost
Cost of Operations 0.27 2.82 6.66 7.56 10.15 18.27

Contribution 10.53 109.63 259.90 296.66 403.59 739.21

Contribution % of Sales 98% 97% 97% 98% 98% 98%

Total Corporate Overheads 63.80 145.36 178.17 180.48 187.21 207.93

Corporate Overheads % of Sales 591% 129% 67% 59% 45% 27%

Profit/ Loss before S&D Expenses -53.27 -35.73 81.73 116.18 216.39 531.28
Profit/Loss Margin -493% -32% 31% 38% 52% 70%

Selling & Distribution Expenses 3% 30.00 40.00 40.00 40.00 40.00 40.00

EBITDA -83.27 -75.73 41.73 76.18 176.39 491.28

EBITDA Margin -771% -67% 16% 25% 43% 65%

PBT -83.80 -76.77 40.60 75.04 175.25 490.57

PBT Margin -776% -68% 15% 25% 42% 65%

Tax - 0.00 0.00 0.00 0.00 47.99 161.89

Tax Check -83.80 -76.77 40.60 75.04 127.25 328.68

Net Profit/ Loss After Tax - -83.80 -76.77 40.60 75.04 127.25 328.68
PAT Margin -776% -68% 15% 25% 31% 43%

21
Projected Balance Sheet (Rs Mn)

Particulars 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Liabilities
Share Capital 233.09 233.09 233.09 233.09 233.09 233.09
Share Premium
Reserves & Surplus -83.80 -160.57 -119.97 -44.94 82.32 411.00
Total Networth 149.29 72.52 113.12 188.15 315.40 644.09

Creditors 0.00 0.00 0.00 0.00 0.00 0.00

Total Liabilities 149.3 72.5 113.1 188.2 315.4 644.1

Assets 4.85 5.55 5.70 5.70 5.70 5.70

Accumulated Depn 0.53 1.57 2.71 3.85 4.99 5.70
Net Fixed Assets 4.32 3.98 2.99 1.85 0.71 0.00

Deposit 0.00 0.00 0.00 0.00 0.00 0.00

Debtors 0.00 0.00 0.00 0.00 0.00 0.00
Inventory 0.00 0.00 0.00 0.00 0.00 0.00
Cash/ Bank 144.97 68.54 110.13 186.30 314.69 644.09
Total Assets 149.3 72.5 113.1 188.2 315.4 644.1

22
Projected Cash Flow (Rs Mn)

Particulars 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

Operating Cashflows

PAT -83.80 -76.77 40.60 75.04 127.25 328.68

Add: Depriciation 0.53 1.04 1.14 1.14 1.14 0.71
Add: Increase in Sundry Creditors - - - - - -
Less: Increase in Sundry Debtor - - - - - -
Less: Increase in stock - - - - - -
Cashflow from Operating Income -83.27 -75.73 41.73 76.18 128.39 329.39
- - - - - -
Investment Cashflow - - - - - -
Less: Capex 4.85 0.70 0.15 0.00 0.00 0.00
Deposit

Cashflow from Investment Operations -4.85 -0.70 -0.15 -0.00 -0.00 -0.00
- - - - - -
Financing Cashflow - - - - - -
Add: Equity Infusion 233.09 - - - - -
Add: Share Premium Change - - - - - -
Add: Debt Infusion - - - - - -
Cash inflow from Finacing Activity 233.09 - - - - -
- - - - - -
Closing Cash Balance 144.97 68.54 110.13 186.30 314.69 644.09

23
Broad Business/ Operations Analysis for Break-Even with Unit Matrix
Loan Amount Units 50,000 1,00,000 2,00,000 3,00,000 4,00,000 5,00,000 10,00,000 15,00,000 20,00,000
Interest Chages p.a 13% 6,500 13,000 26,000 39,000 52,000 65,000 1,30,000 1,95,000 2,60,000
Revenue
Commission
Lender 1.25% 625 1,250 2,500 3,750 5,000 6,250 12,500 18,750 25,000
Borrower 1.50% 750 1,500 3,000 4,500 6,000 7,500 15,000 22,500 30,000
Total Commission Rs 1,375 2,750 5,500 8,250 11,000 13,750 27,500 41,250 55,000

Recurring Servicing Charges

% of Interest 0.5% 32.5 65 130 195 260 325 650 975 1300
Rs pm 3 5 11 16 22 27 54 81 108
Total Revenue Rs 1,408 2,815 5,630 8,445 11,260 14,075 28,150 42,225 56,300

Cost
Payment Gateway 20 20 20 20 20 20 20 20 20 20
Bank Charges 25 25 25 25 25 25 25 25 25 25
Commission
Investor 0.25% 125 250 500 750 1,000 1,250 2,500 3,750 5,000
Borrower 0.50% 250 500 1,000 1,500 2,000 2,500 5,000 7,500 10,000
Courier 50 50 50 50 50 50 50 50 50 50

Total Operational Cost Rs 470 845 1595 2345 3095 3845 7595 11345 15095

Gross Profit Rs 938 1,970 4,035 6,100 8,165 10,230 20,555 30,880 41,205
Gross Profit Margin % 66.6% 70.0% 71.7% 72.2% 72.5% 72.7% 73.0% 73.1% 73.2%

Admin & Other Cost pa ( Excluding

Marketing) 6,00,00,000
No of Loans pa to BE Nos 64,000 30,457 14,870 9,836 7,348 5,865 2,919 1,943 1,456
No of Loans pm to BE Nos 5,333 2,538 1,239 820 612 489 243 162 121
Total Value of Loan Dispersement pa Rs cr 320.0 304.6 297.4 295.1 293.9 293.3 291.9 291.5 291.2
Total Value of Loan Dispersement pm Rs cr 26.7 25.4 24.8 24.6 24.5 24.4 24.3 24.3 24.3

Admin & Other Cost pa ( Excluding

Marketing) 8,00,00,000
No of Loans pa to BE Nos 85,333 40,609 19,827 13,115 9,798 7,820 3,892 2,591 1,942
No of Loans pm to BE Nos 7,111 3,384 1,652 1,093 816 652 324 216 162
Total Value of Loan Dispersement pa Rs cr 426.7 406.1 396.5 393.4 391.9 391.0 389.2 388.6 388.3
Total Value of Loan Dispersement pm Rs cr 35.6 33.8 33.0 32.8 32.7 32.6 32.4 32.4 32.4

Admin & Other Cost pa ( Excluding

Marketing) 10,00,00,000
No of Loans pa to BE Nos 1,06,667 50,761 24,783 16,393 12,247 9,775 4,865 3,238 2,427
No of Loans pm to BE Nos 8,889 4,230 2,065 1,366 1,021 815 405 270 202
Total Value of Loan Dispersement pa Rs cr 533.3 507.6 495.7 491.8 489.9 488.8 486.5 485.8 485.4
Total Value of Loan Dispersement pm Rs cr 44.4 42.3 41.3 41.0 40.8 40.7 40.5 40.5 24
40.4
Sample Profile of Board of Advisors

Aashish Vachani MOF

Y M Desai Partner Desai & Diwanji

Mr. Muthuraman Ex CMD Tata Steel

Mr. Ganguly BOD Tata Sons

Mr. K S Srinivas IAS (Govt of Kerela)

Prabhakar Patil SEBI

Devang Neralla Director- Technology MCX

Mr. M. S. Sriram Prof IIM - A

Dr. Ram Kumar Kakani LBSNAA

Dr. A S Ramchandra Prof Law, LBSNAA

Mr. K. V. Kamath Ex CMD ICICI

Mr. Deepak Pareikh HDFC

Mr. A. Naik L&T

Mr. Damodaran EX Gov SEBI

Dr.Y.V.Reddy Ex Gov RBI

Dr. Indu Shani Ex Mumbai Sherrif

25
Thank You

26