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W14606

MAHINDRA AND MAHINDRA FINANCE SERVICES LIMITED:

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EMPOWERING RURAL CUSTOMERS IN INDIA

Rajeev Kumra wrote this case solely to provide material for class discussion. The author does not intend to illustrate either effective
or ineffective handling of a managerial situation. The author may have disguised certain names and other identifying information to
protect confidentiality.

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This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com.

Copyright © 2014, Richard Ivey School of Business Foundation Version: 2014-12-12

Naresh Bhatt, branch manager, Bijnor Branch, North India, left Vimla Devi’s office to drive to his
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Mahindra and Mahindra Financial Services Limited (MF) rural branch office in Bijnor. “I’ve never seen
anywhere in the world a place so beautiful,” he remarked, but his subordinate, Nand Kishore, did not hear
him. He was too worried about how to proceed with the process of sanctioning Devi’s loan application,
which had already been rejected by another bank on the grounds of lack of documentation and collateral.

Devi was the sole owner of M/s. Triupati Automobiles, located in Bijnor, a rural part of North India 100
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kilometres from Delhi. In business since 2002, the transport company was quite popular in the region. Its
main customers were small-scale pharmaceutical companies in and around Bijnor. Devi also owned a
small piece of agricultural land. With about 10 years of experience in the transportation (logistics)
business and anticipating an increase in profitability in the growing pharmaceutical industry, she decided
to expand her transport business by buying two more commercial vehicles (Exhibit 1).

LOAN SANCTION WITH COMPETING PUBLIC SECTOR BANKS’ RURAL BRANCHES

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Before approaching MF, Devi had applied for a loan from the nearby branch of MyBank, a public sector
bank1 that had a large, rural, nationwide network. She was confident that it would offer her a loan on the
basis of her past business transaction records with it. In December 2012, she applied for a loan to buy two
commercial vehicles worth Rs1,285,000 (equivalent to US$23,182), which she needed immediately
because she had business commitments to transport goods for new customers by January 2013. With all
the necessary legal documents in hand, she filled out the requisite loan application form, pledging her
land as collateral against the intended loan amount. The branch manager promised her that the loan would
be disbursed to her firm within a few days of purchase of the vehicles.
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A week later, officials of a third-party agency appointed by the bank visited Devi’s office for verification
of the submitted documents. They cross-checked her original land ownership documents, inspected the
land and prepared a detailed report. Two weeks later, the bank branch manager phoned her to say that
because the land title was unclear, she needed to pledge some other asset to provide collateral. Devi was
1
In a public sector bank, a majority stake (i.e., more than 50 per cent) is held by the Government of India.

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surprised because she had presumed that the bank would consider her previous business track record and

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future business plan and not only her collateral. However, the branch manager told her that he had to
follow standard procedure for bank loans and there was nothing he could do but accept the third-party
report. Further, he had little confidence in her business plan, especially her future cash flow projections,
and thus was not convinced that she would be able to repay the loan amount. Devi then called on Kishore
Jain, a dealer in the MF Automotive Division.

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Jain: What happened? You were planning to buy two commercial vehicles from us, but I have not
heard from you since last month.
Devi: Yes, I still want to purchase vehicles from you, but my bank is refusing to give me a loan.
Jain: Devi, it is quite strange that they are refusing you a loan. I will personally suggest you meet
Bhatt, the MF’s branch manager. MF is known for supporting rural customers, good customer
service and fast loan processing. I will recommend your case to them.

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BACKGROUND OF MAHINDRA AND MAHINDRA FINANCIAL SERVICES LIMITED

Steered by Chairman and Managing Director Anand Mahindra, Mahindra & Mahindra (M&M), which
sold tractor and farming equipment and had deep penetration in rural India, was a $15.9 billion
multinational group based in Mumbai. It had won many awards and earned huge accolades — in 2011, it
was featured on Forbes Global 2000 list and was named by Dun & Bradstreet the number one company in
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the Indian automotive sector.

A strategic business unit within the group, MF was set up as a non-banking finance company (NBFC)
(Exhibit 2). Its product portfolio included vehicle loans, used vehicle financing, housing finance, personal
loans, fixed deposits, mutual fund distribution, insurance broking, gold loans and loans for construction
equipment (Exhibit 3). In 2013, about 40 per cent of the finance MF provided was for commercial
vehicles, 22 per cent was for tractors and the rest was for passenger vehicles.
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The company began its operations in 1995 in Jaipur, Rajasthan, with 15 branches and 100 employees; its
year-end revenue was Rs500 million (US$8.4 million). Every day, MF’s locally recruited rural employees
would go from one commercial vehicle dealer to another, selling loans to an average of five to 10
customers. MF’s efforts were so successful that it started expanding to all rural and semi-urban areas in
Rajasthan and other states as well. As commercial vehicle dealers started requesting that the company
grant loans to their customers, MF extended its presence all over India, so that by 2013 it had 648
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branches providing the rural poor with easy access to financial services.

Given the country’s vast and diverse culture and geography, MF was faced with differences in rural
consumer behaviour from one region to another. The company soon realized that it was not enough to
have a physical presence but that it was also important to understand local traditions, rituals, customs and
cultural activities and to communicate with its customers in their own language or local dialect.2

As a result, the company changed its focus from product-based to customer-centric, designing products
customized to local needs and sold through local channels. Based on consumer insights and feedback
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from employees, its product range and services differed across all rural geographies. Its customers were
primarily farmers, small traders and vehicle operators but also included some small and medium
enterprises (SME). Thus, it broadened its portfolio from retail lending to SME lending. In 2013, MF had
close to 6,600 employees and managed assets worth Rs103,290 million (US$1.71 billion). See Exhibit 4
for milestones in the company’s history.
2
India has 16 official languages and 3,260 local dialects.

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MF STRATEGIC BUSINESS MODEL

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A Rural Company

India is a land of contradictions: while it presents itself as a fast developing economy, with rising per
capita income and a large base of young people, there are 216 million poor people living in its rural areas.
MF provided loans to them, thus stimulating poverty alleviation, empowering them and creating equitable

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opportunity in rural India.

MF’s decision to focus on rural India was based on many factors. The rural poor were more likely to be
committed to repaying their loans since they valued the additional income generated by the commercial
vehicles MF financed and MF was the only company that gave them access to formal credit. The
management felt the company would have a greater impact by improving the quality and standard of life
of the rural poor, which constituted the most marginalized group in the society. According to Ramesh

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Iyer, managing director, MF’s success could be traced to its “rural-ness”: “A rural-based finance company
in India cannot just copy a strategy that worked elsewhere in the world or that was successful in urban
India; rather, [it] must strategize based on an in-depth understanding of rural customers and then
customize products to fit the indigenous rural poor focused model. . . . It is not just this one odd case of
Devi that we’re dealing with; we have similar rural customer profiles across India.”

Positioning in the Strategic Gap

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Typically, multinational companies and private banks focused on the top tier cities in India, where most
of the high net-worth individuals were based, to achieve the highest margins. They were averse to
reaching out to rural markets, where they assumed the people had little disposable income and no clear
assets to pledge as collateral, the essential criteria for loan disbursement. Moreover, the rural poor were
an unbankable population; that is, most of them did not have a bank account.
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Traditionally, rural Indians used either rural-based public sector banks or individual moneylenders to fund
their financial needs. Local moneylenders offered loans readily but at a very high interest rate of 36 per
cent per annum, while the banks lent money with more affordable interest rates of 10 per cent per annum
but required collateral. Some public sector banks had become more aggressive in increasing their
presence in rural India, lessening the dependence of rural people on moneylenders. However, the banks
followed stringent guidelines when lending loans and relied heavily on collateral. The rate of interest MF
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charged was lower than the traditional moneylenders but slightly higher than the banks. However, its
service quality was far superior to both. To reach out to rural customers was a challenge because they
were scattered and more dispersed compared to urban customers: in 2013, about 70 to 80 per cent of
MF’s customers were 50 to 100 kilometres away from its branch offices. MF employees met these
customers personally, and this face-to-face interaction improved customer service delivery and helped
front-end employees gather the first-hand information required to select the right customers and
understand their needs in order to develop customized loan solutions.

Empowering Rural Customers

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MF followed a unique indigenous business model that it called the “Earn and Pay” model. Unlike other
banks and NBFCs, MF relied on the objective and subjective evaluation of customers by its branch
managers and field executives, rather than outsourcing this job to a third party. Since marginal farmers
did not have any major assets, including records for the very land they tilled or a credit history, risk
assessment was difficult, but MF did not want to turn away deserving farmers and budding entrepreneurs.

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To develop a credit risk profile, the branch manager assessed customer integrity and liability, as well as

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the future cash flow from the vehicle for which the loan was taken. This unique business model was
socially inclusive as it helped customers with low incomes and at the bottom of the social pyramid to
grow by providing them loans based on their future earning capacities. As only a fraction of rural
customers could afford to approach moneylenders or satisfy the bank loan conditions, most shifted to MF.
Iyer claimed that MF had developed internal objective methods that were different than those of the

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traditional banking system:

Although we may not have the financial statements of a customer, we may have enough input and
understanding of the application of the product financed. We finance all the products that have
commercial use, so we do not focus only on the existing customer’s cash flow ability, but also on
the ability of the product to earn and pay. . . . The company has its own internal matrix. For
example, if a tractor is financed, we know that it can be used for, say, X area of a land for tilling

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and thus what the agriculture output will be, resulting into how much the farmer will earn. After
deducting the farmer’s liability from farm income, we can arrive at how much money a farmer
can afford to repay per month.

Over the years, MF had gained an in-depth knowledge of rural and semi-urban markets, which enabled it
to devise products according to customers’ specific needs. Reworking its product portfolio and the
margins it generated was an important decision, as Iyer explained:
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What we have is a multi-product approach, like we know for sure that financing utility vehicles,
tractors, commercial vehicles and second-hand vehicles offers different yields. We look at a
product mix in which our margins can be protected. Normally, we work on minimum of 3 to 3.5
per cent return on an asset; therefore, we will keep revisiting our product mix to ensure that
margins are protected. We have been profitable since the beginning of our operations. (See
Exhibit 5a and 5b).
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The biggest challenge was not only to reach out to rural customers and develop customized solutions that
were relevant and appropriate to their needs but also to follow up and devise appropriate control
mechanisms for recovery of loan repayments. Rangachari Balaji, MF’s vice-president of marketing and
strategy, emphasized that “We primarily operate on one side of the balance sheet, that is, the asset side.
Though lending might be easier, the challenge lies in loan recovery. Hence, it is imperative to have a
strong collection mechanism for sustained business success, especially when catering to the underserved
rural segments.” Loan repayment was a complex issue because rural customers repaid loans mostly in
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cash as they did not have bank accounts. MF used technology to prevent the chance that an employee
might pocket the cash. Immediately upon receiving a cash payment, employees had to generate a payment
acknowledgement receipt on a handheld technological device. This device, which was integrated with a
camera, biometric fingerprint reader, thermal printer, voice recorder, GPRS and LAN connectivity, had
been devised by MF to transform on-field executives into mini-branches to bridge the last-mile gap across
rural India. They could service rural customer product queries and loan repayments. The data generated
by the device were stored in a centralized server. This process not only updated the company’s central
server about the amount of payment received from the customer but provided a printed receipt as proof
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that an account had been debited. This made the customer feel secure and generated trust.

The company categorized two types of loan payment defaulters: circumstantial and intentional defaulters.
The majority were defaulters, those who were not able to repay due to uncontrollable circumstances, such
as an accident or illness. In this case, instead of repossessing the vehicle, MF partnered with the customer
by providing time to deal with the difficulty. The company even took into account local macro-events that
could impact customers’ monthly repaying capacity such as a bad monsoon season, poor crop production

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or bad realization of crop prices. Unlike other financial companies, MF did not resort to legal action

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against the circumstantial defaulter but relaxed the payment plans and adjusted loan instalments for the
coming year. This flexibility was a win-win solution for both the company and its customers. MF realized
that if a customer whose vehicle was financed had a road accident resulting in vehicle damage, this would
impact the customer’s earnings and thus repayment ability. Its strategy of diversifying into the insurance
business led to risk mitigation for both customer and company. Four years ago, MF further diversified

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into housing finance to address rural customers’ needs for security.

Intentional defaulters were earning but not repaying loan amounts. In such instances, the company took
steps to repossess the vehicle at the earliest opportunity as any delay would lead to a drop in its value and
thereby increase the loss. Employees had to be in continuous communication with customers in order to
assess the situation and take appropriate steps. This model of high interaction with customers was unique
to MF and a significant source of its business advantage.

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Further, MF differentiated between book entry loss and actual credit loss. For example, in a given
financial year, some circumstantial defaulters might show an outstanding amount on books, but the next
year they might start paying again, so the actual loss would be less than the book value loss. This was an
important fundamental, specifically when the company was dealing with rural customers whose income
was cyclical. MF’s actual credit loss was between 1.0 to 1.2 per cent of total loaned amount, which
compared favourably with its competitors.
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Empowering Rural Employees

MF hired 9,700 local people to serve the rural areas where they lived. Iyer stated: “The company started
recruiting employees from local rural colleges. Eventually, these locally recruited employees gave a
competitive advantage to Mahindra Finance by not only being well-versed in the local language and
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consumer behaviour but also by being socially connected to the rural consumers as they belonged to the
same society.” Hiring local rural employees at the entry level resulted in a lowering of the attrition rate, a
perennial problem of this industry. Vinay Deshpande, chief personnel officer, said: “This decision reaped
two benefits: first, in many cases employees personally knew the customers as both belonged to the same
village and thus the credit risk was reduced to a certain extent; and second, the employees tended to stay
loyal as no one offers a better employment opportunity compared to us in these rural areas.”

MF primarily followed a three-pronged strategy for recruitment: referral hiring, which accounted for 70
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per cent of its employees; and campus recruitment from graduate and management colleges and
newspaper advertisements, which accounted for 30 per cent. The human resources department
empowered local branches to hire candidates referred by existing employees and dealers. The company
typically visited 75 to 80 rural-based graduate colleges across the country in its recruitment drive during
the graduation period of February and March. When manpower requirement was high, the company also
used local newspapers advertisements as a recruitment source. It also started approaching non-profit
organizations who were engaged in vocational training in rural areas. Aspirants were selected according
to multiple criteria, such as an aptitude test, sales job orientation and possessing the right behavioural
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traits like honesty and a positive attitude. The company believed that employees could be trained on all
aspects of the needed skill sets except inherent behavioural traits.

This hiring strategy had its own set of challenges; for example, locally hired employees had poor
communication skills (written and verbal) and a limited understanding of English, which was necessary as
the company’s internal communications — policy communications, communications from top
management and internal documentation — were in English.

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To overcome this challenge, MF’s newly recruited employees had to attend the Mahindra Finance

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Academy, which was staffed by 16 full-time employees, although the academic courses were designed
and taught by professors from top Indian business schools. They also underwent an intense introduction
to the company tradition called “Rise” and a training program, Drona, which included an induction
program of five days, on-the-job training of 25 days and a certified course for field executives. Employees
were taught technical and soft skills, such as “how to be sensitive to local traditions,” “how to access the

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credit worthiness of a customer” and “how to collect loan repayments” (Exhibit 6). MF encouraged its
employees to attend short-duration executive courses from leading schools in India and abroad and
sponsored them. Deshpande emphasized the company’s vision: “Don’t join us as an employee — you
have joined a family, be passionate. . . . We are a rural-based company and may diversify into new
products, geographies, territories or finance formats, but we are here to serve rural customers’ needs. You
have to continuously acquire formal degrees and qualify in professional exams to keep up with the future
directions of Mahindra Finance, and the Mahindra Finance Academy will help you do so.”

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MF expected branch staff to take control of the day-to-day activities of their rural branch — meeting
commercial dealers for lead generation, meeting customers, assessing the credit worthiness of customers,
assessing the customers’ integrity to repay loans, collecting back money for loan repayment and ensuring
satisfactory rural customer services. The branch manager was directed to give near total control of the
business or branch to the frontline sales persons, who were thus empowered to take risks and decide on
the spot whether a customer was credit-worthy and to disburse loans, usually within two days. Deshpande
explained: “Empowerment improves employees’ entrepreneurial skills and commitment to identify the
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right type of customer. [The employee] is responsible for failures (such as if he is unable to collect money
later or if the customer turns out to be in bad debt). This gives him a sense of ownership. Wrong decisions
cannot affect employees’ take-home pay; if they did, everyone would fear taking decisions. Yet, the
branch as a whole must take responsibility for thinking through decisions that affect the bottom line.”

CORPORATE GOVERNANCE
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On the liability side, MF initially borrowed money only from banks, but later, viewing this dependency
on one source of funding as risky since it made the company vulnerable to external environmental factors,
it started borrowing from mutual funds, insurance companies, corporations and pension funds. The costs
involved were the same. Similarly, MF expanded its finance instruments from loans to fixed term
deposits, non-convertible debentures and bonds.
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MF’s audit committee suggested a more internal stringent provision policy than the Reserve Bank of
India (RBI) guidelines on provisions.3 Iyer stated: “Our lower non-performing asset (NPA) is a testimony
of our model’s robustness.” MF had a strong policy on loan-to-asset value for the period for which money
was lent (Exhibits 7 and 8).

MF won many corporate governance awards, such as the Golden Peacock Award. Understandably, it had
the best credit ratings in the industry, including the FAAA Cirisil credit rating for fixed deposits, the AA+
for long-term deposits and the P1+ for short-term deposits. However, Ravi Venkataraman, the chief
financial officer, modestly said, “As a policy, we follow high investor relations, remain transparent and
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communicate with investors on a regular basis — and if one practices best corporate governance, a good
credit rating follows as a natural result.” Iyer summed up the unique strategic model by stating:
“Mahindra Finance has evolved from an auto product financing company to a solution provider in a retail

3
Provision was a fund kept aside by a company to pay for losses that were likely to arise in the future, for example, bad
debts. The Reserve Bank of India is the country’s central bank.

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rural market. This is what has differentiated us from others in the market. Now, we are a benchmark for

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any company that wants to establish its presence in rural India.” See Exhibit 9 for MF’s business model.

DEVI MEETS WITH MF

Devi was in dire need of funds and hoped that MF could consider her proposal on a priority basis. Bhatt

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and Kishore visited her suburban office for physical verification in the pre-loan process called “Field
Investigation,” which included an internal standard form assessing the savings (earning and expenditure)
of the customer. Since the inception of the business, no mandatory taxes, such as income tax, sales tax or
service tax, had been paid; thus, there was no authentic income proof. Also, the small landholding that she
claimed to own was in a relative’s name. Devi was earning Rs12,000 (US$200) per month profit from her
current sole commercial van. If she purchased another two vehicles, profit would increase to Rs24,000
(US$400) per month (see Exhibit 10).

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Bhatt was impressed with Devi’s knowledge about the market, transportation and the logistics of
pharmaceutical products, but her firm had no proper documents and generated a meagre profit. Bhatt
thought, “This is not a reason to leave such a good customer. With her hard work and knowledge, she will
prove to be a good customer in the future, and I am sure about that.” Since Kishore had recognized Devi
as the mother of a schoolmate, Bhatt asked him: “What is your opinion about her? Is she an ethical person
and would she pay back her loan amount on time?” Kishore assured Bhatt that she had integrity.
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On MF’s portable handheld device, Bhatt and Kishore collected Devi’s data, such as her biometrics, voice
and photograph, which were vital to handling operational risk and compliance. The device generated a
10-digit “Loan Proposal Number,” which Kishore gave to Devi. This was a unique number used to track
the progress of the sanction of the proposal online by using secured access to the site or by calling a toll-
free number, which could also be used to register any grievance about the functioning of the MF branch.
Devi was highly impressed with these systems and appreciated that technology was being used for the
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benefit of the customer. When they were leaving the office, she became choked with emotion and said:

Mahindra Finance gave me a loan when the public sector bank rejected my claim, stating that I
“do not have proper loan documents and collateral.” It was you and Mahindra Finance who
trusted me, my earning potential and integrity, and agreed to give me a loan in two days. I am
indebted to Mahindra Finance for life. I have no doubt about your company meeting all my
financial needs. I have only one answer — Mahindra Finance — and I will recommend it to
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everyone in my village.

Kishore was speechless. During the journey back to the MF office, he asked himself: Although MF was
definitely making a difference for the rural unbankable population, was the strategy too risky?
Specifically, he wondered whether their decision to grant a loan to Devi was right or not, since her loan
application had been rejected by another bank after due diligence.
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EXHIBIT 1: DETAILS OF LOAN

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Hirer Name: Vimla Devi Agreement #: 1704405
Vehicle Financed: Tata LPT 1613 (4x2) Total Loan Amount: Rs1.285 Million
Quantity: Two Duration: 15 years
Two Vehicle Cost: Rs1.9 Million Rate of interest: 12% p.a.
Date & Year of Financing: December 2012 Equated monthly installment: Rs15,422

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Source: Mahindra Finance internal customer records

EXHIBIT 2: NBFCS (NON-BANKING FINANCE COMPANIES) IN INDIA

A nonbanking finance company (NBFC) in India is defined as any company that is engaged in loans and advances.
Yet, unlike a bank, it cannot accept demand deposits, does not form part of payment and settlement systems and
cannot issue cheques drawn on itself. NBFCs in India have complemented the banking sector in fulfilling the

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financing need of the country’s developing economy. NBFCs in India have witnessed unprecedented growth over the
years in terms of their numbers as well as volume. In 2011, there were 12,409 NFBCs in India. Unlike public sector
banks, NBFCs have flexible structures that allow them to unbundle and customize financial services. However,
NBFCs are much smaller in size in comparison to the banks.

Source: A. Karunagaran, “Inter-connectedness of Banks and NBFCs in India: Issues and Policy Implications,” 2012,
www.rbi.org.in/scripts/PublicationsView.aspx?id=13979, accessed April 21, 2013.
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EXHIBIT 3: LIST OF PRODUCTS AND SERVICES OFFERED BY MF

 Tractor Loans: For a wide range of tractors of the Mahindra, Swaraj and Shaktiman brands.
 Utility Vehicles: For Mahindra and other multi-utility vehicles.
 Car Loans: For cars and preferred financier for many car manufacturers such as M&M, Hindustan Motors,
Hyundai, General Motors and Maruti Udyog Limited.
 Commercial Vehicle Loans: For commercial vehicles (both new and used) including trucks, buses, tippers,
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excavators, three-wheeler, light commercial vehicles, etc.

 Two-Wheeler Loans: For a wide range of two-wheelers, including motorbikes, mopeds, scooters or
scooterettes; company provides loans to women customers at special rates.
 Construction Equipment: Flexible loans for construction equipment (new and used).
 Refinance: Loans against a used/existing car, utility vehicle and other commercial vehicles.
 Personal Loans: For personal needs such as marriage related expenses, children’s higher education, medical
treatment, agricultural needs, etc.
 Fixed Deposit: One of the options of cumulative and non-cumulative deposits for financial savings.
 Gold Loan: “Loan against Gold” product launched in Kerala. This offering helps to provide liquidity against gold
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ornaments without having to sell them.

Source: Mahindra Finance, www.mahindrafinance.com, accessed April 21, 2013.

EXHIBIT 4: MF MILESTONES

1993 Commenced financing of Mahindra and Mahindra Commercial Vehicles

1999 Commenced tractor retail financing in rural and semi-urban areas
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2001 Total Assets crossed the Indian Rupees 10 billion mark

2002 Commenced financing of non-Mahindra & Mahindra vehicles
2006 Company went public
2008 Commenced the home loan business
2011 Reached Indian Rupees 100 billion in Total Assets and ventured into SME financing
2103 Managed assets worth Indian Rupees 1,03,290 Million

Source: Mahindra Finance, www.mahindrafinance.com/history-milestones.aspx, accessed April 21, 2013.

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EXHIBIT 5A: FINANCIAL SUMMARY OF MAHINDRA FINANCE (RUPEES IN MILLIONS)

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Particulars 2012 2011 2010 2009 2008
Estimated Value of Asset Financed 195,043 144,199 89,154 62,812 58,497
No. of Contracts 2,024,038 1,557,622 1,189,848 973,493 815,665
Total Assets 185,616 137,541 95,150 783,493 730,282
Total Income 279,459 201,258 156,880 138,466 122,680

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Profit Before Depreciation & Tax 9,448 7,182 5,305 3,343 2,807
Depreciation 196 157.9 99.0 87.3 87.3
Profit Before Tax 9,253 7,025 5,206 3,256 2,720
Profit After Tax 6,201 4,631 3,427 2,145 1,770
Dividend % 140 100 75 55 45
Equity Share Capital 1,027 1,025 960 957 952
Reserves & Surplus 28,483 23,856 16,314 13,722 12,176
Net Worth 29,510 24,880 17,274 14,679 13,129

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Source: Mahindra Finance, www.mahindrafinance.com/summary-of-results.aspx, accessed April 21, 2013.

EXHIBIT 5B: MF KEY FINANCIAL PERFORMANCE INDICATORS

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No
Do

Cost to Income = Operating Expenses (including Depreciation)/Net Interest + Other Income; ROA (Return on Assets) is
calculated based on Average Total Asset; RONW (Return on Net Worth) is calculated based on Average Net Worth.
Source: Mahindra Finance, www.mahindrafinance.com/pdf/presentation/MMFSL_Corporate_Presentation_12.pdf, accessed
April 21, 2013.

This document is authorized for educator review use only by REV. DR. C. JOE ARUN, Bharathidasan University until Aug 2018. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860
 Page 10 9B14A065

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EXHIBIT 6: MF EMPLOYEE ENGAGEMENT AND TRAINING

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 Training programs for employees on regular basis
 Five-day induction program on product knowledge, business processes and aptitude training
 Mahindra Finance Academy training programs for prospective and existing employees at five locations
 Assessment & Development Centre for promising employees
 Employee recognition programs


rP
Annual Convention Award and Achievement Box
 Participation in Mahindra Group’s Talent Management and Retention program
Source: Mahindra Finance, www.mahindrafinance.com, accessed April 21, 2013.

EXHIBIT 7: MF NON-PERFORMING ASSETS ANALYSIS

Particulars (Rs. Million) FY11 FY12

Gross Non-Performing Assets (NPA) 5,488 5,543

yo
Less: Provisions 4,744 4,324
Net NPA 744 1,220
Total Assets (including income reversal) 137,905 186,634
Gross NPA to Total Assets (%) 4.0% 3.0%
Net NPA to Total Assets (%) 0.5% 0.7%
Coverage Ratio (%) 86.4% 78.0%

Source: Mahindra Finance, www.mahindrafinance.com/pdf/presentation/MMFSL_Corporate_Presentation_12.pdf, accessed

April 21, 2013.
op
EXHIBIT 8: PROVISIONING NORMS

Duration (months) RBI Norms Duration (months) Mahindra Finance

6 and <= 18 10% > 5 and <= 11 10%
> 18 and <= 30 20% > 11 and <= 24 50%
> 30 and <= 54 30% > 24 months 100%
> 54 months 50% NA NA
tC

Source: Mahindra Finance, www.mahindrafinance.com/pdf/presentation/MMFSL_Corporate_Presentation_12.pdf, accessed

April 21, 2013.

EXHIBIT 9: KEY RISK AND MF MANAGEMENT STRATEGIES

Key Risk MF Management Strategies
Volatility in interest rates Matching assets and liabilities
No

Rising competition Increasing branch network

Raising funds at competitive rates Maintaining credit rating & improving asset quality
Dependence on M&M Increasing non-M&M Portfolio
Occurrence of natural disasters Increasing geographical spread
Employee retention Rural employment / Empowerment/ Training
Loan repayment in cash Effective technology-based control

Source: Mahindra Finance, www.mahindrafinance.com/pdf/presentation/MMFSL_Corporate_Presentation_12.pdf, accessed

April 21, 2013.

EXHIBIT 10: REVENUE AND EXPENDITURE STATEMENT OF M/S. TRIUPATI AUTOMOBILES

Do

Revenue (per month) Expenditure (per month in rupees)

100 km per day @ Rs10 per km Driver’s salary : 7,000
Office-running expenditure: 5,000
Diesel cost: : 6,000
Total: 30,000 (US$500) Total: 18,000 (US$300)

Source: Mahindra Finance internal customer records.

This document is authorized for educator review use only by REV. DR. C. JOE ARUN, Bharathidasan University until Aug 2018. Copying or posting is an infringement of copyright.
Permissions@hbsp.harvard.edu or 617.783.7860