Evolution, Industry Status, Problems, Challenges, Opportunities & Future Strategy -

1. LEASING IN INDIA Evolution, Industry Status, Problems, Challenges, Opportunities & Future Strategy - Indian Perspective Presented By Rahul Gupta General Manager-International Business NBG Printographic Machinery Co. Pvt. Ltd., www.nbgprintographic.comNew Delhi, India

2. Phases of Evolution

3. Status of Leasing Industry in India

4. Present Industry Order • Only few major players (NBFCs) exist apart • from a host of Public & Private Sector Banks • SREI International Finance • Sundaram Finance • Cholamandalam Finance • Mahindra & Mahindra • GE Capital • Shriram Finance • Tata Finance • Countrywide Finance • Citicorp

5. NBFCs on strong turf • NBFCs are today an Integral Part of Indian Financial System showing improving health: • Increase in resource profile • Significant decline in NPA • Substantial improvement in brand image • Improvement in profitability margins • Maturing industry in which financially & managerially weak companies already weeded out • Surviving companies are large cororates with good brand image

6. NBFCs on strong turf • NBFCs enjoys a Niche position in the financial sector due to: • Better Customer service • Innovative & flexible financing options • Continuously reducing NPA’s • Healthy Capitalisation • Innovative resource mobilisation • Focused Operation – Products/Customers/Geography • Formation of Finance Industry Development Council-a Self Regulatory Organisation for NBFC’s

7. Problems of the Industry

8. Leasing Companies in India are facing certain problems • Resource Constraints due to huge capital outlay • Risk of Obsolescence - landing in too much trouble due to • capital loss in case of obsolescence • Non-availability of Sales Tax Consideration on acquisition of • capital equipment & lease rentals making leasing transaction • uneconomical • Cut-Throat Competition in view of many players • Lack of Qualified Personnel due to nature of the job • Delay in Rental Payments which may at times result in bad debts • Attitude of Government with no defined guidelines with regard to sales tax and investment allowances of leasing business

9. Challenges before the Industry in context of NBFCs

10. Rising Competition from Banks • Unequal competition from Banks & MNCs – Cost of Funds • No focused / dedicated Recovery Mechanism - Housing Finance Corporations / Banks enjoy special recovery platforms such as DRT’s / Recovery officers / Securitisation Act 2002 • TDS on interest payments to NBFCs – Not applicable to banks • NBFC Stigma – Credibility issues , Industry brand image • Competition for talent - From newer financial services players

11. Funding and Regulatory Issues • Poor availability of medium and long term funding • Although right of repossession of assets recognized there are impediments in implementation • Multiplicity of taxes - Sales tax / Service tax / Entry tax on lease transactions • Multiple Regulators - Lack of Comprehensive Legislation

12. Opportunities for the Industry

13. Huge Leasing Opportunity • Large Potential • Outstanding lease & hire purchase assets around US$ 4 Billion • Large variety of user segment • High growth potential in Vehicle Finance • Commercial Transportation – Govt. support, Diverse products • Personal Transportation – Wide Variety, Low finance costs, Increasing Propensity for credit purchase, Huge used car finance market • New Products - Dealer Finance, Working Capital Finance, Personal Loans • Low lease penetration ratio • Around 1.5% as a % of Gross Domestic Capital Formation • Very low in sectors like equipment & infrastructure • Substantial upside possible • Expansion Opportunity • Huge infrastructure spending in next 5-10 yrs (apprx US$ 120-150 Billion) • Steadily rising disposable income – Generating huge demand for consumer goods

14. With growth ingredients in place • Global opportunities – Cross-Border Leases allowed • Substantially reduced dependence on public deposits as a source of fund • Comparatively Low Default Rate – Particularly in consumer loans and vehicles financing as compared to many other markets

15. Future Strategy

16. Clear Segmentation and Positioning Clear Segmentation and Positioning • Identification of focus areas and core strengths • (Special Focus on the booming & promising ‘consumerism’ themes like Auto Industry, Telecom Sector, IT Services & Equipment, Infrastructure Development, Social Sector with emphasis to Health, Education, Sanitation, etc. ) • Consolidation • Customer centric service

17. Development of focused Business Strategy • Improve quality of asset portfolio • Implement risk mitigating tools • Matching asset-liability tenure • Sustainable, varied & innovative resource mobilisation practices

18. Innovation to address evolving consumer needs • Operating Leases • Leveraged Leases • Residual value products • Using Depreciation & Tax Shields for structuring

19. Cross Shift focus from customer to product / asset • Develop strong asset management capabilities including repossession & remarketing • Long term mutually beneficial vendor relationships Cross S Shift • Distribution of Financial Products • Distribution of Insurance Products • Strong liability product Cross Selling Securitization

20. THANK YOU