Capital First receives ‘Outstanding Corporate Transformation India 2018’ award by Capital Finance International 2018
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Mr. V Vaidyanathan, Chairman & Managing Director, Capital First Ltd. has been awarded the Most Inspirational Leveraged Management Buyout award by Capital Finance International 2018
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We are delighted to inform you Mr. Vaidyanathan was awarded as one of the “Game Changers of India” by Economic Times at the Economic Times Global Business Summit 2018. "
We are delighted to inform you Mr. Vaidyanathan was awarded as one of the “Game Changers of India” by Economic Times at the Economic Times Global Business Summit 2018. We at Capital First are happy to share that from a start-up company with Rs. 94 Crores in retail loans in 2010, today Capital First has reached a loan book of Rs. 27,220 Crores as of 30th June 2018. We have lent over seven million loans to our selected target segment- Indian consumers, MSMEs and entrepreneurs who were traditionally underserved. The best part is our Gross and Net NPA are at ~1.7% and 1% 90 DPD respectively.
“... From positive journalism to creating market linkage for micro enterprises to bridging rural-urban divide these leaders are innovating the way new business is done. These change-makers have recognised the possibilities to build sustainable businesses targeting the bottom of the pyramid and investors that are willing to back them in their efforts. India's Game Changers come from varied backgrounds and skill sets." It brings Economic Times great pride to announce that Mr. V. Vaidyanathan has been recognized as one of “The Game Changers of India-2018." We are delighted to inform you Mr. Vaidyanathan was awarded as one of the “Game Changers of India” by Economic Times at the Economic Times Global Business Summit 2018. We at Capital First are happy to share that from a start-up company with Rs. 94 Crores in retail loans in 2010, today Capital First has reached a loan book of Rs. 27,220 Crores as of 30th June 2018. We have lent over seven million loans to our selected target segment- Indian consumers, MSMEs and entrepreneurs who were traditionally underserved. The best part is our Gross and Net NPA are at ~1.7% and 1% 90 DPD respectively. “... From positive journalism to creating market linkage for micro enterprises to bridging rural-urban divide these leaders are innovating the way new business is done. These change-makers have recognised the possibilities to build sustainable businesses targeting the bottom of the pyramid and investors that are willing to back them in their efforts. India's Game Changers come from varied backgrounds and skill sets." It brings Economic Times great pride to announce that Mr. V. Vaidyanathan has been recognized as one of “The Game Changers of India-2018."
Mr V Vaidyanathan nominated as ‘Entrepreneur of the Year’ for The Economic Times Awards For Corporate Excellence.
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Sumant Sinha has led ReNew Power Ventures to the position of India’s largest clean energy company in a short span of time, overtaking older rivals on the way with a mix of mostly organic growth and a major acquisition in the rapidly growing but extremely competitive sector.
The entrepreneurship and leadership of Sinha, an alumnus of IIT-Delhi, IIM-Calcutta and Columbia University, has helped ReNew Power become India’s No. 1 renewable energy company.
Even though several internet and digital new age companies were also in the fray, the jury went in favour of companies with more proven business models, picking Sinha for creating India’s largest clean energy company in just seven years. The award, the jury agreed, was a recognition of the scale he has built in a relatively short span of time.
Sinha dedicated the award to his team at ReNew Power.
“This award is a recognition of what we have built together — this fabulous company which is our (professional) home,” he said. “It is also an indication that the renewables industry has started getting better recognised. ”
With projects adding up to 6,600 megawatts, including 4,000 MW already commissioned, it is nearly double the size of its nearest competitor in India. It is also India’s only renewables firm that is among the top few in both wind and solar energy.
It has raised debt and equity from global marquee investors ranging from Goldman Sachs, which acquired a substantial stake in the early days of ReNew Power, to Canada Pension Plan Investment Board, that recently invested $247 million on top of its $144-million investment in January 2018.
Sinha, who has been an investment banker in the US and UK and CFO at the Aditya Birla Group and COO at Suzlon, helped the company he founded raise $1.1 billion in equity and $3.4 billion in debt from global investors. The funding helped it acquire Ostro Energy, which has a capacity of more than 1,100 MW.
Sinha, a first-generation entrepreneur, steered ReNew Power to the top without any backing of big business houses or conglomerates.
Capital First awarded Financial Services Company of the Year at the VC Circle Awards 2018
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W, Capital First, Manpasand, Blackstone & Kedaara among winners of VCCircle Awards
India-dedicated private equity firm Kedaara Capital, venture capital firm SAIF Partners, private-sector lender Capital First Ltd and the company behind womenswear label W are among the winners of VCCircle Awards 2018.
The annual awards, now in their seventh year, recognise and felicitate PE- and VC-backed portfolio companies in key sectors, besides the key players in the ecosystem including investment funds, law firms and investment bankers.
The winners, awarded on Tuesday as part of the ongoing VCCircle India Limited Partners Summit 2018, being held at Trident Hotel, Mumbai, were chosen based on the recommendation of an eminent six-member jury. This year’s jury of industry veterans and long-time watchers of business in India evaluated the nominees on a variety of qualitative and quantitative parameters such as financial performance, brand salience and management quality.
The jury comprised Vikram Limaye, managing director and CEO, National Stock Exchange; Vishakha Mulye, executive director, ICICI Bank and former head of ICICI Venture; Gopal Srinivasan, founder of TVS Capital and chairman of the PE-VC industry body IVCA; Deep Kalra, founder, chairman and CEO, MakeMyTrip; Abhishek Lodha, managing director, Lodha Group; and Shailender Kumar, CEO, Oracle India.
TCNS Clothing Co Pvt. Ltd, which owns the ‘W’ brand of clothing for women, juice maker Manpasand Beverages Pvt Ltd, education services firm People Combine Avenues Ltd, contract research manufacturing firm Syngene International Ltd, Capital First—which is merging with IDFC Bank—and infrastructure solutions firm Enzen Global Solutions Pvt Ltd bagged the portfolio company awards in their respective sectors.
The awards also recognized top PE and VC fundraisers, as also exit of the year based on annualised return or internal rate of return (IRR).
Kedaara Capital, which raised the largest conventional sector-agnostic PE fund dedicated for India in a decade, bagged the PE fundraiser of the year award. PE giant KKR received the exit of the year award for the high returns it clocked from Gland Pharma Ltd in what was a landmark inbound acquisition deal involving a Chinese firm.
While VC firm IDG Ventures lost out to SAIF Partners for the VC fundraiser of the year, it was picked for a special jury award in recognition of its domestic fundraising that opened up new avenues of fundraising from local family offices, which otherwise did not bet on alternative investment industry in the past.
The best intermediaries—investment banks and law firms—were honoured, too. Avendus Capital and Kotak Mahindra Capital bagged the I-bank of the year award for PE and M&A categories. AZB & Partners and Cyril Amarchand Mangaldas received the law firms of the year award under the PE and M&A categories, respectively.
This year’s awards also introduced the VCCircle Hall of Fame, which recognise the funds raised over the years by an Indian PE firm and the amount deployed by a global PE major. The Hall of Fame awards went to ICICI Venture and Blackstone.
The nominations for the awards were powered by VCCEdge, the data research platform of News Corp VCCircle. The Hall of Fame awardees were picked solely based on the data collated by VCCEdge.
Capital First receives the Economic Times Best BFSI Brand Award 2018
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Capital First receives ‘Outstanding Contribution To Financial Inclusion India’ award by Capital Finance International 2017
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Supporting financial inclusion and serving the country's expanding middle class, India's Capital First has provided credit to over four million customers via its nationwide branch network. The company serves the vast universe of fifty million or so micro, small, and medium-sized enterprises (MSMEs) and India's vast consumer base using a differentiated credit-scoring model that leverages the power of deep analytics — the mining from multiple sources of large data sets, coupled with some traditional checks. Thanks to its innovative approach, Capital First is able to create an institution ground up within a short time and reach customers ignored by traditional financial services providers — people and businesses previously deemed un-bankable. The company now has a vibrant loan portfolio of more than $3bn. This performance is all the more remarkable taking into consideration the net NPA (non-performing asset) ratio consistently below 1.0% — a number most banks can only dream of.
Listed on India's two main stock exchanges, Capital First was founded in 2012 via a management buyout (MBO) which shifted the company's focus from asset management, broking, and real-estate financing to consumer and business finance. The company became one of India's remarkable success stories. Capital First saw its market cap increase near 10 fold from $120 million before the MBO in March 2012 to over $1.17 bn in March 2017. Capital First offers solid proof that reaching out to those at the margins of regular markets need not entail risk or dampen profitability.
The CFI.co judging panel agrees that the company, now one of the India’s largest non-bank financial institutions, enjoys privileged exposure to India’s vast economic upside. The judges declare Capital First winner of the 2017 Outstanding Contribution to Financial inclusion India Award.
Mr. V Vaidyanathan, Chairman & Managing Director, Capital First Ltd. has been awarded the Mint SAP Digitalist Award.
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Founder and executive chairman, Capital First Group
Vaidyanathan founded Capital First in 2005 and has over the years nurtured it into a financial powerhouse. In his previous role, he grew ICICI Bank to 1,400 branches in 800 cities. An alumnus of Birla Institute of Technology, Mesra, he completed his Advanced Management Program from Harvard Business School, Boston.
“The way we think about digital is that everybody in this country can be given a loan,” he said. The trick, according to him, is to figure out the right amount, right interest and right tenure that are tailored for specific individuals. Capital First sought to differentiate itself using technology tools and more granular use of data. Explaining that most existing lending firms “left almost 50% of the market untouched”, Vaidyanathan said “digitalization makes sense if you open up the other part of the 50%, which most banks and financial companies have excluded,” he said. “If something can grow the market and add value, it is digital—the rest is just talk,” said Vaidyanathan.
Mr. V Vaidyanathan, Chairman & Managing Director, Capital First Ltd. has been awarded the APEA Entrepreneur of the year award in the Financial Services Industry sector.
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"There are risks and costs to action. But they are far less than the long-range risks of comfortable inaction" - John F. Kennedy
There are many inspiring stories of entrepreneurship, often created by first generation entrepreneurs of the successors who take it to greater heights. The story of Capital First captivated us because this is one of the rare stories of the risen of a new breed of professional entrepreneurs. For it is not common to come across wildly successful professionals leave their big jobs and start afresh on a much smaller scale with equity positions, recapitalise the company, get equity and debt backing, successfully build an institution and create value for self and shareholders. That's what Vaidyanathan Vembu has done with a new brand Capital First.
Born to a family of four siblings, with family income representing middle class means, he was the only one in his family to join the private sector. His siblings joined the Indian Air Force and the Indian Army like their father who associated with the Air Force too. He joined Citibank in 1990 in the Consumer Banking division financing car loans. In 2000 when ICICI, a leading Indian financial conglomerate was setting up retail businesses, he joined to spearhead it. By 2006 he built a retail business of over USD 20 billion and a large branch network and joined the Board of the bank at 38. He was the MD and CEO of ICICI Prudential life insurance company. But he did not rest there.
His entrepreneurial idea was built on a new retail lending institution afresh, but this time with ownership stakes. "I used to remark to my ICICI colleagues I wish 1 got a green-field bank license and build a new bank exclusively in retail banking." "But bank licenses were rare to come by in India so the next best option was to open a Greenfield NBFC." The idea he says, was "to provide loans to small entrepreneurs and consumers using new-age technologies."
"I believed we needed equity capital of at least Rs. 10.00 bn (USD 150 mn) to have a reasonable shot." he says "I was looking around for a Private equity to back me with such a sum, to start a company focused on consumer financing." While he was still looking around, he chanced upon a publicly listed company with a net worth of USD 100 mn, and whose shares had come down sharply from Rs. 1100 to Rs. 95 in 2 years because of the global crisis. The company was basically providing wholesale loans to real estate developers and was doing Forex, Broking, and Wealth Management. Non-performing assets were high at 5.4%. "I thought we could start new retail business using this platform, raise USD 50 million equity from the markets or by "Preferential route" from some Private Equity. Accordingly, he arrived at a deal with the promoters to won 10% of the equity of the company, who agreed to just be "investors", and whom he describes as "extremely graceful".
In the months following, he had many meetings with many mutual funds to raise equity through a process called QIP, where a company can place shares to institutional investors, but couldn't. Meanwhile, existing majority shareholders publicly expressed intention to sell out at the right price.
There needs to be some business model to demonstrate to a potential private equity. So he wound down the subsidiaries of Forex; wealth and broking, and instead built a top-notch retail team by offering stock options and acquired talent from professional institutions like Standard Chartered, ICICI, HDFC, Barclays and Citi. In order to produce a proof of concept on the basis of which prospective investors could be attracted, the team built some new and unique business. The company gave small loans of USD 500 to USD 1000 to customers using certain judgment criteria and then created champion-challenge strategies to compare one pool of loans against the other and teased out the value of key variables using regression analysis. Over time with more sophisticated tools, more data and more experience the technology based underwriting improved dramatically. Meanwhile the company built the credit lines of about USD 1 billion to fund these businesses.
“He believes all his team members, particularly his senior people have significant stakes and are playing entrepreneurial roles in the organisation. He says that they are energetic motivated and very committed towards building an outstanding institution. “
Having built these concepts in a prototype scale, he presented this concept to many leading private equity players. He assured them he could build a loan book of USD 5 billion in 5-6 years if he had their backing. To show personal commitment, he agreed to lock his entire stake, acquire more stale at market prices, and signed many other caveats, locking himself contractually.
The India economy turn rather weak during 2010-12. Inflation remained elevated at 10%, India's monetary authority Reserve Bank of India raised interest rates by 25 bps 16 times in 3 years in response to high inflation, and GDP growth rates dipped steadily from 9% in 2010 to 5% in a few years. Most important, business magazine cover stories were planting doubts in the investor community like "India-blackout nation, India-drifting into abyss”, corruption scandals, and so on.
Finally in 2012 after scouting for a year, he secured an equity backing of Rs. 8.10 billion (USD 150 mn). The company was reborn with a new set of shareholders, a new mandate, a new Board, a new Company name and a new Brand Capital First was created.
The retails business built on the company has crossed over USD 2.5 billion with 3.5 million customers in six years. What's better, the asset quality has stayed superior to the rest of the industry with NPA consistently below 1%. The company's capital has grown from hundred and USD 103 million in 2010 to USD 500 million with capital adequacy of over 21%, much above the regulatory requirements .
The share price of the company has moved from Rs. 120 in March 2012 to over Rs. 750 now, and market cap registered an astonishing increase from USD 125 million to over USD 1.0 billion, India's latest financial sector "Unicorn"
He believes all his team members, particularly his senior people have significant stakes and are playing entrepreneurial roles in the organization. He says that they are energetic motivated and very committed towards building an outstanding institution. For all of us, he says corporate governance is not a slogan; we want to practice it day in and day out. Talking of the future, he says the new emerging environment with high Internet penetration high speed data connectivity and the new instant mobile-based payment platforms provide an incredible opportunity for growth not just for Capital First but for the entire industry. The under penetration of finance that could not be solved for 75 years, can be resolved in the next 10 to 15 he says.
As we write this note, we hear that Vaidyanathan has sold about 1.5% stake in the company. On being asked whether it represents reduced confidence in his company, he is quick to clarify that he had availed a loan to acquire his stocks in the first place, but since the stocks have risen in value, he has sold a small percentage to square the debt. "It was part of the original plan". He retains about 11% and "we can grow for decades" he says "More important" he points out, that "the buyers are marquee and well informed investors like Goldman Sachs, Ashmore, and HDFC Life." Notwithstanding, such bold moves to break through the glass ceiling into entrepreneurship are quite uncommon around us.
Mr. Apul Nayyar, Mr. Nihal Desai, Mr.Pankaj Sanklecha, Mr. Adrian Andrade, Mr. Pradeep Natarajan and Mr. V Vaidyanathan receive Asia's India Innovator of the Year Award at CNBC India Business Leader Awards 2017 on behalf of Capital First.
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V Vaidyanathan - CMD, Capital First Limited received CNBC Asia’s India Innovator of the Year Award
Non-food credit growth in India YOY is quite low at 3.29% as of February 2017, largely led by de-growth in the industry segment, mainly large corporates, which de-grew by 4.89% during the period. But a closer look at a sectorial level shows that credit growth at MSME (including industry and services) and consumer credit have grown 8.61%. But how is it possible that credit is stalled at the large corporate level (which we colloquially refer to as investments), but growing at the grassroots? After all small entrepreneurs derive orders from the large corporates. But this logic tends to see credit growth through the prism of manufacturing sector alone, which represents only 25% of GDP. The explanation is that apart from a top-down trickle economy, there is a bottom-up consumption economy too. Out of 609 micro industries financed and tracked by Capital First, only 38% are in the manufacturing sector. The larger entrepreneurship ecosystem is driven today by consumption. Services such as salons, kirana shops, trading, chemists, eateries, architects, designers, fuel stations, garages, doctors, travel agents are doing quite well and powering overall credit growth. Decades of loan book built by large corporate loans are getting rebalanced to financing consumption and trading, which is a welcome development. The other factor is whether demand is affected by demonetization. Here the data shows that economic activity is back to pre-November levels. Enquiries for loans are a lightning rod for economic activity. CIBIL reports show that retail loan enquiries fell 12% in November '16 over Sep '16, but are now higher over September '16 by 9%. Similarly, CIBIL commercial bureau records show a dip in enquiries of 4% in November '16 but up 29% in February 17. The sensitivity to lower interest rate is higher at the bottom of the pyramid. A corporate does not choose to put up a plant because interest rates are low, they would bother about larger issues like project clearances at State and Central level. On the other hand, low rate directly affects the monthly repayment capability and hence, a consumer buying a home or a trader using finance as working capital is likely to avail credit if the interest rate is low enough to afford the EMI. The latent need for goods and services are huge in India owing to an aspiring class, and is hugely elastic to interest rates and corresponding affordability. Seen in this light, interest rates are a catalyst to power consumption in the country and directly influence the demand at the bottom of the pyramid for smaller entrepreneurs. Given RBI's concerns on inflation based on volatility in global crude prices, possible El-Nino Effect, and one-off effect because of GST implementation, the RBI's neutral stance on Monetary Policy is appropriate. As far as excess liquidity due to demonetization is concerned, the RBI may use any of liquidity tools excepting CRR in the days to come. But sooner than later growth at the grassroots, which is humming along now, can be accelerated and will become a distinct priority.
CNBC Asia’s India Innovator of the Year Award The CNBC-TV18 ‘India Business Leader Awards’ are considered a benchmark when it comes to recognizing the top leaders in India’s business ecosystem. The awards aim at acknowledging those leaders who have made a stellar difference in their respective spheres, creating that much desired edge above their peers. This awards property is back with its 12th edition, to felicitate the visionaries who have led India's glorious journey from the front, setting new standards in terms of growth, scale, and market leadership. CNBC-TV18 looks forward to saluting these champions at a gala commemoration on 23rd March 2017 in New Delhi. This year, the awards ceremony will be presided over by the Hon'ble Finance Minister Arun Jaitley. Dignitaries such as Chandrababu Naidu, KT Rama Rao, and Harsimrat Kaur Badal will also be present to witness the most celebrated business awards of the country. The recipients of the awards have been chosen after a diligent process by an esteemed jury panel chaired by Aditya Puri and aided by Cyril Shroff, Sanjay Nayar, Shikha Sharma, Vishal Sikka, Arundhati Bhattacharya, Harsh Mariwala, Kalpana Morparia, and Rajiv Memani. The list of categories and winners is as follows: • Outstanding Company of the Year - Asian Paints • Most Promising Company of the Year - Amara Raja Batteries • State of the Year - Andhra Pradesh • Hall of Fame - RC Bhargava and Dr. Bimal Jalan • Outstanding Contribution to Brand India - Dipa Karmarkar • Outstanding Business Leader of the Year Award - Arundhati Bhattacharya • Brand of the Year - Maggi and Make Love Not Scars • Young Turk of the Year - Byju’s • Young Turk Start-up of the Year - Tonbo Imaging • The Disruptor- OLA cabs • CNBC Asia's India Innovator Of The Year - Capital First Limited • CNBC Asia's India Talent
Management Award - RBL Bank • CNBC Asia's Corporate Social Responsibility Award - Mahindra & Mahindra Financial Services • CNBC Asia's India Business Leader Of The Year - Vishal Sikka
Mr. Vaidyanathan, Chairman and Managing Director, Capital First nominated finalist at the prestigious CNBC 15th Asia Business Leaders Awards-2016
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Mr. Apul Nayyar receives the Most Trusted Financial Brand Award for Reliability & Customer Satisfaction from World Consulting and Research Corporation(WCRC) on behalf of Capital First.
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With a Strong Foundation – V Vaidyanathan, Capital First
It's often said that leaders these days must operate in an environment of extreme volatility. Do you agree? How does that affect the way you lead?
In our business there are tectonic changes happening both within the industry and from outside. Within financial services, there are big shifts in payment and settlement systems, the digital wave, demon-etisation, banking regulations, new banking licences, payment banks. External changes such as devel-opments in the analytics world, artificial intelligence, robotics etc. Whether internal or external, they all affect us.
So it affects the way we lead- I am always scanning for emerging changes around us, prepare the organisation in terms of structure so we stay in tune, or a step ahead.
Do you see your role as more of a big-picture strategist or a hands-on manager?
In large established organisations running for decades, there is probably a choice. For start-up organ-isations, this is a rhetorical question- we have to be both. One hand we have to big picture things like scouting for equity, choose business strategy, choosing lines to exit or to get into hiring leaders.
But ideas without execution is useless. So I may sometimes even get involved in apparently micro matters like turnaround times, customer satisfaction, office location, hiring decisions, leave or working days policy and so on. Last week when I visited a branch where I found a long queue for making payments after demonetisation. One customer said she was willing to pay by debit cards but we had no POS machines facility in branches! We are getting all our centers enabled for this now.
How do you have the confidence to know the right choice is to zig when everyone around you is telling you to zag? If I may ask you to share an incident.
It comes from confidence in the thought or idea. It works both ways-sometimes our co-leaders may see angles that I may not have seen and I pull back. Sometimes despite objections I have to power ahead because I think it is right. Launching some business lines were fraught with risks, some businesses lose money and show no visibility to make, there may be objections, but we kept going and improvising along the way.
Do you have a formal mechanism for making sure you stay in touch with employees and customers on the organization's front line?
I visit our branch offices often, when we speak to some employees, message I leave behind spreads like wildfire. I also write to employees often and do townhall meetings for culture, conduct in society, key priorities.
How much of your time do you spend developing leaders within your organization?
We have great leaders in our two Executive Directors Apul and Nihal, our CFO Pankaj and our senior management teams who provide direction. Our HR leader Adrian focuses on this too. When running large organisations we are only a sum total of the kind of leadership teams we create. I try that leaders have impeccable integrity, culture, driven, energetic and at same time very competent
Demonetization has caused a lot of disruption for your business. Your take?
First, it is great for India to get the cash to the banks. Even if all the money comes back, we will still be a winner as tax collections will go up and culture will change for the positive. In the end, what is good for India is good for us. Country first.
Whom do you owe your success to?
To a great family, wonderful share-holders, Board, and energetic employees whom also I think as family.
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December 2016 — WCRC Leaders 85
Mr. V Vaidyanathan, Chairman and Managing Director, Capital First awarded the ET Most Promising Business Leaders of Asia 2016 at the Economic Times Asian Business Leaders Conclave 2016.
LEADERSHIP LEARNINGS
Words to live by:
“Think POSITIVE and take your CHANCES.”
DNA OF A LEADER: I believe the first requirement for a leader is to be positive. This is not a motivation talk, it has real power. If a batsman is trying to hit ball for a six, at the moment he is swinging the bat he has to believe he will connect and it will go the distance. If he is tentative, he will only end up spooning a catch. We launch every business thinking it will work out. During the period when we were hunting for private equity for management buyout of the company, I met every PE thinking they are going to do it. This way there will be a natural spring in our step.
Next there is no substitute for hard work and persistence. No one gets lucky. Even the luckiest people put an effort.
When we hire people, people join us by sacrificing their jobs with existing institutions, so we don’t have the liberty of saying failure is fine and all such clichés. We have to play to win and work, 24 X 7, to make a success. Of course hard work is no substitute for strategy, and hope is not a strategy. To develop as a leader is a continuous lifelong effort. But in my opinion we grow as a leader when people around us grow learn and prosper as well.
MY STORY
SEED OF THE DREAM
While heading the retail banking business at ICICI Bank, I started wondering if there was a way I could promote a new bank, I felt all I needed was backing of capital from someone. I later found that was too difficult, bank licenses were rare. But to get an NBFC license was easier. I felt there existed a great opportunity build an NBFC in the large, growing and underserved MSME and consumer financial services market in India and someday convert It to a bank. While I was exploring this idea with some PE players, I came across an existing NBFC which was largely into wholesale financing. We worked out a deal where I could acquire 10% of the equity of the company. The idea I had was that I could superimpose a retail financing NBFC on this lending platform and phase out other noncore businesses like Forex and broking.
PIVOTAL MOMENT
Between 2010 to 2012, we shut down most of the subsidiaries and legacy businesses and starting building retail lending in the company. We drew up a retail business blueprint, bought retail systems and technologies, hired a retail team, and launched many retail lines of businesses. Despite challenges of hiring employees, lack of debt funding and a failed QIP attempt, we grew the retail loan book from Rs. 94 crores to Rs. 3400 crores by 2012. We then demonstrated the proof of concept to a number of large private equity firms who had, in theory, the ability to sign big cheques, While most attempts fell off for one reason or the other (too early stage of business, India GDP growth stalling from 9% to 5% during the period, high NPA of company, too early stage), we finally succeeded in selling the concept to Warburg Pincus.
FORMULA FOR SUCCESS
Capital First is founded on the core idea that it should address the niche, less-served segment with contemporary technology solutions: and financing of MSMEs and consumers fits into this theme. The conventional financiers have found it difficult to finance small entrepreneurs and consumers as the ticket sizes are low, loan tenor are short, operating costs are high, collections costs are high. credit underwriting is expensive, and NPA have traditionally been high (5-6%) in this segment. Traditional channels were not keen on doing such products which were unviable, as well as too small for them to warrant their time.
BIG TAKEAWAYS
MY BIG INSPIRATION: I have been inspired by people who achieved success despite odds, across many fields like sports, innovators, business, and entrepreneurship. Among businesses, Mr. Kamath is a shining example of a person with great grace, visionary leadership and thinking through the big picture.
MY BIG LEARNING: Be positive - it's a necessary condition, but not a sufficient condition. No matter what headwinds- slow economy, funding, unproven concept, balance sheet issues.. it works out in the end. Secondly, believe in serendipity not luck. Finally the goodwill of people around us is an invisible powerful force.
RECENT SUCCESSES: The market cap of the bank grew from Rs. 7.90 billion (USS 120 million) before the Management Buyout on March 31, 2012 to Rs. 76.00 billion (USD 1.16 billion) on 31st March 2017.
Capital First awarded in the prestigious Fortune “Next 500” for FY 2016. Mr. V Vaidyanathan receives the award on behalf of the company from Shri Nitin Gadkari.
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CELEBRATING THE GIANTS OF TOMORROW
Highlights from the second Fortune India The Next 500 event, which showcased India's largest and finest midsize companies and shone the spotlight on the challenges faced by this neglected segment.
THE SECOND ANNUAL Fortune India The Next 500 event was held in Delhi on August 19 to celebrate the achievements of India's largest midsize companies and their stellar role in the country's economy.
The chief guest and keynote speaker was Nitin Gadkari, union minister for road transport, highways, and shipping. Chandreshwar Prasad Singh, minister of urban development and housing development, Government of Jharkhand, was the guest of honour. He was joined by Ramsevak Sharma, chairman of the Telecom Regulatory Authority of India.
The event was attended by the CEOs and directors of The Next 500 companies, senior industry leaders, policymakers, academicians, and senior bureaucrats.
Eminent personalities in the audience included Amir Ullah Khan, senior policy advisor to Bill and Melinda Gates Foundation; Sunil Sinha, chief economist, India Ratings; Nilanjan Banik, professor at Bennett University; Harshbeena Zaveri, managing director and president, NRB Bearings; Emmanuel Balayer, vice-president — marketing, Bhartiya Urban; and Pranav Haldea, managing director, Prime Database group.
The event also featured a host of renowned thought leaders speaking on a variety of subjects, including Shailesh Pathak, executive director, Bhartiya Group; Sanjeev Sanyal, author, former banker, and urban planner; Suresh Narayanan, chairman and managing director, Nestle India; and Ajay Rastogi, founder, Foundation for Contemplation of Nature.
Fortune India collaborated with a number of marquee partners to build this unique event. These included state partner Jharkhand; automobile partner Ford; associate partner Giant Starkenn; evening partner The Glenlivet; hospitality partner The Leela Palace New Delhi; and television partner NDTV Prime.
D.D. Purakayastha, managing director and CEO of ABP Pvt. Ltd., Fortune India's parent company, delivered the welcome address. He reiterated the contribution made by the Next 500 companies, calling the leaders of these companies "visionaries and disruptors" who are creating paradigms of change in India Inc. It is Fortune India's mission to deliver information on people, ideas, and technologies changing the world to a community of decision makers. And The Next 500 list is a vital part of this information.
INTRODUCING THE CONCEPT of The Next 500, D.N. Mukerjea, editor, Fortune India, pointed out that Fortune India's The Next 500 is the only definitive ranking of midsize companies. Fortune India, he said, is the only publication to understand that this set of companies is neglected both by policymakers and by those who provide capital. Whether or not these companies break into the Fortune India 500, they matter to the economy at large, he said. "These businesses are the backbone of the Indian economy, and will be responsible for its phenomenal growth in the coming years," he added.
He proved his point with a set of unexpected data, comparing the growth of the Fortune India 500 companies with that of The Next 500 companies. While overall growth was similar; the double-digit growth of the last 50 of The Next 500 outstripped the sluggish 3% growth seen in the last 50 of the 500 list.
Despite the clear evidence of growth, these companies, Mukerjea said, often faced problems in accessing capital. Policymakers and bankers need to address this issue, and allow these midsize companies space to grow. As Fortune India had articulated in The Next 500 issue of June 2016, across sectors, highly leveraged balance sheets remain a drag on performance.
Equally, a number of these midsize companies are hungry for growth. Predictably, as we found last year, manufacturing dominates the list, with 413 companies accounting for 83% of the total revenue.
This year, 50 companies from last year have moved into the revenue bracket that qualifies them for a place in the Fortune India 500. The event sought to felicitate the top movers into the 500.
The idea behind The Next 500 event is to create an accessible, world-class knowledge-sharing platform that will help these companies learn from each other and from the policymakers they meet. At the same time, our goal was to celebrate the many successes of these companies. Last year, we felicitated 10 of the top wealth creators.
This year, we added to that by including companies that have moved into the 500 list (technically, they are The Next 500 alumni). We also identified and felicitated companies that were most likely to move into the 500 list.
The 30 companies felicitated came from sectors as diverse as pharmaceuticals, e-commerce, banking, tourism, automotive, and infrastructure development. Guests from this list included Yogesh Agrawal, managing director, Ajanta Pharma; Abhijit Bose, head-retail assets and strategic alliances, DCB Bank; Hitesh Oberoi, managing director and CEO, Info Edge (India); Ashish Bhatia, group general manager, IRCTC; Deepak Chiripal, CEO, Nandan Denim; Madhavan Menon, chairman and managing director, Thomas Cook (India); and Nitin Sood, CFO, PVR; and many more besides.
IN HIS KEYNOTE ADDRESS, Gadkari urged the companies on Fortune India's Next 500 list to work with government to improve the country's infrastructure and waterways. He also highlighted his plans to expand the current national highways system from 96,000 km to 2 lakh km. The improved road network will help ease the logistics and transport bottlenecks that have long been an impediment to local businesses, he said. Gadkari added that the government is building two arterial bypasses for trucks passing through Delhi, which will dramatically curb pollution in the National Capital Region.
Guest of honour Chandreshwar Prasad Singh began by asking the audience if he could talk in Hindi. In an address that recognised the chief minister of Jharkhand, Raghubar Das, as the driving force behind much of the development in the state, Singh emphasised on the business opportunities that Jharkhand offered. "I offer single-window clearance to all Next 500 companies for projects in Jharkhand," he announced.
Before his responsibilities as chairman of the Telecom Regulatory Authority of India, Ramsevak Sharma, was chief secretary to the Government of Jharkhand, and also director general of the UIDAI. Speaking after Singh, Sharma said that to most people, it appears that no infrastructure development is taking place in Jharkhand. But work was progressing, he said, except that the pace was sometimes slow. That's because the state has seen too many changes in government, he added.
THE MINISTERS' ADDRESSES were followed by a series of talks, and questions from the audience. Kicking off the sessions was Shailesh Pathak, executive director, Bhartiya Group, speaking on India's infrastructure in the next few years. Starting off by asking how many in the audience cycled to school, he segued into the need for good urban transportation systems. Public transport can and should be supported by cheap and non-polluting modes of private transport: cycles.
Following that was Sanjeev Sanyal, author, economist, and former banker, speaking on how the Indian Ocean changed, and is changing, the world. Drawing upon historical examples, including the maritime adventures of the Chola kings of South India, Sanyal spoke of how India views its neighbours today.
The first speaker focussed on the future and the second on the past, began Suresh Narayanan, chairman and managing director of Nestle India. His talk would be on the present, he said, before talking of the Maggi crisis that almost brought his company to its knees. Using his own example, he explained what a leader could do when a crisis paralysed the company.
The last speaker, Ajay Rastogi, who founded the Foundation for Contemplation of Nature, explained how all humans have a deep connection to nature. While it may not be possible for everyone to live amid nature, he said it was possible for even the most boring corporate workplace to bring some elements of nature in, even if it's a small plant.
The event closed with Arun Singh, business head, Fortune India, delivering the vote of thanks, followed by a networking session.
Mr. V. Vaidyanathan, Chairman and Managing Director, Capital First awarded Outstanding Entrepreneur Award at Asia Pacific Entrepreneurship Awards 2016.
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"THIS IS INDIA - LAND OF INCREDIBLE OPPORTUNITIES, YOU CAN ACHIEVE ANYTHING HERE."
There are great inspiring stories of entrepreneurship, but this one will make you sit up and read it again. How often do you find a senior executive leave his job at a board position at a large institution and acquire a falling stock thinking he can turn it around? That's exactly what Vaidyanathan Vembu (Vaidya, to friends) did to start his entrepreneurship journey. At 42, he was already the MD and CEO of ICICI Prudential Life Insurance, and earlier on the Board of ICICI bank. He built and ran a USD 30 billion consumer finance loan book, and managed 1400 branches with $20 bn in deposit.
His idea was build a retail lending institution, in a niche area where banks don't lend, on the backbone of technology, but with ownership states this time around. The idea was to provide small loans of USD 1000 to USD 1,00,000, in niche segment of micro enterprises and consumers - an area where banks traditionally don't focus much. But the issue for any entrepreneurship, even if you had the right idea, is how do you get started - how do you raise your first round of equity? How do you raise debt? What about terms? Also, probabilities of success drop sharply when you don't have a known brand to bank on. But there have been great case studies of such successes like Narayanamurthy, founder of the reversed software giant Infosys - who quit his job at Patni Computers.
"I didn't mind starting small all over again, but not too small. I believed we need a net-worth capital of at least Rs. 10.00 bn ($150 mn) to have a reasonable shot." he says. "I was looking around for a Private equity to back me with such a sum, to start a company. While he was still looking around, he chanced upon a publicly listed company with a net worth of USD 100 mn, and whose shares had come down sharply from 1100 to Rs. 95 in 2 years because of the global crisis. The company was basically providing wholesale loans to real estate developers. Non-performing assets were high at 5.4%. "I thought this was ideal platform for entrepreneurship as we could start retail financial services. The company was already listed and had a lending licence, and I could raise USD 50 mn from the market or PE." Accordingly, he arrived at a deal with the promoters to own 10% of the equity of the company, who agreed to just be "investors", and whom he describes as "graceful".
Ideas are easy on spread sheet and paper, but tougher in reality. Neither could he raised equity, nor debt, to grow the company he had bought into. In the months following, he had many meetings with many mutual funds to raise equity through a process called QIP, where a company can place shares to institutional investors. But for one reason or the other, nothing worked. Meanwhile, existing majority shareholders publicly expressed intention to sell out at the right price. Vaidya then pitched the idea to over a dozen large private Equity Firms, including the well- known ones Bain, Blackstone, Carlyle for their backing.
But the timing couldn't have been worse. The India economy took a turn for the worse after 2010. Inflation remained elevated, India's monetary authority Reserve Bank of India raised interest rates by 25 bps 16 times in 3 years in response to high inflation, and GDP growth rates dipped steadily from 9% to 4.5%. Most important, business magazine cover stories were painting scary picture like "India-blackout nation, India- drifting into abyss", corruption scandals, and so on, ceding doubts in the investor community.
The amount was big- he was looking over $150 mn of equity to buy out other shareholders, and it was a big sum to seek backing. Matters got complicated because of high media visibility and speculations whenever a deal was being discussed with any potential investor, being public company. He couldn't sleep for more than 4-5 hours a night, out of stress, not knowing who will back him, and not knowing how to convince them to do it. There were too many moving parts about debt, business growth, profitability, attracting new employees, and retaining existing ones under these circumstances.
Meanwhile he had to produce a proof of concept to attract prospective investors as mere spreadsheet projections wouldn't do. So despite limited capital on hand; he built a top-notch retail team of over 800 retail professionals. He offered handsome stock options and went talent scouting from the best of names, from Standard Chartered, ICICI, HDFC, Barclays and Citi. The company diversified into consumer and MSME financing. Even under the tight liquidity conditions and uncertainties, the company built the credit lines brick by brick from USD 100 million in 2010, to over USD 900 million by 2012.
He was still negotiating with one Gurgaon-based PE when Vaidya had a chance meeting with a senior Warburg Pincus professional one evening on a flight from Delhi to Mumbai on March 7, 2012. Not letting go of the opportunity of having two captive hours with a large PE, he pitched the same story on the flight. In later negotiations, WP said they wanted to see well-defined idea (he told them we'll lend to micro- entrepreneurs), in an industry that has great potential (his case was Financial services), and in an economy they have confidence in (he says “what’s better than India?"). He assured them he could build a loan book of $4-5 billion in 5-7 years if he had their backing. To show personal commitment, he agreed to lock in his entire stake and signed many other caveats, locking himself in contractually.
After 3 months of negotiations, WP agreed to invest $150mn, with which the existing shareholders were bought out, an open offer launched for the minority shareholders for 26% and fresh equity infused into the company. The deal was concluded and thus Capital First was founded with all things new- new shareholders, a new Board, new business lines, new name and a new Brand.
It was a big breakthrough. “I couldn't sleep that night" he says after 2 uncertain years, there was certainty. Since then, Capital First has built a loan book of USD 2 billion, acquired an astonishing 2 million micro-customers, hired 1300 employees. The share price of the company has moved to over Rs. 350 now, and market cap increased from $125 million to over $500 million between 2012 to 2016. "India is really incredible India, anything is possible here". says Vaidyanathan.
CAREER HIGHLIGHTS
Founded Capital First by acquiring stake in existing NBFC and then securing $150 mn equity backing from PE firm-Warburg Pincus under adverse macro conditions in India, and created a new brand.
Transformed Capital First from wholesale NBFC with handful of customers to retail financing with 2 million customers. Retail loan increased from USD 14 million to USD 2 billion.
Market cap increased from USD 125 mn in 2012 to USD 500 million in 2016.
Copyright © Capital First Limited
Copyright © Capital First Limited
