Factoring Landscape – India India Factoring & Finance Solutions Pvt Ltd Factoring Landscape – India Global Factoring Summit – 5th May 2017 Ravi Valecha – First Executive Vice President Head Business, Product and FI Network

How Many of you currently use? How Many of you currently use? Question? How Many of you currently use? 1990 - early 2000s in India Obsolete!! How Many of you currently use? Mid 2000s onwards Modern Question of obsolescence / modernity

How Many of you currently use? How Many of you currently use? Question? How Many of you currently use? 1900s – now?? in India Traditional!! How Many of you currently use? 2011 onwards (1990s) Modern Question of obsolescence / modernity

Why hasn’t Factoring picked up in India? Question? Why hasn’t Factoring picked up in India? Awareness? Can Ignorance be bliss? Regulations around Factoring? Factoring Act 2011 and numerous others Easy availability of traditional banking finance? Is that enough? Comfort zone? – banks?? Adapt Comfort zone? – clients?? Commercial sense Fear of unknown Learning Who loses? Indian Companies and most importantly…. Indian Economy Question of obsolescence / modernity

Huge Potential for sustained growth – current nascent stage Factoring – landscape in India India’s share is only 0.16% of the global factoring volume in CY 15 (0.14% in CY 11) Indian Factoring Industry grew at 7.2% CAGR as against Global growth of 4.2% over 2011-15 period Country wise market share of Factoring Volume Growth in Factoring volume - world Growth in Factoring volume - India CAGR 4.3% CAGR 7.2% CY 11 CY 15 Amt in € Source: FCI Annual Review Report Huge Potential for sustained growth – current nascent stage

Policy initiatives – propelling growth Improved policy support Factoring Regulation Act, 2011 NBFC – Factor, 2013 TReDS, 2014 NCGTC Fund, 2015 Non-Recourse Factoring, 2015 Non-Factoring Revenue Cap SARFAESI PSL status to Factoring Improving policy support & awareness about benefits of Factoring driving growth

Existing Market – New Product – Improved regulations Factoring Environment - 2017 Outlook USD 304 B of Bank Trade Credit (BD/CC/OD) Suppliers to the large Global MNCs – Make in India Open Account Factorable Trade of USD 154 B New bank / non bank operators required Export Trade of USD 240 B ( 9.5% YOY) Threat: Embargo on Credit Insurance No Serious Player in Factoring – except few Banks viewing Factoring as a threat Lack of Knowledge in factoring – a major block Opportune time to capitalize Total Bank Credit for Trade Factorable opportunity – India (USD B) Source: RBI, Intellecap, Factoring Yearbook, FCI $304 B Existing Market – New Product – Improved regulations

Not just finance but a bouquet of services – a wholesome package What is Factoring? Purchase of Open Account Receivables – Assignment Prepayment against AR – financing Non Recourse Facility – Exports Usually unsecured facility Balance sheet management Collection is managed by the Factor – Correspondent for Export Factoring Frees up working capital – and cuts FX exposure for Export Factoring Additional feature of credit protection – correspondent factor Credit Insurance not required as buyer risk covered by Correspondent – Export Factoring Gradual movement from LC backed to open account structure – a growing global requirement Not just finance but a bouquet of services – a wholesome package

Client can concentrate on his core business Advantages to Client Improves his cash flow – immediate funding upon presentation of invoices Client need not spend time on chasing overdue debts – collections are done by our Correspondent No Languages / time zone issues with foreign debtors – collections are done by our correspondents No losses due to Bad debts – Correspondent cover / insure Buyer’s Credit Risk Fully unsecured Facility – Client free to pledge his securities to Bank Balance Sheet ratios improves – Factoring is Off Balance Sheet for Client Improves Commercial competitiveness – higher credit terms does not affect the Client Self Liquidating Finance – Financing is recovered from payments made by the buyer Client can concentrate on his core business

Factoring vs Bank Finance Receivables are Assigned / Purchased Factoring Limit - Off Balance Sheet (Non-Recourse) Unsecured Receivables get converted into Cash Factoring Limit is based on future Sales Factoring is based on Client’s performance of goods and Debtor’s Creditworthiness Collection Services No Penalty on Overdues Buyer Concentration approach Bank Finance Receivables are Hypothecated Bank Limit reflects on Balance Sheet as Loan Mostly Secured Receivables remain as Debtors Bank Limit is based on Balance Sheet Banking Limit is based on Client’s Creditworthiness No Collection Services provided Penal Interest on Overdues Client Concentration approach

Thank You India Factoring & Finance Solutions Pvt Ltd Global Factoring Summit – 5th May 2017 Ravi Valecha – First Executive Vice President Head Business, Product and FI Network