1. 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

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

3. 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

4. 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

5. 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 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

6. 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

7. Existing Market – New Product – Improved regulations
Factoring Environment
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

8. 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

9. 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

10. 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

11. 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