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Executive Summary
Capital First Ltd (NSE: CAPF) is a leading Financial Institution in India focused on providing debt financing to MSMEs and Indian consumers. Capital First was founded in its current form in 2012 by Mr. V. Vaidyanathan by first acquiring a stake in an existing NBFC and then securing an equity backing of ₹ 8.10 Billion from global Private Equity player Warburg Pincus, resulting in a Management Buyout of company which included  an open offer to the public, new shareholders,  reconstitution of a new Board, raising ₹  1.00 billion in fresh equity through preferential allotment, and creation of a new brand and entity called Capital First.

2008-2010
The company was initially listed on the Indian Stock Exchanges in January 2008 as Future Capital Holdings. Within 2 years of launch, FCH had invested in a number of diverse businesses including wholesale financing Real Estate Developers, Corporate Credit, Private Equity Asset Management, Foreign Exchange Business (through Joint Venture arrangement), Retail Broking Business (through Joint Venture arrangement), Mall Management Business, Wealth Management and Property Services. The company had a subsidiary NBFC for specialized lending. The company was largely a wholesale financing NBFC with ₹ 8.35 Billion worth of loans to real estate developers (90% of total loan book of ₹  9.30 billion). The gross NPA of the company as of March 31, 2010 was 5.28% and the Net NPA was 3.78%.

2010-2012
In 2010, Mr. Vaidyanathan concluded an agreement to acquire 10% of the equity of the company and joined the company as VC and MD, and decided to use the NBFC platform to build a retail financing institution entirely focused on MSME and consumer credit. As part of this strategy, in a series of corporate actions, the company exited legacy businesses and built the platform for retail financing. In August 2010, the company convened an EGM of the company and secured approval of shareholders to merge the subsidiary into the parent company to conserve capital and to streamline operations. In March 2011, the Foreign Exchange business was sold to the 50% JV partner Centrum. Again as part of the same realignment in March 2011, the retail equity and wealth management businesses, which were 50% JV with Centrum, was purchased from the partner and later wound down.

The company instead launched and incubated many retail businesses for financing small entrepreneurs who were starved of credit, and Indian consumers in such areas where traditionally lenders were not interested as these segments have been traditionally fraught with credit risks as well as lack operational efficiency and scale. Hence in order to address a new market in a new way, the company developed proprietary credit decisioning models, by using deep analytics and proprietary research and launched new businesses in these areas. Thus financing India’s 50 million MSMEs and India’s emerging middle class, with a differentiated model, based on new technologies became the founding theme of the company.

During 2010-2012, the company built the proof of concept for many such businesses focused on the small borrowers, and demonstrated the same to many large private equity players for their equity backing to buy out the existing promoters who had expressed interest to sell out, to launch an open offer for minority shareholders, and for fresh equity in the company for growth. For building newly launched retail businesses, the company was constrained for both equity and debt capital. Quoting from an article in Enterprise Asia, “Even under the tight liquidity conditions and uncertainties, the company built credit lines from USD 100 million in 2010, to over USD 900 million by 2012. During this period, he built a top-notch retail team of 800 professionals in 2 years. He offered handsome stock options and went talent scouting from the best of names, from Standard Chartered, ICICI, HDFC, Barclays and Citi.”

2012-Date
The company was on the lookout for equity support for about two years even while developing the proof of concept for the new business lines. “While Mr. Vaidyanathan was still negotiating with one Gurgaon-based PE, he 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 story on the flight - of lending to micro-entrepreneurs in an industry (Financial Services) with great potential and an economy (India) they had already shown confidence in.”

“After 3 months of negotiations, WP agreed to invest INR 8.10 Billion into the company, including ₹ 1.00 Billion by way of preferential allotment. As part of the process, an open offer was launched as per SEBI Takeover guidelines for minority shareholders for 26%.”

Thus ‘Capital First’, a new entity and brand founded in 2012 with equity backing of ₹ 8.10 Billion from Warburg Pincus, by way of management buyout of existing shareholders which included the following corporate actions:


 * Creation of a new Brand Capital First
 * ₹ 1.00 Billion primary capital raised by way of Preferential Allotment
 * Launch of Open Offer for minority shareholders for 26%
 * Reconstitution of The Board of Directors
 * Powering up of the retail lending business model which was started in 2010.

In FY 14 the company applied and secured Certificate of Registration to start a Housing Finance Company from National Housing Bank to commence business of affordable housing finance.

In March 2014, Capital First raised fresh equity capital of ₹ 1.78 Billion, of which ₹ 1.28 billion was raised from Warburg Pincus in a second round, and ₹ 0.50 Billion was raised from HDFC Standard Life

In March 2015, Capital First raised fresh equity of ₹ 3.00 Billion through QIP allocated to DIIs and FIIs, largely subscribed to by Goldman Sachs Asset Management, Birla Sunlife and One North Capital.

In December 2016, Capital First raised fresh equity ₹ 3.40 Billion by preferential allotment to GIC, Singapore, a sovereign wealth fund.

Products offered
Capital First provides debt financing to small Indian entrepreneurs and to Indian Consumers ranging from as low as ₹ 10,000 to ₹ 20 million for a wide range of tenures ranging from as low as 6 months to upto 15 years. Small businesses usually avail these loans for business expansion, purchase of Plant and Machinery, office furniture, painting and renovation of office, office lighting, display panels, office automation, PCs, laptops and printers. Consumers usually avail these loans for purchase of televisions, LED Panels, washing machines, mobile phones, two wheelers, and used cars. The company also offers affordable housing largely focused at self-employed individuals and salaried individuals.

Franchise: With this unique approach based on a technology platform to service underserved segments, Capital First has financed over 3.2 million Indian enterprises and consumers, disbursed ₹ 280.00 billion (USD 4.18 billion) worth of loans and built loan assets of ₹ 179.37 Billion  (USD 2.57 Billion) as of September 30th 2016.

The company’s retail financing book has continuously increased over the years to cross ₹ 161.63 billion as of Sep 30, 2016.

Within 6 years, the Company has built a large network capable of providing financing in 222 locations across the country.

The company’s long term credit rating for Bank Facilities, NCD & Subordinated Debt has been continuously upgraded over the years to AA+ which has been achieved by very select financial institutions in India. The series of upgrades represents the significantly improved performance of the company over the years across all parameters including strong capitalization levels, strong business model, comfortable asset quality parameters, healthy liquidity position, experienced management team, strong promoters and reputed institutional shareholders. The short term credit rating of the company is A1+ (Highest).

Asset Quality: The Gross and Net NPA of the Company are 0.98% and 0.45% respectively (basis 120 days past due recognition), which demonstrates high asset quality as compared to the Indian financial services industry. By comparison, the weighted Gross and Net NPA of the top 10 banks in India as per published financials is 6.72% and 3.92% respectively, and the weighted Gross and Net NPA of the top 10 NBFCs in India is 4.41% and 2.06% respectively as on Sep 30, 2016. The market capitalization of the company has risen from ₹ 7.90 billion (USD 159 Million) on March 31st 2012 to ₹ 64,018 Million (USD 955 million) as on September 30th 2016.

Shareholding Pattern and Key Shareholders (As of December 23, 2016)
http://www.sharekhan.com/stock-market/company-details/company-profile/equity/Capital-First-Ltd/17024862.00/CAPF/share-holding-pattern.htm,/ref>

Corporate Social Responsibilities / Social Initiatives
Capital First Ltd. has been actively contributing to the society in the form of its CSR activities. During FY 2015-16, the company launched seven key initiatives as under:

1.	Capital First - Scholarship Program This is the company’s flagship CSR program and involves providing financial assistance to students who on their own merits, have been able to secure admission to selected management programs, but happen to belong to economically weaker section of the society and are therefore, unable to afford the expenses for the programs. Such students are awarded scholarship under the Capital First Scholarship Program.

2.	Capital First - BALM Fellowship Program Capital First supports students with an annual family income of less than ₹ 1,50,000 per annum for the Capital First – BALM Fellowship Program which works in the area of mental health for economically weaker segments. The program offers students a tuition waiver, rental and living stipend, support for local travel and travel for fieldwork placements.

3.	Distribution of Books and Digital Products In collaboration with Navneet Education Ltd., the company has identified 16 target schools in the three talukas of Pune district. One digital classroom was installed per school in seven schools across two talukas as per the need-assessment undertaken. Students are also provided with handy materials that aid in the development of good English and vocabulary, along with other informative books.

4.	Capital First Woman of Substance Capital First has partnered with the NGO - Etasha Society - to provide vocational training towards empowering women from low-income backgrounds, using the platform of education. The objective is to offer training to women between the ages of 18 and 30 years who are keen to earn a sustainable living.

5.	Capital First EduBridge Training Program Capital First in collaboration with EduBridge, a Mumbai-based training has have set up a co-branded career academy in Pune which provides job-oriented training in retail, BFSI, IT/ITeS and hospitality sector. 191 students till date have participated at the Pune Academy.

6.	Om Creations Trust – Supporting Children with Down’s Syndrome Capital First has set up the Om Creations Trust to help mentally challenged children/ young adults to develop and realize their potential by giving them opportunities to study, acquire skills and integrate into the mainstream. The project has students from the SPJ Sadhana School with Specialized Education in the Arts and Crafts, Hospitality and Catering skills which enable them to earn a living and also lead a more meaningful life.

7.	Bala Janaagraha Capital First in partnership with Bala Janaagraha runs an education program for children in 11 municipality schools in Nagpur City which focuses on teaching children principles of good citizenship.

8.	Supporting Drought Relief Work Employees of the company are encouraged to personally participate in the CSR activities of the company. The Company Chairman visited the drought-affected districts of Latur and Beed to get a firsthand understanding on the gravity of the situation, engaged with the local people and assessed the way the company can bring sustainable change by supporting NGOs involved in river rejuvenation and bund building in the affected areas of Marathwada region. Post the visit, Capital First and its employees contributed an amount of ₹ 36 Lakh for the drought relief work in the region.

Awards and Accolades

 * Asia Pacific Entrepreneurship Award 2016: Outstanding Entrepreneur Award to Mr. V. Vaidyanathan – 24th March 2016


 * The company featured in India’s Top 500 Companies & Corporates by Dun and Bradstreet in 2016 and was ranked 381 based on total income. This was a substantial upgrade from the debut ranking of 467 for Capital First in the overall category in 2015.


 * The Company received the Asset Triple A Treasury, Trade and Risk Management Awards in Hong Kong 2016. 11th June 2016.


 * The company debuted in the Fortune Next 500 list in August 2015 with a ranking of 273 and climbed to Rank 70 in the list of Fortune Next 500 companies in August 2016. The company was awarded “Giants of Tomorrow” by Fortune magazine in their Annual event held on 19th August 2016 at New Delhi.


 * On 20th November 2016, Business Today ranked Capital First No.274 in India’s list of most valuable companies in their 2106 ranking of the best corporates, which was an upgrade of 49 ranks as compared to the debut ranking of 323 in the list in 2015.


 * On 28th November 2016, Capital First debuted in ET 500 “India’s Future Ready Companies with rank of 466.


 * On 15th December 2016, Mr. Vaidyanathan was conferred with the prestigious “Most Promising Leaders in Asia Award” by Economic Times at Asian Business Leaders Conclave from Hon. Dato' Sri Mustapa bin Mohamed, Minister of International Trade & Industry, Malaysia.