Indian Construction Equipment and Infrastructure Financing Market

0
Indian Construction Equipment and Infra Finance Sector Overview
Market Study and Growth Outlook
2017
Maple Growth Partners

1
Project Objective and Focus of the Document
• One of our Singapore-based impact investing fund client had asked us to conduct a detailed study within the
Indian NBFC market to identify growth segments based on their investment criteria
• They were looking for tech-oriented companies with an investment ticket size of less than $1 million
• This full report is a 300 pager document providing a detailed overview of the Indian NBFC industry
• We first provided a broad overview of the Indian NBFC market and identified 12 service segments such as
SME, education, healthcare, auto, housing, infra finance, construction equipment finance, loan against
property (LAP), affordable housing, microfinance, gold, and wholesale finance
• Of these identified segments, we carried out a detailed study on the following 9 segments our client was
broadly interested into: SME, auto, healthcare, education, housing, affordable housing, construction
equipment finance, infra finance, and LAP
• Then, we compared and evaluated all these segments based on a strict investment parameter
framework to come up with a more fact-based (rather than intuitive) investment rationale and go-to-
market strategies
• We later presented our sector insights, value creation game plan, actionable targets for each of the
attractive segments, along with a directory of industry experts and influencers so that our client had the
primary first-hand resource to assess the investment opportunities within the identified attractive service
segments
• While the entire report is exclusive for the said client, we have provided our piecemeal analysis on the two
least interested sectors (from the client perspective) i.e. infrastructure financing and construction equipment
finance in order to showcase our research and analytical skillsets and capabilities

2
Table of Contents
• Indian NBFC Market Overview
1. Infrastructure Financing Market Overview
• Infra Finance Market Dynamics and Key Growth Drivers
• Critical Success Factors
• Major Challenges / Issues / Investment Concerns
• Key Companies and Financials Overview
• Selected M&A Deals
• Investors Focused on the Sub-Sector
2. Construction Equipment Finance Market Overview
• Construction Equipment Finance Market Dynamics and Key Growth Drivers
• Critical Success Factors
• Major Challenges / Issues / Investment Concerns
• Key Companies and Financials Overview
• Selected M&A Deals
• Investors Focused on the Sub-Sector

3
A. NBFC Market Overview and Segmentation

4
Non Banking Financial Institutions
Housing
Finance
Company
(NHB)
Insurance
Company
(IRDA)
Stock e/x,
brokers,
merchant
banking etc.
(SEBI)
Nidhi
Companies /
Chit fund
(GOI)
Non-Banking Financial
Company (NBFC)
All India Financial
Institutions (RBI)
Loan
Company
Investment
Company
Asset
Finance
Company
Residuary
NBFC
Loan
Company
Investment
Company
Asset
Finance
Company
Infra
Finance
Company
Infra Debt
Fund
Factoring
Core
Investment
Company
Micro-
finance
Primary Focus
Areas of this
Document
Structure of Non-banking Financial Institutions in India and Primary Focus Areas
NBFC-
Deposit
taking
(RBI)
NBFC - Non
Deposit
Taking
(RBI)
Note: The regulatory authority for the respective institution is indicated within the brackets
Source: CRISIL Research; RBI; MGP Research

5
Classification of NBFCs based on Liabilities
• NBFCs are classified on the basis of liabilities into two broad categories:
1. Deposit-taking (NBFC-D)
• Number of NBFC-D registered with RBI has declined from 776 in 2001 to 202 in 2016
2. Non-deposit-taking
• Deposit-taking NBFCs (NBFC – D) are subject to requirements of capital adequacy, liquid assets maintenance, exposure norms
• In recent years, NBFC sector has seen a fair degree of consolidation, leading to emergence of larger companies with diversified
activities. Consolidation and acquisition have increased number of NBFCs with asset base in excess of Rs 5bn. To ensure
sound development of these companies given their dominant share in NBFC assets, large size, and dependence on public
funds, the regulatory response has been to introduce exposure and capital adequacy norms for NBFCs with assets of Rs 5
billion and above (termed as NBFC – ND – SI)
• Further, in 2015, non-deposit-taking NBFCs with asset size of Rs 5 billion and above were labelled as ‘systemically important
non-deposit taking NBFCs’ (NBFC-ND-SI) and separate prudential regulations were made applicable to them
• The rest (NBFC-ND) which fall below this limit account for the majority proportion of the NBFC entities
Classification of NBFCs into Deposit and Non-Deposit Taking Categories
NBFCs
(11,682)
Deposit taking (NBFC –D)
(202)
Non-Deposit Taking NBFCs
(11,480)
Systemically important
(NBFC -ND-SI)
(220)
NBFC –ND
(11,260)
Note: Figures in brackets represent number of entities registered with RBI
Source: CRISIL Research; RBI; MGP Research

6
• Non-banking Financial Companies (NBFCs) help fill gaps in the availability of financial services with respect to
products as well as customer and geographic segments. They cater to the unbanked masses in rural and
semi-urban reaches and lend to the informal sector and people without credit histories, thereby enabling the
government and regulators to realise the mission of financial inclusion
• Financing requirements in India have risen in sync with the economy’s notable growth over the past
decade. Non-banking financial companies (NBFCs) have played a major role in meeting this need,
complementing banks and other financial institutions.
• The outstanding loans of NBFCs grew from ~Rs. 8,300bn (~$129.6bn) in 2012 to ~Rs. 17,200bn (~$268.3bn)
in 2016 at a CAGR of ~20%
• As of March 2016, they accounted for 15% of the overall systemic credit
• NBFCs are expected to continue to gain market share and explore new markets given the positive operating
conditions, better operational efficiency, and public sector banks struggling on asset quality front
NBFCs are Steadily Gaining Share of Credit and Their Outstanding Loans Grew at
a CAGR of ~20% Between 2012 and 2016
8,308
10,398
12,143
14,683
17,195
23%
25%
17%
21%
17%
0%
5%
10%
15%
20%
25%
30%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
2012 2013 2014 2015 2016
NBFCs Outstanding Growth y-o-y
69% 68% 65%
14% 14% 15%
17% 18% 20%
0%
20%
40%
60%
80%
100%
2012 2014 2016
Capital Market Borrowing and ECB NBFCs Credit Bank Credit
Growth in NBFCs Outstanding Loans (Rs. billion) NBFCs Share in Systematic Credit is Growing
CAGR 2012-2016: 19.9%
Source: DHFL Annual Report 201-17; MGP Research and Analysis

7
Key Regulatory Distinction Between NBFC and Banks
Regulatory Distinction Between Banks and NBFCs
Source: CRISIL Research

8
447
374
244
165
149
127 127
97
0
50
100
150
200
250
300
350
400
450
500
UK
Japan
US
China
Germany
Thailand
Malaysia
India
264
130
74
33 29 27 26
13
0
50
100
150
200
250
300
UK
US
Japan
China
Germany
Thailand
Malaysia
India
• Credit penetration in India is very low as compared to the major economies
• On similar benchmarks, NBFC penetration in India is even lower
• Economists believe that credit usually grows rapidly as economic growth gathers pace, thus it is safe to
assume that NBFCs will likely grow even faster, considering the growth rates seen over the past few years
Macro-Economic Indicators Highlight Significant Underdevelopment of Credit
and NBFC Segments in India When Compared to Major Economies
Lower Credit Penetration in India vs Other Economies NBFC Size Substantially Lower vs Other Economies
While credit and NBFC penetration in India is very low as compared to the major economies, positive business
sentiments, favourable government policies, and ongoing growth in the economy will likely facilitate rise in
demand for credit and NBFCs going forward
Total credit as a percentage of GDP NBFC credit as a percentage of GDP
Source: BCC Research – Enormous Potential in Non-Bank Finance and
Ways to Make it Happen in India, December 2015

9
NBFC Market Segmentation and Focus on the Selected Sub-Sectors for this
Document
Non Banking
Financial
Companies Market
Segmentation
1. MSME Loans
2. Education
3. Affordable / Low-Cost Housing
4. Healthcare Financing
5. Housing
6. Auto Finance
7. Infrastructure Financing
8. Construction Equipment Finance
9. Gold Loan
10. Microfinance
11. Wholesale Finance
12. Loan Against Property
These highlighted
sub-sectors will be
discussed in detail
in the subsequent
sections

10
1. Infrastructure Finance
A. Infra Finance Market Dynamics and Key Growth Drivers
B. Critical Success Factors
C. Major Challenges / Issues / Investment Concerns
D. Key Companies and Financials Overview
E. Selected M&A Deals
F. Investors Focused on the Sub-Sector

11
9,905
11,662
13,383
14,963
15,920
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2012 2013 2014 2015 2016
(Rs.Billion)
NBFC Loan Outstanding to Infra Projects is Projected to Increase at a Moderate
Growth of ~10-11% in the Near Term; Overall Loans to Infra Projects Also Rising
Outstanding Loans to Infrastructure Projects NBFC Loans to Infrastructure Projects
• While NBFC loan outstanding to infra projected have doubled over the past five years, annual growth has moderated
significantly from 20-25% levels seen earlier to 10-12% in the last two years
• Delays in road projects, lower-than-expected investments in telecom and hurdles in securing fuel linkages for power
projected have resulted in deceleration
• NBFC loan outstanding to infra projected is expected to reach ~ Rs. 7,100bn by FY2018, primarily led by brownfield
projects along with government focus on specific segments such as transmission and distribution in the power sector and
roads and infra among others
• Loans to infrastructure projects provided by both NBFCs and banks grew from Rs. 9.97tn in 2012 to Rs. 15.9tn in 2016 at a
CAGR of 12.6%
Source: CRISIL Research; MGP Research
3,116
3,799
4,387
5,169
5,764
6,282
7,09921.9%
15.5%
17.8%
11.5%
9.0%
13.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2012 2013 2014 2015 2016 2017E 2018E
(Rs.Billion)
NBFC Outstanding Loans Y-o-Y Growth
CAGR 2012 – 2016: 16.6%
CAGR 2016 – 2018E:11.0%
CAGR 2012 – 2016: 12.6%

12
Infra-Focused NBFCs Market Share has been Growing Steadily
Share of NBFCs v/s Banks Tenure Wise Portfolio Split for Banks and NBFCs (2015)
• NBFCs market share is rising marginally on an annual basis since 2012 to currently stand at ~36% which is expected to further
continue this upward trend to reach ~38% by 2018
• While public sector banks are not that aggressive lenders to infra projects given their deteriorating asset quality and weak
capital position, they still account for ~80% of infrastructure loans among banks
• On the other hand, private corporate lenders are more focused on strengthening their retail franchises. Banks have been
cautious to lend the high value infra projects in the past few years and is expected to continue to do going forward
• Going forward, NBFCs are likely to continue to increase their share in the overall infra financing in India
• Most of the loans provided by NBFCs are long-term in nature with very minimal proportion accounting for short-term loans
8%
22%
92%
78%
0%
20%
40%
60%
80%
100%
NBFCs Banks
Short Term Loans Long Term Loans
31% 33% 33% 35% 36% 37% 38%
69% 67% 67% 65% 64% 63% 62%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 2016 2017E 2018E
NBFC Banks

13
Growing Infra Spending and Investments Coupled With Rising Public Private
Partnerships (PPPs) Will Likely Drive Demand for Infra Financing (1/2)
• India’s investment in infrastructure is estimated to double to about ~$1 trillion during the 12th Five Year Plan
(2012-17) compared to the previous Five Year Plan
• Investment in infrastructure is the main growth driver of the construction equipment industry
• The NITI Aayog estimates total infrastructure spending to be about of 9% of GDP during the 12th Five
Year Plan (2012-17), up from ~7% during the previous plan (2007-12)
Infrastructure Spending During 11th and 12th Five-Year
Plan ($ billion)
Infrastructure Spending as Percentage of GDP
76
69
90
102 102
157
181
174
211
260
0
50
100
150
200
250
300
FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17
($billion)
5.2%
6.4%
7.2%
7.5%
7.9%
8.4%
7.4%
7.6%
7.9%
8.4%
9.0%
7.0%
9.0%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
10th Five Year Plan
FY2008
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
11th Five Year Plan
12th Five Year Plan
11th Five
Year Plan
12th Five
Year Plan
Source: IBEF Construction Equipment Report, June 2017

14
Growing Infra Spending and Investments Coupled With Rising Public Private
Partnerships (PPPs) Will Likely Drive Demand for Infra Financing (2/2)
• Of total investment of ~$1 trillion during the 12th Five-Year
Plan, over 20% each is estimated to have been allocated for
roads and power sub-segments
• India has the world’s second largest road network –
spanning 4.7 million kilometres
• The Government intends to increase the paved road
to total road ratio and build more national highways
• China submitted a five year trade and cooperation
plan to India offering its willingness to finance 30 per
cent of government’s $1 trillion investment target
• Japan has also pledged USD35 billion investment
over the next five years
• India is second only to China in terms of the number of
Public Private Partnership (PPP) projects. The government
is promoting PPP models to help achieve its investment
targets and to build 100 smart cities
356.4
227.8
119.4
86.3 84.5
126.8
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
Transport Power Telecom Irrigation Water
Supply
Others
Rising Private Investments for Infrastructure Development PPP and Non PPP Project Distribution in Smart Cities
12th Five Year Plan – Fund Allocation to Infrastructure
Sub-Segments ($ billion)
25%
35%
47%
75%
65%
53%
0%
15%
30%
45%
60%
75%
90%
10th plan 11th plan 12th plan
Public Private
33%
57%
70%67%
43%
30%
0%
20%
40%
60%
80%
Phase I Phase II Phase III
PPP Projects Non - PPP Projects

15
Bonds and Banks, FIs are the Primary Source of Funding for Infra-Focused NBFCs
77.1%
35.8%
11.7%
56.2%
7.8%
1.9%2.9% 3.0%0.5%
3.2%
0.0%
15.0%
30.0%
45.0%
60.0%
75.0%
90.0%
All Infra NBFCs Infra NBFCs - Excluding PWC and REC
Bonds Banks, FIs Foreign Currency Loans/ECBs Commercial Paper Others
• NBFCs typically meet their funding requirements through market borrowings, particularly bonds
• Bond issuances accounted for ~77% of funds raised by NBFCs in 2016 and share of bonds exceeded ~84%
in total borrowings by PWC and REC
• Excluding PWC and REC, funding mix of other NBFCs is skewed towards banks and financial institutions,
which accounted for ~56% of the funding mix, with bonds and non-convertible debentures accounting for more
than 35% share
• The flow of bank credit to infra-focused NBFCs other than public sector infra-focused NBFCs can decline
going forward due to lower risk appetite and weak balance sheets of banks arising from large exposure to
NBFCs
• Moreover, due to a weaker rupee, domestic market borrowings will likely remain the largest source of finance
for NBFCs as of now
Funding Mix of All Infra-Focused NBFCs
Source: CRISIL Research, MGP Research

16
18.3%
29.4%
27.9% 30.7%
46.2%
42.4%
39.4%
35.1% 42.2%
56.7%
7.3%
3.9%
2.8%
4.1%
3.1%
5.4%
3.2%
3.2% 1.5%
4.6%
2.1%
4.1%
6.5%
1.6%
10.9%
16.4%
5.7% 5.6% 4.9%
37%
39%
45%
49% 54%
47%
49%
40%
49%
73%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
(Infrastructureindustryproportiontototalindustries)
(ShareofsectorsintheInfrastructureIndustry)
Power Roads and Bridges Ports and Airports SEZ, Industrial, Biotech and IT Park Storage and Water Management Telecom
For the Projects Assisted by FIs in India, Power has been the Most Dominant Sub-
Sector with 56.7% Share of Total Industries and ~80% Share of Infra Projects
• Among the investments of the total projects (other sectors including textiles, mining, construction, hotels, food products, cement,
etc.), power sector accounted for about 56.7% share. Of the infra industry, power sector accounted for ~80% share
• Infrastructure industry includes power; roads and bridges; ports and airports; SEZ, industrial, biotech and IT park; storage and
water management; and telecom sectors. Infra accounted for ~73 share of the total projects assisted by financial institutions
Sector-Wise Share of Infrastructure Projects Assisted by Financial Institutions, 2015-16
Source: Reserve Bank of India

17
In the Power Sector, Transmission and Distribution Segment has been Gaining
Share in the Overall Disbursements
• The share of disbursements in the transmission and distribution (T&D) segment in the overall power sector
grew from 17% t 28% in the last two years on account of strong support from the government in terms of
higher budgetary allocations whereas the share of disbursements in the generation segment have declined
from ~54% in 2014 to ~44% in 2016 due to poor financial health of private players and dearth of new projects
• While banks lent 60% of their infrastructure portfolio to the power segment (generation and T&D companies),
~92% of NBFCs outstanding infra loans were extended to the power sector. This ~92% is partly skewed by
the presence of government backed specialized institutions such as Power Finance Corporation (PFC) and
Rural Electrification Corporation (REC)
92%
45%
60%
5%
35%
18%
1%
4%
9%
2%
16%
12%
0%
20%
40%
60%
80%
100%
NBFC NBFC Excluding
PWC and REC
Banks
Power Roads Telecom Other Infra
Power Sector Disbursements Breakdown by Segments Infrastructure Finance Portfolio Proportion
59%
45%
54%
46% 44%
24%
30%
17%
24% 28%
17%
25% 30% 30% 28%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 2016
Others (Includes Transitional Finance, STL, BLC, etc)
Transmission and Distribution
Generation
Source: CRISIL Research, MGP Research

18
445
1,005
905
1,403
2,002 2,015
908 932
507
426
695
-
500
1,000
1,500
2,000
2,500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
(Rs.Billion)
While the Cost of Infra Projects Sanctioned by Financial Institutions has been
Declining Since the Previous Few Years, 2016 Reported a Solid Growth Y-o-Y
• Infrastructure investments grew at a CAGR of ~45% between 2006 and 2010 backed by the economic boom. However, global
recession of 2008-09 pulled India into the vortex of the global crisis and investments decelerated sharply between 2011 and
2015 as many companies cancelled/postponed their expansion plans in the anticipation of slower growth
• However, in FY2016, cost of infrastructure projects sanctioned by financial institutions surged by ~63% y-o-y with number of
projects increasing from 73 in 2015 to 114 in 2016
• Over the past year, the government has announced several policy changes to speed up project execution and address
issues related to fuel availability, economic feasibility of projects, and and financial health of discoms
• Over the next couple of years, according to CRISIL Research, infra investment growth will likely be in the range of 9-14%
• Continued efforts by government to improve ease of doing business coupled with slight improvement in performance of
the corporate sector will likely drive demand going forward
Institutionally Assisted Infrastructure Project Investments (Project Cost in the Year of Sanction)
2006-2010 CAGR of ~45%
backed by the economic boom
CAGR of
~9-14%
Continued
government efforts,
improved business
environment..
Source: Reserve Bank of India, CRISIL Research

19

20
Critical Success Factors for NBFC Infrastructure Financing
1. No Caps on
Sectoral
Exposure for
NBFCs
• While sectoral exposure of banks is capped internally, such limitations are not applicable to NBFCs
being specialized institutions
• Banks have been cautious in lending the high value infrastructure projects and are focused in cleaning-
up their balance sheets. This has resulted NBFCs to gain infra finance market share from ~31% in
2012 to ~36% in 2016
2. Less
Competition From
Banks
• Public sector banks are not aggressive lenders to infra projects, given their deteriorating asset quality
and weak capital position
• On the other hand, private banks have been focusing more on building retail franchises
• This will likely result in increasing demand and better prospects for infra-focused NBFCs
3. Long Tenure
Infra Loans Better
for NBFCs
• Long tenure infra loans typically widen the asset-liability mismatch for financiers
• Banks, for instance, rely almost exclusively on retail deposits to fund their advances. While the
average tenure of individual retail deposits does not exceed a year, infrastructure project
advances have significantly longer tenures
• To narrow asset-liability mismatch and incentivise banks to fund infra projects, RBI released
guidelines on infra bonds and the 5/25 structure
• NBFCs do not typically have any asset-liability mismatch as its borrowings are also long term in nature.
Additionally, it does not have to abide to any RBI asset-liability related guidelines
4. Eased
Overseas
Borrowing Norms
May Help in
Reducing Cost of
Funds
• As of April 2016, NBFCs can raise rupee-denominated ECBs with a minimum maturity of five years,
subject to 100% hedging
• Until then, RBI has allowed the infrastructure companies to raise only long-term external borrowings of
more than 10 years
• NBFCs get the benefit of this revised rule as they can borrow at a more competitive rate from
the international rather than the domestic markets
Source: MGP Research and Analysis

21

22
Major Challenges / Issues / Investment Concerns for NBFC Infrastructure
Financing
1. Difficulty in
Recovering Dues
• Overt the past few years, financiers have been finding it difficult to recover dues from developers and
contractors as borrowers were over-leveraged – making lenders very cautious in such environment
• ~17% of the overall loans were stressed finance (gross NPA + standard restructured assets) as
of March 201, though the stressed advanced ratio of the infra sector declined from ~22% in
September 2015 to ~175 in March 2016 for banks
2. Significant
Dependence on
Bond Market
• Cost of funds has been low for NBFCs given their significant dependence on the bond market – where
coupon rates are lower than bank rates
• Bond issuances accounted for ~77% of funds raised by NBFCs in 2016 and share of bonds
exceeded ~84% in total borrowings by PWC and REC
3. NBFCs,
Excluding PFC
and REC, Have
High Credit Cost
• Bonds issued by PFC and REC have highest credit rating and are tax free, which allows them to keep
their borrowing costs at a lower spread over government securities
• Compared to these two, NBFCs borrow at relatively higher rates, thus, aggregate net profit margins of
NBFCs drops sharply when PFC and REC are excluded
4. Stressed Asset
Level
• Risks associated with funding infrastructure projects are quite high. For example, in the power sector,
State Electricity Boards (SEBs) and state power utilities are large borrowers, whose financial health is
severely stressed
• High concentration of advances to these entities and their inability to meet debt obligations has led to
higher than desirable levels of restricted loans on NBFCs books
• Share of restructured standard assets in total loan outstanding increased from 6% to 9%
to 12% in 2014, 2015, and 2016 respectively
4. High Borrowers
Concentration
Risk
• High sectoral exposure and borrower concentration heightened risks of large-ticket GNPAs
• Players like PFC and REC face high concentration risk as high as ~50% for top 10 borrowers

23

24
PFC and REC Together Account for ~75% Infra-Focused NBFCs Market Share
Power Finance
Corporation, 41%
Rural Electrification
Corporation, 35%
IFCI, 4%
IIFCL, 5%
SREI Infra, 2%
L&T Infra, 4%
Others, 8%
• Power Financial Corporation (PFC), the largest lender to the power sector, controls about ~41% share of the
total infrastructure NBFCs loan outstanding
• PFC and REC (Rural Electrification Company) together accounted for 76% market share of infra loan
outstanding by NBFCs
• While REC and PFC are specialized players, other NBFCs have a fairly diversified portfolio across power,
roads, telecommand urban infrastructure
Market Share Among Infra NBFCs (2016)

25
Power Finance Corporation Ltd (PFC)
Company Overview Key Performance Indicators
Profitability Ratio Other Miscellaneous
• Power Finance Corporation Limited provides financial
products and related advisory, and other services to the
power sector in India
• The company offers fund based financial policies/products,
including asset acquisition; bridge, corporate, short term,
and rupee and foreign currency term loans; short term loan
for SPV; buyer’s line of credit; and credit facility for purchase
of power
• It serves state electricity boards, state power utilities, state
electricity/power departments, other state departments,
central and joint sector power utilities, equipment
manufacturers, and private power sector utilities
• The company was founded in 1986 and is based in New
Delhi, India.
2012 2013 2014 2015 2016 CAGR
Loan Outstanding (Rs. bn) 1,301 104 1,888 2,172 2,375 16.2%
Capital Adequacy Ratio 16.3% 18.0% 20.1% 20.3% 20.3% -
Tier - I Capital 15.4% 16.8% 16.4% 17.0% 17.1% -
Tier - II Capital 0.9% 1.2% 3.7% 3.4% 3.2% -
Return on Equity 16.9% 19.7% 20.8% 19.6% 17.7% -
Return on Assets 2.5% 2.9% 3.0% 2.8% 2.6% -
Gross NPA 1.0% 0.7% 0.7% 1.1% 3.2% -
Net NPA 0.0% 0.6% 0.5% 0.9% 2.6% -
2012 2013 2014 2015 2016
Yield on Advances 10.97% 11.48% 12.03% 12.18% 12.02%
Cost of Funds 8.83% 8.88% 8.89% 9.07% 8.66%
Gross Spread 2.15% 2.59% 3.13% 3.11% 3.36%
Operating Expenses 0.10% 0.09% 0.12% 0.12% 0.12%
Fee Income 0.11% 0.12% 0.11% 0.06% 0.04%
Credit Costs 0.12% 0.05% 0.26% 0.41% 0.74%
Net Profit Margins 2.03% 2.56% 2.86% 2.64% 2.54%
• Segment-wise Portfolio Mix (2016): Generation (72%);
transmission (6%);distribution (3%); and others (19%)
• End-Market-wise Portfolio Mix (2016): State sector (69%);
central sector (9%); joint sector (6%); private sector (16%)
• Borrowing Mix (2016): Bonds/NCDs (85.36%); Loans from
Banks and FIs (6.63%); Commercial Paper (2.64%); and
ECBs (5.37%)
• Geographic presence: pan-India (offers services in majority
of the states throughout the country)
Source: Company Filings; CRISIL Research, MGP Research and Analysis

26
Rural Electrification Corporation Ltd (REC)
• REC, a public financial institution, provides financing and
promotion services for power transmission, distribution, and
generation projects in India
• It formulates, implements, and finances a range of power
projects. The company primarily offers long-term loans,
medium-term Loans, and short-terms loans, as well as other
products comprising debt refinance, bridge loans, equipment
lease, loans for power purchase through Indian energy
exchange, and transitional finance loans; and counter-part
funding for the integrated power development scheme
• The company serves Indian public sector power utilities,
such as central and state power utilities, as well as private
sector power utilities
• It was incorporated in 1969 and is based in New Delhi, India.
2012 2013 2014 2015 2016 CAGR
Loan Outstanding (Rs. bn) 1,014 1,274 1,485 1,796 2,013 18.7%
Disbursements (Rs. bn) 306 402 380 464 506 13.4%
Tier - I Capital 15.1% 16.5% 16.0% 16.5% 17.5% -
Tier - II Capital 0.9% 1.2% 3.3% 3.0% 2.9% -
Return on Equity 20.5% 23.6% 24.1% 22.7% 20.8% -
Return on Assets 2.8% 3.1% 3.2% 3.1% 2.8% -
Gross NPA 0.5% 0.4% 0.3% 0.7% 1.7% -
Net NPA 0.4% 0.3% 0.2% 0.5% 1.2% -
2012 2013 2014 2015 2016
Cost of Funds 8.04% 8.17% 8.58% 8.54% 8.92%
Gross Spread 2.78% 3.21% 3.57% 3.71% 3.43%
Fee Income 0.07% 0.10% 0.06% 0.04% 0.03%
Credit Costs 0.05% 0.11% 0.22% 0.48% 0.57%
• Segment-wise Portfolio Mix (2016): Generation (41%);
transmission and distribution (58%); and others (1%)
• End-Market-wise Portfolio Mix (2016): State (82%);
central PSUs (3%); private (15%)
Banks and FIs (1.09%); Commercial Paper (3.31%); and
ECBs (12.96%)

27
India Infrastructure Finance Company Ltd (IIFCL)
• IIFCL operates as an infrastructure financing company
primarily in India
• It provides financial assistance to infrastructure sectors,
such as road, power, airport, port, urban infrastructure,
railways, and pooled municipal debt obligation facilities
• The company’s services include long term senior and
subordinate debt, takeout financing, credit enhancement,
and refinancing
• It also provides advisory services, including project appraisal
and syndication services, as well as project development
services comprising conducting feasibility studies, project
structuring, financial structuring, and development of detailed
business cases
• It was incorporated in 2006 and is based in New Delhi, India.
2012 2013 2014 2015 2016 CAGR
Loan Outstanding (Rs. bn) 203.8 265.8 238.8 270.0 316.1 11.6%
Capital Adequacy Ratio - 19.0% 26.9% 25.1% 20.3% -
Tier - I Capital - - - - - -
Tier - II Capital - - - - - -
Return on Equity 18.7% 24.6% 9.8% 12.0% 6.7% -
Return on Assets 2.3% 3.3% 1.4% 2.0% 1.2% -
Gross NPA 0.0% 1.0% 3.8% 2.5% 3.1% -
Net NPA 0.0% 0.9% 2.8% 3.8% 2.2% -
2012 2013 2014 2015 2016
Cost of Funds 7.08% 7.06% 8.61% 7.86% 9.26%
Gross Spread 2.83% 4.06% 2.27% 2.92% 2.78%
Fee Income 0.06% 0.09% 0.04% 0.07% 0.08%
Credit Costs 0.19% 0.13% 0.91% 0.98% 1.77%
• Sector-wise distribution of cumulative disbursements
(2016): Road (48%); Power (45%); Others such as ports,
railway, telecom, and urban infra (~7%)
• Types of financing - cumulative disbursements (2016):
Direct lending (73%); refinance (17%); and takeout finance
(11%)
• IIFCL is a wholly-owned Government of India company and
broadly caters to sub-sectors such as transportation, energy,
water, sanitation, communication, social and commercial
infrastructure

28
L&T Infrastructure Finance Ltd.
• L&T Infrastructure Finance Ltd. (L&T Infra Finance) is
promoted by the engineering and construction conglomerate
Larsen and Toubro Limited (L&T) and L&T Finance Holdings
Limited ( a subsidiary of L&T)
• L&T Infra Finance was incorporated in 2006 and is
headquartered in Mumbai, India
• A NBFC, L&T Infra Finance provides various financial
products and services primarily for power, telecom, roads,
water, oil and gas, and other sectors in India.
• The company offers debt financing solutions through various
products, such as term loans, debentures, securitized debt,
subordinated debt, mezzanine debt, convertible/non
convertible debentures, and preference shares
2012 2013 2014 2015 2016 CAGR
Tier - I Capital 16.0% 14.2% 15.8% 13.1% 14.0% -
Tier - II Capital 0.3% 1.6% 2.0% 4.4% 5.9% -
Return on Equity 16.9% 16.6% 12.2% 9.0% 8.9% -
Return on Assets 2.8% 2.6% 1.8% 1.2% 1.0% -
Gross NPA 1.7% 1.5% 3.5% 1.9% 2.4% -
Net NPA 1.5% 1.2% 2.9% 1.3% 1.6% -
2012 2013 2014 2015 2016
Cost of Funds 9.48% 9.12% 9.32% 9.10% 9.23%
Gross Spread 3.00% 2.92% 2.28% 2.13% 1.96%
Fee Income 0.32% 0.35% 0.21% 0.25% 0.01%
Credit Costs 0.36% 0.58% 0.91% 1.43% 1.13%
• Loan Portfolio Mix (2016): Renewable power (33%); roads
(22%); real estate (7%); thermal power (13%); power – Corp
+ T&D (8%); telecom (4%); and others (13%)
Banks and FIs (48.35%); Commercial Paper (5.75%); ECBs
(0.49%); Others (6.64%)
• It is one of the select few financial institutions classified as
an Infrastructure Finance Company (IFC) and as a Public
Finance Institution (PFI) by the Ministry of Corporate Affairs
• Geographic presence: pan-India

29
IFCI Ltd
• IFCI, previously Industrial Finance Corporation of India,
cater to the long-term finance needs of the industrial sector
• Its financial products include Debt and Equity Segments
• Its Debt Segment includes products, such as short-
term loans, medium-term loans and long-term loans
• Its Equity Segment includes investment in IPO, right
issue, QIP and warrants, as well as in the secondary
markets for listed companies; strategic investment in
unlisted companies, and trading in the secondary
market, including equity derivatives
• The Company also provides infrastructure advisory
services and monitoring of public issues.
• IFCI Limited was founded in 1948 and is headquartered in
New Delhi, India
2012 2013 2014 2015 2016 CAGR
Loan Outstanding (Rs. bn) 167 129 165 228 258 11.5%
Tier - I Capital 12.8% 15.3% 13.9% 12.7% 11.5% -
Tier - II Capital 8.4% 8.6% 7.5% 6.0% 5.4% -
Return on Equity 16.4% 9.2% 9.0% 8.9% 5.6% -
Return on Assets 2.6% 1.7% 1.9% 1.7% 1.0% -
Gross NPA 13.5% 22.2% 17.3% 10.3% 13.1% -
Net NPA 1.9% 10.2% 11.4% 7.2% 9.5% -
2012 2013 2014 2015 2016
Cost of Funds 9.25% 9.25% 8.62% 8.99% 9.31%
Gross Spread 1.74% 1.67% 2.72% 1.86% 2.03%
Fee Income 0.20% 0.11% 0.14% 0.16% 0.07%
Credit Costs -0.47% 0.67% 2.07% 1.46% 2.66%
Net Profit Margins 1.89% 0.66% 0.40% 0.26% -1.00%
• Disbursement Mix (2016): Infra (25%); manufacturing
(36%); services (25%); and others (14%)
(1.8%); Others (3.6%)
• Geographic presence: Pan-India

30
SREI Infrastructure Finance Ltd
• Srei Infrastructure Finance Limited provides financial
services in India and internationally
• It operates through Financial Services and
Infrastructure Equipment Services segments
• The company operates a portfolio of ~42,076 towers across
22 telecom circles in India; operates ~5,412 km of toll based
roads; rents infrastructure equipment for the construction, oil
and gas, and energy sectors; develops SEZ and industrial
parks; and invests in water and waste water management,
and solid waste management and recycling projects, as well
as engages in rural IT infrastructure business
• The company is a subsidiary of Adisri Commercial Private
Limited. It was incorporated in 1985 and is based in Kolkata,
India.
2012 2013 2014 2015 2016 CAGR
Loan Outstanding (Rs. bn) 91 101 114 122 134 10.3%
Tier - I Capital 14.6% 14.3% 10.7% 11.2% 12.5% -
Tier - II Capital 5.6% 7.4% 7.1% 5.8% 5.0% -
Return on Equity 2.3% 3.6% 2.2% 3.4% 2.1% -
Return on Assets 0.6% 0.7% 0.6% 0.6% 0.3% -
Gross NPA 0.9% 2.5% 2.4% 4.6% 4.5% -
Net NPA 0.8% 2.2% 2.1% 3.8% 3.4% -
2012 2013 2014 2015 2016
Cost of Funds 12.53% 12.91% 12.72% 11.41% 11.21%
Gross Spread -1.33% -0.76% -0.90% 0.14% 0.20%
Fee Income 0.67% 0.91% 0.91% 0.86% 0.21%
Credit Costs 0.22% 0.24% 0.28% 0.69% 0.36%
Net Profit Margins -1.86% -1.15% -1.19% -0.60% -0.93%
• Loan Portfolio Mix (2016): Power (32%); transportation
(26%); communications (12%); oil and gas (4%); social and
commercial infra (21%); and others (5%)
(4.04%); and others (0.13%)

31
IL&FS Financial Services Ltd
• IL&FS Financial Services Limited (IFIN), a NBFC, provides a
range of financial and advisory solutions in India
• It specializes in infrastructure financing transactions, with a
combination of investment banking skill sets, such as debt
syndication, corporate advisory, and lending capabilities
• The company offers asset and structured finance products,
including acquisition financing, special situation financing,
mezzanine finance/quasi equity structure, operating lease,
structured debt and asset-based finance, and debt capital
markets; and project debt syndication services for
infrastructure, manufacturing, real estate, and other sectors
• It was incorporated in 1995 and is based in Mumbai, India.
IL&FS Financial Services Limited is a subsidiary of
Infrastructure Leasing & Financial Services Limited.
2012 2013 2014 2015 2016 CAGR
Tier - I Capital 15.2% 14.2% 14.1% 14.4% 12.7% -
Tier - II Capital 5.0% 7.8% 7.5% 7.3% 7.7% -
Return on Equity 15.5% 19.8% 14.0% 12.5% 9.2% -
Return on Assets 2.6% 2.9% 2.0% 1.7% 1.2% -
Gross NPA 0.6% 1.1% - 2.6% 2.8% -
Net NPA 0.4% 0.9% - 2.1% 2.2% -
2012 2013 2014 2015 2016
Cost of Funds 11.46% 11.63% 10.71% 10.31% 9.07%
Gross Spread 1.70% 1.87% 2.54% 2.30% 2.02%
Fee Income 2.08% 1.71% 0.94% 1.12% 1.09%
Credit Costs 0.73% 0.43% 1.24% 1.20% 1.37%
Banks and FIs (50.18%); Commercial Paper (18.05%);
Others (12.12%)
• Beyond the pan-India presence, IFIN has an international
presence through its fully-owned subsidiaries in Singapore,
UK, Hong Kong and Dubai
• From concept to commissioning, IL&FS houses the
expertise to provide the complete array of services
necessary for successful project completion: visioning,
documentation, finance, development, management,
technology and execution

32

33
Date Target Business Description [Target/Issuer] Buyers Deal Value ($m) Eq. Value/ BV
Jul-17
L&T Infrastructure
Finance Co. Ltd.
L&T Infrastructure Finance Company Limited, a non-banking
financial company, provides various financial products and
services primarily for power, telecom, roads, water, oil and gas,
and other sectors in India.
International Finance
Corporation, a PE/VC arm of
The World Bank Group
103 -
Dec-11
India Infrastructure
Finance Company
Limited
India Infrastructure Finance Company Limited operates as an
infrastructure financing company primarily in India. It provides
financial assistance to infrastructure sectors, such as road,
power, airport, port, urban infrastructure, railways, and pooled
municipal debt obligation facilities.
Government of India 176 -
Major Deals in the Indian Infra Finance Sector; While There is Hardly any M&A
Activity in this Sector, Financial Buyers Primarily Invest in Public Companies
Source: Capital IQ; Above deals are private placements
Financial Buyers Active in this Sector Invest in Sector-Focused Public Companies Through Private Placements. Infra and
Construction Equipment Financing (CEF) Markets are Dominated by Large Listed Firms, With Hardly any Sector-Focused
Small Private Players.

34
2. Construction Equipment Financing
A. Construction Equipment Finance Market Dynamics and Key Growth Drivers

35
Construction Equipment Financing Overview
• Construction equipment financing (CEF) demand is primarily linked to the performance and growth prospects
of the overall urban infrastructure, roads, ports, irrigation, power, real estate, steel, cement, mining etc.
• In anticipation of potential growth, firms across various industries purchase new or used equipment, or opt for
equipment on lease. This results in an increase in demand for equipment which in turn drives demand for
construction equipment financing
Major End-Market Growth Components for Construction Equipment Financing
End-Use Industries
Mining and Quarrying
(coal, iron ore, etc.)
Manufacturing (steel,
cement, fertilizers)
Construction (real
estate, roads, urban
infrastructure, ports, etc.)
Power (coal-based)
Mining shovel, walking
draglines, dumpers,
cranes, stacker, etc.
Forklifts, cranes,
conveyor, etc.
Backhoe loader, cranes,
excavator, compactor,
stacker, reclaimers, etc.
Feeders, crushers,
conveyors, screeners,
etc.
Growth in end-markets creates demand for construction equipment which in
turn facilitates demand for the related financing
Source: MGP Research

36
Indian Construction Equipment Revenue, Both in Terms of Volume and Value, is
Expected to Grow at a CAGR of ~13-14% Over the Next Few Years
• Sale of construction equipment in India in volume terms is expected to grow at a CAGR of __ between 2016
and 2018 to reach ~96,700 units by 2018
• Construction equipment industry revenue is expected to reach ~$5bn by 2020, growing at a CAGR of ~
between 2016 and 2020
• While industry revenue took a sharp fall in 2015 and 2016 amid a general weak sentiment in the Indian
economy coupled with slower industrial activity
• However, going forward, expected faster economic growth and the government’s efforts to accelerate
project clearances will likely drive demand for construction equipment in India, which will facilitate the
related financing demand
Total Number of Construction Equipment Units Sold Growth in Revenues From Construction Equipment
3.7
3.9
4.3
4.6
4.2
5.1
3.9
6.5
2.9 3.0
5.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2020E
($billion)
50.0
45.5
40.5
59.7
72.2
66.4
55.9
60.7
68.2
76.0
96.7
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018E
(Inthousands)
CAGR 2013 - 2016: 10.8%
CAGR 2016 – 2018E: 12.8%
CAGR 2013 - 2016: -8.4%
CAGR 2016 – 2020E: 13.6%

37
Construction Equipment Disbursement and Equipment-Financing NBFCs’ AUMs
are Expected to Grow at CAGR of ~9% and 12% Respectively, Between 2016-2018
257
297 295
275
255
243
253
287
0
50
100
150
200
250
300
350
2011 2012 2013 2014 2015 2016 2017E 2018E
(INRbillion)
• The government has announced several schemes, stepped up public investment, and re-started many stalled projects in order
to boost infrastructure spending. Policies were announced in sectors such as power and roads to spur investment
• Over the next few years, infrastructure projects will likely provide bulk of the construction opportunity, contributing ~92% of the
overall construction spending
• While construction growth is expected to be driven primarily by transportation infra (roads, rail, airports, ports); urban infra (mass
rail transit systems, water supply and sanitation, and urban housing), and rural infra (rural roads, irrigation, and rural housing),
spending on infra projects is expected to be low as firms in metals, petrochemicals, and cement slow expansion plans amid
muted demand and low utilization levels
• Indian construction industry market is expected to grow by ~7-9% in 2017, with growth averaging 11-12% annually over the next
five years. Indian CE disbursements is estimated to grow from ~ Rs. 243bn in 2016 to ~ Rs. 287bn by 2018 at a CAGR of ~9%
• NBFCs asset under management (AUMs) is expected to grow from Rs. 292bn in 2016 to Rs. 365bn by 2018, at a CAGR of
11.8%
Construction Equipment Disbursement Trend in India
285
318
299
287 292
315
365
12%
-6%
-4%
2%
8%
16%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
0
50
100
150
200
250
300
350
400
2012 2013 2014 2015 2016 2017E 2018E
NBFC AUM (Rs. Bn) AUM Growth y-o-y
NBFC Asset Under Management (AUMs, Rs. bn)

38
Growth Evolution of Construction Equipment Financing Market
2007 to 2012 2012 to 2016
Near Term Growth
Prospects
• Demand for construction equipment rose sharply
between 2007 and 2012 led by infra and real
estate development and NBFCs supporting small
firms
• Robust sales of new equipment provided a boost
to construction equipment financing
• The size of the CEF industry in terms of
disbursements towards new equipment, posted a
CAGR of ~24% to Rs. 297bn during this period
• The entry of new players increased finance
penetration to ~80-85% from ~70-75% in the
previous 7-8 years
• Rising competition pushed up LTV ratio to ~80%
for new sales
• CEF market plunged as a
slowdown in demand, fall in
capacity utilization, policy
paralysis, delayed clearances, poor
financial health of infra companies,
ban on mining in some states,
limited access to long-term finance,
and high interest rates impacted
investments in infra sector
• Rising delinquencies prompted
financiers to turn cautious and
lower the LTV for new purchases
• Disbursements for purchase of
new equipment are estimated to
have declined at a CAGR of ~5%
between 2012 and 2016
• New government
schemes, stepped-
up public
investment, and re-
started many
stalled projects in
order to boost
infrastructure
spending over the
next few years
• Construction
equipment
financing for new
equipment sales is
projected to grow
at a CAGR of ~9%
over the next 2
years

39
Earth Moving Equipment is the Largest Construction Equipment Segment;
Crawler Excavators is Expected to be the Fastest Growing Equipment by 2018
Key construction Equipment Industry Segmental Breakup:-
• Earth Moving Equipment (ECE): Largest segment of the construction equipment sector in India and are primarily used in the
mining and construction industries. Equipment include backhoe leaders, excavators, wheeled loaders, dumpers/trucks, skid
steer loaders
• Material Handling Equipment: This segment has four categories: Storage and handling equipment, engineered systems,
industrial trucks, and bulk material handling
• Concrete Equipment: They are used to mix and transport concrete. Equipment include concrete pumps, aggregate crushers,
transit mixers, asphalt pavers, batching plants
• Road Building Equipment: They are used in various stages of road construction. Widely used ones are excavators, diggers,
loaders, scrapers, bulldozers, etc.
Crawler excavators is expected to be the fastest growing equipment by 2018, mainly on demand for mid-sized crawlers (20T) from
the construction segment and their versatile usage
49.5% 43.0% 39.3%
19.0%
23.0% 29.0%
10.7% 10.0% 10.3%
8.2%
7.0% 7.2%4.5% 6.0% 4.7%
3.0% 4.0% 3.6%5.2% 7.0% 5.9%
0%
20%
40%
60%
80%
100%
2014 2015 2018E
Backhoe Loaders Crawler Excavators
Mobile Cranes Mobile Compressors
Compaction Equipment Wheeled Loader
Others
Earth Moving,
62%Concrete Equipment,
14%
Material
Handling, 10%
Road Construction
Equipment, 8%
Others (such as Material
Processing), 6%
Construction Equipment Revenue by Segments, 2015 Unit Sales of Equipment

40
• Fundamentals for the sector are set to remain strong on the back of increasing infrastructure investments
• Almost all global technology leaders in the construction equipment sector have a presence in India – either as joint
ventures or with their own manufacturing or marketing companies
• Cumulative FDI inflow (since April 2000) into market for earth-moving equipment increased to USD389.4mn till March 2017
• Joint ventures with global majors have provided domestic companies access to advanced technology and a whole gamut of
project management experience
• The burgeoning real estate industry in India gives a fillip to the demand for concrete and building construction equipment
• The residential real estate demand is driven by rising population and growing urbanisation; rising income levels leading
to higher demand for luxury projects; growing demand for affordable housing to meet lower income groups demand
• Commercial real estate demand will likely be driven by growth in IT/ITeS sector and organised retail
• India’s real estate market is anticipated to reach USD180 billion by 2020. Increasing construction is becoming more oriented
toward mechanisation to reduce project time and control costs – leading to higher demand for advanced construction equipment
FDI Inflows in Earth Moving Equipment ($ million) Concrete Equipment Sales Growth (Sales in ‘000s units)
74 75
132 134 134 134
170 175
209
235
337
389
-
50
100
150
200
250
300
350
400
450
FY2006
FY2007
FY2008
FY2009
FY2010
FY2011
FY2012
FY2013
FY2014
FY2015
FY2016
FY2017
($million)
Joint ventures with global majors have
provided domestic companies access to
advanced technology and a whole gamut
of project management experience
Increasing FDI Inflows in Earth Moving Equipment Segment and Potential Growth
in Concrete Equipment Sales Driven by RE Sector, to Stimulate Demand for CEF

41
NBFCs Account for ~55% of the Total CEF Disbursements Towards New
Equipment; CEF Industry Enjoy High Finance Penetration of ~90%
• NBFCs dominate the organized funding segment in the CEF industry, accounting for ~54% share of total
disbursements towards new equipment
• Banks normally extend project finance (including disbursements for procuring equipment) and have
lower exposure to direct CEF
• Construction equipment industry has finance penetration of 80-85%, wit institutional sales or cash purchases
accounting for the balance
• Institutional sales include purchases by government institutions/corporation, such as Coal India, India
Army, Bharat Heavy Electricals Ltd, GAIL (India) Ltd, etc. and other such bodies procuring equipment
via tenders
• Imported machinery’s finance penetration is higher at about 90%
NBFC v/s Bank CEF Disbursements Construction Equipment Finance Penetration
Financed, 80-85%
Institutional and cash
purchase, 15-20%
45% 47% 46% 45% 45%
55% 53% 54% 55% 55%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013-14 2014-15 2015-16 2016-17P 2017-18P
Banks NBFC

42
Used Equipment Account for ~30% of Total Equipment Financing; Retail Segment
Dominates CEF Industry
• Since 2012, low earning and dwindling number of new projects prompted a shift in customer preference towards used
equipment. In a bid to improve margins, financiers too stepped up funding for used equipment
• Disbursements towards used equipment accounted for 27-30% of overall construction equipment loans in 2015-16. In 2016-17,
used equipment disbursement is expected to comprise 25% as new equipment finance is expected to pick up
• First time buyers (FTBs) and retail customers account for ~65-70% share of the CEF industry
• While NBFCs focus mainly on retail customers, including first time buyers (FTBs), they also cater to large customers
• FTBs and retail customers generate higher margins for financiers as they are charged a higher rate of interest due to
lower credibility compared to large customers and lower bargaining power
• In terms of customer mix, banks mainly focus on large customers (contractors) because retail clients (hirers) rquirements are
generally small in size and have either limited documentation or take time in fulfilling the stringent criteria of the banks
Breakup Between Financing of New and Used Equipment CEF Financing Customer Mix
Contractor, 30%
Hirer and Retail
Segment, 70%
Used equipment,
28%
New equipment, 72%

43
55%
68%
75% 73%
68%
8%
11%
5% 6%
4%
26%
15% 12% 12%
20%
11%
7% 8% 9% 8%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 2016
Bank Loans Debentures Securitization Others
Bank Funding is the Primary Source of Funds for NBFCs, Accounting for About
Two-Third Share of the Total Borrowings
• Bank funding (term and working capital loans) accounted for ~68% share of the total borrowing
• Post 2012, the Reserve Bank of India (RBI) securitization guidelines, the share of securitization in
overall borrowings of NBFCs declined to about 12% in 2014-15 from ~26% in 2011-12
• The RBI guidelines stipulated a holding period and minimum retention requirement for originating
NBFCs to securitise loans
• For SREI Equipment Finance, the share of securitization in overall borrowings increased to 20% in
FY2016 from 14% in FY2015
Borrowing Profile of NBFCs¹ – Skewed Towards Banks
Note:
1. The above chart is based on the borrowing profile of SREI Equipment Finance and Sriram Equipment Finance. 2016 Numbers are
only for SREI Equipment Finance

44
Closer Look at SREI Equipment Financials, We Derive that Both RoA and Gross
NPAs Have Shown a Declining Trend in the Recent Period
Return on Assets for SREI Equipment Finance Gross NPAs for SREI Equipment Finance
• Return on asset (RoA) for SREI Equipment Finance as declined from the levels of 1.9% in 2012 to 0.7% in
2016. However, going forward, based on broker estimates, RoA for the company is expected to increase
marginally through 2019
• Delinquencies, which increased in the last few years, inched downwards in the second half of 2015-16. The
GNPA of SREI contracted to 2.8% in 2016 from 4.7% in 2015
• Industry experts believe that faster economic growth and the government’s efforts to accelerate project
clearances to improve utilization rates and earnings of equipment operators, will likely lead to flattish
NPAs in the near future
1.9%
1.8%
1.3%
0.9%
0.7%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
2012 2013 2014 2015 2016
2.8% 2.8%
4.0%
4.7%
2.8%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
2012 2013 2014 2015 2016

45
• While financiers were able to reduce cost of funds in 2015, lower interest yield resulted in slightly lower gross
spread
• Net profit margin (NPM) showed a declining trends due to stable operating expenses and higher provisions
and write offs by financiers resulting in higher credit costs
• However, according to CRISIL Research, NPM is expected to improve in the near term due to
• Gross spreads to improve with a further decline in cost of funds
• Stable credit cost due to a shift towards 120-day NPA recognition, as improving economic growth and
faster project clearances limit delinquencies
• Operating expenses are also expected to decline as the number of repossessions are projected to
decline
Industry Profitability
While Net Profit Margins in the Recent Past have Declined Due to Higher Credit
Costs, NPM is Projected to Improve Gradually Over the Near Term
Source: CRISIL Research; MGP Research; Aggregate financials of SREI Equipment Finance and Shriram Equipment Finance
2012 2013 2014 2015
Interest Yield 12.1% 12.6% 13.6% 13.2%
Cost of Funds 7.2% 7.7% 8.5% 8.2%
Gross Spread 4.8% 4.9% 5.1% 5.0%
Operating Expenses 1.6% 1.4% 1.4% 1.9%
Other Income 0.0% 0.0% 0.0% 0.0%
Credit Costs 0.7% 0.8% 1.5% 3.1%
Net Profit Margin 2.6% 2.7% 2.3% 0.1%

46

47
Critical Success Factors for NBFC Construction Equipment Financing (1/2)
1. Minimising
Asset Quality
Risk
• Risks relating to asset quality are partially offset as NBFCs primarily lend to subcontractors and hirers.
These players can move their assets across projects, and are not dependent on specific projects to
generate cash flow
• Good rentals and firm demand can help construction equipment owners recover cost faster, improving
their repayment capacity
2. Residual Value
of Equipment
Incentivises
Borrowers to Pay
• While the average life of major construction equipment is 6-7 years, the loan tenure typically ranges
only 3-4 years
• Thus, the residual value of the equipment incentivises borrowers to repay sooner. Additionally, as the
equipment forms the collateral, lenders are comfortable about loan recovery in case of defaults
3. Global
Positioning
Systems (GPS)
• To minimize and manage risk, construction equipment owners are trying to grow a well-distributed
business across many states and are also exploring diversification into other lines of businesses
• Hence, to monitor such accounts, some lenders are using global positioning systems to see the
deployment of equipment to clients
4. Operational
Efficiency
• As compared to banks, NBFCs have better processes focused on target customers and wider reach –
aided by direct selling agents and a faster documentation process
• NBFCs have better recovery systems, which include warehouses at strategic locations to house the
repossessed equipment, in case of defaults
5. NBFCs Know
Their Target
Customers
• In infrastructure projects, the big developers usually sub-contract part of their work to the small and
medium scale entrepreneurs who constitute the bottom of the infrastructure pyramid
• However, these players do not enjoy access to institutional financing (like banks). Thus, it is the NBFCs
which cater to the credit needs of such players
• The NBFCs have grass-roots knowledge of the credit needs of these players and have a fair idea of
their capability. NBFCs take a call on extending credit to these players based on the track record of
these players, their order books, cash flow, etc.

48
Critical Success Factors for NBFC Construction Equipment Financing (2/2)
6. Beyond the
Financing Role
• NBFCs have better understanding of customers’ businesses, associated risks and cash flows
• NBFCs recommend equipment selection, suggest prudent asset redeployment in the event of any
project becoming stressed or asset become idle
• Moreover, as leasing/rental of construction equipment is a fragmented industry, NBFCs also have
equipment rental/leasing offerings
• Specialized financiers support clients across the lifecycle of the asset – procurement, deployment,
maintenance and disposal
• They offer a range of services such as new equipment loan, used equipment loan, leading solutions,
equipment rental, and disposal services
• They also facilitate trade-ins, exchange and financing of refurbished equipment in tie up with dealers
and manufacturers
7.Others
• NBFCs have been preferred by customers due to their reach, services and structured product offerings
• NBFCs offer doorstep services, tailor made schemes to suit individual requirement, higher loan to
value, simple documentation process, flexible repayments, and various customer-friendly schemes
• A combination of these services enable NBFCs differentiate themselves with other competitors and
banks

49

50
Major Challenges / Issues / Investment Concerns for NBFC Construction
Equipment Financing (1/2)
1. Highly Cyclical
• The equipment finance industry is highly cyclical. Challenging macroeconomic environment adversely
affect cash flows to borrowers
• A confluence of multiple macroeconomic problems, both at home and abroad, can create a situation
where liquidity is scarce and the cost of credit is high
2. Clearance and
Land Acquisition
Delays
• Delays related to forest and environment clearance and delay as a result of land not being acquired
escalate project costs, discourage lenders, and send negative signals to investors
• This also results in an increased interest costs for the sector. This is impacting large infra companies
and their project viability. Policy issues like land acquisition, environmental clearances and mining need
to be addressed on priority basis.
• A sense of policy paralysis can slow down both project implementation as well as announcement of
new projects
3. Loan Recovery
and Difficulty in
Repossession of
Assets
• Loan recovery is a major challenge for NBFCs
• NBFCs do not enjoy a level playing field vis-à-vis banks and other financial institutions,
especially when it comes to issues like making provisions for bad loans, while recovering assets
once a loan goes bad or paying taxes on sticky advances
• With the regulatory framework tilted heavily in favour of borrowers, this creates incentives for
wilful defaults
• With most borrowers working in government / quasi-government projects, repossession of assets in
case of defaults becomes even more challenging for NBFCs
4. Under-
developed Used
Equipment Market
• The secondary market for used equipment in India is underdeveloped
• While the financing penetration for used machines is small, there exists no proper trading platform for
used equipment
• Putting in place a proper registration procedure for infrastructure equipment is key to an orderly growth
of used equipment market as this can help in calculation of residual value of used equipment.

51
Major Challenges / Issues / Investment Concerns for NBFC Construction
Equipment Financing (2/2)
5. Taxation or
Regulatory Issues
• Most heavy equipment are not registered and are without all-India permits
• Inter-state movements of these equipment become a nightmare for operators. We anticipate that with
the Introduction of GST, some of these hindrances may come down
• Lack of clarity and transparency in policy regulations is a major hindrance faced both by finance
seekers and providers in the CE spectrum
6. Low
Depreciation Rate
• Prime life of each equipment is around 3-4 years
• With rapid technological progress, the equipment life-cycle is progressively getting shorter
• In this backdrop, a depreciation rate of only 15% p.a. for an equipment asset acts as a major deterrent
for a healthy growth of the industry (compared with 30% for commercial vehicles)
7. Limited
Financing
Options From
OEMs
• Original equipment manufacturers (OEMs) in India offer limited financing options, and payment terms
for first-time users are often unfavourable.
• The result is that access to financing prevents many prospective users from buying
8. Low Rental
Penetration
• Organised players with large rental fleets are in limited numbers in India because they lack the capital
to expand. These organised players face huge pricing competition from the unorganised segment,
where players are involved in off-the-book cash transactions and can therefore offer much lower rates
• Renting penetration is India is much lower (7-8%) than in other large ECE markets (65% in the US and
35% in China) because of a tax regime that makes moving equipment across states unviable
9. Others
• For interest paid to NBFCs on loans for equipment financing, tax is deducted at the source, which is
not the case with banks
• According to AT Kearney, external commercial borrowing (ECB) as a source of funds is available only
when purchasing imported equipment; it is not available for domestic equipment

52
D. Major Companies

53
Organized Players Account for ~90% Share of the Overall CEF Industry; SREI
Equipment Finance is the Largest Player
• The CEF industry is largely organized given the high equipment prices, asset valuation expertise and
dependence on customer relationships, accounting for ~90% share of total construction equipment financed
(in volume terms)
• Major players are SREI Equipment Finance, Sriram Equipment Finance (Shriram Transport Finance
Company), Magma Fincorp, L&T Finance, DFC Bank, Kotak Mahindra Bank, and ICICI Bank
• Unorganized players include small financiers with local presence
• Specialized financiers support clients across the lifecycle of the asset, i.e. procurement, deployment,
maintenance, and disposal. They offer a range of services such as new equipment loan, used equipment loan,
leasing solutions, equipment rental, and disposal services. They also facilitate trade-ins, exchange and
financing of refurbished equipment in tie up with dealers and manufacturers
NBFCs/HFCs LAP Borrower Base Share of Collateralized Properties
SREI Equipment
Finance, 64%
Shriram Equipment
Finance, 6%
Magma
Fincorp, 6%
L&T Finance, 4%
Others, 20%
Organized, 90%
Unorganized, 10%

54
D. Major Companies

55
Date Target Business Description Buyers Deal Value ($m) Eq. Value/ BV
May-17
Money Masters
Leasing & Finance
Limited (BSE:535910)
Money Masters Leasing & Finance Limited, a non-banking
financial company, provides hire purchase and leasing services
for small and medium business enterprises in India.
- 0.5 -
Sep-16
Kwality Credit &
Leasing (BSE:531206)
Kwality Credit & Leasing Limited operates as a non-banking
financial company in India. It offers hypothecation of vehicles
and equipment, and loans for machineries.
- 0.0 -
Aug-16
Sakthi Finance
Sakthi Finance Limited, a non-banking financial company,
primarily provides asset financing services in India.
- 116.9 -
May-16
Amarnath Securities
Amarnath Securities is involved in the hire-purchase, leasing,
and financing lease operations; and purchasing, selling, hiring,
or letting on hire plant and machinery, and equipment.
- 0.1 1.64x
May-16
Amarnath Securities
Amarnath Securities is involved in the hire-purchase, leasing,
and financing lease operations; and purchasing, selling, hiring,
or letting on hire plant and machinery, and equipment.
- 0.2 0.931x
Apr-16
Sakthi Finance
ABT Investments (India)
Private Limited
- -
Aug-14
Frontier Capital
Limited
It engages in the financing of heavy commercial vehicles and
construction equipment for individual and corporate customers.
Inimitable Capital Finance
Private Limited
3.3 -
Aug-14
Sakthi Finance
- 3.2 -
Jan-14
Frontier Capital
Limited
- 0.0 0.19x
Nov-13
Frontier Capital
Limited
Private Limited
4.2 -
Jan-13
Kwality Credit &
Leasing (BSE:531206)
Kwality Credit & Leasing Limited offers hypothecation of
vehicles and equipment, and loans for machineries.
- 1.5 -
Major Deals in the Construction Equipment Finance Sector in India (1/2)
Source: Capital IQ; MGP Research and Analysis
Note: Deals in borders are M&As while others
are private placements

56
Date Target Business Description Buyers Deal Value ($m) Eq. Value/ BV
Aug-12
Srei Equipment
Finance Limited
It offers financial Services and infrastructure equipment
services in India and internationally
BNP Paribas SA; SREI
Infrastructure Finance Ltd
38.0 -
Mar-12
DFL Infrastructure
Finance (BSE:511393)
DFL Infrastructure Finance Limited offers financing for tractors
and farm equipment and construction equipment to customers.
Auctus Holdings Pvt Ltd 0.0 -
Feb-12
Sakthi Finance
Avdhoot Finance; Sakthi
Financial Services
5.7 -
Apr-11
DFL Infrastructure
Group of investors* 1.0 -
Dec-09
Frontier Capital
Limited
Private Limited
0.1 1.16x
Jun-08
GE Capital
Transportation
Financial Services Ltd.
GE Capital Transportation Financial Services, Ltd. provides
financial solutions for the transportation segment. It also
provides construction and mining equipment financing.
GE Capital (Mauritius)
Investment Company, Ltd.
11.8 2.54x
May-08
DFL Infrastructure
Zwirn Pragati Capfin Pvt. Ltd. 5.2 -
Aug-07
Frontier Capital
Limited
- 0.0 1.02x
Feb-07
DFL Infrastructure
D.B. Zwirn & Co., L.P. 5.1 -
Aug-06
DFL Infrastructure
D.B. Zwirn & Co., L.P. 8.0 7.96x
Major Deals in the Construction Equipment Finance Sector in India (2/2)
Source: Capital IQ; MGP Research and Analysis
We haven’t included these investors in our ‘major investors in the sub-sector’ section, as this was a private placement deal
Note: Deals in borders are M&As while others
are private placements

57
Company Name
Geographies
of Interest
# of Transactions,
Last 3 Years as -
AUM
($bn)
Most Recent
Fund Size ($m)
and Closed Date
Industries of
Interest
Bite Size - Min &
Max Equity
Investment ($m)
Current and Pending Subs/
Investments List
Buyer Seller Size Date Min Max
1
BNP Paribas SA
(ENXTPA:BNP)
- 7 3 - - - - - -
Long list of non-relevant Spanish
companies
2
ABT Investments
(India) Private
Limited
- 2 - - - - - - -
Sakthi Finance Limited
(BSE:511066); Sakthi Sugars
3
Auctus Holdings
Pvt Ltd
- - - - - - - - -
DFL Infrastructure Finance Limited
(BSE:511393)
4
Avdhoot Finance
and Investment
Private Limited
- - - - - - - - -
Avdhoot Finance and Investment
Private Limited, Asset Management
Arm; Sakthi Finance Limited
(BSE:511066)
5
D.B. Zwirn & Co.,
L.P.
- - - - - - - - - -
6
GE Capital
(Mauritius)
Investment
Company, Ltd.
- - - - - - - - -
GE Capital Transportation Financial
Services Ltd.; KSK Power Ventur
PLC (LSE:KSK)
7
Inimitable Capital
Finance Pvt Ltd
- - - - - - - - - Frontier Capital Limited
8
Sakthi Financial
Services (Cochin)
- - - - - - - - -
Sakthi Finance Limited
(BSE:511066)
9
Zwirn Pragati
Capfin Pvt. Ltd.
- - - - - - - - -
DFL Infrastructure Finance Limited
(BSE:511393); Zwirn Pragati Capfin
Pvt. Ltd., Asset Management Arm
Investors Landscape for the Construction Equipment Financing Sub-Sector - Most
of these Investors are Strategic Buyers or Holding Companies
Financial Buyers Active in this Sector Invest Directly in Sector-Focused Public Companies. Infra and CEF Markets are
Dominated by Large Listed Firms, With Hardly any Sector-Focused Small Private Players.
Source: MGP Research

58
Research Resources
• IBEF Construction Equipment Report, June 2017
• BCC Research – Enormous Potential in Non-Bank Finance and Ways to Make it Happen in India, December
2015
• DHFL Annual Report 201-17; MGP Research and Analysis
• CRISIL Research
• Reserve Bank of India
• Capital IQ
• Company filings
• MGP Research and Analysis

59
• This document has been compiled by Maple Growth Partners (MGP) from sources believed to be reliable, but
no representation or warranty, express or implied, is made by MGP, its affiliates or any other person as to its
accuracy, completeness or correctness. Such information may be incomplete or condensed and/or may not
have been independently validated by MGP. MGP expressly disclaims liability for any direct or consequential
loss arising from any use or reliance upon this material or the information contained herein.
• Certain of the information contained herein represents or is based upon forward-looking statements or
information, which may include descriptions of anticipated market conditions and changes, and expectations
of future industry activity. Maple Growth Partners believes that such statements and information are based
upon reasonable estimates and assumptions. However, forward-looking statements and information are
inherently uncertain and actual events or results may differ from those projected. Therefore, undue reliance
should not be placed on such forward-looking statements and information.
Disclaimer
MAPLE GROWTH PARTNERS
+91 9930-206-207
niraj.singhvi@maplegrowthpartners.com

Indian Construction Equipment and Infrastructure Financing Market

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