Valuation of

Capital Float

GROUP 1
Private Equity Aastha Anuj Koustubh Siddhant Snehansu
Mital Mahajan Laha Jain Pradhan
PGP-15-167 PGP-15-099 PGP-15-197 PGP-15-230 PGP-15-234
 Industry Scenario – Why SME Lending?
What is SME Lending? Position in Fintech
Online B2C Commerce
Unmet 38% 27%
demand Funding by banks Digital payments Wallet payments
& NBFCs
P2P money transfers
Ineligible for SME
financing
35% Business Lending Platform
Lending
FINTECH Crowd-funding
Business Finance
Restrictive lending policies
 Simple credit access Invoice factoring Platforms
Inflexible collateral needs
 Collateral free terms
Slow disbursements
 Trustworthy partner Automated Investment Services
High interest rates Consumer Finance
Consumer lending platforms

Fintech
Averageintransaction
India transaction value
value per in in
user million $$
million Why Lending?
SME Lending? (Transaction
(Average value in
transaction million
value per USD
SMEinINIndia)
USD)
80000.00
250.00 Total Business Finance (2016) 5000.00
150.00
85% CAGR for
- $ Business
465.9 milFinance till 2020 8774.03% CAGR for SME Lending till 2020
200.00 4000.00
60000.00 206.6% CAGR for Business Lending
100.00
150.00 3000.00
40000.00 33,011.9
100.00 2000.00
50.00
20000.00
50.00 1000.00
0.00 0.00 0.00
0.00
2014 2014 201520152016
2016 2017
2017 2018 20192019 2020
2020 2014
2014 2015
2015 2016
2016 2017
2017 2018
2018 2019
2019 2020
2020
business finance
consumer finance consumer finance digital
business finance digital payments
payments business
business lending
lending crowdfunding
crowd funding invoice
invoicefactoring
factoringplatform
platform
Industry About Us Our Story Management Customers Valuation Term Sheet Summary
 About Us – Capital Float
Customer segment Prime Idea Sources of funds
Short-term loans

Secured & Un-Secured

Rs. 44 Cr
Rs. 7 Cr

$ 16 mil

Equity Investors

Business Model
Low risk due to established cash-flows Linked to cash-flows Seems Un-Secured, but is it?
Established Businesses Small Businesses New Businesses
 Registered  Give INR 50  Not needed  100-200% of  Listed on e-commerce  80-100% of sales,
Company Lakh Max to be turnover  1 Year old - flexible tenure : 3-6
 >3 Years old  6 months to 3 registered  25% of  Turnover: 20 months
 Turnover: 1 years time  Turnover to payments in Lakhs/year or 1.5  EMI of 1.5-2% of
Crores INR period be stable EDC machine Lakhs/month principal/month

Industry About Us Our Story Management Customers Valuation Term Sheet Summary
 Our Growth Story
Why Listing? Vendor Benefits Our Growth Drivers
Sales of Goods
 Indirectly secured
 Penetration of Internet
 Enables vendors to
and Cellphones
Escrow produce more
 Growth of e-commerce
 Vendors to list on
and online vendors
multiple e-commerce
 Growth of online sales
platforms

Growth of e-commerce segment Future Growth plans

80 4.8% 6.0%  Explore different types of online sellers (service providers)
Capitalize on
70 Example - tie-up with online food delivery chains (Zomato,
growth prospects 4.4% 5.0%
60 3.6% Swiggy, and Foodpanda) to lend to food vendors (such as
4.0% HoFoo)
50 2.6%
 Make a niche in the short term lending market & be a
40 3.0%
1.7% market leader giving unsecure loan
30  Enhance credit check model for every model
2.0%
20 0.8%  More internet users in Rural India, T2, & T3 cities 
1.0%
10
14
25 39 55 72 “Mobile-first” growth strategy  High Reach & faster loan
6 access
0 0.0%
2014 2015 2016E 2017E 2018E 2019E  Targeted promotion of capital float in T2 & T3 cities 
Retail e-commerce sales (Billion $) E-commerce as a % of total retail sales generate awareness of SME business lending
Industry About Us Our Story Management Customers Valuation Term Sheet Summary
 Management

SASHANK RISHYASRINGA UTHAM REDDY

Co-founder & Managing Director Vice President - Product
Alma mater Work Experience

Stanford & Princeton Wipro & Tech Mahindra

GAURAV HINDUJA KUMANAN RAJAGOPAL

Co-founder & Managing Director Vice President - eCommerce Sales
Alma mater Work Experience

Stanford & Christ American Express & ICICI

ROHAN ANGRISH AMAN BHARGAVA

CTO Sr. Vice President, Capital Markets
Alma mater Work Experience

Grant Thornton & Ernst & Young

Stanford & IITB

Industry About Us Our Story Management Customers Valuation Term Sheet Summary
 Customers – Market Sizing
Assumptions
Thus, % of viable
Average Growth of SMEs in India -
1 2 customers are 23% of
5% CAGR
total

Average Revenue Per Customer Average loan amount 2500000.00 Fee 0.02
Growth of
3 (ARPC) is calculated using the Average duration (months) 5.00 Revenue 268750.00
ARPC at 11%
Interest income on loans interest charged average (p.a) 0.21 Growth of SME output 11%

Calculations of Market Sizing and Revenue Revenue Estimation

Number of Viable Target Penetration Customers Revenue (INR
Access to technology
Year
SMEs (mn) SMEs (mn) (%) (mn)
ARPC (INR)
in mn) 2016  38%
2026  70% (expected)
74.3 % CAGR

2016 32.76 2.42 0.06% 0.0015 268750.00 403.13

2017 34.40 2.75 0.11% 0.0030 298312.50 886.54
2018 36.12 3.12 0.19% 0.0059 331126.88 1949.64 Impact of competitors

11% CAGR
2019 37.92 3.55 0.33% 0.0117 367550.83 4287.58 By 2026, prices are expected to
2020 39.82 4.03 0.57% 0.0231 407981.42 9429.10 come down by 30%
2021 41.81 4.58 1.00% 0.0458 452859.38 20736.14
24.7% CAGR

2022 43.90 5.20 1.25% 0.0648 502673.91 32575.54

2023 46.10 5.91 1.55% 0.0917 557968.04 51174.72
2024 48.40 6.71 1.93% 0.1298 619344.53 80393.19 Factoring the above, we deduce a
2025 50.82 7.63 2.41% 0.1837 687472.42 126294.09
revenue of INR 13,000 Cr. (2026)
2026 53.36 8.67 3.00% 0.2600 763094.39 198402.36

Industry About Us Our Story Management Customers Valuation Term Sheet Summary
 Valuation – Venture Capital Valuation Model

Total Revenue in 2026

EV/revenue industry median for mature
13,767.83 Crores stage NBFC : 4

Optimistic revenue Pessimistic

Realistic revenue (130%) EV capital float median : 54,521 Crores
Revenue (50%)

0.5 0.3 0.2 Weights:

Assuming investor expecting 20X return,

valuation in 2016: 2,726 Crores
13,6303
Crores

Revenue CAGR:
85.87% Assuming 70% liquidation in 10 years, post
money valuation: 817 Crores (117 million
USD)

Industry About Us Our Story Management Customers Valuation Term Sheet Summary
 Valuation – Relative Valuation Model
Assumptions
Identify peer companies that Stable growth stage  Discount Enterprise Value (EV) for stable growth,
1 2 Pessimistic Valuation
3
are listed on the stock exchange large company size, & pessimism using scorecard

Calculations Scorecard
Multiples for comparable companies Utilize operating
margin
(EBITDA/Revenue)
to calculate
EBITDA. Use
EV/EBITDA to
calculate EV.

• EV using EV/Revenue
• EV Using Operating Margin

Industry About Us Our Story Management Customers Valuation Term Sheet Summary
 Valuation – Discounted Cash Flow Model
Assumptions Limitations
Revenue: Based on Market Sizing

EBITDA as a % of Sales: Converged to taking Cash flow projection is difficult for a

into consideration tech based accompanies
high growth start-up
and NBFC

Depreciation and Amortization as a % of

Sales: Taken into consideration tech based
companies Factoring intangible assets and making
1129 Million USD future projections is difficult
Capex as a % of Sales: Converged to industry
average of NBFCs

Reinvestment: 80% of ending cash flows

As FCFF is negative till 2020, the
reinvestment amount is uncertain

Terminal Growth assumed at 5%

Excel Embedded here 

1 USD = 66 INR

Industry About Us Our Story Management Customers Valuation Term Sheet Summary
 Valuation – WACC Calculation

Assuming Tax rate = 30%

Capital Float behaves like an NBFC = 0.30

D/E = 6.3
Capital Float’s debt is mostly short-
term loans

D/V = 0.8635

E/V = 0.1365 Rs. 44 Crores Rs. 7 Crores

@ 13.5% @ 13%

Weighted average cost of debt

= 0.8635 = 0.1365 = 13.43%

= 13.43%

Industry About Us Our Story Management Customers Valuation Term Sheet Summary
 Valuation – WACC Calculation

“Extended CAPM”

1 5 7
Regressing 10-year bond yields for 1
Regressing daily returns of listed peers against SENSEX for 1 year,
year and adding inflation (4%), RF = = 0.8635
we calculate Beta using slope method and covariance method,
7.82%
2 = 0.1365

Regressing SENSEX index returns for

= 0.30
1 year, RM = 23.19%

3 = 13.43%

Due to equity expectations from small

= 39.3%
size companies, RSMB = 5%

4 6 Thus,
Due to risk for NPAs, RSPR = 3% = 39.3% or = 39.3% = 13.48%

Industry About Us Our Story Management Customers Valuation Term Sheet Summary
 Term Sheet

Terms to be considered

 Pre money valuation

 Liquidation multiple for preferred stock

 Participating vs Non participating preferred stock

 Pro-rata rights
“Rich” Entrepreneur
 Option pool

 Board of Control

Industry About Us Our Story Management Customers Valuation Term Sheet Summary
 Summary and Risks

Valuation : DCF Valuation: Relative Valuation: Venture

methodology Model Capital Method

1129 million 51 million 117 million

USD USD USD

Risks
Non Performing Assets Competition Dependency Low Differentiation

 Borrowers and third-  Other competitors can

party may default due to: also follow the “escrow”
 Low barriers to entry
• Bankruptcy  High dependency on model
• Lack of liquidity listing of SMEs on E-
 Tech startups offering
• Operational Failure commerce websites  Competitors who are
similar services
 Delays in enforcing NBFC can also get
collaterals  losses registered with RBI

Industry About Us Our Story Management Customers Valuation Term Sheet Summary
THANK YOU
 Competitors
Advantage Capital
Company Float (USP)

 Working Capital loan  Micro and small loans  Working Capital loan
Products to MSBs  Business and Elite Loans

 Short-term revolving  Repayment as per  Loans with repayment

Business Model High Flexibility
line-of-credit sales (NeoCash) as per cash flows

 Rs. 50,000 to Rs. 10  Rs. 2 Lakh to Rs. 1 Crore  Rs. 3 Lakh to Rs. 50
Loan Amount
Lakh Lakh

Credibility  Registered with RBI  Registered with RBI  Registered with RBI

Revenue  INR 20.5 Crores  NA  INR 1.4 Crores

 >100 customers with  1500 loans worth  1000 customers & High customer base in
Customers short time
200+ transactions Rs 150 Crores Rs. 250 Crores loan

 $ 10 million  $ 8.62 million  $ 16 million Greater confidence

Funding among investors
 Latest - Seed  Latest - Series C  Latest - Series A

Industry About Us Our Story Competitors Management Customers Valuation Summary

 Appendix - Management Details
Who? Education LinkedIn Credibility
KUMANAN • PG: MBA (Marketing) from Thiagarajar School of 500+ Connections
RAJAGOPAL Management, Madurai - 1996 – 1998 4.5
Vice President • Graduation: BSc (Physics) from The American 17
College, Madurai - 1993 – 1996 Recommendations
e-Commerce Sales

Work Experience
Jan 1999 – Dec 2000 – May 2002 – Jan 2003 – Jun 2004 – Feb 2007 –
Year Dec 1999 May 2002 Jun 2004 Feb 2007 Mar 2015
Jan 2003

Techpacific
Company
India Ltd

District Networking products Senior Marketing Territory Area Head – Head - Merchant
Designation Manager sales specialist Executive Manager `Key Accounts Acquisition

Relevant work

Progress from Area

Achievements No No No No 3 Major
Sales Manager
to Area head Awards

Due Diligence Sources of Data

 Appendix - Management Details
Who? Education LinkedIn Credibility
AMAN • PG: BSc (Electrical Engineering) from Georgia Tech 500+ Connections
BHARGAVA - 2000 – 2004 3
• Graduation: Don Bosco School, Park Circus – 1988
Sr. Vice President - 2000 1
• Certification: Chartered Accountant (CA) Recommendations
Capital Markets

Work Experience
Dec 2003 – Apr 2003 – Aug 2004 – Mar 2010 – May 2012 –
Year Apr 2004 Aug 2004 May 2012 June 2015
Dec 2009

Company

Analyst Engineering Senior

Designation Intern Intern
Manager Director
Manager

Relevant work

Progress from • Auditing

Achievements No No Associate to Auditing • Firm was accused
Manager of malpractices
Due Diligence Sources of Data
 Appendix – Sources of Data

Links
• http://www.ifc.org/wps/wcm/connect/4760ee004ec65f44a165bd45b400a808/MSME+Report-03-01-2013.pdf?MOD=AJPERES
• http://billpayne.com/wp-content/uploads/2011/01/Scorecard-Valuation-Methodology-Jan111.pdf
• http://www.bis.org/ifc/publ/ifcb38.pdf
• http://www.businessworld.in/article/Strengthening-SME-Financing-In-India-To-Reduce-Debt-Gap/22-12-2015-89594
• http://www.iibf.org.in/documents/reseach-report/Report-30.pdf
• http://firstbiz.firstpost.com/sme-report/pdf/Analysing-Indian-SME-perceptions-around-Union-Budget-2014-15_Final-new.pdf
• https://www.crunchbase.com/organization/capital-float#/entity
• https://www.kpmg.com/IN/en/IssuesAndInsights/ArticlesPublications/Documents/Snapdeal-Report_-Impact-of-e-Commerce-on-Indian-SMEs.pdf
• http://www.slideshare.net/Tracxn/tracxn-alternative-lending-landscape-india-july-2015
• http://msme.gov.in/WriteReadData/DocumentFile/MSME%20ANNUAL%20REPORT%202014-15_English.pdf
• http://people.stern.nyu.edu/adamodar/pdfiles/papers/younggrowth.pdf
• http://people.stern.nyu.edu/adamodar/pdfiles/valn2ed/ch23.pdf
• http://billpayne.com/wp-content/uploads/2011/01/Scorecard-Valuation-Methodology-Jan111.pdf
• http://www.blog.sanasecurities.com/non-performing-asset-npa-in-public-sector-banks/
• http://www.inc.com/drew-hendricks/5-things-angel-investors-should-look-for-in-a-startup.html
• http://faculty.london.edu/icooper/assets/documents/ArithmeticVersusGeometric.pdf
• http://articles.economictimes.indiatimes.com/2014-10-28/news/55521350_1_sashank-rishyasringa-e-commerce-zovi
• http://www.statista.com/statistics/289770/india-retail-e-commerce-sales/
• http://www.statista.com/statistics/379167/e-commerce-share-of-retail-sales-in-india/

Due Diligence Sources of Data

 Appendix – Sources of Data

Documents
• All Annual reports of peers
• Ministry of corporate affairs (MCA) – Zen Lefin Pvt. Ltd.
• India MSME report 14-15 (Govt. of India – Annual Report)
• BCG Report on "Productivity in Indian Banking 2015"
• BCG Report on "Indian banking 2020"
• BCG Report on "Enormous potential in Non Bank Finance and Ways to make it happen"

Due Diligence Sources of Data