GoCrackit bfsi_industry sector overview

1. Take Charge of Your Finance Career!
BFSI Sector Overview | LBSIM

2. Why Finance?

3. About Myself
• PGP 2006-08, IIM Ahmedabad, B.E.Electrical, VJTI, Mumbai
• NTPC Ltd.
• PwC - GRID
• EY – TAS (IB)
• Co-founder, LKP Power Advisors – Financial and Strategy Advisory
• IIM Bangalore – published 8 cases at Harvard Business Publishing
• Co-founder GoCrackIt

4. Agenda
Sectoral Overview
Finance Careers Overview
Fundamental Preparation for Interviews
Behavioral & Fit Questions
Financial Modeling – Case Study
Sample Interview Questions
Alumni Career Journeys

5. BFSI – Sector Nuances
• Regulated Industry with Multiple regulatory authorities
• Rich in data
• Multiple Products & Services
• Private & Public Players
• Complex user journeys
• Technological changes

6. Banking Sector Overview
Source : RBI
Reserve Bank
of India
12 Public Sector Banks
22 Private Sector Banks
46 Foreign Banks
56 Regional Rural Banks
1485 Urban Cooperative Banks
96000 Rural Cooperative Banks
2L+ ATMs

7. Banking Sector Overview – Credit Growth
Source : IBEF
• FY 16 – 20, CAGR of
3.75%, reduction due to
impact of COVID
• Drivers – Retail &
Corporate across
Services, Real Estate,
Consumer Durables,
Agriculture
• Expected credit growth
is 8-9% by end of year!
USD Bn

8. Banking Sector Overview – Deposits Growth
Source : IBEF
• Drivers – Strong growth
in savings & disposable
income
• Technology – Govt.
push towards expanding
banking using
technology
• Public confidence in
Indian Banking System
USD Bn

9. Banking Sector Overview – Assets
Source : IBEF
• Growth in assets across
Public, Pvt & Foreign
Banks to USD 2.52 Tn
• Public Sector accounted
for 60%
USD Bn

10. Banking Sector Overview – Interest Income
Source : IBEF
• Interest income of USD
101.6 Bn b
• Public Sector accounted
for 58%
USD Bn

11. Banking Sector – Key Trends
Source : IBEF, other sources
• Improved risk management practices
• Integrated approach to risk management
• Basel II norms
• Asset – Liability match
• Technological Innovations for primary channels of banking
• Digital Innovations
• Social media
• Payments – NEFT, IMPS, RTGS
• Increased Rural Teledensity to improve banking in rural areas
• Focus on Financial Inclusion – Pradhan Mantri Jan Dhan Yojana
• Consolidation amongst foreign & domestic banks
UPI - March 2021 - 2.73 Bn
transactions worth USD 67.31 Bn

12. Banking Sector – Digital Lending
Source : IBEF
USD Bn
• Digital lending is
expected to double

13. Banking Sector – Key Drivers
• Economic & Demographics
• India amongst Top 7 economies
• Strong economic growth with high disposable incomes
• Population in 15-64 age group expected to grow
• Rising rural income
• Infrastructure Financing
• Housing finance
• Personal finance

14. Banking Sector – M&A Activities
• March 2020 – SBI raised USD 100 mn in green bonds
• April 2020 - Axis Bank acquired 29% in Max Life Insurance
• Feb 2021 – Axis Bank acquired 9.9% in Max Bupa Health Insurance
Company
• Aug 2020 – People’s Bank of China acquired 0.0056% in ICICI Bank
• Aug 2021 – Barclays PLC will invest INR 3000 Cr in India unit

15. Banking Sector – Capital Markets

16. Financial Services Sector Overview
Financial
Services
Capital
Markets
Asset
Management
Broking
Wealth
Management
Investment
Banking
Insurance
Life
Non - Life
NBFCs
Asset Finance
Company
Investment
Company
Loan
Company

17. Financial Services – Mutual Funds
Source : IBEF
• 98.6 Mn accounts have
USD 444.11 Bn AUM
• In FY 21, USD 13.12 Bn
were invested through
SIP
• Growth in Beyond Top
30 cities is expected to
drive the MF industry

18. Financial Services – Mutual Funds
Source : IBEF
• Corporates have been
the highest investors
followed by HNIs
• Top 5 AMCs in India
• SBI
• HDFC
• ICICI Pru
• Aditya Birla Sun
Life
• Kotak Mahindra
• Groww – Tech based
platform to distribute
MFs

19. Financial Services – Capital Markets
Source : IBEF
• Companies listed in
FY21
• NSE – 1793
• BSE - 5647
• 55 IPOs raised USD 4.25
Bn in FY 21
Companies listed on Indian Stock Markets

20. Financial Services – Broking
Source : ICRA, Globalnewswire
• FY 2020 – 58%
marketshare owned by
full service brokers
• Discount brokers are
making substantial
inroads based on tech
based models
• 6.3 Mn accounts opened
in first half FY 2021
• Covid 19 impact has
been
• Zerodha witnessed
massive growth
195
210
270
0
50
100
150
200
250
300
FY 2019 FY 2020 FY 2021
(E)
INR Bn
INR Bn
Indian Broking Industry

21. Financial Services – Wealth Management
Source : IBEF
• Advisory asset
management, tax
planning and financial
planning – Top 3
services in demand
• India is expected to be
4th largest private wealth
market globally by 2028
No. of HNIs in India

22. Financial Services – Investment Banking
Source : FT

23. Financial Services – Investment Banking
Source : VentureIntelligence
Top Advisors - PE
Rank Company Name
#of
Deals
Amount
$M
1 Avendus 23 3,138
2 Credit Suisse 2 1,020
3 Allegro Advisors 6 760
4 Kotak Mahindra Capital 6 750
5 Steer Advisors 2 633
6 Bank of America Merrill Lynch 1 590
6 Goldman Sachs 1 590
6 Morgan Stanley 1 590
7 Ernst & Young 2 498
8 JM Financial 4 467
9 Investec Bank 7 446
10 Spark Capital Advisors 4 435
11 Ambit Corporate Finance 6 419
12 Moelis & Company 1 398
13 o3 Capital 6 346
14 Jefferies & Co. 2 320
15 KPMG 4 232
16 Axis Capital 2 231
17 Veda Corporate Advisors 7 137
18 Aream & Co 1 123
19 Unitus Capital 5 90
20 ICICI Securities 3 67

24. Financial Services – Investment Banking
Source : VentureIntelligence
Top Advisors - M&A
Rank Company Name
#of
Deals
Amount
$M
1 Kotak Mahindra Capital 5 2,724
2 Deloitte 3 1,822
3 Ernst & Young 3 1,441
4 ICICI Securities 2 1,219
5 Phoenix Advisers 1 1,000
6 Credit Suisse 1 900
7 Avendus 5 659
8 Steer Advisors 1 625
9 Ambit Corporate Finance 3 559
10 Moelis & Company 1 398
11 Aream & Co 1 360
12 JM Financial 4 307
13 Jefferies & Co. 1 275
14 Edelweiss Financial Services 2 274
15 KPMG 8 256
16 o3 Capital 2 225
17 Investec Bank 3 167
18 Deutsche Bank 1 150
19 Torreya 1 106
20 Carnegie Investment Bank 1 90

25. Financial Services – NBFCs
Source : VentureIntelligence
• NBFCs finance more than
80% of equipment leasing
and hire purchase
activities
• Public funds of NBFCs
increase from USD 278.23
Bn in FY 16 to USD 470.61
Bn in FY 20
• 9425 NBFCs are registered
with RBI
• NBFCs get deposits from
public for 12 to 60 months
period with max ceiling
interest rate of 12.5%

26. Financial Services Sector – M&A Activities
• Piramal Group acquired Dewan Housing Finance Corporation – USD
4.7 Bn
• Sundaram Asset Management acquired Principal Asset Management
• Cross utilization of channels – USD 46.78 Mn
• People’s Bank of China invested in Bajaj Finance
• Reforms and simplification of process
• Impact of Technology

27. Insurance Sector - Overview
IRDAI
Life
Public – 1
Private – 23
General
Insurance
Public – 6
Private - 21
Specialized
Insurance
Public – 2
Standalone
Health
Insurance
Private – 7
Re-Insurance
Public – 1
Private - 11

28. Insurance Penetration

29. Insurance Density

30. Insurance Penetration & Density in India
Source : IBEF
• Life insurance penetration - 2.8%, Non-life insurance penetration – 0.9%
• Insurance penetration – USD 78
• Govt boost through policies such as Saral Jeevan Bima, expected to boost
penetration

31. Life Insurance Premiums
Source : IBEF
• New Business Premium has been consistently growing
• ICICI Pru is targeting 30% annual growth

32. Insurance – Public & Private Sectors
Source : IBEF, IRDAI
• Private sector is seeing continuous increase in Life & Non-Life Insurance

33. Insurance – Life
Source : IBEF, IRDAI
• LIC is leading player in life. IPO is expected to provide a further boost

34. Insurance – Non Life
Source : IBEF, IRDAI
• Public sector players lead the market – New India Assuarance, United
India, National Insurance

35. Insurance – Non Life
Source : IBEF, IRDAI

36. Insurance - Trends
Source : IBEF, IRDAI
• Distribution Channels – apart from agents
• Bancassuarance
• Online
• NBFCs
• Partnerships
• Star Health Insurance partnered with PhonePe to offer digital
insurance
• Bharati AXA partnered with FinCare Small Finance Bank to offer Life
Insurance Products
• New Products – Non-linked, Critical healthcare, “Switch On Switch Off”
• Digital intermediaries – Policy Bazaar
• Growth Drivers & Opportunities
• Rising incomes
• Crop | Health | Motor
• Low income urban & Pension Markets

37. Finance Careers Overview
Investment
Banking
PE/VC Hedge Funds
Asset
Management
Banking
Financial
Services
Corporate
Finance
Equity
Research

38. Investment Banking
• Investment Banking is a specific division of banking related to creation
of capital for other companies, governments and other entities
• Underwrite new debt & equity securities
• Sales of securities
• Facilitate M&A & restructuring
• Trade for institutions & private investors
• Issue and place stock
Top
Investment
Banks
J P Morgan, Goldman Sachs, Bank of America Merill Lynch, Morgan
Stanley, Citigroup, Barclays Capital, Credit Suisse, Deutsche Bank, Wells
Fargo, UBS, HSBC
Indian
Investment
Banks
EY, PwC, SBI Caps, Avendus, O3, Axis, Central Bank of India, Edelweiss,
HDFC Bank, ICICI, IDBI, Religare Capital, SMC Capital

39. PE/VC
PE
J P Morgan, Goldman Sachs, Bank of America Merill Lynch, Morgan
Stanley, Citigroup, Barclays Capital, Credit Suisse, Deutsche Bank, Wells
Fargo, UBS, HSBC

40. PE/VC
Global PE/VC Firms
• TPG
• Blackstone Group
• Kohlberg Kravis Roberts
• Goldman Sachs
• Carlyle Group
• CVC Capital Partners
• Apax Partners
• Bain Capital
• Oaktree Capital Management
Indian PE/VC Firms
• Gaja Capital
• Accel Partners
• Blume Ventures
• Kotak Private Equity
• Everstone Capital
• IDFC Private Equity
• Reliance Capital
• IDG Ventures
• Fidelity Growth Partners

41. Hedge Funds
• Called as “Alternate Investment Funds” in India
• Similar to Mutual Funds but with a difference!
• Hedging risks and getting good returns need aggressive
investment strategies
• Special investors – with high risk appetite
• Investment classes – Currencies, derivatives, stocks, real estates,
bonds etc.
• Fees - 2% fixed fee: 20% of profits
Top Hedge
Funds
Bridgewater Associates, AQR Capital Management, Renaissance
Technologies, JP Morgan Asset Management, Two Sigma Investments
Indian Hedge
Funds
Ambit, Ankur Capital Fund, Anthill Capital Ventures, Avendus, Baring PE
India AIF

42. Asset Management
Source: Investopedia
• Manage wealth of HNIs and institutional clients
• Mutual Funds, AMCs
Top Asset
Management
Firms
Blackrock, VanGuard, Charles Schwab, Fidelity, BNY Mellon, JP Morgan,
Prudential, Pimco (part of Allianz), Sumitomo, Aberdeen,
Indian AMCs HDFC AMC, Large Mutual Funds

43. Equity Research
• Analyse companies on fundamentals
• Provide Buy, Sell, Hold recommendations
• Trading and sales divisions use this research
Top Equity
Research
JP Morgan Chase, BoAML, Credit Suisse, Barclays,CITI, GS, Morgan
Stanley, Bloomberg, Thomson Reuters
Indian Equity
Research Firms
Top Banks,Brokerage Firms – Motilal Oswal, Prabhudas Liladhar, Emkay
Research
Tech Based
Equity
Research
AlphaMetry, Stock views, Quandl, William O’Neal, Zerodha, Sensibull

44. Broking/Trading
• Buy & sell at exchanges such NYSE/BSE/NSE etc.
• Securities
• Forex
• Commodities
• Derivatives
• Broker vs Trader
• Trader works for an investment bank or large finance company
and buys & sells as per assets of company
• Broker buys & sells on the behalf of a client

45. Banking – Corporate & Retail
• Corporate Finance, Project Finance, Sales,Strategy
Retail Banking
• Individuals as customers
• Deposits from individuals in
Savings Accounts & FDs
• Provide loans for education,
home, car, personal needs
• Focus on automation and self-
service
Corporate Banking
• Corporates as customers
• Deposits from corporates in
Current Accounts & FDs
• Provide loans for projects,
working capital
• Focus on relationship building &
personalized service
• Indian Banks – Cooperative, Regional, National
• Foreign Banks

46. Corporate Finance
• Objective - Maximise shareholder value through long term and short
term financial planning
• Responsibilities
• Planning financial requirements
• Raising funds in effective manner
• Investing funds in assets
• Monitoring capital allocation and RoI
• Working capital management

47. Treasury
• Cash Management
• Liquidity Planning &Control
• Management of interest, currency and commodity risks
• Procurement of finance and financial investments
• Contacts with banks and credit rating agencies
• Corporate finance

48. Microfinance
• Providing finance and financial services to the un-banked and poor
• Microfinance companies
• Ujjivan
• Bandhan
• SKS
• Janalakshmi
• Basix
• Share Microfin
• Spandana Spoorthy
• Grameen Koota
• Equitas Microfinance
• SKDRDP
• Satin Creditcare

49. Insurance
• Sales
• Meet customers and sell insurance policies for life, health, accident
• Meet corporate customers for sale of policies for employees, assets etc.
• Underwriting
• Determine new insurance policies to meet specific customer needs
• Insuring voice, vintage cars
• Claims
• Verify and process claims
• Detect fraunds
• Actuary
• Analyse data to calculate risks & premiums
Top Companies
• LIC
• Tata AIG
• Bajaj Allianz
• New India Insurance
• ICICI Prudential
• IFFCO TOKIO General Insurance
• Oriental Insurance
• Birla Sun Life
• HDFC Standard Life
Types of Insurance
• Term Life | Health
• Investment
• Car | Two wheeler
• Travel
• Tax Saving
• Child
• Retirement | Home
• Home
• Critical Illness

50. NBFC
• Engaged in business of loans & advances, acquisition of securities,
leasing, hire-purchase, insurance business, chit business etc.
• Examples
• HDFC
• Power Finance Corporation
• Reliance Capital
• IDFC
• Shriram Transport Finance
• Bajaj Holdings
• Muthoot Finance

51. Fundamentals for Interviews
Financial
Analysis
Cash flow and
Valuation
Current Affairs
Problem
Solving

52. Behavioral & Fit Questions
Leadership Teamwork
Long Hours
(& after party!)
Client Facing
Why this role/
company?
Sales
Examples from your experiences – Tell a story.

53. Behavioral & Fit Questions
What has been your biggest achievement?
Answer questions with regards the role!
Are you willing to relocate?
Which course did you like/dislike the most?
Ethics
Negotiations

54. Financial Modeling – Case Study
• Assumptions
• Market and economic analysis
• Regulatory analysis
• Flow of the model – ease of readability
• Sensitivity & Scenario analysis

55. Sample Interview Question#1
• Three statements – P&L, Balance Sheet and Cash Flow
• P&L – Operational efficiency, profitability
• Balance sheet – Assets, liabilities and capital structure
• Cash flow – Enables evaluation of company
Tell me the significance of financial statements

56. Sample Interview Question#2
• Explain the cash flows to debt & equity holders vis-à-vis just equity
holders
• Explain the formulas
What is the difference between FCFF & FCFE

57. Sample Interview Question#3
• IRR is that rate which makes NPV zero
• Considers time value of money
• ROI is (Expected value – Original Value)/Original Value
What is the difference between IRR and ROI

58. Sample Interview Question#4
• WACC is Weighted Average Cost of Capital
• WACC= Cost of Equity * Proportion of Equity + Cost of Debt
*Proportion of Debt*(1-Tax Rate)
• Cost of Equity is calculated by CAPM
• Cost of Equity = Risk free rate + Beta * Equity Risk Premium
• Cost of equity is always higher than cost of debt
• Tax shield
• Debt is less risky
How do you calculate WACC? What is CAPM?

59. Sample Interview Question#5
• Multiples based
• EV/Revenue, EV/EBITDA, EV/EBIT, P/E, P/BV
• DCF
How do you value a company?
• Financial Institutions such as banks – since capex, WC and debt are not
clearly defined and these operate under regulations
• Volatile cash flows
When is DCF not used for valuation

60. Sample Interview Question#6
• Assumptions
• Should be sound, well researched and through through
• Should be kept at one place and should be distinctly coloured
• Error checks – eg. Balance sheet balances
• Dashboard or Output sheet
What makes a good financial model?

61. Sample Interview Question#7
• In restaurant business, customers pay upfront, while suppliers provide
30+ days of credit. Thus, suppliers’ money is helping fuelling growth of
company
• Online & discount retailers, grocery stores, restaurants, telecom
companies
What is negative working capital? Is it beneficial?

62. Sample Interview Question#8
• Synergies
• New markets/geographies
• Technology
• Drive out competition
What are drivers of M&A

63. Sample Interview Question#9
• Post money = Pre money + Investment received
What is pre-money and post-money valuation?

64. Sample Interview Question#10
• Increase in capital through large number of investors
• Higher liquidity
• Exit strategy for founders/initial investors
• Higher regulations
• Focus on quarterly results
What are the advantages of doing an IPO?

65. Financial Statements
P&L/Income
Statement
Performance of company over specific period of time
Balance Sheet Position of a company at a given point of time
Cash Flow
Statement
Cash inflows/outflows

66. Ratio Analysis - Liquidity
Current Ratio Current Assets/Current Liabilities
Quick Ratio Cash & Cash Equivalents + Accounts Receivables/Current Liabilities
Cash Ratio Cash & Cash Equivalents /Current Liabilities
Liquidity Ratios – Will the company survive in short term?

67. Ratio Analysis - Churn
Receivables
Turnover
Sales/Average Receivables
Days
Receivables
365/Receivables Turnover
Inventory
Turnover
Cost of Goods Sold/Average Inventory
Turnover Ratios – Inventory, Receivables to Cash
Inventory Days 365/Inventory Turnover

68. Ratio Analysis - Churn
Accounts
Payable
Turnover
Purchases/Accounts Payable
Days Payable 365/Account Payable Turnover
Turnover Ratios – Purchases to Payables

69. Ratio Analysis – Asset Utilization
Asset Turnover Sales/Assets
Net Fixed Asset
Turnover
Sales/Net Fixed Assets
Operating Performance
Equity
Turnover
Sales/Shareholders’ Equity

70. Ratio Analysis – Profitability
Gross Profit
Margin
Gross Profit/Sales
Gross Profit = Sales - COGS
Net Profit
Margin
Net Profit or PAT/Sales
Equity
Turnover
Sales/Shareholders’ Equity
Return on Total
Assets
EBIT/Assets
Return on Total
Equity
PAT (before dividends/minority interests) /Total Equity
Total Equity = Ordinary Capital + Reserves + Preference

71. Ratio Analysis – Profitability
Return on
Equity
Net Income/Owner’s Equity
Dupont’s ROE Net Margin*Asset Turnover*Asset Leverage

72. Ratio Analysis – Financial Risks
Leverage Ratio Total Debt/Shareholder’s Equity
Interest
Coverage Ratio
EBITDA/Interest Expense
Debt Service
Coverage Ratio
EBIT/ (Principal + Interest +Lease)
Sustainable
Growth Rate
ROE*(1-Divdend Payout Ratio)

73. Gross Profit Margin Ratio
ü Varies widely across industries
ü Digital Products vis-à-vis FMCG product
ü Highway company vis-à-vis Thermal power generation company
ü Varies due to accounting processes
ü FMCG – packaging – is it COGS or SGA

74. Current Affairs
ü Economy related questions – GDP, Growth, regulations
ü Stock market movements
ü IL&FS debacle, NPAs
ü Blockchain & financial transactions
ü Impact of technology

75. Resources
ü http://aswathdamodaran.blogspot.com/
ü https://www.investopedia.com/
ü https://www.wallstreetmojo.com/
ü https://www.moneycontrol.com/
ü https://www.wallstreetoasis.com/

76. THANK YOU