HOW TO FUND AN INCLUSIVE BUSINESS

SEPTEMBER 2013

1 The views expressed in this presentation are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. The countries listed in this paper do not imply any view on ADB's part as to sovereignty or independent status or necessarily conform to ADB's terminology.

Agenda
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Introduction To Unitus Capital

How UC helps companies grow

Client Examples: Janalakshmi Financial Services/ENCASH

Equity investments in Inclusive Businesses

Conclusion

UNITUS CAPITAL

Institutional Investors Impact Funds Family Offices / Foundations High Net Worth Individuals Government Institutions

Global Investors

Debt & Equity Capital Markets Structured Products Private Placements Mergers & Acquisitions Buy-side Advisory Work

Microfinance Microinsurance Technology Renewable Energy Healthcare Education Water & waste management Agriculture

Social Businesses

Unitus Capital connects social businesses with the global capital markets

UNITUS CAPITAL
Demonstrated ability to deliver innovative transaction structures and increase our clients access to capital and attractive investment opportunities Raised ~$900 mn for 40 clients across emerging sectors like microfinance/rural banks, healthcare, education, renewable energy

Expansive geographic presence focused on high growth and emerging economies

Mandates in in Philippines, Africa,Pakistan, China, India, Pakistan and Mandates India, the USA, Philippines, Singapore and Australia China

Strong pipeline of significant transactions

Current pipeline of signed mandates totals over $250 mn for ~20 clients

Strong investor relationships with a unique mix of mainstream and social investors

Coverage of over 500 institutional investor groups

Talented core team of 18 professionals with strong credentials

Alma mater includes leading institutions like Harvard Business School, MIT, Oxford, Duke University, ESCP-EAP, IIM Ahmedabad, ISB, IIM Bangalore, MDI, IIT Kanpur, IIT Guwahati

Top tier investment banking and private equity expertise

Talent pool from TVS Capital, World Bank, Acumen Fund, Morgan Stanley, Citigroup, UBS, Nomura, Lehman Brothers, KPMG, Deloitte, SBI Capital Markets and Kotak
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A TRUE PARTNERSHIP THROUGH THE ENTIRE TRANSACTION

Senior advisory panel 1. Establish short list and approach

CLIENT

Establish formal dialogue with a willing investor candidates

Geoff Woolley Co-Chairman Narayan Ramachandran Co-Chairman

2. Drive development of marketing documentation

Develop marketing documentation in collaboration with the client, including teaser document, information memorandum, management presentation, process letter, etc.

Core transaction team Project Lead Eric Savage Co-Founder and President Abhijit Ray Co-Founder and MD

3. Determine heads of terms

Negotiate, agree and outline terms subject to due diligence, investors internal approval and final documentation

4. Manage due diligence Execution Management

Co-ordinate information requirements and arrange site visits.

Equity placement expertise + Execution support

5. Assist negotiation and final documentation

Co-ordinate closely with lawyers on all commercial issues, and push through key contractual wish list.

Kylie Charlton Co-Founder & MD Ann Short Chief Operating Officer

Gauravjeet Singh Director Amit Kumar Rathi Vice President

Throughout the process, UC commits to ensuring that the client has complete and up-to-date decision making information

CLIENT PROFILE JANALAKSHMI FINANCIAL SERVICES

UC has helped Janalakshmi Financial Services, a Bangalore based microfinance institution, raise $90 mm in equity and $80 mm in debt over the last four years. Janalakshmi provides savings, loans, pensions, insurance and other critical products to their clients in urban India.
800,000
700,000 600,000 500,000 695,974 177

200
180 160 140

CAGR: 114%
400,000 300,847 300,000 200,000 100,000 0 2010 Borrowers 2011 2012 Gross Portfolio outstanding (in USD million) 2013 82,161 12 193,150 65

120 100 80 60 40 20 -

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UC took an early bet on a very promising MFI with a visionary founder, strong technology and great management.

CLIENT PROFILE ENCASH

Equity Raised USD 3 million (February 2012)

Investors

Incofin Investment Management, ResponsAbility

Business

Provides retail ATMs, ATM process outsourcing and software services to Philippine thrift, cooperative and rural banks. Enables them to provide their rural customers access to a wider range of financial products and services. The funds raised helped ENCASH to substantially increase their ATM network by approximately 850 ATMs to about 1200 ATMs. Provided much needed financial services to an estimated additional 2.5 mm rural Filipinos. First equity transaction in the Philippines for Incofin.

Impact

Headquarter

Manila, Philippines

Equity Vs. Debt Financing

Equity Financing: Selling a portion of your business to investors through a share offering
Advantages: Frees up working capital, pristine financial history not needed, access to investors networks, typically doesnt have rigidly defined repayment amount or interest payments Disadvantages: Investors entitled to a share of the profits, and can have a say in company management, therefore finding the right investor is key

Debt Financing: Getting a loan from a financial institution

Advantages: Retain ownership of business, builds business credit, interest payments are tax deductible Disadvantages: Monthly payments drain working capital, putting assets up as collateral, credit rating suffers if payment obligations arent kept, high debt = high risk to investors for future equity raises

Key components of a business plan

Executive Summary Company Description Industry Overview Strategy & Roadmap Competition Financials Essentials about the company in 1-2 pages Management Overview & Products and Services Defining the addressable market and competitors Marketing, sales, expansion plans, and targets and benchmarks Overview of the competitive dynamics of the business Income Statement, Balance Sheet, Cash Flow, Projections to show profitability

Funding
Annexure

How Equity/Debt funds will be allocated

Supporting Documents, charts, etc.

EQUITY INVESTMENTS IN INCLUSIVE BUSINNESS

What Investor are looking for:

Growth Investors are seeking capital appreciation through growth

Transparency High Level of transparency provides greater confidence to the investor community.
Governance- Good governance is essential for the benefit of all stakeholders, especially investors. Founder/s and senior management team A reputed promoter group and a seasoned management team Profitability: A company that is profitable or has a clear path to profitability will have considerable leverage over investors Technology: The level of technological symbiosis with the business is an important factor, as it directly relates to the efficiency of the business.

Potential Investors in the Inclusive Business space:

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Social and financial performance metrics

Financial Metrics

Equity Internal Rate of Return (IRR) Gross Margin EBITDA PAT Valuation Metrics Price/Earnings Ratio Price/Book Ratio Price/Revenue Ratio Counting something and making it count IRIS Double/Triple Bottom Line PPI (Grameen Foundation)

Social Metrics A Consensus is still forming

UNITUS CAPITAL
UNITUS CAPITAL (UC) IS THE WORLDS LEADING SOCIAL INVESTMENT BANK

Named as the #1 investment bank in Asia in 2012 by social investment deal volume. Unitus Capital is a highly trusted advisory in the social impact space. We have a world class team with deep experience in PE, VC and banking. Our mission is to act as a catalyst between the investors and the social enterprises.

UC would be happy to explore helping any inclusive business that is considering accessing foreign equity.

Unitus Capitals main focus is the BoP population

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THANK YOU