Title: Millennium India Acquisition Company (SMCG)
1Millennium India Acquisition Company (SMCG)
Investor Presentation 2008
2Table of Contents
I. Company Overview II. Investment
Thesis III. Opportunity in India IV.
Millenniums Initial Investment V. Expertise
in Indian Markets VI. Financials
3Company Overview
- Millennium India Acquisition Company Inc. (
NASDAQ SMCG ) is a closed-end investment fund - Focused on industries and companies benefitting
from Indias rising middle-class financial
services, retail, healthcare and infrastructure - Principal asset is a 14.4 equity stake in SMC
Group, a privately-held company that is one of
the largest and fastest growing retail financial
services companies in India - Led by a management team with deep Indian
experience and a rigorous investment selection
process
4Investment Highlights
-
- Rigorous investment process, supported by
managements extensive in-market experience and
personal networks, allows Millennium to identify
fast-growing private companies that cater to
Indias exploding middle-class - Initial industry focus Financial Services is
among Indias fastest-growing, and due to a
tighter regulatory environment and cultural
preference toward savings vs. credit, presents a
potentially lower risk alternative to US
Financials - Initial investment SMC Group is a rapidly
expanding, well-managed retail financial services
company, serving 500,000 customers through
1,300 offices in 300 cities in India - Access based on current Indian laws, foreign
investments by US investors into Indian companies
such as SMC is restricted Millenniums
innovative structure is a quick way U.S.
investors can gain access - Growth given the recessionary business
conditions in developed nations, countries like
India, still exhibiting GDP growth of over 7,
remains an attractive investment destination for
growth-oriented investors
5Investment Opportunity in India
6Macro-Economic Drivers in India
- Despite global turmoil, in October 2008, IMF
reiterated its forecast for Indian GDP growth
of around 8 for 2008, and 7 for 2009 - Economic prosperity is spurring the rise of
Indias middle class of 300 million expected
to double in size over the next decade - Rising consumer spending a 08 McKinsey study
found that in two decades, India will surpass
Germany as the worlds fifth largest consumer
market - Mature political economy with development as its
core agenda sound legal framework
7Indias Financial Services Sector
- Indias financial services sector is one of the
fastest-growing areas in India, driven by rising
personal incomes, corporate growth, and financial
sector liberalization - Less than 3 of Indias 1.2 BN population are
invested in the markets today - Youngest educated workforce in the world 50 of
the population is under 25 - Savings rates amongst the highest in the world
(180 BN in savings accounts) - 5 of household savings invested in the markets,
vs 55 in the US - Pension funds are just being allowed to invest
their assets in the equities markets - A new culture of equity ownership is being
created, like the US in the 80s - Move towards full capital account convertibility
- Tarapore Commission Report being implemented in
stages from 2008-12, for full convertibility of
the Indian rupee - Greater control by foreign firms to invest into
India, and vice versa, driving volumes further -
2008
2007
544.1 B
8Indias Financial Services Sector (contd)
- According to the Wall Street Journal, trading
volumes are expected to increase about 50 a
year for the next 2 to 3 years - Cash/Derivatives were 1.678 trillion in 2005-06
compared to 544.1 billion in 2000-01 - Less than 20 of the insurable population is
covered insurance represents an 80 billion
untapped market - Boston Consulting Group has projected that
managed assets will grow from 170 billion to
1 trillion by 2015
2008
1 trillion
Cash/Derivatives in India
Projected Growth AUM in India
2007
300 Growth
1.68 T
Assets Under Management
544.1 B
170 B
2007
2015
2000 - 01
2005 - 06
9Millenniums Initial Investment SMC Group
10Millenniums First Investment SMC Group
- Millennium India Acquisition Company owns a
14.4 equity stake in SMC Group - Millenniums current stake is the largest
foreign shareholder position in SMC Group - Both CEO Jacob Cherian and CFO Suhel Kanuga
have board seats on SMC with veto power
- 4th largest financial brokerage firm in India
- Privately held
- One of the largest distribution networks
serving over 525,000 clients - Expanding internationally, initial focus in
the Gulf region - Pan-India footprint exceeds 1,300 locations
- Diversified revenue base and strong balance
sheet - Member of leading domestic and international
exchanges
11Innovative Structure
Millenniums innovative structure allows U.S.
investors access to a high-growth, privately-held
Indian financial through an investment holding
company listed on NASDAQ
- 7,500 financial advisors / 1,300 locations /
525,000 customers - 250 billion in customer transactions (FY08)
- 254,000 transactions per day (FY08)
- India-Based Shareholders
- 85.25 ownership
- 90 insider ownership
- Required to own 50 of SMC
- 14.44 ownership
- Public Currency (NASDAQ)
- 2 Board Seats held by Millennium CEO CFO
- Affirmative rights Veto Power
- Active in strategic direction operations of
SMC - Largest foreign stake in SMC
12SMC Group Management
Subhash Chand Aggarwal, Co-Founder, Chairman CEO
Mahesh C. Gupta, Co-Founder and President
D.K. Aggarwal, Chief Operating Officer
- Over 20 years of experience in the securities
and commodities markets - Responsible for day-to-day operation
including managing, controlling and
supervising a substantial part of arbitrage
business in equities and commodities - Chairman of legal technical guidance
committee association of NSE members of
India - A Chartered Accountant a Fellow Member of
the Institute of Chartered Accountants of
India
- Over 25 years of experience in Capital
- Chairman Managing Director of SMC Comtrade
Ltd., a Member of National Commodity and
Derivative Exchange Limited (NCDEX) and
Multi Commodity Exchange of India Limited
(MCX). - Specialization in risk management and
surveillance - A Chartered Accountant a Fellow Member of the
Institute of Chartered Accountants of India (ICAI)
- Over 25 years of experience in Capital
Markets - Chartered Accountant A Fellow Member of the
Institute of Chartered Accountants of India
(ICAI) - Active in the business and industry
leadership circles in India - Invited to join Prime Minister of India on
recent business visit to Japan, as key member of
the financial markets team - Serves as Member of the Managing Committee of
the Associated Chamber of Commerce and Industry
(ASSOCHAM), as well as Co-Chairman of the Capital
Market Expert Committee
13SMC Group Overview
- Wide range of investment products and services
under one roof - Ranked 4th largest in India in terms of number of
trading terminals, by Dun Bradstreet (June
2007) - One of the largest retail distribution networks
in India, currently serving the investing needs
of over 525,000 clients - State-of-the-art trading platform handled
fast-growing trading turnover of over 100
billion in Fy2007, and over 250 billion in
FY2008 - Untapped market less than 3 of Indias billion
population is invested in the markets - Member of leading domestic and international
exchanges - Coveted set of licenses and regulatory approvals
in place, providing a diversified revenue base
and high barriers to entry - Expanding internationally Initial focus is the
Gulf region, accessing a large number of
overseas-settled Indian nationals - Diversified revenue base, customer base, strong
balance sheet with no debt
SMC Group
- Transaction Businesses
- - Equities
- - Commodities
- Derivatives
- - DGCX International
- E-Trading
- Arbitrage
- Advisory Businesses
- Investment
- Banking
- Investment
- Advisory
- Research
- Financial Products
- Distribution
- Businesses
- - Mutual Funds
- IPOs
- Insurance
- Services Businesses
- - Depository
- Clearing
- Wealth
- Management
- Services
13
14SMC Growth Strategy
SMC and Millennium are partnering to implement a
two-pronged strategy First to grow the number
of customers we serve and second, to offer more
products and services
- Grow the number of customers
- Increase the number of employees, including
brokers, from 2,000 to 4,000 by the end of FY
2010 - Increase the number of financial advisors from
7,500 to 9,000 by the end of FY2010 - Expand our footprint to 2,000 locations
(currently 1,300) by the end of FY2010
- Aggressively grow service offerings and
cross-selling opportunities - Continue to build state-of-the-art trading
platform technology - Add new offerings in the wealth management space
- Use a non-bank finance company to jump start our
margin funding business for high-net worth
individuals - Leverage alliances and joint ventures where
appropriate
15New Business Segments
- Insurance
- SMC group holds a valuable license for insurance
broking distribution of life and non-life
insurance products of all major carriers in India - Plan to hire 400-600 commission based sales staff
to accelerate growth - Branch network allows us to tap into Tier 1/2/3
cities India has one of the lowest insurance
penetration rates in the world - SMC competitors such as India Infoline have
experienced exponential growth, testifying to the
market potential
- Wealth Management
- Offers wealth management products to
high-net-worth individuals and families through
an existing customer base of over 500,000
investors and a branch network in over 300 cities
in India - Signed Joint Venture with Sanlam Group in Sep
2008 (Second-largest listed financial services
company in South Africa with over 77 BN AUM) to
establish an asset management and wealth
management business in India - Awaiting final regulatory approvals for launching
an asset management business
- Online Trading
- Invested in a state-of-the-art online trading
portal, capable of offering investors diverse set
of products and services including equity,
commodity, mutual fund, IPOs and research - Signed MoU with Punjab National Bank (Oct 08),
second largest bank in India with over 35 million
accounts, to provide online investment and
trading services through SMCs infrastructure
16Competitive Advantage Distribution Footprint
- SMC Group has built one of the largest
nationwide retail distribution networks in India - Currently over 1,300 locations in over 360
cities in India
- Awarded Fastest Growing Retail Network
2008 in India, by BusinessSphere - Targeted opportunities to cross-sell a wide
range of complimentary products and services
across the network - Physical distribution supplemented by internet
capabilities through a state-of-the-art online
trading portal - International expansion opportunities
- One of the first Indian firms to expand into
Dubai to service non-resident Indians
17Significant Barriers to Entry
- SMC is a member of the leading exchanges and has
secured the necessary licenses to provide
services in virtually all the sectors of the
Financial Services Industry - Management estimates it would take over two years
to secure all the licenses and memberships SMC
has obtained
- Member of the largest equity exchanges in India
- National Stock Exchange (NSE) and Bombay Stock
Exchange (BSE)
- Member of the largest commodities exchanges in
India and Dubai - Multi-Commodity Exchange (MCX) and National
Commodity Derivative Exchange (NCDEX) - Dubai Gold Commodities Exchange (DGCX) one
of the fastest growing exchanges in Asia
- AMFI license for Mutual Fund Distribution
- Registration with leading Asset Management
Companies for distribution of fund products in
India, including Franklin Templeton and Fidelity
- IRDA license for Insurance Brokerage
- CDSL Depository
- Clearing Member of NSE FO, BSE FO and DGCX
- SEBI license for Merchant Banking and
Underwriting - SEBI license for Portfolio Management Services
18SMC Financial Highlights
- Millenniums FY08 revenue was 8.24 million
- Millenniums FY08 net income was 2.24 million
- Millenniums FY08 EPS was 0.27
19Millenniums Expertise in Indian Markets
20Millenniums Management Team
Jacob Cherian, Chairman CEO
Suhel Kanuga, President CFO
- Over 16 years of experience in the financial
services industry with companies such as Computer
Sciences Corp, KPMG, and JP Morgan - Led or Co-led numerous global multimillion
dollar business transactions in business
restructuring, turnaround, growth, cost reduction
and off-shoring strategies - Evaluated undervalued assets and business
divisions, significantly increased revenues to
clients and optimized business performance - Significant background and business experience
in both India and Wall Street - Formerly, Adjunct Professor of International
Finance at St. Johns University
- Previously a principal of CSCs financial
services division and has worked for KPMG LLP
and U.S. West - Responsible for identifying and building
business value, restructuring and transforming
businesses by implementing strategic growth
initiatives - Significant international management
experience, having led transactions with
businesses across the U.S., Europe and Asia - Significant background and business experience
in India and Wall Street - Expertise in derivatives, capital allocation,
international expansion, merger integration and
business restructuring
21In-Market Management Investment Experience
- Management team background deeply rooted in
India - Unparalleled market insight and access to Indian
business leaders and industry thought
leaders - Distinguished Board, comprised of senior
industrialists with decades of experience - building businesses in India, as well as Wall
Street investment management experience - State-to-state regional familiarity
- Strong track-record leading numerous global
multimillion dollar business transactions in
business restructuring, turnaround, growth and
cost reduction
22Investment Selection Process
- Millennium focuses on high-growth sectors, such
as the financial services industry catering to
Indias rising middle class - Middle-market leadership, innovative business
model, quality products and services,
strong/proven financials, reputable management
team are all qualities of investments Millennium
actively seeks
23Millennium Financials
24Financial Snapshot of Millennium
Symbol NASDAQ Fiscal Year End 52-Week Range
Current Price Shares Outstanding Market
Cap Revenue (3/31/08) Net Income (3/31/08) EPS
(3/31/08) Insider Ownership
SMCG March 31st (SMC) 1.17 - 8.10 1.49 8.21
million 11.84 million 8.24 million 2.24
million 0.27 12.7
Data As of Oct 9, 2008
25Contact Information
Corporate Headquarters Millennium India
Acquisition Co. 330 East 38th Street Suite
30F New York, NY 10016 Website
www.milcapital.com