Money Matters Financial Services Ltd

Indian Economic Overview

Indian economy has survived the global downturn and has shown remarkable revival withthe economy registering GDP growth at 7.6% in FY 2009-10. Backed by strong domesticdemand, rise in consumption, investment & trade and positive capital inflowsIndia’s economic growth is projected at 10% in FY 2011-12. The Indian economy isexpected to quadruple to Rs 205 trillion in the next ten years.

Consumption and infrastructure sector in India will be the growth catalysts in comingyears, the Government’s emphasis for infrastructure development in the country. TheGovernment of India is committed to raising infrastructure investment from the current 4%of GDP to 9% of GDP over the next few years. The financial sector will be a directbeneficiary of this accelerating growth momentum.

Indian Capital Markets

Led by the economic revival, renewed growth momentum across corporate India andincreased capital inflow, the Indian economy and the financial services sector postedimpressive gains during FY 2009-10.

The benchmark indices in India, BSE Sensex and Nifty, outperformed most of their globalpeers. The BSE Sensex rose to a high of 17,793 points during FY 2009-10 registering agrowth of 80% year-on-year basis.

The Indian debt capital market too played a crucial role in facilitating revival forCorporate India. It continues to play a very important role for any growing economy whichrequires a large amount of capital for achieving accelerated growth.

As the Indian economy resumes its growth path, the need for infrastructure developmentwill provide exciting opportunities for the financial sector. Though Public PrivatePartnership (PPP) model will remain a key growth driver, nearly one-third of plannedinvestment is expected from the Private Sector.

Money Matters, with its broad-based financial product offerings, is fully geared tomake the most of the opportunities unfolding for the financial services sector.

Company Overview

A one-stop shop for Corporate Debts, Money Matters Financial Services Ltd. (MoneyMatters) is a leading Advisory and Investment Banking Company in India. The Company offersinnovative financial solutions and services encompassing Credit Syndication and DebtCapital Market Advisory Services, Investment Banking and Asset Financing. Ability to offerexemplary services has enabled the Company to service industry leaders and largecorporates for their financial requirements. These clients span across diverse sectorsincluding Urban Infrastructure, Telecom, Power, Steel, Hospitality, Social Infrastructure,Retail, and Financial Services. The Company, through its continuously expanding serviceofferings, aims to offer existing clients wider range of services, while exploringopportunities to expand its client base.

Financial Overview

In FY 2009-10, the Consolidated Income from operations of the Company increased bynearly 29% to Rs 227.04 Crores from Rs 176.30 Crores in the previous fiscal. TheCompany’s Consolidated Profit after Tax (PAT) stood at Rs125.57 Crores as against Rs102.65 Crores in the previous year. Advisory services remained the key revenuecontributor, with Credit Syndication and Debt Capital Market contributing significantshare of the overall revenues. However, at the same time, Money Matters is in the processof building strategic business blocks by expanding its services which would contributesignificantly to its future growth.

Business Overview

Money Matters offered timely, innovative financial solutions that enabled CorporateIndia to tide over the difficult phase prevailing for a significant part of the lastfiscal. The ability to raise funds in difficult times in sectors reeling under the impactof the recession has paved the path for long-lasting relationships with renownedcorporates. As the Indian economy rebounded, it fuelled opportunities for the financialsector. The Company’s ability to execute large and complex transactions has enabledit to achieve robust growth.

1. Credit Syndication & Debt Capital Market

The Company today is one of the largest players in the Credit Syndication & DebtCapital Market providing a holistic approach to financing related services that arealigned to the evolving market / client requirements. With its wide range of structuredand innovative financial solutions, Money Matters offers corporate solutions throughvarious channels in a cost-effective and time bound manner. The Company’swell-established track record and credible presence has enabled it to successfullycomplete large borrowing programmes for several corporate houses. The Company offersadvisory services for:

• Credit Syndication

• Balance Sheet Funding

• Debt Capital Market

The key achievements in this core business segment include:

• Arranged Rs 32,000 Crores in aggregate for corporates through various debtproducts.

• Continued presence across diverse sectors, with key focus on UrbanInfrastructure, Power, Manufacturing and Social Infrastructure.

• Structured and delivered a wide range of complex and time critical transactions.

• Significantly expanded management team strength and enhanced complex productdelivery capabilities.

2. Investment Banking

Money Matters offers knowledge-driven, high-quality financial advisory services acrossdiverse sectors. The Company’s business is led by a team of high calibre experiencedprofessionals. Coupled with in-depth understanding of the clients’ needs, MoneyMatters creates customised capital structures that are perfectly and strategically alignedto the customers’ business plans.

The services offered by the Company encompass:

• M&A Advisory

• Private Equity Advisory

• Mezzanine Finance

• ECB/FCCBs

3. Asset Financing

Money Matters offers timely services to corporates, addressing various liquidityrequirements including financing for expansion / diversi3cation. The Company’sofferings include:

• Short-term Corporate Financing

• Structured Product Financing

• Margin Funding

• Acquisition Financing

Money Matters to leverage its relationships with a large numbers of corporates wouldgauge their requirements and offer bridge / partial finance on a priority basis. Thisshall also enable the Company to cross–sell the other service offerings of theCompany. The Company is in the process of setting up a specialised team in place to rollthis plan.

4. Financial Turnaround Advisory

Money Matters possesses specialised knowledge and experience in assisting corporates inmanaging and overcoming financial stress situations. The Company evaluates the stresssituation, reviews various alternatives, offers customized solutions for the liquidity /cash flow management and draws comprehensive plans for the debt servicing and thefinancial turnaround of the client.

The Company’s services in this domain encompass:

• Financial Restructuring of the liabilities

• Recapitalising / Reorganization of the Debt / Equity of the company

• Induction of Strategic Investor / Partner

SWOT Analysis

Strengths

1. Offering a complete gamut of financial services.

2. Deep knowledge of regulatory environment to develop customised financial solutions.

3. Credible and proven track record of servicing large corporate houses.

4. Dynamic management team with more than 400 man years of experience.

Weaknesses

1. Major revenue from Credit Syndication & Debt Capital Market.

2. Presence primarily in the domestic market.

Opportunities

1. With the domestic economy expected to quadruple over the next decade, it wouldunveil immense growth opportunities benefiting the financial services sector. MoneyMatters is well positioned to benefit from the unfolding opportunity.

2. Expertise and skills in the investment advisory space will help in pursuing businessopportunities in the international market.

3. The existing relationship with corporates will enable the Company in expanding itsAsset Financing business.

Threats

1. People and relationships driven business model. Attrition of key people can impactthe Company’s business.

2. Business is directly linked to the growth of the economy and capital markets. Anyslowdown or economic hiccups may affect the business.

Outlook

With an eye on growth, synergies and market leadership, the Company will continue toexpand its portfolio of financial services and products, thereby gaining competenciesacross businesses. Given the robust growth prospects, the Company aims to consolidate itsposition as one of the premier financial services groups in India. The strategy forachieving this goal would be to continue expanding the Company’s portfolio offinancial services and products, provide effective financial solutions, and build abusiness model that is well diversi3ed across financial market activities with uniquestrengths in each business.

The Company’s long-term association with the capital markets has provided it withdeep insights into the functioning of the Indian financial institutions. This would enablethe Company to capitalise on advisory services and fund based activities. Additionally,Money Matters would also focus on effectively managing special situations and help enhanceshareholder value by providing creative capital restructuring strategies, whileconsummating transactions within a short span of time.

Risks and Concerns

While any business is far from being a risk-free activity, the financial servicessector is more prone to risk. To combat this, Money Matters follows a process of riskmanagement that comprises risk identi3cation, risk analysis and measurement. This isfollowed by creating a suitable risk mitigation or management framework covering controlactivities / procedures. Some of the key risks that the Company manages proactively arelisted herein:

Macroeconomic risk

Risk: The recent disruption in financial markets has altered the Indian economiclandscape. Any slowdown in the country’s economy can affect capital expenditure andgrowth plans of the Company’s clients.

Risk mitigation strategy: The Company follows a de-risked business strategy and hasestablished its client base across diverse sectors, thereby insulating it from dependenceon any particular sector which may be adversely impacted by a slowdown.

People risk

Risk: Stat attrition and non-availability of key personnel affect theCompany’s operations.

Risk mitigation strategy: Attrition is managed by adopting healthy employeepractices that promote and encourage a good work culture. This is coupled withperformance-based promotion and rewards, con3ict resolution mechanism, sound pay andincentive structures benchmarked with industry standards. The Company fosters a healthywork culture, endorsing ethical practices and nurturing talent.

Market risk

Risk: The Company has investments in bonds and other fixed income instruments. TheCompany is exposed to credit and interest rate risk on this portfolio.

Risk mitigation strategy: The Company has a stringent investment policy and riskmanagement structure to monitor the value at risk on the portfolio.

Competition risk

Risk: Increasing competition from domestic and international companies may affectmarket share and profitability.

Risk mitigation strategy: The Company has diversi3ed its product offerings. Thiswould result in cross-selling of various services to existing clients by leveraging on thelong-standing relationships with them and in new client acquisitions.

Human Capital

The Company places due importance on its human capital assets and invests in buildingand nurturing a strong talent pool to gain strategic edge and to achieve operationalexcellence in all its goals. With decades of proven experience in all aspects of corporatetransactions and reorganisation, the professionals at Money Matters provide unique insightand complete business solutions to the Company’s clients.

For Money Matters, FY 2009-10 has been a year of augmenting its major asset - humanresource capital. The Company believes that the key to continued growth lies in unleashingthe entrepreneurial energy of its employees. Employees are encouraged to bring theirentrepreneurial spirits to the fore in the respective domains.

Internal Controls and Adequacy

The Company has adequate system of internal control for business processes with regardto operations, financial reporting, compliance with applicable laws and regulations etc.

Cautionary Statement

Certain statements in this Management Discussion and Analysis describing theCompany’s objectives, projections, estimates, expectations or predictions may beforward looking statements within the meaning of applicable securities laws andregulations. Although the expectations are based on reasonable assumptions, the actualresults could materially di3er from those expressed or implied.