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Millennium India Acquisition Company (SMCG)

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Title: Millennium India Acquisition Company (SMCG)


1
Millennium India Acquisition Company (SMCG)
Investor Presentation 2008
2
Table of Contents
I. Company Overview II. Investment
Thesis III. Opportunity in India IV.
Millenniums Initial Investment V. Expertise
in Indian Markets VI. Financials
3
Company 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

4
Investment 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

5
Investment Opportunity in India
6
Macro-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

7
Indias 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
8
Indias 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
9
Millenniums Initial Investment SMC Group
10
Millenniums 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

11
Innovative 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

12
SMC 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

13
SMC 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
14
SMC 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

15
New 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

16
Competitive 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

17
Significant 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

18
SMC Financial Highlights
  • Millenniums FY08 revenue was 8.24 million
  • Millenniums FY08 net income was 2.24 million
  • Millenniums FY08 EPS was 0.27

19
Millenniums Expertise in Indian Markets
20
Millenniums 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

21
In-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

22
Investment 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

23
Millennium Financials
24
Financial 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
25
Contact Information
Corporate Headquarters Millennium India
Acquisition Co. 330 East 38th Street Suite
30F New York, NY 10016 Website
www.milcapital.com
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