Situation
Our client is a US-based VC firm that wanted to invest in a digital lending company. The client requested a detailed research report to get an actionable investment idea followed by:
- Industry research: Creating a sector compendium for identifying macro factors that affect the investment potential of the digital lending sector.
- Company research: Performing deep-dive research tasks on companies such as fundamental analysis, financial modelling, and competitive benchmarking.
Solution
JMI was engaged in the end-to-end process of deal sourcing including:
- Provided a high-level overview of sector trends, outlook, and its key drivers like smartphone penetration and addressable market.
- Conducted detailed fundamental research on the company financial report to get insights on NIM, asset size, loan disbursal and other KPIs. Also, identified the catalyst and key risk factors with their mitigant for business.
- JMI team identified that the company AUM will grow at c.12% CAGR in the next 3 years with its customer acquisition cost decreasing from USD 10 to USD 8 and CLTV increasing up to 20%.
- Provided insights on the competitive landscape and constructed a benchmarking model across key metrics like market share, customer base, CAC etc.
- Developed a 5-year quarterly model with financial statements and valued the company with a market-based approach including company comparable (P/B multiple) and precedent transaction.
Outcome
- JMI delivered actionable insights on its report comprised of sectoral research, company research and competitive landscape.
- The output involved a financial model with different scenarios (Base, upside, and downside) and sensitivity analysis.
- JMI team valued the company at P/B of 3.2x.