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S w a d h a a r F i n A c c e s s
Swadhaar FinServeSixth Annual Report 2013
The core purpose of Swadhaar’s existence is to enrich the lives of our clients. We exist to give our clients the means and opportunities to live their lives to the fullest. The story of our past year is reflected through the stories of our clients. We set out to capture a single day in the life of our clients, and in the process, we learnt a lot about their lives. They work hard to provide for their loved ones. Most work all day long, some taking on multiple jobs.
Why? It allows them to provide the little joys of life that we often take for granted, but which brings a world of happiness to their loved ones. Whether it is buying a new school bag when your child starts school, taking your family for a movie in the theater, or taking an autorickshaw instead of wait-ing for the bus... these little luxuries are what make our lives fulfilling. The deep satisfaction that comes with bringing a smile and happiness to our loved ones is priceless. While our clients work tirelessly to do their bit for their loved ones, we focus on doing our bit for them.
The little joys of life...
:)
Table of Contents
06 Managing Director’s Statement
11 Our People12 Swadhaar’s Core Values:
Living our Values14 Employee Initiatives 16 Client Features:
A Day in the life of Sheetal, Champaben & Rehanabibi
24 A Day at a Swadhaar Branch26 Operational Performance 28 Director’s Report38 Auditor’s Report44 Financials
From the Managing Director
The past year has seen the Indian microfinance sector move back to stabil-ity, with clarity on regulations. This saw a return of capital (both debt and equity) to the sector as a stronger framework is put in place for financial inclusion. To outside perception as well, the industry has ‘turned the corner’1 from a difficult phase.
At Swadhaar, it was a year of steady and stable growth within the existing states of Maharashtra and Gujarat and the portfolio grew from Rs. 786 million to Rs. 1,152 million, including the man-aged portfolio. The Company recorded its second year of profitability, despite pricing reductions arising from regula-tions. In the coming year, Swadhaar is looking at expanding further in current states of operations, as well as new re-gions in Madhya Pradesh and Rajasthan. We focused our efforts on improving the efficiency at existing branches, strength-ening the foundation for expansion, and investing resources into a few innovative experiments keeping the future of finan-cial inclusion in mind.
There were some very positive industry developments - key amongst these being that the client and not merely outreach was at the centre of all policy and in-dustry discussions. Secondly, there was increased adoption of services from the credit bureaus for microfinance cli-ents, particularly from the large and for profit MFIs. Swadhaar supplies data to three bureaus, and all clients are checked against the available data for level of indebtedness and credit history, before sanction of a new loan. We have seen the positive effects of loans being denied on the basis of adverse credit history, with some clients who had defaulted in the past now settling their old outstanding debts. We also saw this as an area where 1 Livemint; Has Microfinance turned the corner; 26 Nov 2012
clients need to be sensitized to the im-plications of having a poor credit score or history, and incorporated it into our client education programs. The chal-lenge ahead is to get universal coverage for MFI and SHG clients, including banks lending directly to the same clients also providing their data to the bureaus. This has the potential, over time, to cre-ate a reliable and fast process for client selection and setting loan amounts. The industry can then move towards design-ing products that are based on client need and risk profile, gradually intro-ducing individual products.
Customer education remains a strong focus point for Swadhaar, and delivering this within the communities we operate in has been the objective of our partner non-profit entity Swadhaar FinAccess (SFA), who now has extensive experience in financial education for low literacy microfinance clients. SFA success-fully piloted a ‘Financial Inclusion and Literacy Center (FILC) at Chembur in Mumbai this past year, with funding from the Michael and Susan Dell Foun-dation as well as GIZ, and the Swadhaar entities have now started a collaborative effort to create such FILCs at 16 loca-tions in Maharashtra and Gujarat. Our aim is to equip clients to understand their own financial needs better and selecting appropriate financial products for their life cycle needs. Swadhaar will gradually scale these to all branches, as per resource availability.
Swadhaar is looking at diversifying the product offering in the coming year, with non-credit products to complement the core joint liability group loan, and offer clients an opportunity to create better financial safeguards for them-selves. This will be done in partnership with insurance companies and other financial service providers.
06
Swadhaar strove to meet the needs of both women from low-income house-holds who were ready to borrow in groups, as well as urban micro entre-preneurs with larger and individual loan requirements. While the provision of loans to support working capital for the latter remains a large unmet need, it falls outside the scope of MFIs, and in 2011-12 we had to take the decision to run down our individual lending portfolio. As a result, in the current year, the scope of this product has been cut back signifi-cantly, though the company continues to offer individual loans through a few branches in Mumbai.
Swadhaar values its relationship with Ac-cion, as a strategic partner and the larg-est investor. This partnership has helped us to weather the storm in the past and raise resources at crunch times. Under the Technical Assistance (TA) program during the year, the Swadhaar team worked closely with Accion in strength-ening and improving processes and tools in the areas of Internal Audit, IT, Train-ing, Individual Loan Methodology, Risk, and Customer Protection. Innovation is an important theme running through all TA projects, whether products, chan-nels or distribution. Through access to global experts, learnings from Accion’s overall experiences and leveraging their partnerships, Swadhaar is favorably positioned to take advantage of evolving opportunities.
In January 2013, Swadhaar underwent a social performance rating under the Global Impact Investing Rating System (GIIRS). I am happy to share that Swad-haar’s GIIRS rating was 108.5, which is higher than the average score for the market globally. As this Report goes into print, we have received an upgrade from CRISIL on our grading as an MFI- from mfR 4 to mfR 3. This is a reflection of
the strength and quality of operations, achievement of targets, sustained prof-itability for the second year, planned diversification into two other states, social performance, strong governance and the quality of the Board and senior management.
Mr. RajaRam Kamath completed a year as CEO in November 2012. He was subsequently inducted as an Executive Director on the Board, in recognition of ably taking over day-to-day management. He will transition from an Accion sec-onded position to a Swadhaar position in November 2013. The Company further strengthened the Board by inducting Mr. Anal Jain as an Independent Director. Both these additions were made in June 2013. The Company will benefit greatly from Mr. Jain’s years of experience in business, IT and microfinance.
The financial transactions of the poor are characterized by frequent, small amounts in cash. Whilst MFIs have been able to handle the last mile for credit, the same success is not seen in savings or insurance products from the formal sector, where fees are insufficient to meet the transaction costs. Alternative channels to ‘feet on the street’, where technology can facilitate customer self service through available infrastructure, especially in urban areas, are possible solutions to overcome the constraints of cash intensive, high cost transactions. Accordingly, a key area of innovation, and one that we are working on with Accion is a digital strategy, which we consider will be a significant differen-tiator in the future for designing and distributing client focused products and managing operations at scale.
With the wide coverage and acceptance of mobile phones, even in poor house-holds, this looks like a promising
07
delivery channel. However, it is our belief that availability of a channel alone will not drive usage. Efforts are required to educate and handhold clients for adoption, until critical mass is reached. Additional costs will need to be incurred in running the mobile channel along-side the traditional MFI one, before full benefits can be realized through greater efficiencies of the new channel. With the introduction in India of a full mobile wallet, backed by a bank account, we felt sufficiently excited by the potential, and launched a pilot for mobile money pay-ments with Airtel Money, to explore the landscape of digital payment technolo-gies. This has been piloted in some of our Mumbai branches and whilst it is still in an early stage, we are eager to see how clients respond to this channel.
Investment in innovation such as the project above, may be seen by many as a distraction, one better left to those with deeper pockets. However, at Swadhaar, as we look to the future, and what is essentially the next era of Indian micro-finance, we also ponder on an important question raised in the ‘Microfinance Banana Skins’ Report, 2012 - How do we stay relevant as an industry? The unique strength of the microfinance model has been to create a sustain-able delivery channel to bring financial services to the unbanked poor, and prove that they are a credit worthy customer segment. However, as we evolve as an industry, and our clients’ needs evolve and become more sophisticated, we need to broaden the offering seamlessly beyond credit at affordable costs.
I strongly believe that our strength as MFIs lies in understanding our clients, whilst our ability to service the client fully is constrained by availability of infrastructure, capital and regulatory boundaries. The Indian financial sector
needs to embrace financial inclusion not as a regulatory push alone, but as ad-dressing a client base that is capable of sustaining a profitable business. As new banking licenses based on a financial inclusion agenda are awarded, perhaps the banking industry and its service providers will push the boundaries that can take us into the next era of Indian microfinance.
Our future will be determined both by our ability to design and deliver products aimed at customer satisfaction, and by forging strategic partnerships. Such partnerships that see the client as the core will enable us to ride on infrastructure that exists or is coming up, reduce costs and by leveraging respective strengths, help us move towards a stronger and more cohesive microfinance model that is truly ‘relevant’.
Veena Mankar
Managing DirectorJune 2013
08
Our People
Board Of Directors Lalita D. Gupte Chairperson (Promoter’s Nominee)
Veena Mankar Managing Director (Promoter)
Anita Ramachandran Independent Director
Siddhartha Chowdri Nominee Director, Accion
Valérie Kindt Nominee Director, Accion
Geeta Dutta Goel Nominee Director, Michael and Susan Dell Foundation
Srinivas Bhaskar Rao Nominee Director, Indian Family Trust
Technical Service Provider Accion
Auditors Haribhakti & Company
Bankers / Financial Institutions Central Bank of IndiaDevelopment Credit Bank Ltd.GRUH Finance Ltd.IDBI Bank Ltd.IFMR Capital Finance Private Ltd.Maanaveeya Development & Finance Pvt. Ltd.MAS Financial Services LtdMV Microfin Ltd.Ratnakar Bank Ltd.Reliance Capital Ltd.Standard Chartered Bank
Senior Management Team Veena Mankar Managing Director RajaRam Kamath Chief Executive Officer (Seconded by Accion) Abhishek Agrawal Chief Financial Officer (Seconded by Accion) Soju Annie George Vice President – Operations
Reena Sen Vice President – Finance Atanu Bhaumik General Manager – Information Technology Mukesh Manjkhola General Manager – Commercial
Premal Brahmabhatt General Manager – Internal Audit
S. Pasupathy General Manager – Risk, Quality Control & Chief Compliance Officer Urmee Mehta General Manager – Strategy and Product Development Venkateshwara Prabhu General Manager – Human Resources, Administration, Training Swati Apte Senior Consultant
Registered Office Tenement 1/3 & 1/4, Old MHB Colony, Anand Nagar, Santacruz (E), Mumbai – 400055
11
Swadhaar’s Core Values: Living our Values
OUR MISSIONto make available, responsible and efficient financial services to econom-ically vulnerable and underserved urban households, enabling them to attain financial security and meet their aspirations
OUR VISIONto be the preferred provider of micro-financial services
OUR VALUES our values reflect who we are as an organisation and the manner in which we aim to achieve our mission: Customer FirstResponsibilityExcellenceIntegrity
12
CUSTOMER F IRSTdo’s: ° Provide quick and better ser-
vices to the customers ° Develop a personal relation-
ship with the customersdon’ts: ° Don’t be rude or argue
° Don’t give incomplete information
RESPONSIBILITYdo’s: ° Take ownership
° Match accountability to au-thority
don’ts: ° Don’t react but respond ° Don’t waste resources
INTEGRITY do’s: ° Maintain confidentiality
° Adhere to policies and processes
° Report anything that doesn’t seem right
don’ts: ° Don’t hide information ° Don’t use shortcuts
EXCELLENCEdo’s: ° Innovate and Improve ° Be consistent ° Deliver on timedon’ts: ° Don’t repeat mistakes ° Don’t be afraid to ask
questions
13LIVING OUR VALUES In May 2012, Swadhaar’s communication team conducted a workshop for all management staff focused on the company’s Core Values. The theme of the work-shop was: Living our Values. The objective of the workshop was to go beyond the discussion of Core Values as ‘ideas’ or ‘words’ and convert them into tangible action statements that all employees could relate to as part of their daily work, and portray how they might ‘live’ a certain Core Value. After lively debates and heated discussions, there were extensive lists of Do’s and Don’ts created for each Core Value. A snapshot of these are presented here:
Employee Initiatives
Leadership Retreat: In continuation of its tradition from the past year, Swadhaar organized a lead-ership retreat in March 2013. For the first time, all managerial staff traveled outside Mumbai for an offsite program. As a part of this workshop, the organiza-tion’s primary goals for the next financial year were identified, and a strategic plan was drawn up to arrive at action items for each department. The intensive 3-day program focused on team building and soft skills development. It was a great opportunity for the management team to spend time together, and under-stand how to work even better together as a team.
Staff Town Halls : With its branches spread out over several locations, Swadhaar held two town hall meetings for its field staff over the past year. Quarterly targets were discussed at these meetings, and any important developments in the past quarter were shared with the teams. These meetings gave senior management staff a chance to meet with the field staff, and also pro-vided them with an opportunity to relax and get to know each other better.
Soft Skills Training for Branch Managers:
This year, Swadhaar’s HR department took the initiative of extending Soft Skills training to all Branch Managers. It was observed that while Branch Managers displayed excellent skills in business development, they needed some guid-ance in being able to handle the staff at the branch. Some of the main modules covered were:
Time ManagementDelegationCrisis management
14
Employee Engagement:
Several new initiatives were launched in the past year to strengthen employee engagement across the organization: Monthly Newsletter: Swadhaar Connect is a monthly newsletter launched in April 2012. It is sent out to all Swadhaar staff and branches and serves as a strong connection between different teams and regions. Along with regular updates, the newsletter also contains fun Swad-haar trivia and a monthly message from selected team members.
Employee Energizers: Also called ‘Friday Fun’, these were small events conducted at the Head Office and branches on major festivals and Fridays. Along with improv-ing bonding between the employees these events also helped create lighter moments at work.
Employee Related Policies:
Swadhaar finalized and released some important Human Resources (HR) Poli-cies in the past year. These are: Whistle-blower Policy, and Sexual Harassment Policy. Both policies were put in place to create a greater sense of security for employees at all levels and encourage staff to behave in a moral and ethical manner. These policies were also presented to and approved by the Board.
Internal Promotion through the Competency Model:
Swadhaar piloted a unique performance appraisal model for staff at the field level. The objective of this appraisal model was to assess all top performing field staff across different branches and regions on a common platform, thus comprehen-sively gauging their leadership capabili-ties. In July 2012, Swadhaar invited 14 of its top performing Loan Officers to Mumbai for a two day Competency Assessment. The Loan Officers went through a rigorous process involving: a Capability Assessment test, a group discussion, and two rounds of interviews. Expert panels consisting of Swadhaar’s senior management and Consultants conducted the interviews. Based on the assessments, 4 out of the 14 staff were shortlisted for promotions.
15
A day in the life of our Clients
16
Sells clothes, Runs a Chinese food stall and does Night duty (She started her clothing business in 2012 and the Chinese bhel stall this year.)
First Cycle Loan Amount: Rs. 14,000Disbursed on 07 December 2011
Second Cycle (Current Cycle)Loan Amount: Rs. 22,000Disbursed on 30 January 2013
Lives with her two children Nitesh (class 9) and Megha (class 8), her sister and her son.
Sheetal likes spending time with the children, and playing different games with them in her free time. Whenever she gets time in the afternoon she tries to catch up on her sleep but that doesn’t happen often since she works in the afternoons too.
She used the first loan amount of Rs. 14,000 to buy clothes from the whole-sale market. She had to buy stock worth Rs. 25,000 and used the loan money for that. During the rains, she also sells umbrellas.
She used the second loan amount of Rs. 22,000 to set up the Chinese stall. Before starting the Chinese bhel, she started out with selling sandwiches, which didn’t work out. She used some of the money to buy the sandwich maker and the rest of it to buy utensils etc.
Daily Schedule
7 am – 10 amWakes up at 7am and leaves for her home at 10am. Sheetal goes for night duty to take care of an ailing man.
11 am – 2 pm Gets ready for the day. Sheetal along with her sister cleans the house, washes clothes, cooks food and then eats lunch.
2 pm – 5 pm Along with her employee she goes around her locality to sell clothes for children. She has regular clients who buy from her often. Once a week she along with her employee goes to Masjid Bunder to get her stock of clothes.
5 pm – 6 pm Does preparations for her Chinese bhel stall. Her sister helps her set up the stall, cut vegetables, make chutney.
6 pm – 10 pm Stands at the stall where they sell Chinese bhel at Rs. 10 per plate
10 pm – 2 amLeaves for night duty. She generally sleeps at around 2 am.
2 am – 7 amGoes to bed
Business
Loan Details
Family Details
Interests
Loan Purpose
“For women like us, who have to work as well as look after our household, Swadhaar has proved to be very helpful. Taking these loans has helped me in a big way, first by helping be start the clothing business and then by enabling me to set up the food stall. It is not only I who has benefitted from the loan, but my sister as well. She too has an extra source of income.”
18
Sheetal Mahesh Gosavi 35 years
Chembur, Maharashtra
Khakra making
First Cycle (Current Cyle)Loan Amount: Rs. 10,000Disbursed on 31 July 2012
Lives with her husband, his second wife, her four children and her in-laws.
She likes meeting people. She likes to catch up with her relatives, and goes to meet them often.
She used the loan amount to buy ingre-dients required for her khakra business (flour, oil, masala etc). Before taking the loan, she used to work at the Divya Mahila Gruh Udyog where she earned Rs. 4000 per month. She learnt how to make different variaties of khakra there and once she got the loan, she started making over 50 varities at home along with her other group members.
Daily Schedule
6 am – 9 amWakes up at 6am and gets the children ready for school. She then says her prayers.
9 am – 1 pm Work starts. Along with 6 other people, she kneads the dough and prepares the khakras. They make over 50 varities of khakras.
1 pm – 1.30 pm Lunch
1.30 pm – 7 pm Prepares khakras, does the packing. They prepare around 40 kgs of khakra everyday.
7.30 pm Goes to fetch water
10 pm – 11 pmEats dinner, plays with the children for sometime and then goes to bed
Business
Loan Details
Family Details
Interests
Loan Purpose
“The loan officers are very helpul and they inform us before they come to collect the EMI. The good thing about Swadhaar is that it doesn’t require all the group members to attend meetings every week/month. Since we work the entire day, it gets difficult to take out time for regular meerings.”
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Champaben Sailesh Mochi 35 years
Gotri, Gujarat
Kitemaking, Tailoring
First Cycle Loan Amount: Rs. 10,000Disbursed on 29 July 2011
Second Cycle (Current Cycle)Loan Amount: Rs. 18,000Disbursed on 31 August 2012 Top Up Loan for Rs. 5,000 disbursed on 02 May 2013
Lives with her husband, son, daughter-in-law and grand daughter (1 and a half years). Her husband injured his leg and doesn’t work anymore. He helps Rehana with her work at times. Her son goes to work at a Pepsi agency. Daughter-in-law does tailoring work at home.
She likes spending time with her grand daughter(playing with her/ taking her out/ enjoys ice cream). Rehana also likes interacting with people and likes visit-ing her mother in Ahmedabad. She also enjoys watching TV serials.
She used the first loan amount to buy a sewing machine. She mostly does alterations and stitches her family members clothes at home. The second loan which was for Rs. 18,000 was used towards her kitemaking business. In a day, she works on 1,000 kites. The 1,000 kites cost her Rs. 950 but she sells them for Rs.1,200 to the distributor earning Rs 250 for every 1,000 kites.
Daily Schedule
6 am – 9.30 amWakes up at 6am and says her prayers, cleans the house and cooks breakfast for the family
9.30 am – 1.30 pm Uses adhesive to attach paper on the edges of the kite to make it more sturdy
1.30 pm – 3 pm Prepares lunch, rests for a while, plays with her grand daughter
3 pm – 4 pm Rehana mostly alters clothes. She also sticthes pillow covers and does some patch work
4 pm – 7pm
Works on the kites
7 pm – 8.30 pmPlays with her grand daughter, takes her out 8.30 pm Cooks and eats dinner with her family 11 pm Watches TV and then goes to bed
Business
Loan Details
Family Details
Interests
Loan Purpose
“Swadhaar’s loan officer and the branch staff have always been very helpful. Unlike big banks, Swadhaar doesn’t need a lot of documents and the loan is processed within a couple of days. It would be great if Swadhaar could offer the clients bigger loans, this way we will be able to invest more in our business.”
Rehanabibi Ahmadbhai Belim 50 years
Nadiad, Gujarat
22
Morning meetingChalk out a plan for the day with the Sales Team; discuss any issues /problems; convey important product or process changes to the branch teams.
During the day | Team Leader
Tasks performend at the Branch Tasks performend at the Branch
Tasks performend on the Field Tasks performend on the Field
During the day | Loan Officer
A day at a Swadhaar Branch
Start of the day All branch staff arrive at the branch and start preparing for their day.
Managing Branch
Performance
CustomerGrievanceRedressal
BranchAdministration
Sales at Branch
Cash Withdrawal/
Deposit from Bank
ApprovingLoans
TeamManagement
OverseeingSales TeamActivities
ApprovingGroups
Paperworkfor Loan
Application
GroupFormation
Renewals
CollectionsCustomer
Relationships
LoanAppraisals
Promotion& Sales
DeliquencyManagement
24
During the day Branch Operations Executive (BOE)
Close of operations at Branch
End of the day LOs: Return to branch and deposit cash, applications and documents. Prepare paperwork for the next day.
End of the day TL & BOE: Count and reconcile cash. Complete any administrative work.
During the day Financial Education Trainer (SFA Trainer)
A specialised Financial Education Trainer, from Swadhaar FinAccess (SFA) is a part of the team at most Swadhaar Branches. The SFA trainer mans the Financial Information and Literacy Center (FILC) at the Branch, providing infor-mation and guidance on any issues related to Financial Management for Swadhaar’s clients and the community.
Customer Service
Screening Applications
Branch Administration
Collections at Branch
Sales at Branch
PreparingDisbursement Kits
Disbursements
Employer Data Verification
CLOSED
Man the FinancialInformation andLiteracy Center (FILC)
Conduct compulsoryFinancial Educationsessions for clients
25
Operational Performance
26
0
100
200
300
400
500
600
700
800
900
1,000
Field Staff Total Staff
174 57 196 504 786 1152
54
328
144
425
254
425
252
369
205
8,234 27,391 56,727 96,60080,201
Outstanding Portfolio (Rs in millons)
27,3
91
Active Clients
800
900
1000
1100
1200
700
600
500
400
300
200
100
0
March 2009 March 2010 March 2011 March 2012 March 2013
March 2009 March 2010 March 2011 March 2012 March 2013
Active Clients 8,234 27,391 56,727 80,201 96,600
Outstanding Portfolio (Rs in millons)* 56.62 195.64 504.05 786.04 1,151.94
PAR > 30 days (%) 1.08% 0.91% 1.09% 2.03% 1.19%
OSS Ratio (%) 34.10% 48.65% 79.14% 101.78% 105.90%
Field Staff 54 144 254 252 205
Total Staff 174 328 425 425 369
Total Income (Rs in millons) 11.53 39.26 115.76 191.82 251.59
Net Profit (Rs in millons) -26.04 -40.98 -29.40 6.56 11.63
*(Owned & Managed)
Portfolio: Active Clients: Field Staff: Total Staff
Portfolio: Total Income: Net Income: OSS Ratio
Portfolio: Active Clients: Par>30 days
2757
786
1152
196
50
4
-26.
04
-29.
4-3
OSS Ratio (rhs, %)Net Profit (Rs in millions)
11.5
4
34.
10%
48.
65%
79.1
4%
101.
78%
105.
90%
39.
26
115.
76
191.
28
6.5
6
251.
59
11.6
3
-40.
1
Outstanding Portfolio (Rs in millions) Total Income (Rs in millions)
800
900
1000
1100
1200
700
600
500
400
300
200
100
0
March 2009 March 2010 March 2011 March 2012 March 2013
25.0%
0.0%
50.0%
75.0%
100.0%
125.0%
150.0%
800.0
900.0
1000.0
1100.0
1200.0
700.0
600.0
500.0
400.0
300.0
200.0
100.0
0.0
March 2009 March 2010 March 2011 March 2012 March 2013
Outstanding Portfolio (Rs in millions)
0.00 %
1.00 %
2.00 %
3.00 %
4.00 %
5.00 %
PAR > 30 days, %
57
8,23
4
27,3
91
56,
727
80,
201
96,
600
196
50
4
786
1152
1.0
8%
0.91
% 1.0
9%
2.03
%
1.19
%
Active Clients
Directors’ Report
Dear Members,
Your Directors are pleased to present before you Swadhaar FinServe’s Annual Report for the financial year 2012/13, being its sixth year of operations, along with the audited Balance Sheet as at March 31st, 2013 and the Profit and Loss Account for the year ended March 31st, 2013.
outreach and growthSwadhaar recorded steady growth in the past year, which resonated with the overall return to stability for the microfinance sector, and closed the year with a profit be-fore tax of Rs. 14.02 million and net profit of Rs.11.63 million. This represented an increase of 77 % over the previous year and was the second year of profitability for the Company. By March 2013, the company had a total of 24 branches in Maharashtra and Gujarat, with an outstanding portfolio of approximately Rs.1152 million (increase of 46.5% over the previous year) covering 96,600 clients (increase of 20% over the previous year).
As at March 31st 2013
JLG Loans IBL Loans Total (Including Top Up Loans)
Number of active clients 92,988 3,612 96,600
Assets Under Management –
Outstanding Loan Portfolio (In Rs 000 ) 1,107,993 43,949 1,151,943
Number of Loan Officers 185 20 205
Number of Outlets 22 2 24The outstanding portfolio includes Rs. 343,918,845/- for 36, 378 Joint Liability loan clients (JLG) sold to Financial Institutions and managed for collections on their behalf.
operating and f inancial performance
results (Rupees’000)
Results As at 31st March, 2013 As atv31st March, 2012
(A) Total Income 251,590 191,819
(B) Total Expenses 237,574 188,465
(C) Profit for the year (A–B) 14,016 3,354
(D) Deferred Tax Adjustment 67 (3,201)
(E) Current Tax Adjustment 2,319 –
Excess of Total Income over 11,629 6,555
Expenditure (C–D–E)
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performance ratios
Financial Efficiency As at 31st Mar 2013 As at 31st Mar 2012
Operational Self-Sufficiency 105.90% 101.78%= Total Operating Income/ Total Operating Expenses
Total Operating Cost Ratio (Annualized) 16.31% 22.84% = Total Operating Expenses excl. financial cost / Avg. Outstanding Portfolio (Assets Under Management)
Yield on Portfolio (Annualized) 30.91% 28.20%= Income from Portfolio/ Avg. Outstanding Portfolio
Weighted Average Cost of Borrowing 16.12% 15.89%(Interest cost + other cost on debt)/ outstanding Portfolio)
Financial Margin 9.88% 10.11%(Interest Rate Charged – Weighted Average Cost of Borrowing)
Capital Adequacy Ratio 34.33% 58.08%(Tier I Capital + Tier II Capital)/ Risk Weighted Assets Personnel Efficiency As at 31st Mar 2013 As at 31st Mar 2012
Number of Active Loan Clients per Loan Officer 471 318 = Number of Active Loan Clients/ Total Loan Officers
Loan officers as % of total staff 55.56% 59.29%
Portfolio Quality As at 31st Mar 2013 As at 31st Mar 2012
Qualifying Assets 88.04% 91.20%As per RBI Circular for MFI-NBFC
Loan Loss Rate 0.92% 1.33% = Amt of LoansWritten Off/ Avg Outstanding Portfolio (Assets under management)
Portfolio in Arrears > 30 days 1.19% 2.03%= Amount Past Due > 30 Days/ Outstanding Portfolio (Assets under management)
Portfolio in Arrears > 90 days 1.01% 1.47%= Amount Past Due > 90 Days/ Outstanding Portfolio (Assets under management)
Risk Coverage Ratio 81.76% 63.82% = Loan Loss Reserve/Amount past due >30 days
f inancial education and customer protectionClient Communication ToolsCustomer protection is an important focus for Swadhaar. The company undertook a detailed review in this past year to identify aspects of the loan process that could be strengthened from a customer protection perspective. The following projects were implemented based on the review:
To improve the transparency of information to clients, Swadhaar redesigned its entire set of communication materials ranging from posters at its branches to tools used by
29
the branch and field staff to explain aspects of the loan process to clients.
PostersAll information displayed at the branches was consolidated into 5 posters in the local vernacular language and redesigned to work as a complementary set, creating a com-mon visual language for communication to clients. These posters are prominently displayed helping clients to immediately identify and read important information.
FlipchartsAnother aspect of transparency that Swadhaar considers very important is the method of communication with clients. To convey critical information in an easily understood and consistent format Swadhaar developed simple visual flipcharts that are used as tools by the Loan Officer during group formation and the Branch Executive during disbursement. These were developed in collaboration with Swadhaar FinAccess (SFA), and use simple visuals and pictorial examples so that low literacy clients are also able to grasp the information easily.
In November 2012, Swadhaar’s flipchart tool was highlighted as a best practice for Compulsory Group Training by the Smart Campaign.1 The Smart Campaign is a global effort to unite microfinance leaders around a common goal: to keep clients as the driving force of the industry. It is housed at Accion International’s Center for Financial Inclusion.2
Compulsory Financial Education ModuleIn the year 2011/12, Swadhaar had piloted a compulsory Financial Education module for its clients, at two of its branches in Mumbai. This was rolled out across 13 Swadhaar branches in the past year. Specialized trainers from SFA conduct this module at the Swadhaar branch, and all clients are required to attend the module prior to disburse-ment. Over the year, 29,802 clients participated in this training. The introduction of this module was part of a customer protection initiative to introduce basic financial education concepts as an integral part of the loan process for all clients. It was found that nearly 40% of clients, who attend the basic module, then chose to register for the voluntary 5 comprehensive sessions Financial Education training offered by SFA in the community.
social performanceSwadhaar underwent a Social Performance Rating in the past year:
Global Impact Investing Ratings System (GIIRS) Rating3 In January 2013, Swadhaar completed the GIIRS Rating exercise. The GIIRS is a com-prehensive and transparent system for assessing the social and environmental impact of companies and funds with a ratings and analytics approach analogous to Morningstar investment rankings and Capital IQ financial analytics. It seeks to spark the impact investment movement by providing a tool that is intended to change investor behavior and unlock the potential of this new asset class.
1 http://centerforfinancialinclusionblog.files.wordpress.com/2012/12/compulsory-group-training-tool_20121219.pdfhttp://www.smartcampaign.org/tools-a-resources/740 2 www.smartcampaign.org 3 www.giirs.org
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Swadhaar’s score for the GIIRS Rating was 108.5 out of a total of 200 points, which is higher than the average market score reported on the GIIRS system.
As this report goes to print, Swadhaar has completed a Code of Conduct Assessment (COCA) undertaken by MCril with a thorough due diligence that included interac-tions with the entire senior management team and extensive field and branch visits. Swadhaar’s rating on the COCA was 85.8%, completed in May 2013.
risk managementIn the past year, the Risk Department, under the guidance of a General Manager took on an organization wide review of all critical processes. In a month long exercise, each department first identified their critical processes, and then assessed them on the basis of risk. The analysis was completed with an action plan to put in place tighter controls for areas where risk was perceived to be higher.
The Risk Department also undertook detailed, regular analysis of all loan related data to identify and address portfolio quality issues. They introduced templates that help the company identify, and understand trends enabling better management of delinquency.
information technologyDuring the year Swadhaar undertook a project to identify a suitable Core Banking System. Swadhaar’s IT team worked closely with technical support from Accion to as-sess various options and select the best suited to our needs. Operations will be migrated onto the new system over the next financial year.
Swadhaar also put in place an online platform to meet its Management Information Systems (MIS) and reporting needs. Through this online platform, users are able to access all operational data and create customized reports based on their requirements.
human resourcesStaff:As of March 31, 2013, Swadhaar had a staff of 369 including 308 branch and regional staff members, a head office staff of 48 and Hub staff of 13. There was some reduction in the branch staff numbers of Individual Loan branches, which were under rundown process; 8 branches were closed during the year. Performance Management:At the beginning of the year, an organization wide exercise was conducted to define Key Responsibility Areas (KRAs) for employees at all levels in management. These were communicated to them, and at the end of the year, employees were evaluated against their KRAs. For the front line Sales teams at the branches, annual appraisals were based on their goal sheet achievement.
Adequate channels were made available to employees to discuss any issues or grievances with regards to the appraisal system.
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Fraud management / Disciplinary action process:Swadhaar believes in taking strict action against fraud and indiscipline, after following a due process of enquiry. In case of any fraud incident or disciplinary issues, complete due diligence was conducted by an independent team appointed by senior manage-ment. All cases were rigorously followed up and if deemed necessary, a complaint was lodged at the local police station with subsequent follow up.
Training:Swadhaar conducted several regular internal training for its employees in the last year. New staff at all levels underwent an induction-training program that included field visits, along with rigorous training on their responsibility areas. Refresher trainings were organized at regular intervals to take into account any changes in policies and processes. Swadhaar also encouraged staff members to enhance their knowledge and skills by attending external training courses, and staff participated in training programs conducted by Accion, National Housing Bank (NHB), Sa-Dhan and other reputed industry organizations.
securitization Swadhaar raised a total funding of Rs. 404 million during the last financial year by entering into various securitization transactions (pass through certificates route). The first transaction of this kind was done with IDBI Bank and remaining transactions were done through IFMR Capital Finance Pvt Ltd. The details of these transactions were as given below: Sr. Particulars Transaction Purchase No. concluded on consideration (Rs in Mn)1 Swahit Series 1 2012 31st December, 2012 75.00 (with IDBI Bank)2 IFMR Capital Mosec XXX transaction 28th March, 2013 80.79 (ICICI Bank)3 IFMR Capital Mosec XXXI transaction 25th March, 2013 191.99 (Axis Bank)4 IFMR Capital Mosec XXXII transaction 30th March, 2013 56.28 (Ratnakar Bank) Total 404.06 As evident, three transactions were concluded in March resulting in large cash balances at the close of the year. These funds will be used for disbursements in the first quarter of the next year, when bank funding is traditionally scarce.
The total financial costs (such as pool rating fees, professional fees, documentation charges) incurred by executing these aforementioned transactions totaled Rs. 5.46 million, and were recognized upfront on these transactions in the books of accounts. The profitability numbers for the current financial year have been arrived at after absorbing such expenses, in line with the practice adopted for expenses incurred on availing lines of credit from banks and financial institutions.
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The cash profit arising on these securitisation transactions will be recognized over the tenure of these transactions in compliance with the RBI guidelines applicable on such transactions.
data sharing with credit bureausSwadhaar reports its client data to three credit bureaus: the CIBIL, High Mark and Equifax Credit Bureau. All loan sanctions are subject to meeting the requirements on maximum loan outstanding and number of MFI’s as lenders as well as a satisfactory report from the Credit Bureau. membership with industry associationsAs the ‘voice’ of microfinance institutions and advocates for pro-sector regulations, the role of the Industry Associations Micro Finance Institutions Network (MFIN) and Sa-dhan has become particularly important over the last year. Swadhaar is a member of both associations and its senior management is involved in these industry efforts. Swadhaar complies with all requirements of the MFIN- Sadhan Common Code of Conduct.
Swadhaar’s Managing Director, Veena Mankar is a Director on the Governing Board of Sa-Dhan.
share capital During the year, no fresh capital was raised. The authorised share capital of the Company remained at Rs 750 million. The Company received a commitment from SIDBI to subscribe to ordinary shares of Rs. 30 million. This investment will be completed in the coming year.
The table below reflects the shareholding pattern as on 31st March 2013:
name of shareholder Total No. of Shares %Promoters & Promoters’ Family & Friends 3,060,424 5.92%Accion Africa Asia Investment Company* 19,650,000 38.02%Michael & Susan Dell Foundation 6,452,250 12.49%Mauritius Unitus Corporation 2,312,500 4.47%M V Mauritius Limited 8,325,114 16.11%Indian Family Trust 6,960,000 13.47%Swadhaar FinServe Employee Welfare Trust 4,919,625 9.52%Total 51,679,913 100.00%*This is the investment vehicle through which Accion International has invested in Swadhaar.
bankers and lendersSwadhaar has drawn term loan facilities for on-lending purposes from Central Bank of India, Maanaveeya Development & Finance Pvt. Ltd., MV Microfin Pvt. Ltd., Standard Chartered Bank, Ratnakar Bank Limited, IDBI Bank Limited and GRUH Finance Limited.
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Swadhaar has met all its commitments towards repayment of interest and principal installments to its lenders on time. The Company has banking relationships with Axis Bank Ltd, Central Bank of India, Development Credit Bank, HDFC Bank Ltd. Standard Chartered Bank, Ratnakar Bank Limited and IDBI Bank Limited. HDFC Bank Ltd is its main banker.
employee stock option scheme 2012 and associate stock option scheme 2012The Company has an Employee Welfare Trust set up to manage and implement the Employee Stock Option (ESOP) Scheme. The purpose of the scheme is to provide employees with ownership in the organization and participate in the value creation as the company grows.
During the year under review the Company has not granted any options under the Employee Stock Option Scheme 2011 and Associate Stock Option Scheme 2011The information pertaining to these is contained in the Notes to Accounts.
registrar and transfer agentTSR Darashaw Limited are the Registrar & Transfer Agent (RTA) for the Company. Their address and contact details are as mentioned below:
TSR DARASHAW LIMITED6-10 Haji Moosa Patrawala Industrial Estate20, Dr. E. Moses Road, MahalaxmiMumbai – 400 011
accion technical assistanceSwadhaar received technical assistance (TA) from Accion in several areas including risk management, technology, process improvements and internal audit as the Company grew towards a systemically important size. As part of various TA projects Accion’s Risk specialists and Swadhaar’s senior management defined the risk and ALCO committees, the technology team selected a new Core Banking System (CBS) to propel the Com-pany’s growth and a new MIS for timely reporting. Further, management controls were improved and the internal audit department was strengthened.
statutory disclosuresThe information required under Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules 1975 is not annexed, as there are no employees under the same.
The Companies (Disclosures of particulars in Report of Board of Directors) Rules 1988 require the disclosure of particulars regarding conservation of energy in Form A and Technology Absorption in Form B prescribed by the Rules. Your Company not being a Manufacturing Company, it is advised that Forms A&B are not applicable.
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board of directorsThe Board of Directors of the Company met 5 times during the year.Name of Director/ No. of meetings Meetings attendedDesignation eligible to attend Ms. Lalita D. Gupte 5 5 Chairperson Ms. Veena Mankar 5 4 Managing Director Ms. Anita Ramachandran 5 4 Independent Director Ms. Geeta Dutta Goel 5 1 Nominee Director Mr. Siddhartha Chowdri 5 4 Nominee Director Mr. Srinivas Rao 5 5 Nominee Director Ms. Valérie Kindt 5 2 Nominee Director
There are four Committees of the Board1. The Audit Committee met Five (5) times during the year and constitutes the following
Directors: Ms. Geeta Dutta Goel, Mr. Srinivas Rao, Mr. Siddhartha Chowdri and Anita Ramachandran.
2. The Finance Committee met Fourteen (14) times during the year and constitutes the following Directors: Ms. Lalita D. Gupte, Ms. Veena Mankar, Ms. Anita Ram-achandran and Mr. Srinivas Rao.
3. The Compensation Committee has been reconstituted as Nominations, Compensa-tion and Governance Committee. The Nominations, Compensation and Governance Committee met Once (1) during the year and constitutes of the following Directors: Ms. Lalita D. Gupte, Ms. Anita Ramachandran and Mr. Srinivas Rao.
4. During the year the Risk Committee was constituted. The Risk Committee met once (1) during the year and constitutes the following Directors: Ms. Geeta Dutta Goel, Mr. Srinivas Rao, Mr. Siddhartha Chowdri and Anita Ramachandran.
ALCO Committee:During the year an ALCO Committee was constituted. The ALCO Committee is a Management Committee and constitutes of the following Members: Mr. RajaRam Kamath, CEO, Mr. Abhishek Agrawal, CFO and Mr. S. Pasupathy, General Manager (Risk, Quality Control & Chief Compliance Officer). The ALCO Committee met Four (4) times during the year. Ms. Geeta Dutta Goel resigned from the Board of the Company in April 2013 as Michael and Susan Dell Foundation (MSDF) decided not to have a nominee on the Board. MSDF indicated in their letter that they wished to limit the time frame of their involvement with investee companies and had confidence in the strength and
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professional conduct of the Board at Swadhaar. The Board sincerely appreciated her support and guidance to the Company since its inception. The Board also took on record her proactive role and substantive contribution whilst accepting her resignation with regret.
The Board of Directors have inducted the following additional Directors on the Board at their meeting held on June 27, 2013.
Mr. Anal Jain as Independent Director and Mr. RajaRam Kamath CEO as an Executive Director.
The Board Committees were reconstituted as follows at the same meeting:
Audit Committee Risk Committee Nomination Compensation and Goverance Committee Ms. Anita Ramachandran Mr. Srinivas Rao Mr. Srinivas RaoMr. Srinivas Rao Mr. Siddhartha Chowdri Ms. Lalita D. GupteMr. Siddhartha Chowdri Ms. Anita Ramachandran Ms. Anita RamachandranMr. Anal Jain Ms. Valerie Kindt Mr. Anal Jain
directors’ responsibility statementThe Directors confirm:– That in the preparation of the annual accounts, the applicable accounting
standards have been followed along with proper explanation relating to material departures;
– That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period;
– That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
– That the Directors have prepared the annual accounts on a going concern basis.
acknowledgementsThe Directors wish to thank all the staff for their dedication and efforts in past year. The Directors would also like to record their deep appreciation for the support during the past financial year of the shareholders, institutions and bankers that have helped the Company grow and build a strong foundation.
Registered Office: For and on behalf of the Board,Tenement 1/3 & 1/4, Old MHB Colony, Anand Nagar, Nehru Road, Santacruz (E), Mumbai – 55 Lalita D. Gupte Veena Mankar Date: June 27th, 2013 Chairperson Managing Director
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Independent Auditors’ Report
To the Members of Swadhaar Finserve Private Limited
Report on the Financial StatementsWe have audited the accompanying financial statements of Swadhaar Finserve Private Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2013, and the Statement of Profit and Loss and Cash Flow Statement for the year then ended and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 (“the Act”). This responsibility in-cludes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assess-ments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the ap-propriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. OpinionIn our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:a) in the case of the Balance Sheet, of the state of affairs of the Company as at March
31, 2013;b) in the case of the Statement of Profit and Loss, of the profit for the year ended on
that date; andc) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.
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Report on Other Legal and Regulatory Requirements1. As required by the Companies (Auditors’ Report) Order, 2003 (“the Order”) is-
sued by the Central Government of India in terms of sub-section (4A) of section 227 of the Act, we give in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the Order.
2. As required by section 227(3) of the Act, we report that: a) we have obtained all the information and explanations which to the best of
ourknowledge and belief were necessary for the purpose of our audit; b) in our opinion proper books of account as required by law have been kept by the
Company so far as appears from our examination of those books; c) the Balance Sheet, Statement of Profit and Loss, and Cash Flow Statement dealt
with by this Report are in agreement with the books of account; d) in our opinion, the Balance Sheet, Statement of Profit and Loss, and Cash Flow
Statement comply with the Accounting Standards referred to in subsection (3C) of section 211 of the Companies Act, 1956;
e) On the basis of written representations received from the directors as on March 31, 2013, and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2013, from being appointed as a director in terms of clause (g) of sub· section (1) of section 274 of the Companies Act, 1956.
For Haribhakti & Co.Chartered AccountantsFirm’s Registration No.103523W Rakesh RathiPartnerMembership No. 45228
Place: MumbaiDate: 27th April, 2013
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Annexure To Independent Auditors’ Report
[Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Require-ments’ in the Independent Auditors’ Report of even date to the members of Swadhaar Finserve Private Limited on the financial statements for the year ended 31st March 2013] i. a) The Company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets. b) The fixed assets were physically verified during the year by the management
in accordance with a regular program of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.
c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of by the Company during the year.
ii. The company did not have any inventories during the year therefore clause 4 (ii) of the Companies (Auditor’s Report) Order 2003, as amended by the Companies (Auditor’s Report) (Amendment) Order 2004 is not applicable to the Company for the current year.
iii. As informed the company has neither granted nor taken any loan, secured or unsecured to / from companies, firms or other parties covered in the register maintained under section 301 of the Companies Act, 1956. Consequently sub clause (b),(c),(e),(f), & (g) of clause 4(iii) of the Companies (Auditor’s Report) Order, 2003 (as amended) are not applicable to Company.
iv. In our opinion and according to the information and explanations given to us, there exists an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of fixed assets and for the sale of service. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control system of the Company.
v. According to the information and explanations given to us, we are of the opinion
that there are no contracts or arrangements referred to in section 301 of the Companies Act, 1956 that need to be entered into the register maintained under that section. Consequently clause 4 (v) (b) of the Companies (Auditor’s Report) order 2003 (as amended) are not applicable to the Company.
vi. In our opinion and according to the information and explanations given to us, the company has not accepted any deposits from the public within the meaning of Sec-tions 58A and 58AA of the Companies Act, 1956 and the rules framed there under.
vii. In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.
viii. The Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Companies Act,
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1956 for any of the products of the company.
ix. a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, investor education and protection fund, employees’ state insurance, income-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues applicable to it though there has been a slight delay in a few cases.
b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees’ state insurance, income-tax, wealth-tax, service tax, customs duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.
c) According to the information and explanation given to us, there are no dues of income tax, sales-tax, wealth tax, service tax, customs duty, excise duty and cess which have not been deposited on account of any dispute.
x. In our opinion, the accumulated losses of the company are not more than fifty per-cent of its networth. Further, the company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.
xi. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution or bank.
xii. According to the information and explanations given to us and based on the docu-ments and records produced to us, the company has not granted loans & advances on the basis of security by way of pledge of shares, debentures and other securities.
xiii. In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause (xiii) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 as amended are not applicable to the Company.
xiv. In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause (xiv) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003 (as amended) are not applicable to the Company.
xv. In our opinion and according to the information and explanations given to us, the company has not given any guarantee for loans taken by others from banks or financial institutions during the year.
xvi. In our opinion, the term loans have been applied for the purpose for which the loans were raised.
xvii. According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.
xviii. The Company has not made any preferential allotment of shares to parties and
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companies covered in the register maintained under section 301 of the Act.
xix. According to the information and explanations given to us, no debentures have been issued by the company during the year.
xx. The Company has not raised money by way of public issue during the year.
xxi. According to the explanation and information given to us, sixteen instances of fraud, amounting to Rs 8,46,023 (of which Rs 1,91,415 recovered) were identified and reported by the entity during the year. The nature of frauds were mainly relating to misappropriation of cash by employees of the company.
For Haribhakti & Co.Chartered AccountantsFirm’s Registration No.103523W
Rakesh RathiPartnerMembership No. 45228
Place: MumbaiDate: 27th April, 2013
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Financials
1244
SWADHAAR FINSERVE PRIVATE LIMITED BALANCE SHEET AS AT 31ST MARCH, 2013 (Amount in Rupees) Particulars Note No. As at 31st March, 2013 As at 31st March, 2012 I. EQUITY AND LIABILITIES 1 Shareholders’ funds a. Share capital 3 467,602,880 467,602,880 b. Reserves and surplus 4 (26,850,917) (38,480,701)2 Non-current liabilities a. Long-term borrowings 5 401,314,882 184,152,916 b. Deferred tax liabilities (Net) – – c. Other Long term liabilities – – d. Long-term provisions 6 2,920,507 2,187,015 3 Current liabilities a. Short-term borrowings – – b. Trade payables – – c. Other current liabilities 7 545,083,440 228,380,277 d. Short-term provisions 8 19,637,860 14,682,771 TOTAL 1,409,708,651 858,525,158 II. ASSETS 1 Non-current assets a. Fixed assets 9 12,295,437 10,298,582
Tangible assets 6,640,806 8,619,555 Intangible assets 5,654,631 1,679,027
b. Non-current investments 10 546,559 546,559 c. Deferred tax assets (net) 11 4,752,595 4,820,026 d. Long Term Loans and Advances 356,820,765 164,374,220
Loans under financing activity 12 347,266,184 155,542,887 Others 13 9,554,582 8,831,333
e. Other non current Assets 14 132,261,826 28,427,230 2 Current assets a. Cash and Bank balances 15 421,974,255 87,491,924 b. Short-term loans and advances 463,239,889 558,870,087
Loans under financing activity 12 460,758,278 556,235,362 Others 16 2,481,611 2,634,725
c. Other current assets 17 17,817,325 3,696,529 TOTAL 1,409,708,651 858,525,158 Significant Accounting Policies & Notes to Accounts referred to above 1 to 37 form an integral part of financial statements. As per Our Attached Report of Even Date For and on behalf of the Board of For Haribhakti & Co Swadhaar Finserve Pvt Ltd Chartered Accountants Rakesh Rathi Lalita D Gupte Veena Mankar Partner Chairperson Managing Director Place : Mumbai, INDIA Anshu Mundhra Date : June 27th 2013 Company Secretary
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SWADHAAR FINSERVE PRIVATE LIMITED STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31 MARCH 2013 (Amount in Rupees) Particulars Note No. As at 31st March, 2013 As at 31st March, 2012A Revenue from operations 18 247,810,699 186,583,932 B Other income 19 3,779,665 5,235,267 I Total Revenue (A +B ) 251,590,364 191,819,199 II Expenses: Employee benefits expense 20 88,354,343 86,974,237 Finance costs 21 79,537,256 41,130,736 Depreciation and amortization expense 9 4,410,148 4,223,933 Loan Loss Provisions 22 10,474,574 16,860,810 Other expenses 23 54,797,949 39,275,095 Total Expenses 237,574,269 188,464,812 III Profit before tax (I–II) 14,016,095 3,354,387 IV Tax expense: (1) Current tax 2,318,880 – (2) Deferred tax 67,431 (3,200,648) V Profit for the year 11,629,784 6,555,035 VI Earnings per equity share: 24 Basic and Diluted Earning Per Share 0.23 0.16 (Face Value of Rs. 10 each) Significant Accounting Policies & Notes to Accounts referred to above 1 to 37 form an integral part of financial statements.
As per Our Attached Report of Even Date For and on behalf of the Board of For Haribhakti & Co Swadhaar Finserve Pvt Ltd Chartered Accountants Rakesh Rathi Lalita D Gupte Veena Mankar Partner Chairperson Managing Director Place : Mumbai, INDIA Anshu Mundhra Date : June 27th 2013 Company Secretary
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SWADHAAR FINSERVE PRIVATE LIMITED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 2013 (Amount in Rupees)Particulars As at 31st March, 2013 As at 31st March, 2012 Profit Before Tax 14,016,095 3,354,387 Add: Depreciation 4,410,148 4,223,933 Loss on sale of assets 1,462,446 168,737 Portfolio Loss 930,870 68,440 Cash Profit from operating activities 20,819,559 7,815,497
Increase/ (Decrease) in Borrowing 217,161,966 118,055,506 Increase/ (Decrease) in Long term provision 733,492 368,987 Increase/ (Decrease) in Other current liability 316,703,160 (91,445,642)Increase/ (Decrease) in Short term provision 2,636,209 9,958,348 (Increase)/ Decrease in Loan portfolio (97,177,083) (207,799,577)(Increase)/ Decrease Other long term loans and advances (723,249) (496,473)(Increase)/ Decrease Short term loans and advances 153,114 (890,664)(Increase)/ Decrease Other current assets (14,120,796) 4,024,615 Cash generated from Operating Activities 446,186,372 (160,409,402)
Investment in Fixed Deposits (161,761,826) 17,347,972 Purchase of Fixed Assets (7,893,006) (1,900,758)Proceeds from sale of Fixed Assets 23,560 116,156 Cash Flows from Investing Activities (169,631,272) 15,563,370
Increase/(Decrease) in Equity (Net of EWT) – 130,400,380 Share Premium (Net of EWT) – 36,540,469 Cash Flows from Financing Activities – 166,940,849 Net increase in cash and cash equivalents 276,555,101 22,094,816
Cash and cash equivalents at beginning of year Balance with Bank- Current a/c 47,321,184 8,144,398 Balance with Bank- Fixed Deposit 30,000,000 50,000,000 Stamp papers in Hand 512,639 293,694 Cash on hand 4,658,101 1,959,015 Total Cash and cash equivalents at beginning of year 82,491,924 60,397,108 Cash and cash equivalents at end of period 359,047,024 82,491,924 Balance with Bank- Current a/c 198,178,370 47,321,184 Balance with Bank- Fixed Deposit 159,300,000 30,000,000 Stamp papers in Hand 245,850 512,639 Cash on hand 1,322,804 4,658,101 Significant Accounting Policies & Notes to Accounts referred to above 1 to 37 form an integral part of financial statements. As per Our Attached Report of Even Date For and on behalf of the Board of For Haribhakti & Co Swadhaar Finserve Pvt Ltd Chartered Accountants Rakesh Rathi Lalita D Gupte Veena Mankar Partner Chairperson Managing Director Place : Mumbai, INDIA Anshu Mundhra Date : June 27th 2013 Company Secretary
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SWADHAAR FINSERVE PRIVATE LIMITEDSIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2013:
NOTE 1: NATURE OF BUSINESS:
The Company is Non-banking Financial Company (NBFC) registered with the Reserve Bank of India (“RBI”) under section 45–IA of the Reserve Bank of India Act, 1934 and primarily engaged in lending and related activities. The Company received the Certificate of Registration from the RBI on 9th May 2008, enabling the Company to carry on business as a Non-banking Financial Company. It has applied to RBI for reclassification as a NBFC - MFI.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES:
1. Basis of Preparation of Financial Statements:The accompanying financial statements are consistently prepared under the historical cost convention, and accrual basis of accounting, in accordance with the generally accepted accounting principles in India (“Indian GAAP”) and conform to the statutory requirements, circulars and guidelines issued by the RBI from time to time to the extent they have an impact on the financial statements and current practices prevailing in India. The financial statements comply in all material respects with the Accounting Standards (“AS”) notified by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956 (“the Act”), to the extent applicable.
2. Use of Estimates:The preparation of the financial statements in conformity with the generally accepted accounting principles require the management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any differences of actual results to such estimates are recognized in the period in which the results are known / materialized.
3. Revenue Recognition:a) Interest income is recognized and accounted on accrual basis as per the agreed terms except in case of Non Performing
Assets outstanding for more than 90 days, which is recognized on receipt basis, as per Company’s Provisioning Policy.b) All other incomes are recognised on accrual basis, except in case of bad debts recovered, cheque bouncing charges,
late payment charges, foreclosure charges and application money, which are accounted as and when received.c) On sale of receivables under asset assignment arrangement, the profit arising on account of sale is recognised over the
life of the receivables assigned on an accrual basis in proportionate to EMI payable to the bank and loss, if any, arises on account of sale is accounted immediately.
d) On securitisation transactions of portfolio under the PTC route (pass through certificates), the Company has followed the provisions specified by Reserve Bank of India (RBI) in its guidelines on Securitisation Transactions. The amortisa-tion of cash profit arising out of securitisation transaction is amortised over the life of the securities issued by the SPV (Special purpose vehicle).
4. Fixed assets & Depreciation:Fixed Assets are stated at cost less accumulated depreciation and impairment, if any. The cost of fixed assets comprises purchase price and any other incidental cost of bringing the asset to its working condition for its intended use. Subsequent expenditure incurred on assets put to use is capitalized only when it increases the future benefit / functioning capability from / of such assets.
For assets purchased and sold during the year, depreciation is being provided on pro rata basis by the Company. On all assets, except as mentioned below, depreciation has been provided using the Straight line method at the rates specified in Schedule XIV to the Companies Act, 1956:
a) Assets costing Rs. 5,000/- or less are fully depreciated in the year of purchase.b) Improvements to Leased Assets are amortized over the lease period from the date of cost incurred.c) Fixed Assets purchased from Swadhaar FinAccess were to be depreciated over a period of 4 years. The current financial
year of 2012–13 is the last year of charging depreciation on those purchased assets.
5. Intangible Assets & Amortization:Expenses incurred on Computer Software having enduring benefits are capitalized and will be amortized over a period of 3 years on a pro rata basis from the date of purchase.
Expenses incurred on securing an irrecoverable right to use and acquire statutory rights in the trade mark/ name “Swadhaar” and Logo in perpetuity from Swadhaar FinAccess, having enduring benefits, are capitalized as an intangible asset with an amortization period of 5 years on straight line basis.
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6. Investments:Investments are classified into current and non-current investments. Investments that are intended to be held for one year or more are classified as non-current investments and investments that are intended to be held for less than one year are classified as current investments.
Non-current investments are valued at cost. Provision for diminution in value of Non-current investments is made if in the opinion of management such a decline is other than temporary.
Current investments are valued at cost or market value, whichever is lower. Profit/loss on sale of securities is determined based on the Weighted Average cost of the securities sold. 7. Employee Benefits:Short term employee benefits Short term employees’ benefits are recognized as an expense at the undiscounted amounts in the profit & loss account for the year in which the related services are rendered.
Long term employee benefitsa) Provident Fund:
In accordance with law, all employees of the Company are entitled to receive benefits under the provident fund. The Company contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee’s basic salary) to the Pension Scheme administered by the Regional Provident Fund Commissioner (RPFC) and the Company has no liability for future provident fund benefits other than its annual contribution. Contribution payable to the recognised provident fund, which is a defined contribution scheme, is accounted for on accrual basis.
b) Gratuity: Gratuity is post employment benefit and is in the nature of Defined Benefit Plan. The Liability recognised in the balance sheet in respect of gratuity is the present value of defined benefit obligation at the balance sheet date, together with the adjustments for unrecognized actuarial gain or losses and the past service costs. The defined benefit obligation is calculated at or near the balance sheet date by an independent actuary. Based on actuarial calculations, which include assumptions about demographics, early retirement, salary increases and interest rates, actuarial gain or loss is recog-nized in the Profit and Loss Account.
c) Leave Encashment: Leave encashment is in the nature of short term benefit. It is calculated based on unutilized leave available to the employ-ees as at the Balance Sheet date by an independent actuary. Every confirmed employee/ full time consultant is entitled to 1 EL for every 25 working days based on pro-rata calcula-tion. A maximum of 5 leaves in a year are mandatory to be availed by the Management staff. EL can be accumulated for a maximum of 42 leaves. Accumulated EL can be en-cashed at the rate of last basic pay drawn on the previous 31st of March or during final settlement in case of, resignation/retirement/termination, subject to a maximum accumulated bal-ance leave of 42 days.
8. Taxation:Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-tax law), deferred tax charge or credit (reflecting the tax effect of timing differences between accounting income and taxable income for the period). Current Tax:Provision for current tax is made on the basis of estimated taxable income for the accounting year in accordance with the Income Tax Act, 1961.
Deferred Tax:Deferred tax expense or benefits is recognised on timing differences being the difference between taxable and accounting income and are capable of reversal in one or more future periods. The deferred tax charge or credit and the corresponding deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the asset can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of the assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect the amount that is reasonable/virtually certain (as the case may be) to be realised.
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9. Operating Leases:Lease payments in respect of operating lease are recognized as an expense in the statement of profit and loss account on accrual basis over the lease term, in accordance with the AS 19, Leases, issued by the Institute of Chartered Accountants of India.
10. Provision and Contingencies:The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation.
A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources.
When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.
Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change occurs.
11. Impairment of Assets:The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit which the asset belongs to, is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.
12. Finance Expenses:Expenditure incurred for raising borrowed funds including ancillary costs incurred in connection with the arrangement of borrowings, which is not eligible for capitalisation, is fully charged to the profit and loss account on incurrence. Likewise, expenditure incurred on funds raised through securitisation transactions (pass through certificates route) are also fully charged to the profit and loss account on incurrence.
13. Foreign Currency Transactions: Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the profit and loss account. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rate on that date.
14. Provision for doubtful debts:The provisioning norms followed by the Company are more stringent than those prescribed by the Reserve Bank of India and are as follows: No. of days portfolio outstanding Provisionoverdue (days) (% on outstanding principal)0–30 0.25%31–60 10.00%61–90 30.00%91–120 30.00% 121–150 60.00% 151–180 60.00% >181 100.00%
Provisioning in respect of managed portfolio will be done subject to the maximum guarantee given to respective assignee bank or financial institution. Provisioning in respect of assigned portfolio in sell out transactions and portfolio sold out in securitisation transactions (pass through certificates route) will not be done.
Under exceptional circumstances including natural disasters, Management may renegotiate loans by rescheduling repayment terms for customers who have defaulted in repayment but who appear willing and able to repay their loans under a longer term agreement. Provisioning on such rescheduled loans will be subject to management decision.
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15. Recognition of income from loan servicing and deferred income on sold out portfolio transactions in earlier financial years and portfolio securitisation transactions (pass through certificates route) entered into this current financial year:During the last financial year, there were three transactions of portfolio sell out. The income on sellout is parked in income from deferred revenue account. The liability to collect the funds lies with Swadhaar. The collected funds need to be repaid to the buyers as per the agreed recovery schedule. Any shortfall in the receivables will be borne by the company to the extent of Cash Collateral or clean up option (restricted to 10%).Therefore, the company recognizes the income on loan servicing in the proportion of agreed recovery schedule.
During the current financial year, there were in total four transactions of portfolio securitisation transactions (pass through certificates route). The collection of funds from the sold out portfolio vests with Swadhaar. The cash profits arising on these four transactions would be recognised over the tenure of these transactions in compliance with the RBI guidelines appli-cable on such transactions. 16. Sold out Portfolio:During the financial year 2012–13, there were four transactions of portfolio securitization through PTC route (pass through certificates). The company will continue to collect the EMIs on behalf of the buyers and remitting the same to the buyers as per decided schedule. During the financial year 2011–12, there were three transactions of portfolio sell out. The company will continue to collect the EMIs on behalf of the buyers and remitting the same to the buyers as per decided timelines every month. The brief details of the transaction are indicated below: (Amount in Rupees)Particulars As at 31st March, 2013 As at 31st March, 2012 a) Individual Loan asset sold to WITFIN on 9th January, 2012:
Sale consideration received for the Individual loan asset sold – 39,999,012 Total book value of the loan asset sold out – 36,743,870 Collection of client EMIs on behalf of WITFIN was till Dec–12
b) Group Loan asset sold to DCB (POOL II transaction) on 9th March, 2012:
Sale consideration received for the Individual loan asset sold – 44,436,098 Total book value of the loan asset sold out – 42,351,964 Collection of client EMIs on behalf of DCB was till Jan–13
c) Group Loan asset sold to DCB (POOL III transaction ) on 22nd March, 2012:
Sale consideration received for the Individual loan asset sold – 19,998,571 Total outstanding book value of the loan asset sold out 6,920,790 18,160,704 Collection of client EMIs on behalf of DCB will be till Jan –14
d) Group Loan asset sold to Swahit 2012 Series 1 on 31st December, 2012: Sale consideration received for the Individual loan asset sold 75,000,000 – Total outstanding book value of the loan asset sold out 34,963,320 – Collection of client EMIs on behalf of Swahit 2012 Series 1 will be till July –13
e) Group Loan asset sold to Mosec XXXI on 24th March, 2013: Sale consideration received for the Individual loan asset sold 191,994,568 – Total outstanding book value of the loan asset sold out 174,994,709 – Collection of client EMIs on behalf of Mosec XXXI will be till Jan –15
f) Group Loan asset sold to Mosec XXX on 24th March, 2013:
Sale consideration received for the Individual loan asset sold 80,789,612 – Total outstanding book value of the loan asset sold out 75,270,058 – Collection of client EMIs on behalf of Mosec XXX will be till Nov –14
g) Group Loan asset sold to Mosec XXXII on 27th March, 2013:
Sale consideration received for the Individual loan asset sold 56,277,163 – Total outstanding book value of the loan asset sold out 51,769,968 – Collection of client EMIs on behalf of Mosec XXXII will be till Nov –14
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NOTE 3: SHARE CAPITAL (Amount in Rupees)Share Capital As at 31st March 2013 As at 31st March 2012Authorised 75,000,000 (PY 75,000,000) 750,000,000 75,000,000 Equity Shares of Rs.10 each Issued, Subscribed & Paid up Equity Shares of Rs.10 each 51,679,913 equity shares with face value of Rs 10
each fully paid–up, (PY 51,679,913) 516,799,130 516,799,130
(Less) Amount recoverable from Employee Welfare Trust
[Face value of Rs 10 on 4,919,625 shares (PY 4,919,625)
allotted to the Trust] 49,196,250 467,602,880 49,196,250 467,602,880 Total 467,602,880 467,602,880 Rights issue of Equity Shares: During the year 2011–12, the Company had raised additional capital of Rs. 146,799,130 /- by way of rights issue of 14,679,913 equity shares of Rs. 10/- each at a premium of Re 3/- per share. Out of this, 1,639,875 shares were issued to Swadhaar FinServe Employee Welfare Trust. Loan to Swadhaar FinServe Employee Welfare Trust:In accordance with the Guidance Note on Accounting for Share based Payments issued by Institute of Chartered Accountants of India (‘ICAI’), the face value of equity shares issued to EWT till 31st March 2013 have been duly shown as deduction from the issued, subscribed and paid up capital and Security premium account. Accordingly, these shares are also not considered for calculating basic EPS.
Note 3.1 Reconciliation of Equity Shares outstanding at the beginning and at the end of the financial year 2012–13
Particulars As at 31st March 2013 As at 31st March 2012 Number Amount in Rupees Number Amount in Rupees Shares outstanding at the beginning of the year 51,679,913 516,799,130 37,000,000 370,000,000 Shares Issued during the year – – 14,679,913 146,799,130 Shares bought back during the year – – – – Shares outstanding at the end of the year 51,679,913 516,799,130 51,679,913 516,799,130 Note 3.2 Terms/ Rights Attached to equity Shares The Company has only one class of equity shares having a par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. In case of further issue of shares, the same shall be offered to all the shareholders on identical terms on a proportionate basis. During the year ended 31 March 2013, the Company has not declared/ paid any dividend to equity shareholders. Note 3.3 Details of Shareholders Holding more than 5% shares in the company
Particulars As at 31st March 2013 As at 31st March 2012 Total No. of Shares % Total No. of Shares %Accion Africa Asia Investment Company 19,650,000 38.02% 19,650,000 38.02%Michael & Susan Dell Foundation 6,452,250 12.49% 6,452,250 12.49%M V Mauritius Limited 8,325,114 16.11% 8,325,114 16.11%Indian Family Trust 6,960,000 13.47% 6,960,000 13.47%Swadhaar FinServe Employee Welfare Trust 4,919,625 9.52% 4,919,625 9.52% Employee Stock Option Scheme and Associate Stock Option Scheme:
a) During the year, the Company has not granted options to the employees or the associates. (Previous Year – 1,005,000).
b) Method of accounting for ESOS & ASOS: The company has adopted Black– Scholes Options Pricing Model in accounting for employee and associate cost on account of ESOS & ASOS respectively. Option is offered with the intrinsic value of the shares based on stock value of Rs 13 per share & the exercise price was fixed by the compensation committee of the Company was Rs 13 per share. The difference between the stock value & the exercise price is being amortized as employee compensation cost over
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the vesting period. The total amount to be amortized over the vesting period is Nil. Accordingly, the company has not taken any impact in statement of profit & loss towards Compensation cost.
c) Salient Features: Options have been granted under the schemes as follows: Particulars As at 31st March 2013 As at 31st March 2012 Outstanding at the beginning of the year 2,903,920 2,101,000 Options Granted during the year – 1,005,000 Lapsed during the year 115,156 202,080 Options vested during the year 110,270 1,784,412 Outstanding at the end of the year 2,793,650 2,903,920
d) As the options are granted using intrinsic value method at an exercise price Rs. 13 equivalent to stock value therefore no employee compensation cost or charge will arise in the books.
e) The fair value of the options based on the Black Scholes Option pricing model for FY 12–13 is as follows: Variables Grant Date – 21st December, 2011 and 22nd February, 2012 No. of Shares Vest–1 Vest–2 Vest–3 Vest–4 1. Risk Free Interest Rate 7.68% 7.70% 7.71% 7.74% 2. Expected Life (Years ) 2.89 3.39 3.89 4.39 3. Expected Volatility 0.00% 0.00% 0.00% 0.00% 4. Dividend Yield 0.00% 0.00% 0.00% 0.00% 5. Price of the underlying share in
market at the time of option granted 11 11 11 11 Option Fair Value (Rs.) 2.12 2.45 2.76 3.07 Vesting % 10% 20% 30% 40%
NOTE 4: RESERVES & SURPLUS (Amount in Rupees)Reserve & Surplus As at 31st March 2013 As at 31st March 2012 A. Securities Premium Account
Opening Balance 52,315,214 15,774,745 Add : Securities premium credited on Share issue, Current Year– Nil, (PY Issue of 14,679,913 Shares @ premium of Rs.3/- each) – 44,039,739 (Less) Amount recoverable from Employee Welfare Trust, Current Year– Nil, (PY Premium of Re 3 on 1,639,875 shares) – 4,919,625 39,120,114 Less Total Share issue expenses – 2,579,645 Closing Balance 52,315,214 52,315,214
B. Surplus Opening balance (92,106,922) (97,350,950) (+) Net Profit for the year 11,629,784 6,555,035 (–) Transfer to Reserves 2,325,957 1,311,007 Closing Balance (82,803,095) (92,106,922)
C. Statutory Reserve Opening Balance 1,311,007 – (+) Statutory Reserve for the year 2,325,957 1,311,007
Closing Balance 3,636,964 1,311,007 Total (A+B+C) (26,850,917) (38,480,701)
Statutory Reserve: An amount of Rs. 2,325,957 (PY Rs. 1,311,007) (20% of profits after tax) has been transferred to the Statutory Reserve Fund in accordance with the provisions of Section 45–IC of the RBI Act, 1934
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NOTE 5: LONG TERM BORROWINGS (Amount in Rupees)Long Term Borrowings As at 31st March 2013 As at 31st March 2012 Secured Borrowings Term loans A. Loan From banks 210,675,616 126,188,107 B. Loan From Financial Institutions 190,639,265 57,964,809 Total (A + B) 401,314,882 184,152,916
“Current maturities of long term debts” of Rs 475,956,463/- (PY Rs 160,972,027/-) under the head “other current liabilities” (Note no. 7) is secured long term borrowings.
Terms and Conditions of Borrowings as on 31st March 2013 Name of Lending institution Amt outstanding Terms and Conditions (Amt. in Rs.) Repayment terms including Other Terms and conditions moratorium Central Bank Of India –1 23,958,325 5 yrs including 1 yr moratorium Secured against hypothecation of Book (monthly installments) Debts with Margin and Cash Collateral
Central Bank Of India – 2 50,000,000 5 yrs including 3months moratorium Secured against hypothecation of Book (Quarterly installments) Debts with Margin and Cash Collateral
Development Credit Bank Ltd – 1 20,769,232 15 months including 2 months moritorium Secured against hypothecation of Book on principal Debts and Cash Collateral
Development Credit Bank Ltd – 2 50,000,000 26 months including 2 months moritorium Secured against hypothecation of Book Debts and Cash Collateral
Development Credit Bank Ltd – 3 30,000,000 26 months including 2 months moritorium Secured against hypothecation of Book Debts and Cash Collateral
Gruh Finance – 1 17,964,809 66 months including 6 months moratorium Secured against hypothecation of Book (Monthly Repayment) Debts with Margin and Cash Collateral
Gruh Finance – 2 27,280,789 60 months from the date of disbursement Secured against hypothecation of Book Debts with Margin and Cash Collateral
Gruh Finance – 3 50,000,000 60 months from the date of disbursement Secured against hypothecation of Book Debts with Margin and Cash Collateral
IDBI Bank 80,000,002 36 months including 6 months moratorium Secured against hypothecation of Book (Monthly Repayment) Debts and Cash Collateral
IFMR Capital Finance Private 18,426,186 12 months Secured against hypothecation of Book Limited (“IFMR Capital”) Debts with Margin and Cash Collateral
MV Microfin Pvt Ltd 25,000,000 12 Months (annual installment) Secured against hypothecation of Book Debts and Cash Collateral
Maanaveeya Holdings & 40,000,000 3 yrs including 1 year moratorium Secured against hypothecation of Book Investments Pvt. Ltd –1 (Half yearly Installment – Interest served Debts with Margin on quarterly rest)
Maanaveeya Development 66,670,000 36 months, repayement in 12 quarterly Secured against hypothecation of Book & Finance Pvt Ltd – 2 installments – interest to be paid on Debts with Margin monthly basis
MAS Financial Services Ltd. – 1 47,222,222 18 months Secured against hypothecation of Book Debts
MAS Financial Services Ltd. – 2 50,000,000 18 months Secured against hypothecation of Book Debts
Ratnakar Bank Ltd – 1 22,229,780 2 yrs including 6 months moratorium Secured against hypothecation of Book (Monthly Repayment) Debts with Margin and Cash Collateral + Leverage of Accion Guarantee covering 45% of total loan amount.
Ratnakar Bank Ltd – 2 76,500,000 2 yrs including 6 months moratorium Secured against hypothecation of Book (Monthly Repayment) Debts with Margin and Cash Collateral + Leverage of Accion Guarantee covering 45% of total loan amount.
Reliance Capital 100,000,000 18 months from the date of disbursement Secured against hypothecation of Book Debts with Margin and Cash Collateral
Standard Chartered Bank 81,250,000 8 equal quarterly installments, starting Secured against hypothecation of Book after 3 months from the first drawdown Debts with Margin and Cash Collateral + Leverage of Accion Guarantee covering 45% of total loan amount.
Total 877,271,345 Applicable Interest Rate is Base Rate + 275 to 450 basis points
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Terms and Conditions of Borrowings as on 31st March 2012Name of Lending institution Amt outstanding Terms and Conditions (Amt. in Rs.) Repayment terms including Other Terms and conditions moratorium Ananya Finance for Inclusive 1,111,104 18 Months (monthly installments) Secured against hypothecation of Book Growth Pvt Ltd Debts
Central Bank Of India 36,458,329 5 yrs including 1 yr moratorium Secured against hypothecation of Book (monthly installments) Debts with Margin and Cash Collateral
MV Microfin Pvt Ltd 27,000,000 2 yrs including 1 year moratorium Secured against hypothecation of Book (half yearly installments – Interest served Debts and Cash Collateral on quarterly rests)
Maanaveeya Holdings & 80,000,000 3 yrs including 1 year moratorium Secured against hypothecation of book Investments Pvt. Ltd (Half yearly Installment – Interest served debts with Margin on quarterly rests)
Ratnakar Bank Ltd – 1 30,555,510 2 yrs including 6 months moratorium Secured against hypothecation of Book (Monthly Repayment) Debts with Margin and Cash Collateral + Leverage of Accion Guarantee covering 45% of total loan amount.
Ratnakar Bank Ltd – 2 50,000,000 2 yrs including 6 months moratorium Secured against hypothecation of Book (Monthly Repayment) Debts with Margin and Cash Collateral + Leverage of Accion Guarantee covering 45% of total loan amount.
IDBI Bank 100,000,000 36 months including 6 months moratorium Secured against hypothecation of Book (Monthly Repayment) Debts and Cash Collateral
Gruh Finance 20,000,000 60 months including 6 months moratorium Secured against hypothecation of Book (Monthly Repayment) Debts and Cash Collateral
Total 345,124,943
Applicable Interest Rate is Base Rate + 150 to 375 basis points
NOTE 6: LONG TERM PROVISIONS (Amount in Rupees)Long Term Provisions As at 31st March 2013 As at 31st March 2012 Provision for employee benefits Gratuity (unfunded)(refer to note no. 25 ) 2,508,291 2,069,732 Leave Encashment (unfunded) (refer to note no. 25 ) 412,216 117,283 Total 2,920,507 2,187,015 NOTE 7: OTHER CURRENT LIABILITIES (Amount in Rupees)Other Current Liabilities As at 31st March 2013 As at 31st March 2012 Current Maturities of Long Term Borrowings 475,956,463 160,972,027 Interest Accrued but not due on borrowings 3,579,178 3,884,692 Advance Collections / Margin Money 8,343,785 28,787,693 Client Insurance Premium – Payable 2,666,518 2,384,796 Outstanding Liability for Expenses 1,305,224 1,749,458 Payable on Assigned Portfolio 1,761,499 9,271,616 Unearned Revenue–Managed/Sold out Portfolio 26,237,178 4,887,096 Employee Benefits– Payable 1,753,270 1,478,210 Repayment Account for Cheques 10,011,077 7,439,543 Professional Fees – Payable 6,531,119 2,941,500 Other Payables 4,235,513 2,380,550 Statutory Dues Payable 2,702,615 2,203,096 Total 545,083,440 228,380,277
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NOTE 8: SHORT TERM PROVISIONS (Amount in Rupees)Short Term Provisions As at 31st March 2013 As at 31st March 2012a. Provision for employee benefits
Gratuity 912,602 763,034 Incentives 2,500,000 1,200,000 Leave Encashment Provision 242,489 1,212,987 Provision for Bonus 1,000,000 –
b. Others Business Loss 13,000 13,000 Provision for Minimum Alternate Tax 2,318,880 –
Loan Loss Provisions 12,650,889 11,493,750 Total 19,637,860 14,682,771
Loan Loss Provisions : (included in note no. 8 above under “Loan Loss Provisions”) (Amount in Rupees)Details of loan loss provision on: Percentage As at 31st March 2013 As at 31st March 2012a. Standard Assets 2,342,380 2,390,991
0–30 Days 0.25% 1,987,453 1,741,240 (Contingent provision against Standard Asset)# 31–60 Days 10% 92,160 257,322 61–90 Days 30% 262,768 392,429
b. Sub–Standard Assets (91–180 Days) 1,204,223 3,270,980 91–120 days 30% 250,959 446,787 121 – 180 days 60% 953,264 2,824,192
c. Doubtful Assets/Lost Assets (>180 Days) 100% 8,807,481 5,204,852 181–360 Days 100% 7,003,995 5,195,311 > 360 days 100% 1,803,486 9,541
d. Additional Provision 283,839 540,769 e. Rescheduled Portfolio 100% 12,965 86,158 Total 12,650,889 11,493,750
#Contingent Provision against Standard Assets The company has made Standard provision @ 0.25% on its standard assets as per the notification NO DNBS PD.CC.No.207/ 03.02.002 /2010–11 dated January 17, 2011 issued by RBI
Provision for doubtful debts: The provisioning norms prescribed by Reserve Bank of India for NBFCs is as given under: i. Loss Assets The entire asset shall be written off. If the assets are permitted to remain in the
books for any reason, 100% of the outstanding should be provided for;
ii. Doubtful Assets a. 100% provision to the extent to which the advance is not covered by the realis-able value of the security to which the mortgage guarantee company has a valid recourse shall be made. The realisable value is to be estimated on a realistic basis;
b. In addition to item (a) above, depending upon the period for which the asset has remained doubtful, provision to the extent of 20% to 50% of the secured portion (i.e. estimated realisable value of the outstanding) shall be made on the following basis : Period for which the asset has remained in doubtful category % of provision Up to one year 20 One to three years 30 More than three years 50
iii. Sub–standard assets A general provision of 10% of total outstanding shall be made.
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However, the Company is making provision as mentioned below which is more stringent than those prescribed by RBI.
No. of days portfolio outstanding overdue Provision (% on outstanding principal) 0–30 0.25% 31–60 10% 61–120 30% 121–180 60% >180 100%
Provisioning in respect of managed portfolio will be done subject to the maximum guarantee given to respective assignee bank or financial institution. Provisioning in respect of assigned portfolio in sell out transactions and portfolio sold out in securitisation transactions (pass through certificates route) will not be done.
Under exceptional circumstances including natural disasters, Management may renegotiate loans by rescheduling repay-ment terms for customers who have defaulted in repayment but who appear willing and able to repay their loans under a longer term agreement. Provisioning on such rescheduled loans will be subject to management decision.
The company has not segregated the current and non current portion of the provision made as company doesn’t have the necessary data for segregating the same.
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82
NOTE 10: NON CURRENT INVESTMENTS (Amount in Rupees)Non Current Investments As at 31st March 2013 As at 31st March 2012Other Investments a. Investment in Equity instruments: 500,000 500,000
Investment in Alpha Microfinance Consultants Pvt. Ltd. 50000 (PY 50000) equity shares with face value of Rs. 10 Each
b. Other -Swadhaar Employee Welfare Trust (Corpus fund) # 46,559 46,559 Aggregate amount of unquoted investment 546,559 546,559 # In the financial year 2009-10, the company had created Swadhaar FinServe Employee Welfare Trust for the purpose of promoting employee welfare activities and for administration, management, implementation and all other matters incidental to any stock option plans. NOTE 11: DEFERRED TAX ASSET (Amount in Rupees)Deferred Tax Asset As at 31st March 2013 As at 31st March 2012Deferred Tax Asset Difference in WDV of assets 198,234 – Gratuity Provision 1,057,056 875,325 Compensated absence provision 202,304 411,053 Provision for doubtful assets 3,295,002 3,579,379 4,752,595 4,865,757 Deferred Tax Liability Difference in WDV of assets – 45,731 Net Deferred Tax Asset 4,752,595 4,820,026
NOTE 12: LOANS UNDER FINANCING ACTIVITY (Amount in Rupees)Loans under financing activity As at 31st March 2013 As at 31st March 2012Loans under financing activity Non-current 347,266,184 155,542,887 Current 460,758,278 556,235,362 Total 808,024,462 711,778,249 Loans under financing activity Standard Assets: 796,778,713 700,292,123 0–30 Days 794,981,226 696,419,729 31–60 Days 921,595 2,567,939 61–90 Days 875,892 1,304,455 Sub - Standard Assets (91–180 Days) 2,425,303 6,195,116 91–120 Days 836,529 1,489,291 121–180 Days 1,588,774 4,705,825 Doubtful Assets / Lost Assets (>180 Days) 8,807,481 5,204,852 181–360 Days 7,003,995 5,195,311 > 360 days 1,803,486 9,541 Rescheduled Portfolio 12,965 86,158 Total 808,024,462 711,778,249
Asset Classification: The Asset Classification Norms prescribed by Reserve Bank of India stipulates that every non-banking financial company shall, classify its portfolio asset into the following classes, namely: i) Standard assets: the asset in respect of which, no default in repayment of principal or payment of interest is perceived
and which does not disclose any problem nor carry more than normal risk attached to the business;
ii) Sub-standard assets: an asset which has been classified as non-performing asset for a period not exceeding 18 months
60
or an asset where the terms of the agreement regarding interest and / or principal have been renegotiated or resched-uled or restructured after commencement of operations, until the expiry of one year of satisfactory performance under the renegotiated or rescheduled or restructured terms:
iii) Doubtful assets: an asset which remains a sub-standard asset for a period exceeding 18 months iv) Loss assets: an asset which has been identified as loss asset by the non-banking financial company or its internal or
external auditor or by the Reserve Bank of India during the inspection of the non-banking financial company, to the extent it is not written off by the non-banking financial company; and an asset which is adversely affected by a poten-tial threat of non-recoverability due to either erosion in the value of security or non availability of security or due to any fraudulent act or omission on the part of the borrower;
The Company has adopted the following criterion of categorizing its portfolio with different provisioning norms as indicated in Note 8: a) Standard Assets: portfolio which has remained overdue for a period of 90 days or less b) Sub - Standard Assets: portfolio which has remained overdue for a period of more than 90 days but up to 180 days c) Doubtful Assets / Lost Assets: portfolio which has remained overdue for a period of more than 180 days or which has
been identified as loss assets. The company has not separately segregated the current and non current portion of the loan balance into standard, sub-standard and loss assets as it doesn’t have the necessary data for such segregation.
NOTE 13: LONG TERM LOANS & ADVANCES (Amount in Rupees)Long-term loans and advances As at 31st March 2013 As at 31st March 2012 UnsecuredDeposits Asset 6,527,867 6,702,290 Other Loans and Advances Tax Deducted At Source 3,026,715 2,129,043 Total 9,554,582 8,831,333
NOTE 14: OTHER NON CURRENT ASSETS (Amount in Rupees)Other non Current Assets As at 31st March 2013 As at 31st March 2012Fixed Deposit (maturity more than 12 months) Non - Lien Fixed Deposit 20,000,000 1,430,395 Lien Fixed Deposit 112,261,826 26,996,835 Total 132,261,826 28,427,230
NOTE 15: CASH & BANK BALANCES (Amount in Rupees)Cash and bank Balances As at 31st March 2013 As at 31st March 2012(A) Cash and Cash Equivalents
Balance with Banks In Current Account 198,178,370 47,321,184 In Deposit Account (maturity less than 3 months) Non - Lien Fixed Deposit 159,300,000 30,000,000 Stamp papers in Hand 245,850 512,639 Cash on hand 1,322,804 4,658,101 Total (A) 359,047,024 82,491,924
(B) Others bank balances Maturity more than 3 months but less than 9 months Non - Lien Fixed Deposit 7,430,395 – Lien Fixed Deposit 55,496,835 5,000,000
Total (B) 62,927,230 5,000,000 Total (A +B ) 421,974,255 87,491,924Lien against borrowings from Banks/ Financial Institutions
61
NOTE 16: SHORT - TERM LOANS & ADVANCES (Amount in Rupees)Short-term loans and advances As at 31st March 2013 As at 31st March 2012 a. Loans and advances to related parties
Unsecured, considered good 23,958 23,958 Loan to Employee Welfare Trust (EWT) 23,958 23,958
b. Advances Recoverable in Cash or Kind 168,299 141,421 Secured, considered good Aviva Insurance Company Ltd. 155,853 128,975 Doubtful 12,446 12,446
c. Others (specify nature) 2,289,354 2,469,346 Advance Against Salary 93,294 179,090 Advance Against Expenses 189,244 139,422
Loan to Employees 2,006,816 2,150,834 Total 2,481,611 2,634,725
NOTE 17: OTHER CURRENT ASSETS (Amount in Rupees)Other Current Assets As at 31st March 2013 As at 31st March 2012Interest Accrued on Fixed Deposit 4,922,725 1,832,062 Interest Accrued on Loan Portfolio 11,340,600 – Interest Receivables on loans 183,274 330,467 Interest Receivable Staff 1,473 1,473 Prepaid Expenses 683,116 536,340 Other Receivables 616,745 996,186 Cenvat Credit Availed 69,392 –Total 17,817,325 3,696,529
NOTE 18: REVENUE FROM OPERATIONS (Amount in Rupees)Revenue from operations As at 31st March 2013 As at 31st March 2012A. Interest Income
Interest from loan portfolio 220,226,106 160,125,492 Interest on Fixed Deposit 8,552,117 7,410,511 Interest on Staff Loan 283,234 213,905 Total (A) 229,061,456 167,749,908
B. Other Financial Services: Processing fee (Net of service tax) 14,634,861 11,281,132 Income from loan servicing 3,662,228 3,842,818 Other operating income 452,154 3,710,074
Total (B) 18,749,242 18,834,024 Total (A + B) 247,810,699 186,583,932
NOTE 19: OTHER INCOME (Amount in Rupees)Other Income As at 31st March 2013 As at 31st March 2012Consulting Fees (IL research) – 2,703,617 Advertising Income – 1,851,308 Reimbursement of training expenses 1,612,366 557,015 Other Misc. Income 46,780 123,327 Fees for research work 2,120,519 – Total 3,779,665 5,235,267
62
NOTE 20: EMPLOYEE BENEFIT EXPENSES (Amount in Rupees)Employee Benefit Expenses As at 31st March 2013 As at 31st March 2012Salaries, incentives and commission 70,961,726 71,889,688 Contributions to - Provident fund 4,071,274 4,581,397 ESIC 1,891,245 1,954,521 Labour Welfare 18,174 19,416 Leave Encashment (462,883) 378,437 Exgratia 520,327 710,998 Insurance-Staff 525,457 386,919 Retirement Benefit 672,885 1,064,386 Training Expenses 275,713 585,450 Recruitment Charges 260,690 228,870 MD Remuneration 4,001,602 3,538,895 Bonus 3,500,000 – Staff welfare expenses 2,118,132 1,635,261 Total 88,354,343 86,974,237
NOTE 21: FINANCE COST (Amount in Rupees)Finance Cost As at 31st March 2013 As at 31st March 2012Interest expense 68,056,224 37,338,289 Other borrowing costs 11,481,032 3,792,447 Total 79,537,256 41,130,736
NOTE 22: LOAN LOSS PROVISION (Amount in Rupees)Loan Loss As at 31st March 2013 As at 31st March 2012Loan Loss Expenses 10,474,574 16,860,810 Total 10,474,574 16,860,810
NOTE 23: OTHER EXPENSES (Amount in Rupees)Other Expenses As at 31st March 2013 As at 31st March 2012Administrative Expenses :- Audit fees Refer note no. 33 796,163 628,710 Banking Charges 1,515,117 1,051,092 Electricity Expenses 1,285,379 1,080,369 Brokerage 147,000 116,000 Insurance Charges 1,850,379 1,518,767 Legal Charges 785,928 55,431 Loss on Sale of Asset 1,462,446 168,737 Memberships & Subscription 355,585 376,602 Office Expenses 1,370,427 754,364 Other Miscellaneous Expense 1,420,952 1,323,140 Portfolio Loss 930,870 68,440 Printing & Stationery 3,802,005 3,410,234 Professional Charges 19,676,680 12,095,698 Rent - Premises 9,945,775 9,207,867 Repairs and maintenance 2,319,033 1,494,459 Telephone and Internet 1,981,361 2,094,522 Transportation 330,682 56,653 Traveling 4,822,169 3,774,012 Total 54,797,949 39,275,095
63
NOTE 24: BASIC & DILUTED EARNINGS/(LOSS) PER SHARE: (Amount in Rupees)Particulars As at 31st March 2013 As at 31st March 2012Net Profit/(Loss) attributable to equity shareholders [A] (Rs) 11,629,784 6,555,035 Weighted Average number of equity shares issued [B] 51,679,913 40,560,926 Basic Earnings/(Loss) per share [A/B] (Rs.) 0.23 0.16
NOTE 25: EMPLOYEE BENEFIT Leave encashment valuation report as at 31st March 2013I Assumptions As at 31st March 2013 As at 31st March 2012Mortality Rate LIC (1994-96) LIC (1994-96)Discount Rate 8.00% 8.00%Salary escalation rate 5.50% 5.00%Rate of return (expected) on plan assets 0.00% 0.00%Withdrawal rate 4.00% 4.61%Retirement age 60 60Expected average remaining service 16.11 15.09I. Data information Number of members 368 404Total monthly salaries 2,729,267 3,009,094Average age 30.24 29.53II Changes in present value of obligations PVO at beginning of year 130,011 221,530Interest cost 1,969 6,781Current Service Cost 674,889 655,960Benefits Paid (210,795) (273,523)Actual (gain)/loss on obligation (143,225) (480,737)PVO at end of year 452,849 130,011III Changes in fair value of plan assets Fair Value of Plan Assets at beginning of year – –Expected Return on Plan Assets – –Contributions 210,795 273,523 Benefit Paid (210,795) (273,523)Actuarial gain/(loss) on plan assets – –Fair Value of Plan Assets at end of year – –IV Fair Value of Plan Assets Fair Value of Plan Assets at beginning of year – – Actual Return on Plan Assets – – Contributions 210,795 273,523 Benefit Paid (210,795) (273,523)Fair Value of Plan Assets at end of year – – Funded Status (including unrecognised past service cost) (452,849) (130,011)Excess of actual over estimated return on Plan Assets – – V Actuarial Gain/(Loss) Recognized Actuarial Gain/(Loss) for the year (Obligation) 143,225 480,737 Actuarial Gain/(Loss) for the year (Plan Assets) – – Total Gain/(Loss) for the year 143,225 480,737 Actuarial Gain/(Loss) recognized for the year 143,225 480,737 Unrecognized Actuarial Gain/(Loss) at end of year – – VI Amounts to be recognized in the balance sheet and statement of P &L PVO at end of year 452,849 130,011 Fair Value of Plan Assets at end of year – – Funded Status (452,849) (130,011)Unrecognized Actuarial Gain/(Loss) – – Net Asset/(Liability) recognized in the balance sheet (452,849) (130,011)
64
VII Expense recognized in the statement of P & L Current Service Cost 674,889 655,960 Interest cost 1,969 6,781 Expected Return on Plan Assets – – Net Actuarial Gain/(Loss) recognized for the year (143,225) – Expense recognized in the statement of P & L 533,633 (480,737)VIII Movements in the Liability recognized in Balance Sheet Opening Net Liability 130,011 221,530 Expenses as above 533,633 182,004 Contribution paid (210,795) (273,523)Closing Net Liability 452,849 130,011 X Revised Schedule VI Current Liability 242,489 1,212,987 Non-Current Liability 412,216 117,283 IX Short Term Compensated Absence Liability Valuation date. 31st March 2013 31st March 2012No of Days 122 3,234Amount * 201,856 1,200,259* Not included in the Net Liabilities under Item No. VIII
Gratuity: Gratuity provision has been made based on the actuarial valuation done as at the year end. The details of actuarial valuation as provided by the independent actuary are as follows:
Gratuity Valuation report as at 31st March 2013 Assumptions As at 31st March 2013 As at 31st March 2012Mortality Rate LIC (1994-96) LIC (1994-96) Discount Rate 8.00% 8.00%Salary escalation rate 5.50% 5.00%Rate of return (expected) on plan assets 0.00% 0.00%Withdrawal rate 4.00% 4.61%Benefit: as per Gratuity ACT with Limit = 1,000,000 1,000,000Retirement age (Years) 60 60Expected average remaining service 16.11 15.09I. Data information Number of members 368 404Total monthly salaries 2,729,267 3,009,094Average age (years) 30.24 29.53Average Service (years) 2.35 2.01II Changes in present value of obligations PVO at beginning of year 2,832,766 2,018,404 Interest cost 223,231 151,471 Current Service Cost 1,112,743 990,651 Benefits Paid (84,758) (250,024)Actuarial (gain)/loss on obligation (663,089) (77,737)PVO at end of year 3,420,893 2,832,766 III Changes in fair value of plan assets Fair Value of Plan Assets at beginning of year – – Expected Return on Plan Assets – – Contributions 84,758 250,024 Benefit Paid (84,758) (250,024)Actuarial gain/(loss) on plan assets – – Fair Value of Plan Assets at end of year – – IV Fair Value of Plan Assets Fair Value of Plan Assets at beginning of year – – Actual Return on Plan Assets – –
65
Contributions 84,758 250,024 Benefit Paid (84,758) (250,024)Fair Value of Plan Assets at end of year – – Funded Status (including unrecognised past service cost) (3,420,893) (2,832,766)Excess of actual over estimated return on Plan Assets – – V Actuarial Gain/(Loss) Recognized Actuarial Gain/(Loss) for the year (Obligation) 663,089 77,737 Actuarial Gain/(Loss) for the year (Plan Assets) – – Total Gain/(Loss) for the year 663,089 77,737 Actuarial Gain/(Loss) recognized for the year 663,089 77,737 Unrecognized Actuarial Gain/(Loss) at end of year – – VI Amounts to be recognized in the balance sheet and statement of profit & loss PVO at end of year 3,420,893 2,832,766 Fair Value of Plan Assets at end of year – – Funded Status (3,420,893) (2,832,766)Unrecognized Actuarial Gain/(Loss) – – Net Asset/(Liability) recognized in the balance sheet (3,420,893) (2,832,766)VII Expense recognized in the statement of P & L Current Service Cost 1,112,743 990,651 Interest cost 223,231 151,471 Expected Return on Plan Assets – – Net Actuarial Gain/(Loss) recognized for the year (663,089) (77,737)Expense recognized in the statement of P & L 672,885 1,064,386 VIII Movements in the Liability recognized in Balance Sheet Opening Net Liability 2,832,766 2,018,404 Expenses as above 672,885 1,064,386 Contribution paid (84,758) (250,024)Closing Net Liability 3,420,893 2,832,766 IX Revised Schedule VI Current Liability 912,602 763,034 Non- Current Liability 2,508,291 2,069,732
66
NO
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: M
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(Am
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As
at 3
1st M
arch
, 201
2 Tr
ansa
ctio
n
Ent
erpr
ise
Ent
erpr
ise
Key
Li
st o
f ent
erpr
ises
E
nter
pris
e E
nter
pris
e Li
st o
f ent
erpr
ises
w
here
con
trol
th
at e
xerc
ises
M
anag
emen
t in
whi
ch K
MP
w
here
con
trol
th
at e
xerc
ises
in
whi
ch K
MP
ex
ists
co
ntro
l P
erso
nnel
ex
erci
ses
sign
ifica
nt
exis
ts
cont
rol
exer
cise
s si
gnifi
cant
influ
ence
in
fluen
ce
Sw
adh
aar
Fin
Ser
ve E
mp
loye
e W
elfa
re T
rust
:
Tow
ards
Exp
ense
s
–
–
–
–
–
–
–
To
war
ds In
vest
men
t
–
–
–
–
–
–
–
To
war
ds in
tere
st fr
ee L
oan
(Re-
inve
sted
in
Issu
e of
Sw
adha
ar’s
Sha
re C
apita
l (In
cl. S
ecur
ity P
rem
ium
)
–
–
–
–
2131
8375
–
– A
ccio
n In
tern
atio
nal
:
G
uara
ntee
Fee
–
2
,44
4,0
49
–
–
–
2
,277
,29
0
–A
ccio
n T
ech
nic
al A
dvi
sors
Ind
ia:
Pro
fess
iona
l Cha
rges
–
1
7,16
8
–
–
–
61,
768
–
Tech
nica
l Ass
ista
nce
–
5,5
29,9
46
–
–
–
3
,361
,492
–A
ccio
n T
rain
ing
Exp
ense
s re
imb
urs
emen
t:
Trai
ning
exp
ense
reim
burs
emen
t rec
eive
d
–
(847
,75
4)
–
–
–
(1
,16
9,87
3)
–M
anag
eria
l Rem
un
erat
ion
to
Ms.
Vee
na
Man
kar
–
–
3,3
34,
138
–
–
–
–
Sw
adh
aar
Fin
Acc
ess:
Ren
t
–
–
–
– –
–
–
Dep
osit
–
–
–
–
–
–
–Tr
aini
ng E
xpen
se
–
–
–
172
,70
9
–
–
46,
138
Trad
emar
k &
Log
o ch
arge
s
–
–
–
– –
–
–
Ele
ctric
ity
–
–
–
–
–
–
987
Prin
ting
& s
tatio
nery
–
–
–
7
2,6
40
–
– –
Pro
fess
iona
l Cha
rges
–
–
–
151
,082
–
– –
Sh
are
Cap
ital
:
Rec
eive
d fro
m M
s. V
eena
Vik
as M
anka
r Joi
ntly
with
Mr.
Vika
s B
hagw
an M
anka
r
– –
– –
– –
ES
OP
Gra
nted
to M
s. V
eena
Man
kar (
No
of o
ptio
ns)
–
–
–
– –
–
–
N
ote:
Rei
mbu
rsem
ent r
ecei
ved
figur
es a
re s
how
n in
bra
cket
s.
Ou
tsta
nd
ing
rec
eiva
ble
/ p
ayab
le w
ith
rel
ated
par
ties
:
(A
mou
nt in
Rup
ees)
A
s at
31s
t Mar
ch, 2
013
As
at 3
1st M
arch
, 201
2 Tr
ansa
ctio
n
Ent
erpr
ise
Ent
erpr
ise
Key
Li
st o
f ent
erpr
ises
E
nter
pris
e E
nter
pris
e Li
st o
f ent
erpr
ises
w
here
con
trol
th
at e
xerc
ises
M
anag
emen
t in
whi
ch K
MP
w
here
con
trol
th
at e
xerc
ises
in
whi
ch K
MP
ex
ists
co
ntro
l P
erso
nnel
ex
erci
ses
sign
ifica
nt
exis
ts
cont
rol
exer
cise
s si
gnifi
cant
influ
ence
in
fluen
ce
Sw
adh
aar
Fin
Ser
ve E
mp
loye
e W
elfa
re T
rust
:
Exp
ense
s re
ceiv
able
(23,
958)
–
–
–
(2
3,95
8)
–
–
Inve
stm
ent
(4
6,55
9)
–
–
–
(46,
559)
–
–
Loan
s &
Adv
ance
s G
iven
(57,
395
,625
) –
–
–
(5
7,3
95,6
25)
–
–
Acc
ion
Inte
rnat
ion
al:
–
7
68,
973
–
–
–
46
9,92
2
–
Acc
ion
Tec
hn
ical
Ad
viso
rs In
dia
:
P
rofe
ssio
nal C
harg
es
–
–
–
–
–
55,
150
–
Te
chni
cal A
ssis
tanc
e
–
–
–
–
–
–
–
A
ccio
n T
rain
ing
Exp
ense
s re
imb
urs
emen
t:
–
(1
5,10
3)
–
–
–
(2
36,
892
) –
M
anag
eria
l Rem
un
erat
ion
Pay
able
–
–
–
– –
–
–
Sw
adh
aar
Fin
Acc
ess:
Ren
t
–
–
–
– –
–
–
Dep
osit
–
–
–
–
–
–
–Tr
aini
ng E
xpen
se
–
–
–
1
67,4
28
–
–
–
Trad
emar
k &
Log
o ch
arge
s
–
–
–
– –
–
–
Ele
ctric
ity
–
–
–
–
–
–
–P
rintin
g &
sta
tione
ry
–
–
–
–
– –
–P
rofe
ssio
nal C
hare
ges
–
–
–
5
9,25
3
–
–
–
Not
e: R
ecei
vabl
e fig
ures
are
sho
wn
in b
rack
ets.
68
NOTE 27: FOREIGN CURRENCY TRANSACTIONS Expenditure in Foreign Currency (on accrual basis): (Amount in Rupees)Particulars As at 31st March 2013 As at 31st March 2012Guarantee Fee payment 2,444,049 1,962,192Travel 31,658 154,508Total 2,475,707 2,116,700
NOTE 28: SEGMENT REPORTING The company is primarily engaged in the business of Micro financing. All the activities of the Company revolve around the main business. Further, the company does not have any separate geographic segments . As such there are no separate reportable segments as per AS-17 “Segmental Reporting” NOTE 29: MSMED Act, 2006 Company has sent letters to suppliers to confirm whether they are covered under Micro, Small and Medium Enterprises Act, 2006 as well as they have filed required memorandum with the prescribed authorities. Out of the letters sent to the parties, some confirmations have been received till the date of finalization of Balance Sheet. Accordingly disclosure treatment has been done. Particulars As at 31st March 2013Principal amount due to suppliers under MSMED Act as at year end Nil
NOTE 30: CONTINGENT LIABILITIES
Claims against the company not acknowledged as debts are Nil
NOTE 31: CAPITAL COMMITMENTS
Estimated amount of contracts remaining to be executed on capital accounts and not provided for Rs Nil (Previous year Rs NIL).
NOTE 32: IMPAIRMENT OF ASSET In the opinion of the board of directors, all current assets, loans & advances would be realizable at least of an amount equal to the amount at which they are stated in the balance sheet. Hence no impairment loss has been recognized on fixed assets.
NOTE 33: AUDITOR’S REMUNERATION (Amount in Rupees)Particulars As at 31st March 2013 As at 31st March 2012As Auditors: Statutory Audit Fees 630,000 450,000 Tax Audit Fees 120,000 120,000In other capacity: Other tax related Services 100,000 102,000 Any other (including Certification) 121,034 60,000 Out of pocket expenses 20,509 9,393 Service Tax 122,555 76,364Total 1,114,098 817,757
NOTE 34: ANNEX I: ADDITIONAL DISCLOSURE IN NBFC-ND-SI
A. CRARItems Current Year Previous YearCRAR (%) 34.33% – CRAR - Tier I Capital (%) 34.17% – CRAR - Tier I Capital (%) 0.16% – Note: FY 2012-13 is first year for the company as systematic important company (NBFC-ND-SI)
69
B. EXPOSURES: Exposure to Real Estate SectorCategory Current Year Previous Yeara) Direct exposure
i. Residential Mortgages – – Lending fully secured by mortgages on residential property that is or will be occupied by the borrower or that is rented; (Individual housing loans up to Rs.15 lakh may be shown separately) – –
ii. Commercial Real Estate – – Lending secured by mortgages on commercial real estates (office buildings, retail space, multipurpose commercial premises, multi-family residential buildings, multi-tenanted commercial premises, industrial or warehouse space, hotels, land acquisition, development and construction, etc.). Exposure would also include non-fund based (NFB) limits; – –
iii. Investments in Mortgage Backed Securities (MBS) and other securitised exposures a. Residential, – – b. Commercial Real Estate. – –
b) Indirect Exposure Fund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs). – –
C. ASSET LIABILITY MANAGEMENT: Maturity pattern of certain items of assets and liabilities (Amount in Rupees) 1 day to 30/31 Over 1 month Over 2 months Over 3 months Over 6 months Over 1 year Over 3 years Over 5 years Total days (1 Month) to 2 months to 3 months to 6 months to 1 year to 3 years to 5 years (As on Mar’13)Liabilities(L) Borrowings from Banks 55,394,896 33,734,280 46,179,195 106,452,575 234,195,518 363,399,389 37,915,493 – 877,271,345 Market Borrowings – – – – – – – – – Assets (A) Advances 53,964,179 44,333,541 42,766,970 119,237,801 209,833,947 348,216,177 1,584,187 123,853 820,060,654 Investments – – – – – – – 546,559 546,559
NOTE 35: As required in terms of paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 FY: 2012-13Particulars Amount Outstanding Amount OverdueLiabilities side: 1. Loans and advances availed by the non-banking financial company inclusive of interest accrued thereon but not paid:
a) Debentures: Secured Nil Nil : Unsecured (Other than falling within the meaning of public deposits *) b) Deferred Credits Nil Nil c) Term Loans 877,271,345 Nil d) Inter-corporate loans and borrowing Nil Nil e) Commercial Paper Nil Nil f) Other Loans (specify nature) Nil Nil
* Please see Note 1 below Assets side : Amount outstanding 2. Break-up of Loans and Advances including bills receivables (Other than those included in (4) below) :
a) Secured Nil b) Unsecured 808,024,462
3. Break up of Leased Assets and stock on hire and other assets counting towards AFC activities Nil i) Leased assets including lease rentals under Sundry debtors :
a) Financial lease Nil b) Operating lease Nil
ii) Stock on hire including hire charges under sundry debtors: a) Assets on hire Nil b) Repossessed Assets Nil
iii) Other loans counting towards AFC activities a) Loans where assets have been repossessed Nil b) Loans other than (a) above Nil
70
Assets side : Amount outstanding 4. Break-up of Investments:
Current Investments: 1. Quoted Nil
i) Shares : (a) Equity (b) Preference ii) Debentures and Bonds Nil iii) Units of mutual funds Nil iv) Government Securities Nil v) Others (Please specify) Nil
2. Unquoted Nil i) Shares : (a) Equity (b) Preference ii) Debentures and Bonds Nil iii) Units of mutual funds Nil iv) Government Securities Nil v) Others (Please specify) Nil
Long Term Investments : 1. Quoted Nil
i) Shares : (a) Equity (b) Preference ii) Debentures and Bonds Nil iii) Units of mutual funds Nil iv) Government Securities Nil v) Others (Please specify) Nil
2. Unquoted Nil i) Shares : (a) Equity 500,000 (b) Preference ii) Debentures and Bonds Nil iii) Units of mutual funds Nil iv) Government Securities Nil v) Others (Corpus Fund in Employee welfare Trust) 46,559
5. Borrower group-wise classification of assets financed as in (2) and (3) above : Please see Note 2 below Category Amount net of provisions Secured Unsecured Total 1. Related parties **
a) Subsidiaries Nil Nil Nil b) Companies in the same group Nil Nil Nil c) Other related parties Nil Nil Nil
2. Other than related parties Nil 808,024,462 808,024,462 Total – 808,024,462 808,024,462 6. Investor group-wise classification of all investments (current and long term) in shares and securities (both quoted and unquoted): Please see note 3 below Category Market Value/Break up or fair value or NAV Book Value (Net of Provisions)1. Related parties **
a) Subsidiaries Nil Nil b) Companies in the same group c) Other related parties Nil Nil
2. Other than related parties 506,806 506,806 Total 506,806 506,806 ** As per Accounting Standard of ICAI (Please see Note 3)
71
7. Other information (Please see Note 4) Particulars Amount in Rupees i. Gross Non-performing Assets
a) Related Parties Nil b) Other than related parties Nil
ii. Net Non-Performing Assets a) Related Parties Nil b) Other than related parties Nil
iii. Assets acquired in satisfaction of debt Nil Notes: 1. As defined in Paragraph 2(1) (xii) of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. 2. Provisioning norms shall be applicable as prescribed in Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve
Bank) Directions, 2007. 3. All Accounting Standards and Guidance Notes issued by ICAI are applicable including for valuation of investments and other assets as also assets
acquired in satisfaction of debt. However, market value in respect of quoted investments and break up/fair value/NAV in respect of unquoted investments should be disclosed irrespective of whether they are classified as long term or current in column (5) above.
4 The provisioning norms followed by the Company are more stringent than those prescribed by the Reserve Bank of India are as follows: No. of days portfolio outstanding overdue Provision (% on outstanding principal) 0-30 0.25% 31-60 10% 61-120 30% 121-180 60% >180 100% Overdue debts outstanding for more than 180 days are written off.
NOTE 36: DISCLOSURES ON SECURTIZATION (Amount in Rs. Lakhs)Particulars Mosec XXX Mosec XXXI Mosec XXXII Swahit 2012 Series I1. No of SPVs sponsored by the NBFC for 1 1 1 1
securitisation transactions2. Total amount of securitised assets as per books of the
SPVs sponsored by the NBFC 760.39 1754.97 518.99 354.913. Total amount of exposures retained by the NBFC to comply with MRR as on the date of balance sheet
a) Off-balance sheet exposures * First loss – – – – * Others – – – – b) On-balance sheet exposures * First loss (In the form of Fixed Deposits) 104.6 197.5 52.0 100 * Others – – – –
4. Amount of exposures to securitisation transactions other than MRR a) Off-balance sheet exposures i) Exposure to own securitisations * First loss – – – – * loss – – – – ii) Exposure to third party securitisations * First loss – – – – * Others – – – – b) On-balance sheet exposures i) Exposure to own securitisations * First loss – – – – * Others – – – – ii) Exposure to third party securitisations * First loss – – – – * Others – – – –
72
NOTE 37: PREVIOUS YEAR FIGURES
As notified by Ministry of Corporate Affairs, Revised Schedule VI under the Companies Act, 1956 is applicable to the Financial Statements for the financial year commencing on or after 1st April, 2011. Accordingly, the financial statements for the year ended March 31, 2012 and March 31, 2013 are prepared in accordance with the Revised Schedule VI. The amounts and disclosures included in the financial statements of the previous year have been reclassified to confirm to the requirements of Revised Schedule VI.
For and on behalf of the Board of Swadhaar Finserve Pvt Ltd
Lalita D Gupte Veena Mankar Anshu MundhraChairperson Managing Director Company Secretary Place : Mumbai Date : June 27th 2013
73
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Front & Back Cover Image Courtesy:Vibhuti Bhandari
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Swadhaar FinServe Pvt. Ltd.Tenement 1/3 & 1/4, Old MHB Colony, Anand Nagar, Santacruz (E), Mumbai – 400055
T: +91.22.2626.1200 F: +91.22.2626.1212/13
info@ swadhaar.comwww.swadhaar.com
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3 4
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5
7 8
10
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Swadhaar FinServe Pvt. Ltd.Tenement 1/3 & 1/4, Old MHB Colony, Anand Nagar, Santacruz (E), Mumbai – 400055 T: +91.22.2626.1200 F: +91.22.2626.1212/13 info@ swadhaar.comwww.swadhaar.com
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