Earnings Update Q3FY16 [Company Update]

8/20/2019 Earnings Update Q3FY16 [Company Update]

1/50

H909 0:10;9 :19 9

P

SKS M icrofinance Limited.inme 19coon, bloc` A. 5-3-1192

509 015..0,0090920, 902911 11) 4452 2;001

r.1.0,59L,20H2I C R O F I N A N C E

January 27, 2016

The SecretaryBSE LimitedPhiroze Jeejeeboy TowersDalai StreetMumbai — 400001.

The Vice President - ListingNational Stock Exchange of India LimitedExchange PlazaBandra- Kuria ComplexMumbai — 400051.

Dear Sir/Madam,

Sub: Earnings Update.

This is to inform you that the Board of Directors of the Company at its meeting held today

i.e. January 27, 2016, had approved the un-audited financial results for the quarter ended

December 31, 2015 and the same have been sent to you.

A copy of the Earnings Update for the aforesaid quarter, which we plan to host on ourwebsite t\ sin 61,1 , ern is attached for your information and records.

We request you to take the above on record.

Thanking you,


2/50

iglillaffirtaArdl Nam

4 S K SM I C R O F I N N C E

EARNINGS UPDATE Q3FY16

JANUARY 2016

SKS Microfinance LimitedBSE: 533228 • NSE: SKSMICROCorporate Identity No. L65999MH2003PLC250504www.sksindia.com

This presentation is solely for viewing. No part of it may be circulated, quoted, or reproduced for distribution without prior written approval from SKS Microfinance Limited.


3/50

CONTENTS

• Hicrui ,f

• Future Strategy

Operational Highlights

Review of Financials

• Financial Architecture

• Capital Structure

Annexures


4/50

H IGH LIGH TS OF Q3FY16

Reduced interest rate charged to borrowers from 20.75% to 19.75% on income-generating loans extended on

or after 7th Dec 2015. W ith this reduction, SKS continues to charge the lowest rate among private MFIs in the

world.

Availed Rs.100 Crs refinance from MU DRA at 10% per annum.Incremental drawdowns of Rs.1,478 Crs. in Q3FY16 (Rs. 931 Crs in Q3FY15), excluding origination under

managed loans. SKS also originated Rs.260 Crs. loans under managed portfolio in Q 3FY16 .

Completed securitization transactions of Rs.616 Crs rated as 'AA (SO)' and issued commercial paper of

Rs.100 Crs. rated as 'A1+ '.

Loan disbursement of Rs. 2,980 Crs. in Q3FY16 (growth of 93% YoY and 12% Q oQ)..

Non-AP P ortfolio grew by 93% (YoY ) and 13% (QoQ) to R s.6,177 Crs. as of Dec 31, 2015.

Marginal Cost of Borrowings* for Q3 FY 16 at 9.98% an d W eighted Average cost of Borrowings# (historical) at

11.5% for Q3FY16.

The un-availed deferred tax benefit of Rs. 389 C rs. and MA T credit of Rs. 71 Crs. will be available to offset tax

on future taxable income.

PAT of Rs.79.5 Crs. in Q3FY 16 (growth of 94% YoY and 2 % Qo Q ).Networth of Rs.1,292 Crs. and capital adequacy at 23.9% as of Dec 31, 2015.

Cash & Cash equivalent^ of Rs.886 Crs.

Note:A Excluding security deposit# including processing fee of Rs. 1.3 Crs paid on Loans on Ba lance sheet in Q3FY1 6.* Includes on and off b/s borrowings, excluding processing fees.Figures rounded off to the nearest digit across the presentation. Figures and ratios have been regrouped wherever necessary.


5/50

AP exposure of Rs. 1,360crore written off/ providedfor

Non—AP Gross LoanPortfolio

2,837

1,185

3,503

3,526

2,87

1,484

Return To Profitabilityost Structure Optimization

Branches 2,403 1,255 -48%

21 60%

-65°/0

43 52%

Other Opex (INR 1crore)

Headcount 5,735 ,932

89ersonnel Cost(INR crore)

(13.6)Bn

FY13(3.0) Bn

FY14

Q3FY11 4FY14 ar.

70

BUILDING BLOCKS OF TURNAROUND POST AP MFI CRISIS

hr cleans ed Sdpwv tide Shock Managed Gt own , R esoi

Lirawclown .-

FY 12FY 13 FY 14 Q3FY11 3FY12 4FY14

4


6/50

Technology Upgraded

attering ofIn-house lendingsystem

rich'connectivitywith daily datareceipt (1,215remote

Installed ocations)omputers at

all brancheswith In-Houselendingsystem

cars with

tablets

_200 012 014 -15 2015 -16

74.5%

61.1%46.9%

DURABLE FOUNDATION FOR SUSTAINABLE GROW TH (1/2)Market Share Regained

Non-AP Portfolio Ou tstanding

Oct'10 une'12 ep'15Sep-15 data as per MFIN; excludes data for Bandhan bank

Capital ReinforcedINR Crs.

SKSDisbursementshare 19 * inQ2FY16

3%

* Industrydisbursementsfor Q2FY16 isRs.14,395 crs.

Net worth - Rs. 1,292 crs

CAR - 23.9% (RBI Requirement

15%)

Cost to Income

FY14 FY15 Q3FY16

Margin al Cost ofBorrowing*

12.6% 1 9% 0.0%

I IFY14 FY15 Q3FY16

# On and Off balance sheet loans including processing fee

5


7/50

Lower State Concentration

Top three states share in GLP

53

45

Sep-10 ec-15

GLP: Gross Loan Portfolio

DURABLE FOUNDATION FOR SUSTAINABLE GROWTH (2/2)

Political Risk Mitigation through interest rate reduction

29.25% .8% reduction in one year

24.55%

Oct-10 an-11 ct-14 ul-15 ct-15 ec-15

Interest rate on income generation loans

Lowest interest ratecharged by any privatesector MFI in the globe

:19.75%

Reduced Borrowing Dependence

Share of borrowing from top 5 banks

52%

Mar-13 Dec-15

Term loan and cash credit facilities

6


8/50

CLARITY ON MAJOR UNCERTAINTIESPOST AP MFI CRISIS


9/50

Concerns Clarity

Will there be multipleregulators? Regulatory clarity — RBI to be the sole regulator

Priority sector status continuesMFIs are the only indirect priority sector dispensation

unding uncert

Will there be contagion?

Has the operating modelbeen challenged?

What will be the economicsoorteguratetinteres

H ..:rate tegitrielx

No contagion• Since past 5 years no other state has followed suit

• Collection efficiency maintained despite disbursements being a fractionof collections during the wind-down mode i.e. Oct'2010 to June'2012.

No alternative credit delivery model has gained currency.

RoA of 3-4% on a steady-state basis

WHAT DOESN'T KILL YOU. MAKES YOU STRONGER - POSITIVEDEVEI OPMENTS POST AP MFI CRISIS

8


10/50

INR crs

OPERATING MODEL VAILIDITY ESTABLISH ED

Collection efficiency of 97 during wind-down mode ispels ever greening myth

Non-AP

LoanPortfolio

Q2FY11 3FY11 4FY11 1FY12 2FY12 3FY12 4FY12 1 FY13

1.9 million borrowers repaid loanswithout incremental lending

in Millions

No. of non-AP borrowers who repaid

on-time during this period5.2

No. of non-AP mem bers who availedloans during this period 3.3

No. of non-AP members who didn'treceive any incremental credit fromSKS during this period

1.9

Internal generation and not incrementaldebt ds prompt repayment

MFI Industry non- AP PortfolioOutstanding (Rs Cr)

Ocil 0 28,300

June'12 14,600

9


11/50

COMPETITIVE LANDSCAPE CHANGES TO SKS' ADVANTAGE

InstitutionalInfrastructure

Credit Bureaus-

- Equifax & Highmark arefunctional

- 95% of MFIs now useCB reports fordisbursements

;Ar

Nn of borrower record Or (--No. of loan records (live) — 4.3 CroreNo. of borrower records (live) — 2.9 Crore

No. of MFIs reporting — 125 (Incl.all 45NBFC-MFIs)Frequency of sharing the records — Wee kly

Market ShareDynamics

2nd , 3m 4m and 5thlargest MFI playerswith 40% Non-APmarket share areunder CDR.

INR crore

Sector outstandingNon-AP Portfolio

Oct '10 — 28,300

Mar'14 — 24,615Mar'15- 40,138

Sep'15 -36,569#

* Source: Equifax (as on Nov 2015)# Sep-15 data as per MFIN; excludes data for Bandhan bank 10


12/50

Marginal Cost ofborrowings: 10.0%.Portfolio funded by debt:80%

STEADY-STATE ROA OF 4 CAN BE TARGETED

Interest rateProcessing fee

21.5

Financial cost perating rov. & axes rofit evenuecost rite-off

*interest rate charged is 19.75% for new loans effective from 7th Dec'15#Processing fee is calculated based on weighted average portfolio mix of 65% IGL(1 Yr. loan) and 35% LTL (2 Yr. loan).

1 1


13/50

Medium-Term TargetsEarnings

Assets*

MFI

Non - MFINon-MFI Actuals — Q3FY16

CREATIVE DISTURBANCE TO ASSET-REVENUE-EARNING CORRELATION

*Note: Core microfinance will continue to be more than 90% of credit assets 2


14/50

TR TEGY


15/50

A COMPARATIVE STUDY OF STRUCTURAL OPPORTUNITIES & CHALLENGES

Access to low cost funds/deposits CASA can be competitive only in the longBank accounts to customers termPolitical risk mitigation

x

CRR and SLR dragNo PSL benefit on bank borrowingsInterbank borrowings capped at 3x NetWorth

SFB x Cannot act as Business Correspondent

x

(BC) to other banksInvestment in technology, infrastructureand functional capabilities for bankingHuge domestic capital raise /dilution

Generate Agri-allied/ PSL for banksLeverage Business Correspondent (BC)model to offer bank accounts and saving

products to customers without CRR andSLR drag

x olitical risk beyond a sizex Cannot access deposits

NBFC-MFI

14


16/50

Access to refinance

SFB - MISSED OPPORTU NITY BUT NOT A SETBACK

Rationale for SFB application Mitigants / Counter Strategies

Sub-20% interest rate mitigates political risk• SKS b ecomes the lowest cost lender with 19.75%

interest rate

Political Risk mitigation

Access to refinance is now a vailable to NBFCs also• SKS has access ed Rs.100 Cr refinance from

MUDRA @ 10%

Bank accounts forcustomers• Migration to cashless

regime to reduce opex

• Seed Jan-Dhan accounts of members• Open bank accou nts for mem bers as BC for other

banks

IattgaNiisdniSidiXitks.,r4

• Lowest borrowing cost in the sector• Highest rating in the MFI sector - Al + for short

term and A+ for long term• Strong Balance Sheet : Strong solvency andsufficient liquidity

• Relationship premium from credit grantors

Downwa rd adjustment ofrisk premium to reduce

cost of borrowings

15


17/50

10

Marginal Sub - 0 Cumulative Cost to Annualisedcost of Interest next 2 Income earningsBorrowing Rate to

Borroweryearssalaryincrease tofield staff

Ratio growth

Balance sheet Low marginal • Productivity & Technology AUMstrength cost of Efficiency initiatives growth

tellar borrowing Scale Operatingrepayment Scale & leveragerecord

Judicioussources mix

Efficiency Non-Loanrevenue

20

THE MOST EFFICIENT MFI IN THE GLOBE

Medium Term Strategic Priorities.

16


18/50

OPERATIONAL H IGH LIGH TS


19/50

OPERATIONAL HIGHLIGHTSParticulars

e , riterL ---,TatPL

Employees (i) + (ii) + (iii) + (iv) + (v) + (vi)

• Field Staff (i) + (H) +(iii) + (iv) + (v)- Sangam Managers* (i)- Sangam Manager Trainees(ii)

- Branch Management Staff (iii)

- Area Managers (iv)

- Regional Office Staff (v)

• Head Office Staff (vi)Members in non-AP States (in '000)

- Members added (in the quarter) (in '000)

Active borrowers in non-AP States (in '000)

- Active borrowers added (in the quarter) (in '000)

No. of loans disbursed (in '000)

Disbursements (for the quarter) (INR Crs.)

Gross loan portfolio - Non-AP (INR Crs.) (A+B+C)

• Loans outstanding (A)• Securitized (B)• Managed loans (C)

Operational Efficiency - Non-AP :

Off-take Avg (Disbursements/ No of Loans disbursed) (INR)

Gross loan portfolio/Active Borrowers (INR)

Gross loan portfolio/ No. of Sangam Managers (Rs. '000)

Active borrowers / No. of Branches

Active borrowers / No. of Sangam Managers

Dec-14

`-)8 4 ,,

9,089 I

8,812

5,104 I

446 1

2,185 1

90 I987

1277

4,274 1

200 13,540 I

272 I

1,271 I

1,544 1

3195i

2,725 1289 I

1811

112,152

9,024 17,196 I

3,111 I

797

1

Dec-15

4-)(-; j

11,086

10,794

6,415

654

2,537144

1,044292

4,957

540

4,158537

1,899

2,980

6,177

5,035

557

586

15,70114,857

10,6113,563

714

I MY%

22%

I2%

1 6%

I 7%

I 6%I 0%

6%11 %

1 6%

1 170%

I 7%I 8%1

49%11 93%

I 3%I 5%

3%

223%11

1rI 9%I 5%I 7%1 5%1

-10%

6%

Sep-15

4i, C) *-

10,782

10,490

6,066

7362,506

1371,045

292

4,592

537

3,821552

1,988

2,665

5,462

4,753

179531

13,414

14,295

10,0113,367

700

0

QoQ%

3%3%

-11%

1%5%

0%

8%

1%9%

-3%

-4%

12%

13%

6%

2 112 ° /:/

17

4%

6%

6%

2%

*Sangam Managers are our loan officers who manage our centers (also called Sangams). As of Decemberl 5, we had 5,822 Sangam Managers in Non:AP States # Incl. 44 Gold branches 8


20/50

orste APduringrisis MFI crisis

Best

PRODUCTIVITY GAINS & COST EFFICIENCY ENABLE SKS TO LEVERAGE TH E CONDUCIVEENVIRONMENT

Productivity - Non-AP:489*

3,640*

10,299*

6.6%

9.7%

10.3%^

10.4%

52.4%

0.20%*0.16w

99.8%*

287

1,320

9,237

9.8%

12.9%

16.0%^

21.7%

275%

5.5%2.9%

94.9%

721

6,275

11,849

8.3%

12.7%

13.6%#

9.6%

74.5%

0.1%0.1%

99.9%

787

8,994

12,273

8.3%

12.1%

12.8W

9.5%

61.1%

0.1%0.1%

99.8%

733 •

9,544

13,378

9.0%

11.7%

11.9W

8.5%

52.3%

0.1%0.1%

99.7%

700

10,011

13,414

9.1%

11.6%

12.1%*

7.6%

47.0%

0.2%

0.1%

99.7%

11

1

11

11

11

111

111

111

1

11-

1714

110,611

15,701

9.1

113%1

11.5%*1

6.8%

46.9%1

1

11

0.1%

0.1%1

99 8%- -

Borrowers/ SM

Gross Loan Portfolio/ SM ('000)

Offtake Avg.

Cost Efficiency:

Financial Cost %$

Cost of borrowings % (withoutprocessing fees)

Cost of borrowings %

Opex/ Gross Loan Portfolio %

Cost to Income Ratio

Credit Quality - Non-AP:

Gross NPA%Net NPA%

Collection Efficiency %

*Enterprise figures - includes figures from AP state$ Financial expenses to Avg. Gross Loan Portfolio^includes processing fee for on and off balance sheet (b/s) funding# Includes processing fee for on b/s funding only, for FY 14 Rs. 13 Crs, FY15 Rs. 14.3 Crs. for Q1FY16 Rs. 1.0 crs & for Q2FY16 Rs. 5.7 crs, & for Q3FY16 Rs. 1.3 Cr

19


21/50

PORTFOLIO MIX

State

U:.

Odisha 6.3`4

14.5%Karnataka 6.6%

12.6%Maharashtra 1.3%

10.5%Bihar 0.2%

9.4%Uttar Pradesh .5%

CONCENTRATION

Metric

State

District

Branch

N PA

Collection

efficiency

*Subject to tolerance

Odisha, Karnataka60 respectively

NORMS

Cap on Disbursement

20% for Karnataka &

Odisha)

i 3 %

4% for Karnataka &Odisha)

1 %1.25 % for Karnataka

& Odisha)

o disbursement to abranch with NPA > 1 %

o disbursement to abranch with on-

time collectionefficiency of < 95%

of 10

and Maharashtra exposureof our networth.

POS % Cap of Networth'

5075% for the state of

Odisha, Karnataka and

Maharashtra)%Only 5% of total

operating districts cango up to 10% ofNetworth)

1%• Only 5% of the total

operating branches can

go up to 2% ofNetworth )

are at 86 , 69 and

9.1%West Bengal 1.9%

5.9%Kerala .0%

t ns .5%Madhya Pradesh .2%

4.8%Rajasthan a .6%

3.9%Jharkhand .6% GLP Q3FY16

- e 1.7% LP Q3FY15Haryana .4%

1.6%Punjab .9%

1.3%

Chattisgarh .2%1.1%

Uttarakhand .0%

0.1%Himachal Pradesh

0.1%Delhi

Note: Portfolio percentage are based on proportion of grossloan portfolio of respective states. 0


22/50

Karnataka 169 8.0

Odisha 149 7.5

Uttar Pradesh 130 6.0

Bihar 128 7.0

West Bengal 126 7.2

Maharashtra 119 7.3

Madhya Pradesh 69 7.4

Rajasthan 59 7.1

Kerala 48 5.8

Jharkhand 47 6.2

Chhattisgarh 23 6.8

Haryana 21 4.8

Punjab 18 6.4

Uttarakhand 12 5.2

Himachal Pradesh 3 1 . 1

Delhi 6.4

Non-AP 1,122 7.0

VINTAGE OF NON-AP BRANCHES IS 7.0 YEARS PORTFOLIO OUTSTANDING BY ECONOMIC ACTIVITY

As of Dec 2015* Excludes 44 Gold Loan Branches.

Livestock 30%

Tailoring, Cloth weaving 11%

Grocery stores an d other retail outlets 10%

Masonry, P ainting, Plumbing, Electrician,Carpenter and related

Trading of Vegetable & fruits

7%

7%

Agriculture 7%

Vehicle repairs 5%

Eateries 5%

Trading of Agri-comm odities 4%

Garments & Footwear retailing 2%

Trading of Utensils, Plastic items 1%

Scrap business 1%

Bangles shop 1%

Other income generating activities 9%

21


23/50

REVIEW OF FINANCIALS


24/50

Q3FY15 Q2FY16 Q3FY16

1,292

Dravvdowns„. , „, ............ „:„.

. c 4 0 w a o l v a t o r t e• ................................

1,569 1,478886

834

746

STRONG SO LVENC Y AND SUFFICIENT LIQUIDITYINR Crs.

Capital Adequacy

RBI Requirement3.9%

Q3FY16

Q3FY15 2FY16 3FY16 3FY15 2FY16 3FY16A Excluding security deposit 3


25/50

Q3FY16

Month isbursement Total

Oct-15 26 4

Nov-15 15 1

Dec-15 ,338 5

2,980

Net interest Income*

181 82

Q3FY15 2FY16 3FY16

Interest income on Portfolio loans + Excess interestspread on securitization + Loan processing fees + BC Fee— Financial Cost

YoY 3%

6,1775,462

3,195

Q2FY16 3FY163FY15 Q2FY16 Q3FY16 Q3FY15

Operating Cost PAT

207

( 6QoQ

324 43

77.9 79.5

41.197 9

85

S KE W E D D IS BU R S E M E N T S R E S ULTS I N F L AT N I I G R O W T H Q 00

Disbursements Pattern on-AP Gross Loan Portfolio ross Revenue

Q3FY15 2FY16 3FY16 3FY15 2FY16 3FY16

Tax Exp: il s. 23 Crs s. 24 Crs

24


26/50

77%5%5%

0.3%100

TotatExpendttureH

0 0 0123 %

41.1 3 7.9

Profit before TaxTax expenseProfit after Tax 25

PAT GROWTH OF 94 YoY NR Crs.

Income from OperationsInterest income on P ortfolio loans 54

Excess interest spread on securitization 0Loan processing fees 1

Other IncomeIncome on investments 4

Recovery against loans written offFacilitation fees from C ross-sellBC feesOther miscellaneous income .2

Total Revenu e 07

263 1 71%

17 75%19 63%

14 I

4 1 -28%9 12%

161.1 I

256 3%

1 1 57%16 16%

9 63%4 -13%

13 -27%16 2%

0.2324

133 69 39 117 14

72 I 13% 21% 70 2%

25 1 18% 7% 26 -4%

3 I 137% 1% 2 47%

I 99 16 29 97 1

9 I 9

Financial expenses 9

Personnel expenses 3

Operating and other expenses 1

Depreciation and amortizationTotal Operating Cost 5

Provision & W rite-offs


27/50

9MFY16 PROFIT INCREASES BY 49 YoY

Particulars 9MFY15

r

I I

9MFY16 1 YoY9FY16

AsM

of Total

I 1 RevenueIncome from Operations

I I

Interest income on Portfolio loans 415 I 714 I 72 75Excess interest spread on securitization 42 I 50 I 19 5Loan processing fees 33 I 50 I 52 5Other Income I I

IIncome on investments 30 44 I 45 5Recovery against loans written off 22

I 12 I 45 1Facilitation fees from Cross-sell 19 I 35 I 81 4BC fees 15 I 44 I 5Other miscellaneous income 1 I 2 I 63 0.2Total Revenue 577 I 950 I 65% 100%

I I

Financial expenses 194I

350I

I 81% 37%I

Personnel expenses 172 I 212 I 24 22Operating and other expenses 62 I 74 I 20 8Depreciation and amortization 3 I 6 I 61 1Total Operating Cost 237 I 291

I

I23% 31%

Provision & Write-offs (1)I

25I

I - 3%I

Total Expenditure 430 I 667 I 55% 70%I

Profit before Tax

Tax expense147 I

I284

65

I

I

I

93% 30%

7Profit after Tax 147 I 219 9% 23%

26


28/50

STRONG CAPITAL BASE AND ROBUST LIQUIDITY DRIVE SKS BALANCE SH EETNO

Particulars 03FY16 I Q3FY16 I YoYEquity share capital 126

1 127 I 1%

Stock options outstanding 24 I 25 I4

Reserves and surplus 848 I1,140 34

Capital & Reserves

Loan funds

9982,545 i

1,2922924,651

I

29

8

Payable towards Securitisation 52I 57 9

Expenses & other payables23 I 29 1 28

Provision for Taxation 5 I 3 1 -30

Unamortised loan processing fees 24 I 48 I101

Employee benefits payable 15 I20 I 34

Interest accrued but not due on borrowings 15 I52

I241

Provision for leave benefits & gratuity 14 20 IStatutory dues payable 3

I 7 107

Unrealized gain on securitization transactions 9 I 5412

rovision for standard and NPA — Non-AP 32 I 63 I93

Provision for standard and NPA -- AP 8 1 0.1 I -98

Liabilities 2,745 5,00482

Q2FY16 oQ

1,050

12726 5%

8%1203 %

INR Crs.

4,452 %68 16%23 6%

8 59%40 1%16 7%3315

5%29%

5 36%

56 12%0.2 -8%

4,728 6%

Fixed assetsIntangible assetsInvestment

Cash and bank balances

Trade receivableInterest accrued and due on loans

Interest accrued but not due on loans

Interest accrued but not due on deposits with banks

Interest strip on securitization transactionsPortfolio loans -- Non-AP

Por t fo l io loans — APLoans placed as collateralSecurity deposits for rent and other utilities

Advances for Loan Cover InsuranceLoans to SKS employee benefit trust

Advance Income Tax

Prepaid insuranceOther advances

Note:1 Non-AP Secuntized/Managed Portfolio

2. Non-AP Gross Loan Portfolio

4

50.2

90410

10

810

2,708

24

1641

519

4

9

470

3,195

I

I

I

II

II

I

135

0.2

1,085

21

121154

4,98414

5141

514

534

1,142

6,177

II

I

II

I

II

I

I

182 .3

20

-81

-55

25

39

84

-41%.

2202

63

-4

-27

32

143

93

14 115 6

0.2

1,039

10 82

1 10

13 6

11 1

124,736

15 8

1796

4

2 51

514

4 6

28 0

709 1

5,462 3

27


29/50

OPERATING AND FINANCIAL LEVERAGES PLAY OUT

ParticularsSpread Analvsic (ac °L of Ava Grosc 1 nar Portfolio

1 )1 ' t f ; '

Q3 FY15 Q2 FY16 1 3 FV16

Financ al Cos* (a ) 9 7% 9 1% .1%

Operating Cost (b) 10.5% 7.6% 6.8%

Provision and Write-offs (c ) 0.2% 0.7% 0.6%Taxes (d ) 0.0% 1.8% 1.6%Total Expense II = (a+b+c+d) 20.4% 19.2% 18.1%

Return on Avg. Gross Loan Portfolio (1)- (II) 5.0 6.1 5.5

Efficiency:Cost to Income 66.4% I 47.0% 46.9%

Asset Quality - Non-AP:

Collection Efficiency99.8% 99.7% 99.8%

Gross NPA 0.1% 0.2% 0.1%

Net NPA 0.1% 0.1% 0.1%Gross NPA (INR Crs.) 2.6 7.5 6.3Net NPA (INR Crs.) 1.8 3.9 3.0

Leverage:Debt : Equity 2.5 3.7 3.6Debt : Equity (Incl. Securitised & Managed Loans) 3.0 4.3 4.5

Capital Adequacy: 34.6 I 24.6% 23.9%

Profitability:Return on Avg. Assets (Incl. Securitised & Managed Loans) 4.0% 5.0% 4.5%

ROE 16.9% 26.9% 25.5%EPS - Diluted (INR) (Not Annualised) 3.2 6.1 6.2Book Value (INR) 79.2 94.9 101.6

28


30/50

OPERATING AND FINANCIAL LEVERAGES PLAY OUT . . . CONTD.

Spread Analysis (as % of Avg. Gross Loan Portfolio)Gross Yield I)Portfolio YieldFinancial Cost a)Operating Cost b)Provision and Write-offs c)Taxes d)Total Expense I = (a+b+c+d)Return on Avg. G ross Loan Portfolio I) - (II)

24.4%19.3%8.2%

10.0%

-0.03%

18.1%6.2

Efficiency:Cost to Income

Asset Qua lity — Non-AP:Collection EfficiencyGross NPANet NPAGross NPA (INR Crs.)Net NPA (INR C rs.)

Leverage:Debt : EquityDebt : Equity (Incl. Securitised & Managed Loans)

CapitalAdequacy:

Profitability:Return on Avg. Assets (Incl. Securitised & M anaged Loans)ROEEPS - D iluted (INR) (Not A nnualised)Book Value (INR)

99.8% I 9.7%0.1% I .1%0.1% I .1%

2.6 I .3• 1.8 I .0

34.6° 3.9%

5.0%23.8%

11.979.2 01.6

4.5%25.0%

17.0

29


31/50

FINANCIAL ARCHITECTURE


32/50

FINANCIAL ARCHITECTURE(1/2)Lenders Mix Sources Mix INI? Crs.

11.6

9.2

6.3

FY14

11.5

On Balance Sheet* 03FY15 Q2FY16 I CtiFYli

Yes Bank 15 131

14

State Bank Group 5% 12 I 12Dena Bank 5 11% I

I10

SIDBI 3 4 9

IDFC Bank 3 6 I 7%

Bank of Maharashtra 8 6 I 6

Kotak Mahindra Bank 6 70 ,7 1 5 %

Andhra Bank 4 4 1 5

HDFC Bank5 3 1

1 4ICICI Bank 11% 8 I 4

Ratnakar Bank 3 4 1 30/01

IDBI Bank 1 4 13

Bank of India 8 3 I 3

Mudra1

I ‘'

slot"

HSBC Bank 2 3 1 2

Standard Chartered Bank 0 2 I 2Citi Bank 1 2 2

Axis Bank 7 2 I 1%

Union Bank of India 1 1%

South Indian Bank 3 2 1 1%

Others 10 3 I 2

Grant Total 2,375 3,604 I 3 748* Includes Term loan and cash credit facilities — — I

Term Loans

Securitisation

ManagedLoans

CP

NCD

CC

Positive Al_M Mismatch

a Avg maturity of assets Avg maturity of l iabilitiesNo. ofmonths

ALM data includes securitized loans 1

2,289 76 3,497 67 1 3,660 62 11

299 10 244 5 I 610 10 11

1

183 6 533 10 1 595 101

170 6 448 9 I 503 9 11

400 8 1 400 7

86 3 107 2 89 2 I

FINANC IAL ARCH ITECTURE (2/2)


33/50

Q3FY16 32Q3FY15 Q2FY16

ei Floating

Fixed* Excludingmanaged loans43%

FINANC IAL ARCH ITECTURE (2/2)Funding Cost Analyss

Metric -+ 4

Marginal cost of

borrowing

Wt. avg. cost ofborrowing (on b/s loans)

f ̀P',

an and off 5 •s loan:,I

(including processing 2.6% 1.9% 1.7% 1.4% 0.02%fees)

I

on b/s loans (excludingprocessing fees) 2.9% 2.3% 2.0% 1.2% 1 0.8%

on b/s loans (includingprocessing fees)" 3.6% 2.6% 2.2% 1.4% 1 0.9%

I .excluding processing fee 12.7% 2.1% 2.5% 1.6% 1.3%paid & other charges

including processing fee 3.6% 2.8% 2.9% 2.1% I 1.5%1

17.3 6.9 .6 .7 .4I-

3,503 ,020 31 ,569 I ,478

8.3% .3% .7% 9.1% I .1%

Loan Processing Fees (INR Crs.)

Drawdown s (INR Crs.)

Financial Cost^

processing fees is amortized for marginal cost calculation. Financial expenses to quarterly Avg. Gross Loan Portfolio.

The above percentages are based on monthly averages. Expenses towards loan processing fees are recognized upfront whereas loan processing fees received from

borrowers are amortized over the period of contract.

Interest Rate Mix of Borrowings*


34/50

33

750[ICRA] A+ CRA Limited

[I GRA] A1+ CRA Limited

CARE AA (SO) CARE Ratings

ICRA AA (SO) CRA Limited

400

200

243

372

EXTERNAL ASSESMENT

MFI Grading

Bank Loan R ating (Long-termfacilities)

Bank Loan Rating (Short-termfacilities)

MFI 1

CARE A+

CARE Al +

CARE Ratings /A N/A

CARE Ratings

CARE Ratings

3,300 4,500

Long-term D ebt (NCD)

Long-term Debt

Short-term Debt

Securitisation Pool

Securitisation Pool

CARE A+ ARE Ratings 00 •

Short-term Debt (CP/N CD) CARE Al + ARE Ratings 00

750


35/50

CA PITAL STRUC TURE ANDSHARE PRICE MOVEMENT


36/50

DomesticMFs,

Insuranceco's & FIB ,

22.2Domestic

Individuals,9.2

FII, 33.9 0,Domestic

Corporates,2.1

Foreign PI, 18.4Corporates,

9.8

_NRI, 4.3

CAPITAL STRUCTURE AS ON 31sT DECEMB ER 2015

SH A R E H O L DI N G PAT TE R NIDFC Mutual Fund .4Morgan Stanley SG PTE MA 4.6%

Amansa Capital PTE Limited =x 4.3Sandstone Alt 4.1

Max Life Insurance Company.5

Vinod Khosla 711 3.3

Tree Line 17 1 3.0

Birla Sun Life Mutual Fund 19 2.8

Kismet Microfinance 0 2.7

Baron Capital Management I 2.3

Alliancebernstein 0 2.1

Kismet SKS II 71 1.9

Morgan Stanley Mauritius s 1.8

Wellington 7 1.7

DSP Blackrock Mutual Fund 1 1.7

Swiss Finance Corporation.,. 1.6

Amundi 1 1.6

Columbia Threadneedle. 1.5

Kotak 1.5%

ICICI Prudential Mutual Fund t 1.4

GMO 1.2%

TVF Fund Ltd. t 1.2SIDBI / 1.2

Wasatch Funds 1 1.1Goldman Sachs 10.9 o. of shares 2.7 Crs.

Vanguard 10.9

Morgan Stanley Inyestment...1 0.9Oth ers f 00,1504;00,0140,0400004000 39.7

Excludes no. of Outstanding ESOPs 0.3 Crs.Note: The Investment under different accounts by a fund areclubbed under their respective names

35


37/50

ec-15

ADJUSTED PRICE TO BOOK COMPUTATION

Book value per share (A) 102

Present value of DTA per share (B)^ 21

MAT per share (C)*

Book value per share — Inclu ding PV of DTA and MAT (A+B+C) 129

Adjusted Pric e to Book R atio (times) 3.9

Note:A Estimated Present Value of Deferred Tax Assets(DTA). DTA as on Dec 31, 2015 is Rs. 389 Crs. Discount rate assumed at12.0% and applied over next 3.25 years' estimated profit.* MAT credit as on Dec 31, 2015 is Rs. 71 Crs.SKS Ma rket Price as of January 27, 2016 — Rs. 498

36


38/50

ANN EXURES


39/50

Norms

OUR PROVISI ONING PO ICY

RBI NBFC-MFI norms KS compliance

Standard Assets -90 days -60 days

Su b-Standard Assets 1-180 days 1-180 days

Loss Assets 180 days 180 days

Standard A ssets

1% of overall Portfolioreduced by Provision forNPA (If provision for NPA< 1% of overall Portfolio)

0.30-1% depending on NPAor as stipulated by RBI,whichever is higher

Su b-Standard A ssets50% of instalmentsoverdue*

50% of outstandingprincipal*

Loss Assets100% of instalments 00% of outstandingoverdue* rincipal/ write-off*

* The aggregate loan provision will be maintained at higher of 1% of overall portfolio or sum of provisioning forsub-standard and loss assets.

38


40/50

COM PLIANC E WITH RBI NBFC-MFI REGULATORY FRAM EW ORK (1/2)

RBI norms for NBFC-MFIs KS c ompliance

Qualifying assets to constitute not less than 85% of its total • Qualifying assets - 96%assets (excluding cash and bank balances) Income generation loans 98%At least 50% of loans for income ge neration activities

Qualifying Assets Criteria*

Rural :


41/50

•


42/50

18%

—13.5W

7% (Mar'16)

8% (Mar'17

10%

7% (Mar'16

7.5% (Mar'17)

Livestock, Agri & Allied

100% Loans are to women

beneficiaries (with less thanRs.1 lac).

Further, Minority communitiesconstitute 16% andeconomically weaker sections71% of loan portfolio.

Loans to MFIs for on-lending

to microenterprises.

1

Agriculture

- Direct Agriculture*

- Direct Small & Marginalfarmers*

Target

Sub-target

Sub-target

38%

2

3

Weaker

Micro-enterprises

Target

Target

100%

100%

SKS LOAN PORTFOLIO QUALIFIES FOR OVERALL PSL TARGET OF 40 AND ALL SUB-TARGETS UNDER NEW PSL NORMS

Note:* As per RBI notification dated 16th July 2015 Banks are directed to ensure overall direct lending to non-corporate farmers does not fall belowthe system wide average of last three years achievement. They should also continue to maintain all efforts to reach the level of 13.5 direct

lending to beneficiaries..Refer Slide no.18 for details on purpose wise loan portfolio outstanding.

41


43/50

Women

Mnori ty M16

Economically Weakersection

JO";

71%

L

SKS 296 dist ic mu 375districts*

68

CRISIL level of financialKS Coverage

inclusion f those

High

Above average

Below average

Low

Grand Total

18%

15%

0 PMmIng 7

SKS Toll free Nu mber

1800 300 1 ,

y)

Thu can ca l th i s mat te r f rom any no te FREE of cos t

SKS FINANCIAL INCLUSION COVERAGE

Strong reach in under-banked areas Weaker & Minority section coverage

68% of SKS branches are in RBI under-banked districts list SKS covers 68 of below average & low

financial inclusion districts identified by Crisil

* Source: RBI under-banked districts data[1] Source: CRISIL Inclusix: An index to measure India's progress on Financial Inclusion, June 2013

.... IS SUPPORTED BY ROBUST CUSTOMER CENTRIC PRACTISESDedicated customer

Doorstep Service Financial literacyservice

Doorstep delivery (i.e. at Center meetings)2 day process c onsisting of hour-long sessions

designed to educate clients on SKS processes

and credit discipline.

Toll-free helpline number

with seven different

vernacular languages 42

PRODUCT OFFERINGS


44/50

Loan portfolio (INRCrs) / (% Mix)

Ticket size range

(w.e.f 7th Dec'15)

Avg. Ticket Size(INR) For Q3FY16

IGL

2,554 (41%)

INR 9,100 to

INR 29,565

16,729

M I L

1,520 (25%)

INR 9,100 to

INR 15,010

14,625

Other productofferIngsmt

72 (1%)

INR 1,799 to

INR 5,290

2,211

Go d loans

52 (1%)

INR 2,000 to

INR 200,000

13,811

PRODUCT OFFERINGS

1,980 (32%)

INR 30,915 to

INR 49,785

31,968

Eligibility*

• Completion of CGT/ GRT

• Age limit 18 yearsto 55 years

• Maximum limit of

INR. 20,010 forIGL 1

• With IGL - Between20th to 46th week

• With LTL —Between

20th to 96th week

Minimum Two IGLLoan cyclecompleted

• Maximum limit ofINR. 38,635 for

LTL 1

With IGL — Between4th to 46th week

• With LTL — Between4th to 100th week

MaximumLTV as % ofgold value ondiEbursement• SP3: 68%• SP4: 75%

Tenure 50 weeks 104 weeks

Annual effectiveinterest rate

Processing fee (Incl.Service Tax)

19.75%(w.e.f 7th Dec'15 for new loans)

1.14%

25 weeks

• 1 9.6 0% - 20 .2 0% •

• 0.94% -1.14%

••

•

•

SP3: 0 - 365 daysSP4: 0 - 270 days

SP3: 15% -24%SP4: 19.2% - 26%

SP3 & SP4: 0.5%

* Eligibility criteria over a nd abo ve the criteria prescribed b y the RBI

^Loans for Mobile Phones, Solar lamps, Sewing Machines, Bio - Mass Stove, Water - urifier and Bicycle. 43


45/50

9.85% 21.26%

11.56% 27.70%

24.29%

32.05%

15,689

2,980

6,177

HIGHLIGHTS LONG TERM LOANS (LTL)

Product De tails.

Purpose ime g enerating activit‘,.

Ticket Size s.30,915 to Rs.49,785

Tenure 04 Weeks

Eligibility Minimum Tw o IGL Loan cycle completed.Maxim um limit of INR. 38,635 for LTL 1

Product design qual weekly installment (EWI) similar to IGLEg.: IGL Rs.15K Ticket size : Rs. 330 EWI

LTL Rs. 30K Ticket size : Rs. 360 EWI

Enterprise Mix LTL

Q3FY15 Q2FY16IQ3FY16:Q3FY15 Q2FY16 Q3FY16

1,271 ,988 ,899 j 4.13% 9.60% 11.92%

12,146 13,404

1,544 ,665

3,195 ,462

Snapshot TL

Q3FY15 Q2FY1d Q3FY16

No. of Loans Disbursed in '000 3 91 26

Avg. Ticket Size INR 8,954 29,677 31,968

Amount of Loan Disbursed ('In Crs.) 52 67 24

Portfolio Outstanding (in Crs.) 69 ,513 ,980

*Disbursement capped at 25% of overall disbursement

A Income Generating Loans with ticket size of Rs.9,100 to Rs.29,565 with tenure of 50 weeks 44

LEVERAGING TH E DISTRIBUTION STRENGTH


46/50

FY14 Sivl1A. 6 cumulative pas t

2:75 years

Mobile Phone 3.5% 9.0% 10.7% 23.2%

Solar Lamp 2.0% 7.9% 8.1% 18.0%

Sewing Machine 0.2% 1.5% 1.7%Bicycle 1.2% 1.2%Bio-mass stove 0.3% 0.8% 1.2%Water Purifier 0.5% 0.5%Total 5.5 17.5 22.8 45.8

#1 2.1% 17.4% 21.7 36.3%#2 0.2% 2.6

#3 0.04

#4

Total 2.1 17.4 21.9 39.0

Cu mulative

rs

LEVERAGING TH E DISTRIBUTION STRENGTH

No. of Units Facilitated (in Lacs)

Gross Fees (after service tax) INR Crs.

Less: Incentives INR Crs.

FY15

Total

8.4

28.3

4.6

Q1FY16Mobile Solar Others Totalphone lamp A

1.8 .4 .7 .0

6.1 .6 .2 2.8

1.7 .3 .7 .6

Q2FY16Mobile Solar Other Total phone lamp s^

2.0 .4 .7 .1

6.0 .7 .1 2.8

.9 .3 .7 .9

Mobilephone

1.3

3.9

1.1

Q3FY16Solar Otherlamp s it

1.2 .4

4.1 .3

1.0 .3

Total

2.9

9.3

2.4Net Fees INR Ors.* 23.7 35** 2.7 1.2** 7.3** 3.2 2.7** 1.1** 7.0 .3** 2.4** 0.7** 5.4**

Loan Portfolio INR Crs. 58.3 40.6 24.8 21.5 86.9 43.8 25.6 23.4 92.8 31.2 22.1 19.2 72.5

Net Fee Income as % of PAT 12.6% 5.7% 4.3% 1.9% 11.9% .1% 3.4% 1.5% 9.0% 2.8% 3.1% 0.9% 6.8%

Loan P ortfolio Mix 1.4% 0.8% 0.5% 0.4% 1.8% i 0.8% 0.5% 0.4% 1.7 0.5 0.4% 0.3% 1.2%

*Net fee post the incentive payout and sans transfer pricing of other operating cost. ** Post MAT adjustment^Loans for Sewing Machines, Bio-Mass Stove, Water-purifier and Bicycle.

Penetration Based On Total No. Of Loans requency Of Loans Based On CurrentMember Base

Cumulative Cross-sel l P enetration


47/50

Geographicalconcentration

norms

Responsiblelending and fair

pricingLiquidity metrics

Cashmanagement

system andprocess controls

I

OperationalRisk

KEY RISKS AND MANAGEMENT STRATEGIES

Risk

I Management

Key Risks

Management

Strategy

• Low cost lender

• Voluntary Cap onRoA from corelending

• Robust Customergrievance

redressal (CGR)Mechanism withOmbudsman

• DisbursementRelated Caps

• PortfolioOutstandingRelated Caps

• Integrated cashmanagementsystem

• Product andprocess Design

• ISO Certified

Internal audit

Well definedmetrics for

- Cash burn

- Businesscontinuity

- Growth

Calibrated Growth

46

INTERNAL AUDIT PLAYS A C RITICAL R OLE IN PROCESS MONITORING


48/50

ClientV isits*

High

Riskitems

(Frauds etc.)

FixedAssets

verifical ion ^

Ad h er e ncc to

Process /Pol ic ies

Monitoringprocess by

supervisors

ClientAcquisition

Statutory

Reg u i retitents(Credit

bureau, Fairpractices etc.)

Center ocument

Meetingverification (KYC,

Process oan utilizationcheck etc.)

IGL Branches

Gold LoanBranches

Regional Offices Quarterly

Head office uarterly

Monthly

45 days

Scope ofAudit

INTERNAL AUDIT PLAYS A C RITICAL R OLE IN PROCESS MONITORING

Strength

Scope

• 196 strong headc ount• IS O 9001:2008 certified pro cess• All branches are inspected m onthly based o n a 4 t ier grading system• Gradin g linked to inc entives/appraisals of field staff

• Head Off ice audi t by K PM G

• Branches 1,300• Branches per In ternal Audit s taff 7• Regional Offices 23

Note:* Approximately 30% of the clientsconfirmations, Lo an uti l ization (LUC)A Fixed Assets are verified o n An nual

are covered by Internal Audit in an year during the branch audits. Clients visited on a sample basis to check for Loan, arrears and awareness on Client Protection P rinciples (CPP)basis

47


49/50

6 0 %

5 0 %

4 0 %

3 0 %

2 0 %

1 0 %

0 %

3 7 %2 9 %

2 2 %

1 2 %

Rued i

Fnonds&REetives ,461r rmin oRsytert-Ort afry Fm ecs oekty Money

(*.Wt / o° t r t t n

WHAT ARE CLIENTS DOING POST THE ANDHRA PRADESH MFI CRISIS?Sources n+ r'redit fin the absence of MF I oans

39

Money Lender H G a w nB r o k e r a n k F C

Interest rates charged by informal sources (inthe absence of MFIs)

Reasons for not repaying MFI loans

liP;NfLII‘ r ' ‘ pn\ I- I „

01° 0

No New Loans Media Reports Nobody is Pressure From MFI Staff Not Pressure Fo rmPaying pinion oming for xternal

Leaders ecoveries gencies

Willingness to repay

Willingness to Repay

Source: What are Clients doing post the Andhra Pradesh MFI Crisis? , MicroSave, 2011 8


50/50

This report is for information purposes only and does not construe to be a ny investment, legal ortaxation advice. It is not intended as an offer or solicitation for the purchase or sale of any financialinstrument. Any action taken by you on the basis of the information contained herein is yourresponsibility alone and SKS and its subsidiaries or its employees or directors, associates will not beliable in any manner for the consequences of such action taken by you. We have ex ercised duediligence in checking the correctness and authenticity of the information contained herein, but do notrepresent that it is accurate or complete. SKS or any of its subsidiaries or associates or employeesshall not be in any way responsible for any loss or damage that may arise to any person from anyinadvertent error in the information contained in this publication. The recipient of this report shouldrely on their own investigations. SKS and/or its subsidiaries and/or directors, employees orassociates may have interests or positions, financial or otherwise in the securities mentioned in thisr epo •

Forward Looking StatementCertain statements in this document with words or phrases such as 'Will , should , etc., and similarexpressions or variation of these expressions or those concerning our future prospects are forwardlooking statements. Actual results may differ materially from those suggested by the forward lookingstatements due to a number of risks or uncertainties associated with the expectations. These risksand uncertainties include, but are not limited to, our ability to successfully implement our strategy andchanges in government policies. The company may, from time to time, Make additional written andoral forward looking, statements, including statements contained in the company's filings with the

'stock exchanges and our reports to shareholders. The company does not undertake to update any—forward-looking statements that may be made from time to time by or on behalf of the company

For any investor relations queries please em ail toinvestorrelations@sksindia com 9

Documents

Earnings Update Q3FY16 [Company Update]