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•Industry Overview and Spandana’s positioning
•Product Suite
•Key financial and operating metrics
•Investors, Bankers and Rating
•Key Strengths of Spandana
•Industry Overview and Spandana’s positioning
•Product Suite
•Key financial and operating metrics
•Investors, Bankers and Rating
•Key Strengths of Spandana
What is Microfinance and MFI ?
• Microfinance is the provision of micro-credit and other financial services to low-income households• Microfinance Institutions (MFIs) are the client servicing interface, working predominantly with women and
providing doorstep financial services• Non-Banking Finance Companies/ Societies/ Trusts/ Coops are the dominant legal form of MFIs
Industry Overview
• Retail financial services landscape in India is dotted by following key players – • Govt/ Public Sector: Banks, District Credit Cooperatives, Regional Rural Banks etc• Private Sector: Indian Banks, Foreign Banks, Non-Banking Finance Companies, including
Microfinance Institutions (MFIs), Urban Coop Banks etc• Unorganized players: Moneylenders, Pawn brokers etc.
* Size of Financial Exclusion: Dr. D Subbarao, Governor, Reserve Bank of India, June 2010
Large Unmet Demand
• * Only 5% of habitations in India have a Commercial Bank branch, only 40% of population has savings Bank account – large gaps in financial inclusion exist
• Estimated demand of Microfinance is INR 333,000 crore (USD 74 billion) against which, only 10% has been reached – including private sector MFIs and govt.’s SHG-Bank linkage programme
Growth path
• Microfinance business model has now been well proven with over a decade of successful track record• MFIs have shown an aggregated growth of over 100% year-on-year for the last 5 years• Being a disaggregated industry, large players with sizeable operations and established track record of
scaling-up the loan portfolio, will continue to grow at a fast pace
Leader in operational efficiencies
• Operating expense ratio at sub 6% level against the industry average of about 12%• Good portfolio quality with a cumulative repayment rate of 99.9% shows that the business model has
shown its robustness over the last 10 years• Staff productivity at over 400 clients per staff against an industry average of 252**
Large scale
• Spandana is the 6th largest MFI in the world, and 2nd largest in India in terms of number of clients• Started operations in 1998 at Guntur, Andhra Pradesh and steadily grew at a compounded annual growth
rate of about 100% since then – mainly due to high degree of customer connect• Scale of operations*: 4.5 mn clients, about 12,000 on roll trained staff, over 1,600 branches in 12
States of India with Asset Under Management (AUM) of about Rs.4,000 crore (USD 0.9 Bn)
* as on June 30, 2010 ** M-CRIL Analytics, 2009 ***CRISIL: India's leading Ratings, Research, Risk and Policy Advisory company (www.crisil.com)
Rating/ Grading
Proven track record
• Strong management team lead by a dynamic leader, founder and Promoter Mrs. Padmaja Reddy• Disbursed over Rs.13.7 thousand crore (USD 3 Bn) cumulatively since inception • Most profitable MFI with highest Return on Assets (7%+ against an industry average of 3.5%)• Optimum Capitalization also ensures one of highest Returns on Equity, presently at 50%+ levels
• ***CRISIL MFI grading: mfR1 (highest rating grade; first MFI to achieve this distinction)• CRISIL Rating of debt and bank facilities: A-/Stable/P1’ (best in the industry)
Sustained growth model
• New products under pilots and testing are ready for scale-up• States where operations started in last 2 ys are ready for scale-up, many new potential states available• Over 42 Banking relationships across Public / Private/ Foreign Banks
•Industry Overview and Spandana’s positioning
•Product Suite
•Key financial and operating metrics
•Investors, Bankers and Rating
•Key Strengths of Spandana
General Loan(Abhilasha)
Agri Family Loan
(Dharani)
Individual Loan
(Sphoorty)Group Loan(Pragathi)
Emergency loan
(Samruddhi)
Nature of Loan
Purpose of Loan
Typical Customer
Loan Size
Loan Tenor
Repayment Terms
Group
For income generation activities
Wage labourers (both skilled
and unskilled) formed in a group of 10
women
Rs 2,000 to Rs 20,000
50 weeks
weekly equated installments
Individual
For small business activities
Small and micro
entrepreneurs with co-obligant
guarantee
Rs 21,000 to Rs 200,000
12 to 24 months
Monthly
Group
For agriculture and allied activities
Small and marginal farmers
and tenant farmers
Rs 5,000 to Rs 30,000
11 months
Interest monthly; principal semi-
annually
Group
For income generating activities
Low-income clients with
slightly better well being than
Abhilasha customers
Rs 15,000 to Rs 25,000
12 to 24 months
monthly equated installments
Group
For emergency cash flow
needs
Existing customers
Rs 2,000 to Rs 10,000
50 weeks
weekly equated installments
Product SuiteFarm Equipment (Tractor) Loan
Individual
For purchase of farm equipments such as tractors
Farmers and young
entrepreneurs with hypothecation of
vehicle
Rs 50,000 to Rs 350,000
3 years
Monthly
Loans are serviced at the customer locations (slums/ villages) with complete transparency – disclosure of all terms of loan, no hidden charges in the name of value added services
•Industry Overview and Spandana’s positioning
•Product Suite
•Key financial and operating metrics
•Investors, Bankers and Rating
•Key Strengths of Spandana
Particulars Mar-07 Mar-08 Mar-09 Mar-10No. of Branches 295 435 944 1,533% Growth 47% 117% 62%
No. of Employees 1,911 3,024 6,373 10,428 % Growth 58% 111% 64%
No. of Clients (mn) 0.97 1.24 2.5 4.2 % Growth 28% 105% 64%
No. of Borrowers (mn) 0.92 1.19 2.4 3.7 % Growth 30% 104% 52%
Cum. loan disbursed (Rs mn) 17,833 29,756 59,959 119,758 % Growth 67% 102% 100%
Gross Loan Portfolio (Rs mn) 3,916 7,313 18,683 35,567% Growth 87% 151% 90%
Total Income (Rs mn) 608 1,339 3,556 7,241 % Growth 120% 166% 104%
Profit after Tax (Rs mn) 26 271 903 2,035 % Growth 942% 233% 125%
120%
p.a.
120%
p.a.
Gross loan Portfolio (Rs. mn)
88%
p.a.
88%
p.a.
Branches
175%
p.a.
175%
p.a.
Profit after Tax(Rs. mn)
• Sustained growth in all operating and financial metrices
• Spandana is the first MFI to cross PAT of Rs.2 Bn (USD 45 mn)
1998 2004 2005 2006 2007 2008 2009
• Registered as a society under Societies Registration Act, 1860
• Transformation to a non-deposit taking NBFC
• Reached 0.1 MM borrowers
• Received CRISIL rating of mf3
• Annual disbursement crossed Rs 1Bn
• Pioneered portfolio sale in the industry
• CRISIL rating upgraded to mf2
• First round of PE infusion by JM Financial and Lok Capital
• Exclusive tie-up with Western Union Money Transfer
• Pilot launch of Farm Equipment Loan
• Second round of PE infusion by Valiant Capital Partners
• Reached 1mn borrowers
• Annual disbursement crossed INR 10Bn
• Reached 3mn borrowers in August
Growth across Andhra Pradesh
Guntur, Andhra Pradesh Karnataka Orissa, Maharashtra,
ChhattisgarhRajasthan,
Madhya PradeshTamil Nadu
Registered as a Society
4 13 34 110
• Pilot launch of Agri Family Loan
New Product Pilot and Testing
Planned new state entries
ConsolidationJharkhand, Goa,
Gujarat, Uttar Pradesh
2010
• Reached 3.7 mn borrowers in March
Post External Equity Funding3 Yr CAGR in Loan Book:
109%
Post Conversion to
NBFC2 Yr CAGR in Loan Book:
28%
80 190 710
2,842
Sep-07 Mar-08 Sep-08 Mar-10
560 1,280
1,970
5,130
Sep-07 Mar-08 Sep-08 Mar-10
Karnataka – Entry in FY05Gross Loan Portfolio (Rs MM)
60 180 550
3,000
Sep-07 Mar-08 Sep-08 Mar-10
Tamil Nadu – Entry in FY06Gross Loan Portfolio (Rs MM)
Maharashtra – Entry in FY07Gross Loan Portfolio (Rs MM)
20 230 760
2,390
Sep-07 Mar-08 Sep-08 Mar-10
Orissa – Entry in FY07Gross Loan Portfolio (Rs MM)
• In every new state that Spandana enters, within a few years, contiguous growth strategy helps in rapid scale-up
•Despite the growth, the Company has been able to maintain its asset quality
•The Company has successfully increased its geographical presence from only 3 states in March 2007 to 12 states in 2010
4 Yr CAGR (07-10) : 74% 4 Yr CAGR (07-10) : 166%
4 Yr CAGR (07-10) : 144% 4 Yr CAGR (07-10) : 231%
Andhra PradeshAndhra Pradesh• 787 branches• 37,772 villages• 2,159,469 clients
KarnatakaKarnataka• 222 branches• 9,630 villages• 571,479 clients
Goa• 3 branches• 65 villages• 3,802 clients
Maharashtra• 125 branches• 6,024 villages• 382,537 clients
Tamil Nadu• 121 branches• 3,599 villages• 337,291 clients
Rajasthan• 9 branches• 233 villages• 20,559 clients
Orissa• 114 branches• 8,209 villages• 353,777 clients
Madhya Pradesh• 100 branches• 2,976 villages• 269,226 clients
Gujarat• 7 branches• 37 villages• 2,375 clients
Chhattisgarh• 36 branches• 1,652 villages• 84,350 clients
Jharkhand• 6 branches• 107 villages• 7,240 clients
New states (post 2008)
Old states (pre-2007)
State of origin (pre-2006)
Profit & Loss Account FY 2007 FY 2008 FY 2009 FY 2010
Income from Operations 469 1,133 3,424 7,004
Other Income 26 141 143 237
Total Income 495 1,274 3,567 7,241
Financial expenses 148 417 1,182 2,210
Personnel expenses 143 233 587 1,144
Operating and other expenses 67 81 165 362
Depreciation 6 9 26 54
Provisions and write offs 89 75 187 360
Total Expenditure 453 815 2,147 4,130
Profit before tax 43 459 1,420 3,111
Tax 16 189 517 1,075
Profit after tax 27 270 903 2,036
Balance in P & L brought fwd - - 216 939
Amount available for appropriation 27 270 1,119 2,975
Transfer to statutory reserve 6 54 181 407
Balance carried to balance sheet 21 216 939 2,568
Earnings per share
Basic and diluted - Rs.10/ share 3 29 80 152
Expenditure
Income
•Annualized portfolio Return (APR) at 26.5%. [against industry avg. of 28%]
•Operating expense ratio at 5.1% [against industry average of 12%]
•Provisions and write-offs include a 1% standard asset charge – higher than the RBI prescribed norms
•Return on Assets at 7%+ [against industry average of 3.5%]
•Return on Equity at 52% [highest in the industry]
•Audited by one of the top-4 Audit firms
•1USD = 46 INR (approx)
All figures in INR million
All figures in INR millionBalance Sheet FY 2007 FY 2008 FY 2009 FY 2010
Sources of funds
Share Capital 86 434 134 135
Reserves and surplus 65 450 2,647 4,716
Shareholders' funds 151 884 2,781 4,851
Subordinated loan (unsecured loan) 195 200 185 -
Secured loans 2,751 4,726 14,761 21,944
Total 3,099 5,813 17,727 26,795
Application of Funds
Fixed assets 24 38 86 115
Investments 6 14 2,951 1
Deferred tax asset, net - - 37 95
Cash and bank balances 448 1,013 2,724 7,766
Loan portfolio (excluding assigned portfolio) 2,698 4,883 12,471 21,301
Other current assets 29 77 130 190
Current assets, loans and advances 3,175 5,973 15,325 29,257
Current liabilities 93 45 367 1,962
Provisions 14 167 304 712
Current liabilities and provisions 107 212 671 2,674
Net current assets 3,068 5,760 14,654 26,583
Total 3,099 5,813 17,727 26,795
•Industry Overview and Spandana’s positioning
•Product Suite
•Key financial and operating metrics
•Investors, Bankers and Rating
•Key Strengths of Spandana
At different stages, institutional investors have joined Spandana and contributed to its growth. As on March 31, 2010, Spandana has a paid-up Share Capital of Rs.13.5 crore (USD 3 mn)
Bankers: Spandana focuses on diversified fund sources so that the cost of borrowing is reduced.
Spandana is supported by 48 Bankers and financial institutions.
Some of the relationships are over five year old –FWWB, SIDBI, ICICI Bank, HDFC Bank and ING Vyasya Bank
Public sector Banks have been showing increasing interest is taking exposure with us.The major funding instruments are Term Loans, Portfolio Sales (bilateral assignments and Securitisation), Capital Markets (NCDs) and Money Market (CPs) products.
Highest rating & grading in the industry (by CRISIL) –• Rating of debt & bank facilities ‘A-/Stable/P1’• Grading of institutional ability: mfR1
Investors
EPS: Rs.152 (Face Value Rs.10)
• Ms. G Padmaja Reddy Founder, promoter and Managing Director of Spandana - She has been instrumental in building Spandana into one of the leading MFIs famed for its scale, efficiency, productivity and profitability
• Dr. Rajiv Behari Lall CEO & MD of IDFC. He earlier worked as Partner at Warburg Pincus, as ED with Morgan Stanley, as a Policy Advisor and Economist at the World Bank, ADB, and in academia.
• Mr. V.P. Shetty Executive Chairman of JM Financial Limited- Asset Reconstruction Company – earlier worked as GM- Vijaya Bank, Chairman and MD-UCO Bank, Chairman & MD-Canara Bank, Chairman & MD with IDBI.
• Mr. Vikram S Rathore ED-SIDBI – over 30 years of experience in Commercial & Development Banking
• Ms. Supritha Shetty JGM-ICICI Bank - heads the Rural Risk, Policy and Compliance of ICICI Bank
• Dr. Venkateswara Reddy Cardiologist with a long standing experience in teaching Medicine
• Mr. Harinder Sawhney Executive Director of JM Financial's Private Equity Fund
• Dr. Bala Deepthi Practicing Doctor of Medicine – represents youth on the board of Spandana
• Ms. M. Asha Latha, Head of HR & Admin at Spandana - has earlier worked in Health Administration
• Mr. Vishal Mehta From Lok Capital – rich experience in fund raising, investments and portfolio strategy
•Industry Overview and Spandana’s positioning
•Product Suite
•Key financial and operating metrics
•Investors, Bankers and Rating
•Key Strengths of Spandana
Highly Efficient Employee Workforce
Highest productivity per employee; lowest operating cost
in the industry
Strong Management TeamYears of diversified experience
Significant Business Growth Potential
Geographical and product expansion coupled with new
initiatives
Exceptional Financial Performance
4-year PAT CAGR of 56%
Diversified Product Offerings
Continuous development of innovative products
Established Capability to Scale
From 3 to 12 states and portfolio growth of 369%, in two years
Streamlined and EfficientProcesses
High quality asset portfolio(almost Zero Net NPAs)