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ESAF MICROFINANCEAnnual Report 2011-12

THINKING AHEAD...

isha Sarath was fond of fashion designing from her school days; a profession hardly jelled with the identity of a girl who hailed from Vadanapilly, a small village in JThrissur, Kerala. Her passion led her forward and with the support of ESAF she started her own tailoring and garments unit, after her studies. The first financial assistance

from ESAF helped her to launch Laxmi Garments, a shop now endeared to youngsters at Vadanapilly. She availed later loans from ESAF to expand her business by recruiting new staff and buying sewing machines and other accessories. She managed to set a trend in fashion by selling readymade fashionable garments, designed and stitched by her, and by servicing customized ‘stitched-only’ garments.

Her knowledge on fashion and her keenness on timely delivery helped her to create visible differentiation in a crowded sector. Gradually, her business expanded and she started getting orders even from faraway places. Soon she found it difficult to meet the deadlines and hence recruited two more women from her neighborhood. She taught them the nuances of fashion and tailoring and trained them to become specialists. Of late, she recruited two more employees and all of them were now capable enough to come out with trendy designs for apparels meant for women and children. Jisha candidly admits that tailoring session organized by ESAF has helped her in understanding latest trends and designs. The Organization also helped her in registering her business unit through 'Shram Jyothi' project implemented with the help of International Labour Organization (ILO).

For young women in Jisha’s village, the commitment that she exemplified in her work was something worth emulating. With an increased income, she is now able to maintain a decent standard of living. She definitely owes a great deal to ESAF Microfinance, which stood by her always and supported her to boost her morale and knowledge, to run the business. She now plans to teach stitching to girls in nearby areas as she wants to give it back to the society that helped her grow.

SHE SHAPES HER LIFETHROUGH DESIGNS...

TABLE OF CONTENTS

THE VISION SETS OFF... 08

ESAF MICROFINANCE AT A GLANCE 09

FROM THE FOUNDER’S DESK 10

NOTICE AND AGENDA 12

DIRECTORS’ REPORT 15

REPORT ON CORPORATE GOVERNANCE 21

MANAGEMENT DISCUSSION AND ANALYSIS 25

STORIES OF TRANSFORMATION 29

AUDITORS’ REPORT 31

FINANCIAL STATEMENTS 34

NOTES FORMING PART OF FINANCIAL STATEMENTS 40

ESAF MICROFINANCEAnnual Report 2012

5

CORPORATE INFORMATIONBoard of Directors : Mr. K. PAUL THOMAS (Founder and Managing Director) : Mr. GEORGE THOMAS (Director - Operations) : Mr. VIKRAMAN AMPALAKKAT : Mr. CHERIAN THOMAS : Dr. IDICHERIA NINAN : Mr. RAJAN SAMUEL : Ms. RANJANI K.C. : Mr. N.A.J.V.S. SUNDARA RAO : Mr. R. PRABHA : Ms. SREEDEVI VENUGOPAL

Chief Mentor : Mr. RAPHAEL PARAMBIAdvisors Social Transformation : Mr. JACOB SAMUEL Strategy & Risk : Mr. A. AKBAR (Former GM, Federal Bank) Finance & Systems : Mr. C.P. SIMON (Former AGM, SBI)

Chairperson, Grievance Redressal Forum : Ms. MEREENA PAUL Company Secretary & Compliance Officer : Mr. PADMAKUMAR K.

Management Team

General Manager : Mr. CHRISTUDAS K.V. Dy. General Manager : Mr. SENTHIL V. General Manager : Mr. GEORGE K. JOHN General Manager : Mr. ROY K. ALEX

Auditors : M/S A. JOHN MORIS & CO. CHARTERED ACCOUNTANTS, CHENNAI.Our Bankers and Funders

Registered Office : #5 / A, Fifth Floor, No. 8 & 9, Gangadeeswara Koil Street, Purasawalkam, Chennai 600 084

Corporate Office : Hepzibah Complex, Mannuthy P.O, Thrissur , Kerala - 680651

Time and Date of Meeting : 12 Noon, 27th September, 2012

Ananya Finance Indian BankAXIS Bank Ltd. Induslnd Bank Ltd. BNP Paribas Ltd.Canara Bank Central Bank of India Oriental Bank of CommerceCiti Bank .NA Punjab National BankCorporation Bank South Indian Bank Ltd.

State Bank of Hyderabad Dia Vikas Capital (P) Ltd. State Bank of IndiaFriends of Women’s World Banking ICICI Bank Ltd. Union Bank of India IDBI Bank Ltd. Vijaya Bank


6

THE VISION SETS OFF...

Iinterminable solutions to the deteriorating economic

steered by the principle of sustainable holistic transformation of the poor and the marginalized.

ESAF, launched in 1995, was a major turning point in the

Prof. Muhammed Yunus and his Grameen Bank in Bangladesh, also inspired Shri. K. Paul Thomas, the founder of ESAF,

Since then, ESAF has come of ages and has grown by leaps and bounds in the sector, ushering in an era of job creation

empowering 457 thousand members through 147 dedicated

was launched in 2008.

1992 Established ESAF Society as an NGO.

1995 Launched microcredit operations under

support of EFICOR.

1997 Shri. K. Paul Thomas, Founder and Managing Director met Prof. Muhammed Yunus in Bangladesh to understand the nuances of microcredit.

Bangladesh.

members.

2004 Expanded operations to Tamil Nadu, Maharashtra and Chattisgarh.

2006 Crossed 1, 00,000 customers.

disbursements.

2007 Won Micro-Insurance Award instituted by ING Netherlands and Planet Finance India.

2008 Ranked 14th in the world, and 4th in India - for

transformed and organized, after acquiring the portfolio and clients of MED operations

wholly owned subsidiary of Opportunity International, Australia.

2009 Selected by International Labour Organization

decent work’.

(P) Ltd., a wholly owned subsidiary of Oiko Credit, Netherlands.

implementing ‘ Sanchar Sakthi’ Project.

sponsored pension scheme (NPS Lite).

2011 Rated mfR4 by CRISIL.

2011 Rated +(Social Rating) by M-CRIL.


7

ESAF MICROFINANCE AT A GLANCE

As on 31st

branches spread across 33 districts in the states of Kerala, Tamil Nadu, Maharashtra, Chhattisgarh and Madhya Pradesh. The Company has 457 thousand clients and 345 thousand borrowers with a loan portfolio of Rs 2,822 million.

Majority of the clientele of your Company is comprised of

to the exploitation of moneylenders. Beginning with a single credit product in the mid-90s, the Company has rolled out

offered. The Company also extends loans to entrepreneurs who are kept away from the formal banking system. Major credit products offered by the Company are mentioned below:

Loan products 1. Income Generation Loan (IGL)2. General Loan (GL)3. Nirmal Loan (NL) - for sanitation purpose4. Jeeva Dhara Loan (JDL) - for drinking water5. Vyapar Vikas Yogna (VVY) - loan for traders6. House Construction Loan (HCL)7. House Repair Loan (HRL)8. Surya Jyothi Loan - for micro energy products

Non-Financial Services Facilitating value addition and marketing of the products of sangam members Providing health services Providing educational services Providing leadership and skill development training

Parameters 2011-12 2010-11 2009 - 10

No. of Branches 147 150 105

No. of Districts 33 35 30

No. of Employees 1462 1591 1139

No. of Members 457193 434425 300017

Disbursement in Rs. million.

4555.94 4120.794 2397.363

Gross loan portfolio in Rs. million

2822.83 2,095.75 1,561.22

State March 2012

Kerala 2,051.80Tamil Nadu 358.62

Maharashtra 269.14

Chhattisgarh 104.60

Madhya Pradesh 38.67Grand Total 2822.83

Distribution of loan portfolio (figures in million)

Operational Highlights

Progress indicators

-

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

09-10 10-11 11-12

1561.22 2095.75 2822.83

Members

0

100000

200000

300000

400000

500000

09-10 10-11 11-12

300017

434425 457193

Disbursement

0

1000

2000

3000

4000

5000

09-10 10-11 11-12

2397.3625 4120.794 4555.94

0

1000

2000

3000

4000

5000

09-10 10-11 11-12

2397.3625 4120.794 4555.94

Revenue

0100200300400500600700

09-10 10-11 11-12

297.84

537.29 652.53

0100200300400500600700

09-10 10-11 11-12

297.84

537.29 652.53

Incremental Borrowing

0

200

400

600

800

1000

09-10 10-11 11-12

849.05

232.64

330.18

0

200

400

600

800

1000

09-10 10-11 11-12

849.05

232.64

330.18

0.00

10.00

20.00

30.00

40.00

50.00

09-10 10-11 11-12

9.94 12.89

41.47

0.00

10.00

20.00

30.00

40.00

50.00

09-10 10-11 11-12

9.94 12.89

41.47

Gross Loan Portfolio

KeralaTamil NaduMaharashtraChhattisgarhMadhya Pradesh

2051.80358.62

269.14

104.60 38.67


8

a barometer of the world’s real progress suggests that nearly

all issues that need urgent attention. The race for unbridled

globalization, the recent economic slowdown in India limits the capacity to tackle many of the economic challenges.

resonating outside the State. The Malegam Committee recommendations and the RBI’s consequential reframed

margin cap and capital adequacy ratio beckons the need for more pragmatism. There is an emergent need for more liberalized approach by Funding Agencies, especially by the Banks.

Despite turbulent times, your Company has been able to widen the client base to 457 thousand from 434 thousand and disburse Rs. 4555.94 million against Rs. 4120.79 million in

Rs. 12.9 million and consolidated total income to Rs. 652.53

I take great pleasure in welcoming you to the

16th Annual General Meeting of the Company.

This time I am doubly delighted in welcoming you, as the parent Organization, ESAF, is celebrating 20th year

happy to know that the 20th

held at Thrissur were inaugurated by Shri. C.N. Balakrishnan, Hon’ble Minister for Co-operation and Khadi. Other eminent personalities from Thrissur including Shri. P.C. Chacko,

and Shri. I.P. Paul, Hon’ble Mayor also participated.

Before analyzing your Company’s performance in the last

economic scenario and the sector in particular.

The world economy continues to be in deceleration mode.

with the crisis in Eurozone not getting abated and the

contraction in Japan also cannot be ignored. The declining growth rates in India, China and Brazil, the poster nations of the emerging world, are truly a cause of concern. When

FROM THE FOUNDER’S DESK


9

I am glad to inform that your Company stands third at the

71000 clients in Kerala, 2500 clients in Tamil Nadu and 3500 in Central India. Under the Sanchar Sakthi Project, a suite of

information to women Self-Help Groups, with the support of Department of Telecommunications, your Company has

of International Labor Organization (ILO), ESAF has assisted

other interested clients as well.

In Central India, your Company continues to partner with

org and CHF International, to implement the Water and

Company has signed an MoU with Micro Energy Credits, USA for aggregating Carbon Credits.

It was an opportunity to build bondages with international

We are well-equipped and organizationally positioned to

remittances), stand testimonies to this. We always remain

In tune with the changing times, your Company has

zeal.

In conclusion, I thank all our stake holders, especially Sangam Members who stood with us always, Board of Directors for their guidance, Bankers, Financial Institutions

and the Management and Staff teams who are the pillars of

patronage.

K. Paul ThomasFounder and Managing Director


10

NOTICE AND AGENDAth ANNUAL GENERAL

MEETING of the members of ESAF MICROFINANCE AND INVESTMENTS PVT. LTD will be held on 27th September,

transact the following businesses:

ORDINARY BUSINESS:1.

st March, 2012 together with the reports of the Board of Directors and Auditors thereon.

2. To re-appoint, Dr. Idicheria Ninan, Director, who retires by rotation and being eligible offers himself for reappointment.

3. To appoint M/s. A. JOHN MORIS & CO., Chartered

from the conclusion of this Annual General Meeting until

their remuneration. In this connection, to consider and, if

Resolution;

“RESOLVED THAT M/s. A. JOHN MORIS & CO., Chartered Accountants, Chennai, be and are hereby re-appointed

the conclusion of this Annual General Meeting until the conclusion of next Annual General Meeting, on such remuneration as may be determined by the Board of Directors of the Company”

SPECIAL BUSINESS4. Appointment of Smt. Sreedevi Venugopal as Director

Resolution

an Additional Director of the Company on 31st October 2011 under section 260 of the Companies Act 1956 and who holds

th Annual General Meeting,

be and is hereby appointed as a Director of the Company in

Act 1956.

5. Increase in the Authorized Capital and to alter the Memorandum of Association.

“RESOLVED THAT the Authorized Capital of the Company be and is hereby increased from Rs. 55,00,00,000/-(Rupees

number of Equity shares of Rs. 10/- (Rupees Ten only) each

Rs. 100/- (Rupees Hundred only) each to Rs. 75,00,00,000

shares of Rs. 100/- (Rupees Hundred only) each.”

“RESOLVED FURTHER THAT to alter Clause V of the

effect to the change in Authorized Capital”

Association is as follows

“The Authorized Share Capital of the Company is Rs.

Rs. 100/- (Rupees Hundred only) each.”

“The Authorized Share Capital of the Company is Rs.

Rs. 100/- (Rupees Hundred only) each.”

6. Alteration of Articles of Association of the Company for increasing the Authorized Capital

“RESOLVED that pursuant to section 31 of the Companies Act, 1956, the Articles of Association of the Company be and is hereby altered by substituting the articles 4.3, & 4.3.b in the following manner”

EXISTING CLAUSES4.3 The Authorized Share Capital of the Company is Rs.

4.3.a

Crore) equity shares of Rs.10/- (Rupees ten only) each,

4.3 The Authorized Share Capital of the Company is


11

into:

4.3.a.

By order of the Board, For ESAF MICROFINANCE AND

INVESTMENTS PVT LTD

SD/-

PLACE : Thrissur PADMAKUMAR K. DATE : 13-06-12 Company Secretary

NOTES:

1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT A PROXY TO ATTEND AND VOTE INSTEAD OF HIMSELF/HERSELF AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY. The members are requested to send their proxy form to the

before the commencement of the meeting.

2. The explanatory statement setting out the material facts pursuant to section 173(2) of the Companies Act, 1956, relating to item no 4 to 6 is annexed here to.

3. Copies of all documents referred to in the notice and

10.00 AM and 1.00 PM on all working days till the date of meeting

1956.

As required under section 173 of the companies Act,1956, the following explanatory statements set the material facts relating to the business mentioned under item no 4, 5 and 6

Item No. 4

Appointment of Smt. Sreedevi Venugopal as Director

Director of the Company in the Board Meeting held on 31.10.2011. She is an elected Trustee of ESAF SHG

and was appointed based on the nomination of the Trust.

will be determined by the Trust she represents.

As an Additional Director her tenure will automatically expire on the day of the Annual General Meeting of the

communication for change in nomination from the Trust. So the Board decided to recommend the appointment of Smt.

she represents.

1.00 PM on all working days till the date of meeting. The

is recommended.

None of the Directors other than the Director seeking appointment is interested in the resolution.

The Board recommends the resolutions to be passed as ordinary resolution (simple majority) - Minimum Statutory

Item No. 5 and 6

Increase in the Authorized Capital and to alter the Memorandum of Association and Articles of Association

The Authorized Capital of the company presently stands at

number of Preference shares of Rs. 100/- (Rupees Hundred only) each.

of the funding banks. The expansion, growth and future plan of your Company is such that there is a need for enhancing

increase the Authorized Capital in tune with the growth.

Capital of the company from Rs. 55,00,00,000/-(Rupees Fifty


12

Crore only) by creation of 2,00,00,000 (Two Crore) number of additional Equity shares of Rs.10 each per share.

The proposal requires amendment of clauses of Memorandum

the enhancement of Authorized Capital. For amendment of Memorandum only ordinary resolution is required, whereas for amending the Articles special resolution is required.

As the proposal requires amendment of both Memorandum

Shareholders is recommended by way of a special resolution (ie. 3/4th majority) to carry out the change.

None of the directors is interested or concerned in these resolutions.

By order of the Board, For ESAF MICROFINANCE AND

INVESTMENTS PVT. LTD

SD/-.

PLACE : Thrissur PADMAKUMAR K. DATE : 13 - 06 - 12 Company Secretary


13

DIRECTORS’ REPORT

th

Annual Report of the Company together with the audited

31st March 2012.

has been a limiting factor until 2011-12. As a result, the issue of moulding a sectoral framework has been engaging the attention of the RBI. The AP crisis has accentuated the need for such a process. To address this lacuna the report of the

been taken into account for the formulation of a sectoral

risk management, eligibility criteria, interest cap, margin cap, portfolio distribution etc., by the RBI. Accordingly, funding

priority sector lending only if the RBI conditions related to the

prudent internal cost control and cost reduction strategies to keep them operationally sustainable. This was tough, considering the inherent specialities of small ticket loans and

a wait and watch approach for the regulations to bring in

funding strategies and started relying more on securitization deals. To ensure adequate returns to stakeholders, some

Despite these challenges, your Company has been able to

the guidelines of the Regulatory Authority.

The Board is glad to present major highlights hereunder .

PERFORMANCE REVIEW

During the year, your Company has grown in portfolio

increased to Rs. 652.5 million from Rs. 537.3 million of the

Parameters 2011 -12 2010 - 11

652.5 537.3

Total Expenses 556.6 494.3

Taxation95.9 43.0

Less

Depreciation 24.6 23.5

Extraordinary Items 9.2 0.0

Taxation 20.6 6.6

41.5 12.9

Tax rose to Rs. 41.5 million in place of Rs. 12.9 million in

only. Earnings per share almost doubled to Rs. 0.60 from last

Financial Results (figures in million)

Despite the turbulent times in 2011-12, the Company

year’s Rs 12.9 million, which would certainly add on the

depicted below:-

1. BORROWINGS

During the year, the Company raised funds of Rs. 2041.7

Portfolio Assignment etc., the details of which are as mentioned below:-


14

Amount

Term Loan 1140

Portfolio Assignment 663

Renewal of Cash Credit Limit 170

Total Fund Raised from Banks/Financial Institutions

1973 96.64%

Unsecured loans 65.5

Secured Debentures 3.2

Total 2041.7 100.00%

Break up of Funds (figures in million)

During the year, high borrowing cost and slackness in the

faced by the Company.

3. CAPITAL INFUSION

During the year, the Paid up Capital of the Company increased from Rs. 483.0 million to Rs. 500 million by additional infusion of equity of Rs. 17 million. All the shares

4. ESAF EMPLOYEES GRATUITY TRUST

Company’s concern for employee welfare.

5. CRAR AND DEBT EQUITY RATIO

Your Company is able to maintain a healthy Capital Risk Adequacy Ratio (CRAR) throughout the year. During the

Equity Ratio stood at 3.7.

6. COMPLIANCE OF REGULATIONS

(A) RBI Regulation

As per Non-Banking Finance Companies RBI Directions, 1998, the Directors hereby report that the Company did not

any public deposits outstanding at the end of the year. The

Bank and implemented the guidelines issued from time to

Practices Code. The company has submitted an application

the RBI circular No. DNBS.CC.PD.No.250/03.10.01/2011-12 dated 02-12-2011.

(B) MFIN/Sa-Dhan Guidelines

MFIN/Sa-Dhan.

7. IMPLEMENTATION OF STANDARD OPERATING PRACTICES

In tune with the changes in the macro-economic and

LenderTermLoan

CashCredit

PortfolioAssignment Total

Ananya Finance for 30 30

Axis Bank 50 113 163

Central Bank of India

200 200

Credit Bank150 150

Dia-Vikas Capital 50 50

IDBI Bank 250 250 500

Indian Bank 50 50

IndusInd Bank 150 150

40 40

South Indian Bank 100 10 110

State Bank of Hyderabad

60 60

State Bank of India 270 100 370

State Bank of 100 100

Total 1140 170 663 1973

Details of Funding


15

States Kerala Tamil Nadu Maharashtra Chhattisgarh MadhyaPradesh

Total

Districts 11 7 7 6 2 33

Branches 86 25 21 10 5 147

Members 3,16,315 68,175 45,775 19,303 7,646 4,57,214

Borrowers 2,28,698 54,338 38,671 17,810 6,299 3,45,816

Total portfolio in million

2,051.80 358.62 269.14 104.60 38.67 2,822.83

Staff 957 208 207 68 22 1,462

561 132 102 47 16 858

A. Snapshot Profile as on 31st March 2012

processes and also the Organizational Structure.

8. IMPLEMENTATION OF CORE BANKING SOLUTION

new Core Banking Solution termed Omni Enterprise and implementation is carried out by M/s Infrasoft Tech India (P) Ltd, which will be a major milestone in strengthening

Company.

9. OPERATIONS

the macro economic scenario, which enabled it to strengthen the internal control systems and procedures also.

As on 31st

st

12, the Company made loan disbursements amounting to Rs. 4556 million, which is an all-time record and this

to the tune of Rs.15092 million. The employee count comes to 1462 of which majority are women who are mainly

the Company embraces.

The Management team of the Company also comprises of seasoned bankers and other experienced professionals in

B. Loan Disbursements and Portfolio (figures in million)

Lender 2011-12 2010-11 Increase

Loan Disbursed in million

4555 4120

Loan outstanding in million

2822 2095

disbursement, which touched Rs. 4555 million in the

2822 million from Rs. 2095 million.


16

C. Productivity

Particulars 2011-12 2010-11 Increase

Branch in Nos2352 2150

404 323

3.29 2.08

PERFORMANCE – ZONE WISE

D. Kerala Zone

Particulars March 2012 March 2011

Districts 11 11

Branches 86 87

Borrowers 228698 192054

Portfolio in million 2051.80 1298.76

outstanding from Rs. 1298.76 million to Rs. 2051.80 million during 2011-12. The Borrower base increased to 2,28,698 in March 12 from 1,92,054 in March 11. As a strategy for

which resulted in a reduction of total number of branches.

E. Tamil Nadu Zone


Districts 7 7

Branches 25 26

Borrowers 54338 67,464


In Tamil Nadu, Loan Portfolio declined to Rs. 358.62 million in March 12 from Rs. 376.1 million in March 11, with a decrease of borrowers to 54,338 in March 12 from 67,464 in March 11.

F. Central India Zone


Districts 15 17

Branches 36 37

Borrowers 62780 63,072


Chattisgarh, and Madhya Pradesh. During the year, the Loan Portfolio decreased to Rs. 412.41 million in March 12 from Rs. 423.6 million in March 11, with corresponding decrease of borrowers to 62,780 in March 12 from 63,072 in March 11.

11. CORPORATE GOVERNANCEYour Company has been practicing the principle of good

process. Though clause 49 of the standard listing agreement

practices followed by your Company is attached and forms part of the Director’s Report.

12. MANAGEMENT DISCUSSION AND ANALYSISThe Management Discussion and Analysis report, highlighting

13. SOCIAL PERFORMANCE AND CORPORATE SOCIAL RESPONSIBILITY (CSR)

that differentiates great from the good. After all, it’s humanity

under the Management Discussion Analysis Section in this Annual Report.

14. RATINGS, AWARDS AND RECOGNITIONS

During the year, the Company was graded Mfr-4 by CRISIL.

sector had to go through in the year 2011-12.

Also your Company was awarded with the rating by M-CRIL


17

Company.

15. DIRECTORSDuring the last Annual General Meeting held on 24th September 2011, Smt. Suja Saji and Shri. R. Prabha, Additional Directors of the Company were appointed as Directors of the Company.

Director of the Company in the Board meeting held on 31st

October, 2011.

Smt. Suja Saji, resigned from the Board with effect from 31st

October, 2011. Board places on record its deep appreciation to

in the Board and for her contribution as a Board Member.

Shri. Idicheria Ninan, Director retiring at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment.

16. AUDITORS AND AUDITORS’ REPORTM/s. A. JOHN MORIS & CO., Chartered Accountants, Statutory Auditors of the Company, will retire at the conclusion of the

the limits of Section 224(1B) of the Companies Act, 1956.

or explanations.

The report of the Auditors to the shareholders is attached

17. DIVIDEND

capital in order to maintain a healthy Capital Adequacy Ratio and to support future growth opportunities.

18. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGOThe Company has nothing to report in respect of information on

under section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in respect of Board of Directors) Rules, 1988, since the Company is not engaged

in manufacturing or processing business. The details regarding

to this report.

19. PARTICULARS OF EMPLOYEESParticulars of employees of the Company who were or are in receipt of remuneration prescribed u/s. 217 (2A) of the Companies Act, 1956 or more per month are shown here as Annexure ‘B’ to this report

20. DIRECTORS’ RESPONSIBILITY STATEMENT

1. Followed in preparation of the Annual Accounts, the applicable standards with proper explanation relating to material departures, where applicable.

2. Selected such accounting policies and applied them consistently and made judgements and estimates that are

of the state of affairs of the Company at the end of the

period.

of adequate accounting records in accordance with the

detecting fraud and other irregularities.

4. Prepared the Annual Accounts on a going concern basis.

21. ACKNOWLEDGEMENTS:The Directors wish to place on record their appreciation for the

Authorities. The Directors also wish to place on record their

employees of the Company.

By order of the Board,For ESAF MICROFINANCE

AND INVESTMENTS PVT. LTD,

(K. Paul Thomas) (George Thomas)Managing Director Director Operations

Place : Thrissur Date : 13.06. 2012

SD- SD-


18

ANNEXURE A Information pursuant to section 217 (1) (e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of particulars in respect of the Board of Directors) Rules, 1988.

FOREIGN EXCHANGE

The details of Foreign Exchange earnings and outgo is shown below:

A.Earnings :- Amt (in Rs.) Amt(in USD) Date Transaction bank

International Labour Organization, Switzerland (towards Shramjyothi Project of ILO)

16,64,332 34,980 14-09-2011South Indian Bank, Thrissur

B. Outgo:-

Dexia Microcredit Fund, Luxembourg (towards Guarantee fee payment)

18,33,260 40,202.50 27-06-2011 Citi Bank NA, Chennai9,89,158 18,731.25 12-10-2011

Grameen Foundation, Washington DC (towards Guarantee fee payment)

4,20,849 9,227.40 28-06-2011“

ANNEXURE B

PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 217 (2A) OF THE COMPANIES ACT, 1956During the year, there were no employees who were in

217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975.

II. The year-end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

Receivable in Foreign currency Receivable in Foreign currency

INR US Dollars INR US Dollars

13,97,463 26,312 4,22,848 9,415

The above receivables are from International Labour Office, Geneva towards Shramjyothi Project.


19

REPORT ON CORPORATE GOVERNANCE

adherence to transparency, accountability, responsibility and fairness in all areas of its operations and in all interactions

The Board functions to ensure the success and stability of the

management team and through continuous monitoring to

responsible, ethical and transparent manner. The Company manages its business and conducts its affairs with the

a. Composition of Board

Sl. No Name Category Date of Appointment

1. Mr. K. Paul Thomas MD 10.10.2005

2. Mr. George Thomas WTD 02.09.2006

3. Mr. Vikraman Ampalakkat NEID 30.09.2008

4. Mr. Cherian Thomas NEID 30.09.2008

5. Dr. Idicheria Ninan NED 30.09.2008

6. Mr. Rajan Samuel NEID 07.10.2008

7. Ms. Ranjani K.C. NED 20.06.2009

8. Mr. N.A.J.V.S. Sundara Rao NED 31.03.2010

9. NED 28.02.2011

10. NED 31.10.2011

A. Company’s philosophy on Corporate Governance

good management, adoption of prudent risk management techniques and compliances as required in the RBI

weaker sections of the society.

B. Board of DirectorsThe Board of Directors comprises of 10 Directors including the Managing Director and a Whole Time Director. Out of

Directors of which three are Independent Directors. On 31st

as the Additional Director, the day Smt. Suja Saji, Non-


20

Board Profile

K. Paul Thomas-The Founder and Managing

years, of which more than 19 years are in

of ESAF Swasraya Producers Company Ltd,

(P) Ltd, ESAF Retail (P) Ltd, Takyon Systems Solutions (P) Ltd, KNBFC-WA and ESAF Society. Recently, he has been elected

Degree in Business Administration. He is the Chairman of

George Thomas - Director Operations has

sector and 8 years of experience in

Swasraya Producers Company Ltd, ESAF

Ltd, ESAF Retail (P) Ltd, and ESAF Staff Welfare Trust. He

Vikraman Ampalakkat - Independent Director has 4 decades of professional banking experience, of which 17 years in

and has retired as CGM. He is also on the

(P) Ltd.

Cherian Thomas - Independent Director, currently functions as Senior Director, IDFC Limited. Has more than 24 years of professional experience in banking

Company Limited, Delhi Integrated Multi-Model Transit

Company Limited, IDFC PPP Trusteeship Company Limited,

Mechanical Engineering and Finance.

Dr. Idicheria Ninan Director, a renowned professor holding a doctorate in Theology from Oxford

Years of experience in Academics and

ESAF Society.

Rajan Samuel - Independent Director -

Finance with Habitat for Humanity

K. C. Ranjani -is the Managing Director of Dia Vikas, a subsidiary of Opportunity International

Opportunity International Australia, on whose sponsorship set up Dia Vikas in 2007, and heading since then. She holds a Post Graduate Degree in Bank Management.

N.A.J.V.S. Sundara Rao

a subsidiary of Oiko Credit Netherlands,

Manager of Oiko Credit. He is a Cost Accountant and Company Secretary and holds MBA in

Ravindranathan Prabha

Federations. He is a seasoned banker

all facets of banking and retired as General Manager, Canara Bank. He is on the Boards

Grameen Bank and holds a post graduate degree in Agriculture.


21

Sreedevi Venugopal- Additional Director -

sangams. She is an elected Board member of ESAF SHG Federation.

C. BOARD MEETINGS

ended on March 31st 2012. These meetings were held on 25th June, 2011, 24th September 2011, 31st October, 2011 and 21st March 2012. The maximum gap between two board meetings was 141 days.

D. DIRECTORS ATTENDANCE RECORD

Directors Attendance record

Sl. No Name Board meeting during Financial year 2011 - 12 Whether present at the Held Attended

1. Mr. K. Paul Thomas 4 4 Yes

2. Mr. George Thomas 4 4 Yes

3. Dr. Idicheria Ninan 4 3 Yes

4. Mr. Vikraman Ampalakkat 4 4 Yes

5. Mr. Cherian Thomas 4 2 Yes

6. Mr. Rajan Samuel 4 2 Yes

7. Ms. Ranjani K. C. 4 4 Yes

8. Mr. Sundararao N.A.J.V.S 4 2 Yes

9. 4 3 No

10. 2 2 NA

11 3 3 Yes

BOARD COMMITTEES

The company has three Board committees Viz. Audit Committee, Human Resources & Remuneration Committee

subsequent meetings.

Mr. Padmakumar K., Company Secretary and Compliance

1. Audit Committeea. Constitution of Audit Committee

The Audit Committee was constituted on 07.10.2008, comprising of the following directors as members.

Sl No. Name Designation

1. Mr. Vikraman Ampalakkat Chairman

2. Mr. George Thomas Member

3. Dr. Idicheria Ninan Member

The Constitution of the Audit Committee meets the requirement of section 292A of the Companies Act, 1956 and Clause 11 of Non-Banking Financial (Non-Deposit Accepting

Directions, 2007.

b. Meeting and Attendance

the Audit Committee were held on 25.6.2011, 24.9.2011, 31.10.2011 and 27.1.2012. The attendance details of the committee are as under.


22

SlNo. Name

Number of meeting during the Financial year 2011 - 12

Held Attended

1. Mr. Vikraman Ampalakkat 4 4

2. Mr. George Thomas 4 4

3. Dr. Idicheria Ninan 4 3

2. Human Resources and Remuneration Committee

a. Constitution of Human Resources and Remuneration Committee

The Human Resources Remuneration Committee was constituted on 13.02.09 with the following Directors as members.


1. Mr. Vikraman Ampalakkat Chairman

2. Mr. K. Paul Thomas Member

3. Mr. Cherian Thomas Member

4. Mr. Rajan Samuel Member


b. Attendance during the year

27.1.2012. The attendance details of the committee are as under.

SlNo. Name

Number of meetings during the Financial Year 2011 - 12

Held Attended


2. Mr. K. Paul Thomas 1 1

3. Mr. Cherian Thomas 1 1

4. Mr. Rajan Samuel 1 0


which comprises of the following Directors as members


1. Mr. K. Paul Thomas Chairman


3. Mr. Vikraman Ampalakkat Member

b. Attendance during the year

on March 31st 2012. These meetings were held on 18.4.2011, 28.4.2011, 4.7.2011, 10.8.2011, 7.9.2011, 13.9.2011, 28.10.2011, 3.11.2011, 9.11.2011, 9.12.2011, 20.12.2011, 3.1.2012, 5.1.2012, 18.1.2012, 27.2.2012, 12.3.2012, 14.3.2012, 17.3.2012, 28.3.2012, 31.3.2012. The

as under.

SlNo. Name

Number of meeting during the Financial year 2011 - 12

Held Attended

1. Mr. K. Paul Thomas 20 20



3. General Share holder information

a. Date time and venue of 16th AGM

The 16th AGM of the Company will be held on 27th September

b. Financial Calendar

The Financial Calendar of the Company is from 1st April to 31st March.


23

MANAGEMENT DISCUSSION AND ANALYSIS

st March

sector. Out of the total 62 million micro credit accounts in India, MFIs constitute the second largest group and are three times ahead of other Financial Institutions. This shows that

sector with a client base of 4.57 lacs, geographically spread to

Financial Highlights

Parameters 2011 - 12 2010 - 11 2009 - 10

Total Assets 2798 2318 1849

IncrementalBorrowings

337 233 849

653 537 298

42 13 10

Operational Highlights

ParametersMarch2012

March2011

March2010

State 5 7 5

Branches 147 150 105

Districts 33 35 30

Members 457193 434425 300017

Sangams 26912 26021 19045

Borrowers 345816 322590 220011

Total Loan Outstanding (in million)

2822.83 2095.75 1561.22

Amount Disbursed During FY (in million)

4555.94 4120.79 2397.36

Disbursed (in million)

15092.28 10536.34 6415.55

Staff (Including 1462 1591 1139

March 2012 - Growth Highlights

Parameters Kerala Tamil Nadu Maharashtra ChattisgarhMadhyaPradesh Total

District 11 7 7 6 2 33

Branches 86 25 21 10 5 147

Members 316315 68174 45775 19303 7626 457193

Borrowers 228698 54338 38671 17810 6299 345816

Total Portfolio in million 2051.80 358.62 269.14 104.60 38.67 2822.83

Staff 957 208 207 68 22 1462

561 132 102 47 16 858


24

FUNDING PATTERN

as on 31st Mar-12

Banks.

BUSINESS PLAN The Company has formulated a Business Plan with long

Company is totally in compliance with the RBI regulations applicable to NBFC-MFIs and taking into account the emerging challenges and opportunities. The long term plan

Rs. 4,000 million.

HUMAN RESOURCES MANAGEMENT

importance to this discipline to manage the operations professionally.

A. Head countas on 31st March 2012, was 1462. Among the zones, Kerala has the highest manpower with 957 employees followed by Central India with 297 and Tamil Nadu with 208 employees.

operations. Out of the 1462 employees, 917 are females and 545 are males.

B. Employee tenure

C. Recruitment - The Company has a fair and transparent

through leading newspapers/ weeklies / local TV channels/

members of our sangams to identify the right candidates. During the year 303 employees were recruited for different posts.

D. Training and Development in ‘placing the right person at the right place’ and training

orientation. A total of 193 training programs were conducted. Efforts are made to ensure conducting training programs

RISK MANAGEMENT

Risk, the Company has embedded the Risk Management in the business process and ensures the implementation of healthy risk management practices in its operational processes and procedures.

INTERNAL AUDIT AND CONTROL The Company practices adequate internal control systems supported by a well-established Internal Audit Department with experienced staff, who conduct audit of Branches and

spot audits are conducted at the Branches by surprise, and

month periodicity. The rating system introduced with effect from 1st August, 2011 has been stabilized. The Internal Audit

quarterly to the Audit Committee of the Board. The audit

of the Branch management and to plug loopholes in the systems. The frequency of Internal Audit has been changed to six months; and plans are on to further reduce the periodicity

followed up with the Branches promptly.

GRIEVANCE REDRESSAL MECHANISM

Mechanism for customers and staff members. In line with

dealing with sexual harassment of women employees is also

6.46%5.03%

25.54%

62.97%

NBFC

Others

PB

PSU


25

functioning under the HR department. Dedicated telephone and mobile numbers are made operational for registering complaints / suggestions.

NEW BUSINESS INITIATIVES

The Company in line with the emerging opportunities

pole position to utilize its rural branch network, knowledge

encompasses a committed workforce of more than 1500, spread across 147 branches in the country and is connected through a cutting-edge technology platform.

MICRO ENERGY PROGRAMS

the poor, the Company is promoting the use of clean energy

Surya Jyothi Scheme. ESAF has already signed an MoU with Micro Energy Credits, USA for aggregating Carbon Credits against the products sold.

TECHNOLOGY INITIATIVES

existing branch based loan tracking system to core banking system. The Roadmap for operationalizing the system is sketched here under.

Roadmap

High-level Roadmap

The system will facilitate the launching of new products

the platform to implement the mobile based collection

meet the RBI requirement of integrating with Credit Bureaus

Company has entered into a contract with IBM India.

SOCIAL PERFORMANCE MANAGEMENT

your Company has strategically made it mandatory to

socio economic growth of the clients. Accordingly, the

thrust by associating in the following areas.

follow a scoring system. Based on this, suitable changes are made in the lending policies. The data is also used for

(MIX) and other external stakeholders about the impact of

Operational EaseManagement Visibility

New productsLender transparency

Streamlined operations

operationsLender transparencyDetailed customer

Process Reengineering

Streamlined TrainingMobile devicesReal time data capture

Easier to launch new

Visibility & TransparencyDirect access for lending partnersManagement on the go dashboardsAnalyticsBusiness PlanningSimulate business scenarios Decision Support

AgilityBottomline

Visibility & TransparancyDecision Support

2012 2012-13 Beyond 2013

Goa

lsPe

riod


26

B) Social Performance Management WorkshopA two day Social Performance Management Workshop (SPM) organized by your Company to plan strategies in accordance with socially responsible guiding principles, was attended by Mr. Calum Scott, Program Impact Director, Opportunity International, Australia, Senior Management Committee Members and Heads of ESAF Business groups. The Company

strategies to adhere to the principles of SMART Campaign, which primarily deals with Client Protection Principles.

the few MFIs to pilot the standards with the support of OIA.

SOCIAL RATING BY M-CRIL A unique effort to rate an Organization with emphasis on Social Performance was conducted by MCRIL in Sep

rating.

SOCIAL RETURN ON INVESTMENT –SROI

Project Consultant, Opportunity International Australia,

Rs 3.19

The report concluded that the Company is well positioned

position on this topic compared to other MFIs in India and iii) its focused staff and R&D department, heading the

to SPM.

INTERNSHIP PROGRAMSInternship programs are offered to students undergoing their post-graduation in Economics, Business Management, and Rural Management from National as well as International

talents, who can build their professional careers in

the faculty of socio economic and four in the discipline of

ACTION RESEARCH PROGRAM ON MICROFINANCE FOR DECENT WORK

The International Labor Organization (ILO) under its

of formalization of microenterprises, implemented an Action

two collaborating organizations chosen by ILO. The aspect of formalization of microenterprises was aimed to support potential growth oriented micro entrepreneurs for gaining

project.


27

STORIES OF TRANSFORMATIONHER ‘MIRROR’ REFLECTS HER DREAMS...

Lfather. Hailing from Mulayam Road in Thrissur district, her

resulted from her father’s death. Her mother’s daily income

a nearby Mirror Manufacturing unit for Rs 100/day. Being a dedicated employee, her enthusiasm allowed her to understand the trade inside out. Soon she was ready with a plan to start her own unit. Her mother and only brother encouraged her to pursue her plans. But raising capital was a

roof thatched with palm fronds.

Rs. 20,000. She utilized the money to procure essential raw

hard were her forte.

Through sheer ingenuity and hard work she earned a

further interest in her products as it appealed to the senses in

ESAF, thanks to her meticulous way of utilizing the money.

She relies on her brother for purchasing glasses and putting them into shapes. Her mother helps her in manufacturing and packing. She employs two permanent staff and occasionally,

rooms. The business also helped her in purchasing new household items and furniture.

and photo frames to retailers in Thrissur and Kunnamkulam. According to her, the biggest challenge she confronts is disposal of glass waste. But the 32 year old is prepared to

WATER DOESN’T FORCE SHALU TO MEET HER WATERLOO

Shalu Tirpude resides in Silli near Bhandara. For this lady from the slums, collecting water for daily use was an uphill task as

she couldn’t afford water tap connection at home. She used to lug water from a municipal tap located almost 2 kms away from her home. Sometimes, she used to wait for hours in the queue and still ended up with empty pots, as the tap would run out of stock. Long wait in the queue also affects her daily routines like sending children to school. Meanwhile, Shalu came to know about ESAF Water and Sanitation (WATSAN) loans through her friends. Soon she contacted ESAF staff, who apprised her in detail about the

the assistance, as she was eager to get rid of the tedious routine.

loans and the importance of clean water. The staff then met the

He was impressed with the project and was well aware of the potential of such a project in his community. He soon made

the support of the Sangam members, ESAF staff organized a community mobilization and training program, in which the clients were educated on the importance of clean water and sanitation.


28

‘SEVAI’ MEANS LIFE FOR SUJATHA

Sujata Shewre owns an

enterprise which specializes in

sweetness of her smile is now sweeter than her product as her business is now known in the name ‘Sujatha Gruh Udyog’. She thanks ESAF

the formalization process through. “I don’t feel inferior to

to differentiate my product”, says the proud 44 year old

With the support of ESAF she bought a machine for Rs 22,000

struck in the form of her husband’s death. He was working

ESAF she became a more professional entrepreneur. Now her business is well established as she has a good network of retail shops as her clients. They call her on mobile and place orders. She has employed two women to whom she pays Rs.3000/- each per month.

“Now I am a proud mother who is capable to meet the educational requirements of my two daughters”, says Sujatha.

VIMALA, A WINNER IN A MAN’S WORLD

Manufacturing and dealing with nuts and bolts is no

silently putting efforts to expand her business of manufacturing plastic nuts and bolts and other plastic products like droppers used for eyes and ears. The task is not that easy as what her

out.

Before starting her own enterprise, Vimala was languishing in a similar workshop as a daily wage worker. The unit was

of the company. Through the Shram Jyothi project, ESAF also supported her in registering her business and getting an ID card, which recognizes her as an entrepreneur.

Her experience speaks for the quality of the products, as

She along with her women staff is able to run the business successfully without the support of their family. She now has plans to buy an upgraded machine, which will help her


29

AUDITORS’ REPORT

TO THE MEMBERS OF ESAF MICROFINANCE AND INVESTMENTS PRIVATE LIMITED

1.MICROFINANCE AND INVESTMENTS PRIVATE LIMITED

Flow Statement of the Company for the year ended on that date annexed thereto. The preparation of these Financial Statements is the responsibility of the Company’s Management. Our responsibility is to express an opinion on

2. We conducted our Audit in accordance with Auditing Standards generally accepted in India. Those standards require that, we plan and perform the audit to obtain reasonable

material misstatement(s). An Audit includes examining, on a

reasonable basis for our opinion.

3. As required by the Companies (Auditors’ Report) order,

section (4A) of section 227 of the Companies Act, 1956 and on the basis of such checks as we considered necessary and

paragraphs 4 and 5 of the said order.

4. Further to our comments in the annexure referred to in

(a) . which to the best of our knowledge and belief were necessary for the purpose of our audit.

(b). In our opinion, proper books of account as required

appears from our examination of the books maintained

us.

(c).with by this report are in agreement with the books of account.

(d).Sheet comply with the Accounting Standards referred to in sub section (3C) of section 211 of the Companies Act 1956.

(e).from the Directors, and taken on record by the Board of Directors, We report that none of the Directors are

as Directors in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

(f). In our opinion and to the best of our information

generally accepted in India.

(i). In the case of the Balance Sheet, of the state of affairs of the Company as at 31st March 2011;

(ii).of the Company for the year ended on that date; and

(iii).the Company for the year ended on that date.

For A. JOHN MORIS& CO. CHARTERED ACCOUNTANTS,

FRN. 007220S

SD/-

PLACE : THRISSUR (G. KUMAR)DATE : JUNE 13, 2012 PARTNER,

M.No: 023082


30

ANNEXURE TO THE AUDITORS’ REPORT(Referred to in paragraph (3) of our report of even date)

REPORT OF THE AUDITOR TO THE MEMBERS IN ACCORDANCE WITH THE COMPANIES (AUDITORS’ REPORT) ORDER 2003

We state that,

1. The Company has maintained proper records showing full particulars including quantitative details and situation

which, in our opinion, is reasonable looking to the size of the Company and the nature of its business.

our enquiries, the disposal of assets during the year was not substantial and would not have an impact on the operations of the Company.

4. Being a Non-Banking Finance Company, the matters in

5. The Company has granted unsecured loans to M/s. ESAF HEALTHCARE SERVICES (P) LTD, M/s. ESAF SWASRAYA PRODUCERS COMPANY LTD and M/s. ESAF RETAIL

301 of the Companies Act, 1956. The maximum amounts

loans granted to such companies were Rs. 14.92 Lakhs,

6. The rate of interest and other terms and conditions of such loans are not, prima facie, prejudicial to the interest of the Company.

7. Since there were no stipulations for repayment of the Principal and payment of interest, we are unable to offer comments on the regularity of the repayments of the loans.

and interest.

9. The Company has not taken any loan, secured or

in the register maintained under section 301 of the Companies Act, 1956.

are not applicable to the company.

11. In our opinion, there is an adequate internal control system commensurate with the size of the Company and

examination of the books and records of the company, carried out in accordance with the auditing standards

continuing failure to correct major weaknesses in the aforesaid internal control system.

to us, the company has not entered in to any contract or arrangement referred to in section 301 of the Act.

13. As the company has not entered into any transactions,

of the Companies (Auditor’s Report) Order, 2003.

14. During the year, the Company has not accepted any deposits from the public. As such the compliance with the

Act, 1956 and rules framed there under are not applicable.

15. In our opinion, the company has an internal audit

commensurate with the size and nature of the business of the Company.

to us, the maintenance of cost records has not been

209(1)(d) of the Companies Act, 1956, for any of the

17. According to the records of the Company, it is regular in depositing with appropriate authorities the

Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and other applicable statutory dues.


31

to us, there are no undisputed amounts payable in respect

Fund, Employees State Insurance, Income-tax, Sales-Tax, Wealth Tax, Custom Duty, Excise Duty & Cess as at the year end, for a period more than six months from the date they become payable.

appropriate authorities.

20. The Company has neither accumulated losses till the immediately preceding Financial Year nor incurred any loss during the current Financial Year under this Report.

to us the company has not defaulted in repayment of dues to Financial Institutions and Banks.

22. Based on our examination of documents and records maintained by the Company, we are of the opinion that the

basis of security by way of pledge of shares, debentures and other securities.

23. In our opinion and according to the information and

Company does not attract any special statute applicable to

24. In our opinion and according to the information and

to us and on the basis of records examined by us, the

others from Banks or Financial Institutions.

obtained.

been utilised for long term purposes.

to us no preferential allotment of shares has been made

listed in the register maintained under section 301 of the company Act, 1956.

to us, the company has created securities in respect of secured debenture issued.

30. The Company has not raised money by public issues in

in respect of clause 4(xx) for the Companies (Auditor’s Report) Order, 2003.

31. The company has reported frauds during the year by customers as well as staff to the tune of Rs. 14,47,403/- and

to us.

32. The company has complied with the prudential

against standard/sub-standard/doubtful/loss assets, as per

Accepting or Holding) Companies Prudential Norms

33. Based on representations by management and our

of the opinion that the Company has adequate procedures for appraisal of credit proposals/requests, assessment of credit needs and repayment capacity of the borrowers.

For A. JOHN MORIS& CO. CHARTERED ACCOUNTANTS,

FRN. 007220S

SD/-

PLACE : THRISSUR (G. KUMAR)DATE : JUNE 13, 2012 PARTNER,

M.No: 023082


32

M/s. ESAF MICROFINANCE AND INVESTMENTS PRIVATE LIMITED,(Formerly Pinnai Finance & Investments (P) Ltd.)

#5A, 5th FLOOR, No. 8 & 9,GANGADEESWARA KOIL STREET, PURASAWALKAM, CHENNAI-600 084.

BALANCE SHEET AS ON 31st MARCH, 2012

Particulars

SCH

A EQUITY AND LIABILITIES1 Shareholders' Funds (a) Share capital 3 500,000,000.00 483,020,000.00 (b) Reserves and surplus 4 71,099,566.35 29,633,247.22 571,099,566.35 512,653,247.222 Non-current liabilities (a) Long-term borrowings 5 934,957,603.90 740,355,526.32 (b) Deferred tax liabilities (net) 6 1,677,278.70 3,028,929.70 (c) Long-term provisions 7 5,680,200.00 -

942,315,082.60 743,384,456.023 Current liabilities (a) Short-term borrowings 8 148,543,731.00 49,660,020.12 (b) Other current liabilities 9 1,056,790,717.66 964,511,039.33 (c) Short-term provisions 10 78,166,695.00 44,830,686.00

1,283,501,143.66 1,059,001,745.45

TOTAL 2,796,915,792.61 2,315,039,448.69

ParticularsAs at

31.03.2012`

As at31.03.2011

`

Note No.


33

SD/-

SD/-

SD/-

SD/-

SD/-

B ASSETS1 Non-current assets (a) Fixed assets (i) Tangible assets ll.A 102,522,030.92 66,860,406.77 (ii) Intangible assets ll.B 19,991,070.00 39,982,140.00 122,513,100.92 106,842,546.77

(b) Non-current investments 12 1,000,000.00 1,000,000.00 (c) Long-term loans and advances 14 646,846,252.66 82,990,392.36

647,846,252.66 83,990,392.362 Current assets (a) Current investments 13 100,000.00 - (b) Trade receivables 15 1,662,693,539.84 1,933,592,184.44 (c) Cash and cash equivalents 16 183,956,215.76 121,285,227.32 (d) Short-term loans and advances 17 155,316,273.30 51,724,002.77 (e) Other current assets 18 24,490,410.13 17,605,095.03

2,026,556,439.03 2,124,206,509.56

TOTAL 2,796,915,792.61 2,315,039,448.69

See accompanying notes forming part of 25the financial statements

In terms of our report attached.

For A. JOHN MORIS & CO., Chartered Accountants, For and on behalf of the Board of Directors FRN. 007220S (K. PAUL THOMAS) (GEORGE THOMAS) (G. Kumar)Managing Director Director Partner Membership No. 023082

(JOBY. C.O) (PADMAKUMAR.K) Chief Financial Officer Company Secretary

Place : Thrissur Date : June 13, 2012

ParticularsAs at

31.03.2012`

As at31.03.2011

`Note No.


34



STATEMENT OF PROFIT AND LOSS - NORMAL AS AT 31ST MARCH, 2012

Particulars

SCHA CONTINUING OPERATIONS

1 Revenue from operations 19 635,560,985.65 515,920,435.512 Other income 20 16,972,277.07 21,373,745.94

3 Total revenue (1+2) 652,533,262.72 537,294,181.45

4 Expenses

(a) Finance costs 21 254,519,819.84 242,641,766.58(b) Employee benefits expense 22 207,834,840.01 171,841,661.00(c) Administrative and other Expenses 23 74,930,206.74 69,103,003.46(d) Depreciation and amortisation expense 11A,B 24,646,687.00 23,510,269.00(e) Provision/ Write offs 24 19,328,084.00 10,729,309.00

Total expenses 581,259,637.59 517,826,009.04

5 Profit before exceptional and extraordinary 71,273,625.13 19,468,172.41items and tax

6 Exceptional items - -

7 Profit before extraordinary items and tax 71,273,625.13 19,468,172.418 Extraordinary items 25.20 9,200,600.00 -

9 Profit before tax 62,073,025.13 19,468,172.41

Particulars 31.03.2012 31.03.2011Note No.Sl. No.


35

Particulars

SCH10 Tax expense:

(a) Current tax expense for current year 21,958,357.00 6,770,057.00(b) (Less): MAT credit - -(c) Current tax expense relating to prior years - -

(d) Net current tax expense 21,958,357.00 6,770,057.00(e) Deferred tax (1,351,651.00) (198,346. 00)

20,606,706.00 6,571,711.00

11 Profit/(Loss) from continuing operations 41,466,319.13 12,896,461.41(9 10)

12 Earnings per share (Face value of ` 10/-each) :(a) Basic 25.19 (i) Continuing operations 0.60 0.34 (ii) Total operations 0.60 0.34(b) Diluted 25.19 (i) Continuing operations 0.60 0.34 (ii) Total operations 0.60 0.34

See accompanying notes forming part of the 25financial statements


For A. JOHN MORIS & CO., Chartered Accountants, For and on behalf of the Board of Directors FRN. 007220S (K. PAUL THOMAS) (GEORGE THOMAS) (G. Kumar)

Managing Director Director Partner Membership No. 023082



SD/-

SD/-

SD/-

SD/-

SD/-

Particulars 31.03.2012 31.03.2011Note No.Sl. No.


36


#5A, 5th FLOOR, No. 8 & 9,GANGADEESWARA KOIL STREET, PURASWALKAM, CHENNAI-600 084.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH, 2012

A Cash Flow from Operating Activities:- Net Profit Before Tax and Extra Ordinary Items/Provisions 71,273,625.13 19,468,172.41 Adjustments for:- Depreciation and amortisation expenses 24,646,687.00 23,510,269.00 Dividend from Mutual funds (1,290,989.09) (308,086.24) Provision for receivables under Microfinance activities 17,625,812.00 10,729,309.00 (Profit) / Loss on Sale of Fixed Assets 20,840.00 (68,402.00) Operating Profit before Working Capital Changes: 112,275,975.04 53,331,262.17 Changes in Working Capital:- (Increase)/ Decrease in Microfinance

activities(Longterm and Short Term) (281,524,840.06) (699,819,165.50) (Increase)/ Decrease in Deposits & Advances

(Longterm and Short Term) (121,788,976.27) (60,626,930.77) Increase/(Decrease) Borrowings from Banks &

Financial Institutions 337,139,479.24 220,788,605.53 Increase/(Decrease) in Current Liabilities 50,367,484.55 50,807,120.19

Cash Generated from Operations 96,469,122.50 (435,519,108.38) Taxes Paid (14,891,042.00) (7,181,613.00)

Cash Flow before Extraordinary Items 81,578,080.50 (442,700,721.38) Cash flow from Extraordinary items - -

Net Cash from Operating activities (A) 81,578,080.50 (442,700,721.38)

B Cash Flow from Investing Activities:- Purchase of Fixed Assets (40,468,081.15) (32,215,920.77) Sale of Fixed Assets 130,000.00 260,328.00 (Increase)/ Decrease in Investments (100,000.00) - Dividend from Mutual funds 1,290,989.09 308,086.24

Net Cash from Investing activities (B) (39,147,092.06) (31,647,506.53)

Particulars For the year ended 31.03.2012

For the year ended 31.03.2011


37

C Cash Flow from Financing Activities:- Issue of Equity Shares 16,980,000.00 169,970,000.00 Proceeds from issue of debentures 3,260,000.00 1,585,000.00

Net Cash from Financing activities (C) 20,240,000.00 171,555,000.00 Net Increase (Decrease) in cash & Cash Equivalents 62,670,988.44 (302,793,227.91) Cash & Cash Equivalents at the beginning of year 121,285,227.32 424,078,455.23 Cash & Cash Equivalents at the end of year 183,956,215.76 121,285,227.32

Notes:- 1. The cash flow statement has been prepared under the "Indirect method" as set out in Accounting Standard - 3, " Cash flow statement".2. Cash and cash equivalents at the year end includes Rs. 43,84,458.93/- in the form of Fixed unencumbered Deposits with Banks.


For A. JOHN MORIS & CO., Chartered Accountants, For and on behalf of the Board of Directors FRN. 007220S (K. PAUL THOMAS) (GEORGE THOMAS) (G. Kumar)Managing Director Director Partner Membership No. 023082



Particulars For the year ended 31.03.2012



38

NOTE PARTICULARS

1 CORPORATE INFORMATION:-

1.1

Liability Groups. The Company is registered with the Chennai Registrar of Companies as a private limited Company on 27th September 1996 vide Registration No. U65933TN1996PTC036650. The Company is holding

getting changed its registration into an NBFC - MFI as per the RBI guidelines relating to NBFCs engaged in

1.2The operations of the Company are mostly concentrated in the States of Kerala, Tamilnadu, Maharashtra,Chattisgarh and Madhyapradesh.

1.3The main loan Products of the Company includes Income Generation Loan (IGL), General Loan (GL), House Construction Loan (HCL), House Repair Loans (HRL),Jeevandhara Loan (JL), Nirmal Loan (NL) and Vyapar Vikas Yojana (VVY).

2 SIGNIFICANT ACCOUNTING POLICIES:-

2.1

2.2 Use of estimates

to make estimates and assumptions considered in the reported amounts of assets and liabilities (including

differ due to these estimates and the dif ferences between the actual results and the estimates are recognised in the periods in which the results are known / materialised.

M/s. ESAF MICROFINANCE AND INVESTMENTS PRIVATE LIMITED,(


NOTES FORMING PART OF FINANCIAL STATEMENTS AS ON 31ST MARCH 2012


39

2.3 Inventories

2.4 Cash and cash equivalents (for purposes of Cash Flow Statement)

2.5

(loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any

2.6 Depreciation and amortisation

Companies Act, 1956 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under:

Assets costing less than ` 500 each are fully depreciated in the year of capitalisation.

2.7

to time.

2.8 Revenue recognition:-

basis. Income on Non performing assets are recognised only when realised and no interest which has remained


40

same is recognised as and when collected during the time of loan disbursement.

is established for its receipt in the period under consideration

Grant Income

Grants the same is set off against expenses incurred.

Interest on Fixed Deposits

Interest on Fixed Deposits are recognised on acrual basis and is debited to the concerned Fixed Deposit folio.

2.9 Other income

Miscellaneous incomes are accounted on receipt basis.

2.10

Fixed assets, except Land are carried at cost less accumulated depreciation and impairment losses, if any. The

date the asset is ready for its intended use and other incidental expenses incurred up to that date. Subsequent

2.11 Intangible assets

Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises its purchase price and other taxes and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates. Subsequent expenditure on an intangible asset after its purchase / completion is recognised as an expense when incurred unless it

originally assessed standards of performance and such expenditure can be measured and attributed to the asset reliably, in which case such expenditure is added to the cost of the asset.

2.12 Foreign currency transactions and translations

on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.


41

2.13 Investments

duties.

for Tangible Fixed Assets.

2.14

Employees State Insurance/Medical Insurance.

an expense as they fall due based on the amount of contribution required to be made.

Company has formed a Gratuity Trust termed “ ESAF Employees Gratuity Fund Trust” and the funds are managed


42

2.15 Borrowing costs

Borrowing costs include interest, Processing charges and amortisation of ancillary costs incurred to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the

2.16 Segment reporting

This is not applicable to the Company being not into different segments of operations, either geographicaly or operationaly.

2.17 Leases/ Rentals

lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement

2.18 Earnings per share

potential equity shares are determined independently for each period presented. The number of equity shares

appropriate.

2.19

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with

Deferred tax is recognised on timing differences, being the differences between the taxable income and the

Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for


43

2.20 Provisions and contingencies

are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are

disclosed in the Notes.

2.21 Insurance claims

Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent

2.22

/ utilising the credits.


44

NOTE 3 SHARE CAPITAL:-

(a) Authorised Equity shares of `10 each with voting rights 50,000,000.00 500,000,000.00 50,000,000.00 500,000,000.00 Preference shares of `100 each 500,000.00 50,000,000.00 500,000.00 50,000,000.00 (b) Issued Equity shares of `10 each with voting rights 50,000,000.00 500,000,000.00 48,302,000.00 483,020,000.00 Preference shares of `100 each - - - - (c) Subscribed and fully paid up Equity shares of `10 each with voting rights 50,000,000.00 500,000,000.00 48,302,000.00 483,020,000.00 Preference shares of `100 each - - - -

Total 50,000,000.00 500,000,000.00 48,302,000.00 483,020,000.00 (i) Reconciliation of the number of shares and amount outstanding at the beginning and at the end of the reporting period:

Opening Balance 48,302,000.00 483,020,000.00 31,305,000.00 313,050,000.00 Fresh Issue - - 1,150,000.00 11,500,000.00 Option Shares 198,000.00 1,980,000.00 - - Employee Benefit Shares 1,500,000.00 15,000,000.00 - - Conversion - - 15,847,000.00 158,470,000.00 Buy back - - - - Other changes (give details) - - - - Closing Balance 50,000,000.00 500,000,000.00 48,302,000.00 483,020,000.00




Particulars

Particulars

As at 31.03.2012

As at 31.03.2012

As at 31.03.2011

As at 31.03.2011

`

`

`

`

Number of Shares

Number of Shares

Number of Shares

Number of Shares


45

(ii) Details of shares held by each shareholder holding more than 5% shares:

ESAF SHG Federation, Thrissur 20,955,400.00 41.91% 20,955,400.00 43.38%ESAF SHG Federation, Coimbatore 5,500,000.00 11.00% 5,500,000.00 11.39%Prachodhan SHG Federation, Raipur 4,500,000.00 9.00% 4,500,000.00 9.32%ESAF Staff Welfare Trust 3,154,900.00 6.31% 1,654,900.00 3.43%Dia Vikas Capital (P) Ltd 11,429,000.00 22.86% 11,429,000.00 23.66%Manaveeya Holdings & Investments (P) Ltd. 3,000,000.00 6.00% 3,000,000.00 6.21%

(iii) T he Company haven’t issued any preference shares till date and there are no arrears of dividends on outstanding as on 31st

March 2012.(iv) The Company is not a holding company or ultimate holding company for the time being and haven’t got any subisidiaries or

associates as on the reporting date.(v) As at 31st March, 2012, 8,95,930 shares (As at 31st March, 2011, 19,53,398 shares) were reserved for issuance. 1,98,000 equity

shares have been issued to the promoters as option shares during the year under review. (see. Note 25.19) (vi) The Company during the year allotted 15,000,00 equity shares to ESAF Staff Welfare trust as Employee Benefit Shares.(vii) The Company have not bought back any of its shares during 5 years immediately preceeding the reporting date.(viii) There are no calls unpaid on the reporting date.(ix) None of the shares of the Company stands forfeited as on the reporting date(x) As on the report date, the company has issued only one class of equity shares with voting rights.

NOTE 4 RESERVES AND SURPLUS:-

(a) Other reserves (Statutory reserve) Opening balance 5,936,220.75 3,356,928.75 Add: Additions / transfers during the year 8,293,264.00 2,579,292.00 Less: Utilisations / transfers during the year

Closing balance 14,229,484.75 5,936,220.75 (b) Surplus / (Deficit) in Statement of Profit and Loss Opening balance 23,697,026.47 13,379,857.06 Add: Profit for the year 41,466,319.13 12,896,461.41 Less: Transferred to: Other reserves (Statutory Reserve) 8,293,264.00 2,579,292.00

Closing balance 56,870,081.60 23,697,026.47 Total 71,099,566.35 29,633,247.22

Particulars

As at 31.03.2012 As at 31.03.2011

class of shares class of sharesNumber of

SharesNumber of

Shares

ParticularsAs at

31.03.2012`

As at31.03.2011

`


46

NOTE 5 LONG-TERM BORROWINGS :-

(a) Non Convertible Debentures Secured 3,695,000.00 1,585,000.00 Unsecured - - 3,695,000.00 1,585,000.00 (b) Term loans From banks Secured 870,085,233.00 589,453,246.00 Unsecured - - 870,085,233.00 589,453,246.00 From other parties Secured 19,166,671.00 91,200,000.00 Unsecured 29,061,397.22 57,869,935.00

48,228,068.22 149,069,935.00 (c) Deferred payment liabilities Secured - - Unsecured - - - - (d) Deposits Secured - - Unsecured - - - - (e) Loans and advances from related parties @ (Refer Note 25.9) Secured Unsecured 11,280,439.78 -

11,280,439.78 - (f) Long-term maturities of finance lease obligations Secured - - Unsecured - - - - (g) Other loans and advances (Vehicle Loan) Secured 1,668,862.90 247,345.32 Unsecured - - 1,668,862.90 247,345.32 Total 934,957,603.90 740,355,526.32

ParticularsAs at

31.03.2012`

As at31.03.2011

`





47

continued..

NOTE 5 (A) LONG-TERM BORROWINGS - OTHER DETAILS:

Notes:(i) Details of bonds / debentures issued by the Company for the year ended 31st March 2012:

85 Non ConvertibleDebentures, 13.5% redeemable on 30-09-2017 85,000.00 - - 85,000.00

10 Non Convertible ebentures, 13.5%redeemable on 15-09-2017 10,000.00 - 10,000.00 100 Non Convertible Debentures, 12.5% redeemable on 16-03-2015 100,000.00 - 100,000.00

100 Non Convertible Debentures, 13.00% redeemable on 16-03-2015 100,000.00 - 100,000.00

1385 Non Convertible Debentures, 12.5% redeemable on 05-01-2015 1,385,000.00 - 1,385,000.00





Particulars

Particulars Terms & Conditions*

The redemption of the principal amount of the

-bentures, payment of all

interest remuneration and remuneration of

the Debenture trustees and all monies, fees and

costs stipulated in the hypothecation are fully

secured against the book

Company

As at 31.03.2012

Secured`

Current`

Unsecured`

Non-current`

As at 31.03.2012





48





470 Non Convertible Debentures, 13.25% redeemable on 30-03-2013 470,000.00 470,000.00 -

680 Non Convertible Debentures, 13.75% redeemable on 30-03-2013 680,000.00 680,000.00 -

Total - Bonds / debentures 4,845,000.00 - 1,150,000.00 3,695,000.00

(ii) The Company haven’t yet reissued any Debentures which were issued till the reporting date.

(iii) Details of bonds / debentures issued by the Company for the year ended 31st March 2011:

385 Non Convertible Debentures, 13.00% redeemable on 27-04-2014 385,000.00 385,000.00



300 Non Convertible Debentures, 11.50% deemable on 25-03-2014 300,000.00 300,000.00

continued..

Particulars Terms & Conditions*As at 31.03.2012

Secured`

Current`

Unsecured`

Non-current`

As at 31.03.2012


Secured`

Current`

Unsecured`

Non-current`

As at 31.03.2012


49


Total - Bonds / debentures 1,585,000.00 - - 1,585,000.00

(iv) Details of terms of repayment for the other long-term borrowings and security provided in respect of the secured other long-term borrowings as at 31st March 2012:

Term loans from banks: Axis Bank Book Debts - 18 mts. 50,000,000.00 - 40,000,000.00 10,000,000.00 Canara Bank Book Debts - 32 mts. 13,471,265.00 - 13,471,265.00 - Central Bank of India Book Debts - 36 mts. 189,659,592.00 - 75,000,000.00 114,659,592.00 Corporation Bank Book Debts - 36 mts. 19,189,076.00 - 18,180,000.00 1,009,076.00 ICICI Bank Book Debts - 24 mts. 37,500,000.00 - 37,500,000.00 - IDBI Bank Book Debts - 60 mts. 279,167,800.00 - 133,931,800.00 145,236,000.00 Indian Bank Book Debts - 35 mts. 54,551,972.00 - 25,775,972.00 28,776,000.00 Oriental Bank of Commerce Book Debts - 59 mts. 29,960,829.00 - 9,999,996.00 19,960,833.00 Punjab National Bank Book Debts - 65 mts. 224,997,260.00 - 60,927,800.00 164,069,460.00 State Bank of Hyderabad Book Debts - 36 mts. 16,437,440.00 - 13,336,000.00 3,101,440.00 State Bank of India Book Debts - 36 mts. 282,320,146.00 - 126,666,676.00 155,653,470.00 State Bank of Travancore Book Debts - 35 mts. 127,336,326.00 - 63,736,326.00 63,600,000.00 South Indian Bank Book Debts - 42 mts. 193,808,000.00 - 76,372,000.00 117,436,000.00 Union Bank of India Book Debts - 59 mts. 47,833,354.00 - 19,999,992.00 27,833,362.00 Vijaya Bank Book Debts - 64 mts. 31,250,000.00 - 12,500,000.00 18,750,000.00

HDFC Bank Vehicle Loan Fixed Asset - 60 mts. 247,345.32 - 89,468.22 157,877.10 ICICI Bank Vehicle Loan Fixed Assets - 60 mts. 652,359.80 - 134,613.00 517,746.80 PNB Vehicle Loan Fixed Assets - 84 mts. 1,100,000.00 - 106,761.00 993,239.00

Total - Term loans from banks 1,599,482,765.12 - 727,728,669.22 871,754,095.90

Secured Term loans from other parties: Manaveeya Holdings & Investments (P) Ltd. Book Debts - 36 mts. 31,200,000.00 - 31,200,000.00 - MV Microfin (P) Ltd. Book Debts - 24 mts. 75,000,000.00 - 60,000,000.00 15,000,000.00 Ananya Finance (P) Ltd. Book Debts - 18 mts. 14,166,667.00 - 9,999,996.00 4,166,671.00

Sub Total 120,366,667.00 - 101,199,996.00 19,166,671.00

continued..


Secured`

Current`

Unsecured`

Non-current`

As at 31.03.2012

Particulars Terms of repayment& security*

As at 31.03.2012

Secured`

Current`

Unsecured`

Non-current`

As at 31.03.2012


50

Unsecured Term loans from other parties:

Dia Vikas Capital (P) Ltd. Clean facility - 24 mts. - 51,000,000.00 29,571,424.00 21,428,576.00 ESAF SHG Federation, Thrissur Clean facility - 24 mts. - 103,453,261.00 86,210,000.00 17,243,261.00 ESAF Staff Welfare Trust Clean facility - 12 mts. - 3,500,000.00 3,500,000.00 - ESAF Society Clean facility - 12 mts. - 11,280,439.78 11,280,439.78 - PrachodhanSHG Federation, Raipur Clean facility - 24 mts. - 10,000,000.00 8,330,000.00 1,670,000.00 FWWB, Ahmedabad Clean facility - 24 mts. - 416,674.00 416,674.00 -

Sub Total - 179,650,374.78 139,308,537.78 40,341,837.00

(v) Details of terms of repayment for the other long-term borrowings and security provided in respect of the secured other long-term borrowings as at 31st March 2011:

Term loans from banks: Axis Bank Book Debts - 18 mts. 97,301,433.28 - 97,301,433.28 - BNP Paribas Book Debts - 12 mts. 50,000,000.00 - 50,000,000.00 - Canara Bank Book Debts - 32 mts. 33,317,902.00 - 19,846,637.00 13,471,265.00 Citi Bank NA Book Debts - 24 mts. 61,999,885.00 - 61,999,885.00 - Corporation Bank Book Debts - 36 mts. 37,380,000.00 - 18,190,924.00 19,189,076.00 Development Credit bank Book Debts - 12 mts. 5,000,000.00 - 5,000,000.00 - ICICI Bank Book Debts - 24 mts. 112,500,000.00 - 75,000,000.00 37,500,000.00 IDBI Bank Book Debts - 60 mts. 79,167,000.00 - 49,999,200.00 29,167,800.00 Indian Bank Book Debts - 35 mts. 25,815,072.00 - 18,231,100.00 7,583,972.00 Indus Ind Bank Book Debts - 18 mts. 27,777,777.77 - 27,777,777.77 - ING Vysia Bank Book Debts - 24 mts. 8,628,150.85 - 8,628,150.85 - Oriental Bank of Commerce Book Debts - 59 mts. 39,960,825.00 - 9,999,996.00 29,960,829.00 Punjab National Bank Book Debts - 65 mts. 285,000,000.00 - 60,002,740.00 224,997,260.00 State Bank of Hyderabad Book Debts - 36 mts. 29,773,440.00 - 13,336,000.00 16,437,440.00 State Bank of India Book Debts - 36 mts. 59,394,332.00 - 47,074,186.00 12,320,146.00 State Bank of Travancore Book Debts - 35 mts. 73,659,511.00 - 46,326,185.00 27,333,326.00 South Indian Bank Book Debts - 42 mts. 142,239,108.00 - 48,436,842.00 93,802,266.00 Union Bank of India Book Debts - 59 mts. 67,110,408.00 - 20,670,542.00 46,439,866.00 Vijaya Bank Book Debts - 64 mts. 43,583,398.00 - 12,333,398.00 31,250,000.00

HDFC Bank Vehicle Loan Fixed Asset - 60 mts. 325,963.64 - 78,618.32 247,345.32

Total - Term loans from banks 1,279,934,206.54 - 690,233,615.22 589,700,591.32

continued..

Particulars

Particulars

Terms of repayment& security*


As at 31.03.2012

As at 31.03.2011

Secured`

Secured`

Current`

Current`

Unsecured`

Unsecured`

Non-current`

Non-current`

As at 31.03.2012

As at 31.03.2011


51

continued..

Secured Term loans from other parties: Manaveeya Holdings & Investments (P) Ltd. Book Debts - 36 mts. 62,960,061.00 - 31,760,061.00 31,200,000.00 Reliance Consumer Finance Book Debts - 18 mts. 71,540,561.00 - 71,540,561.00 - MV Microfin (P) Ltd. Book Debts - 24 mts. 112,947,397.00 - 52,947,397.00 60,000,000.00 HDFC Ltd. Book Debts - 36 mts. 20,956,348.00 - 20,956,348.00 - Ananya Finance (P) Ltd. Book Debts - 18 mts. 23,055,534.00 - 23,055,534.00 -

Sub Total 291,459,901.00 - 200,259,901.00 91,200,000.00

Unsecured Term loansfrom other parties: ESAF SHG Federation, Thrissur Clean facility - 24 mts. - 57,453,261.00 - 57,453,261.00 ESAF SHG Federation, Coimbatore Clean facility - 24 mts. - 3,000,000.00 3,000,000.00 - Prachodhan SHG Federation, Raipur Clean facility - 24 mts. - 25,000,000.00 25,000,000.00 - FWWB, Ahmedabad Clean facility - 24 mts. - 4,396,670.00 3,979,996.00 416,674.00 Total - Term loans from other parties - 89,849,931.00 31,979,996.00 57,869,935.00

Particulars

Particulars



As at 31.03.2011

As at 31.03.2011

Secured`

Secured`

Current`

Current`

Unsecured`

Unsecured`

Non-current`

Non-current`

As at 31.03.2011

As at 31.03.2011


52

(vi) Details of long-term borrowings guaranteed by some of the directors or others:

Bonds / debentures Term loans from banks Canara Bank 13,471,265.00 33,678,161.00 Central Bank of India 189,659,592.00 - IDBI Bank 279,167,800.00 79,167,000.00 Indian Bank 54,551,972.00 26,108,744.00 Oriental Bank of Commerce 29,960,829.00 40,394,412.00 Punjab National Bank 224,997,260.00 288,359,583.00 State Bank of Hyderabad 16,437,440.00 30,174,141.00 State Bank of India 282,320,146.00 60,050,111.00 State Bank of Travancore 127,336,326.00 74,914,576.00 South Indian Bank 193,808,000.00 142,380,400.00 Union Bank of India 47,833,354.00 67,833,346.00 Vijaya Bank 31,250,000.00 44,079,997.00

Total 1,490,793,984.00 887,140,471.00

(vii) The Company has not defaulted in the repayment of loans and interest in any of the Loans outstanding.

ParticularsAs at

31.03.2012`

As at31.03.2011

`


53

6 Deferred tax (liability) / asset Tax effect of items constituting deferred tax liability On difference between book balance and tax balance of fixed assets 1,677,278.70 3,028,929.70 On expenditure deferred in the books but allowable for tax purposes - - On items included in Reserves and surplus pending amortisation into the Statement of Profit and Loss - - Others Tax effect of items constituting deferred tax liability 1,677,278.70 3,028,929.70 Tax effect of items constituting deferred tax assets Provision for compensated absences, gratuity and other employee benefits - - Provision for doubtful debts / advances Disallowances under Section 40(a)(i), 43B of the Income Tax Act, 1961 On difference between book balance and tax balance of fixed assets Unabsorbed depreciation carried forward Brought forward business losses On items included in Reserves and surplus pending amortisation into the Statement of Profit and Loss Others Tax effect of items constituting deferred tax assets Net deferred tax (liability) / asset 1,677,278.70 3,028,929.70

The Company has recognised deferred tax asset on unabsorbed depreciation to the extent of the corresponding deferred tax liability on the difference between the book balance and the written down value of fixed assets under Income Tax.

NOTE 6 DEFERRED TAX LIABILITY:-




ParticularsAs at

31.03.2012`

As at31.03.2011

`

Note


54

7 (b) Provision - Others: (i) Provision for premium payable on redemption of bonds (ii) Provision for estimated loss on derivatives (iii) Provision for warranty (iv) Provision for estimated losses on onerous contracts (v) Provision for other contingencies (Refer Note 30.14) (vi) Provision for Microfinance Loans (Standard Assets) 5,680,200.00 - 5,680,200.00 - Total 5,680,200.00 -

NOTE 7 LONG-TERM PROVISIONS:-




ParticularsAs at

31.03.2012`

As at31.03.2011

`

Note


55

(a) Loans repayable on demand From banks Secured 148,543,731.00 49,660,020.12 Unsecured 148,543,731.00 49,660,020.12 From other parties Secured Unsecured - - (b) Loans and advances from related parties Secured Unsecured - - (c) Deposits Secured Unsecured - - (d) Other loans and advances (specify nature) Secured Unsecured - - Total 148,543,731.00 49,660,020.12

Notes: (i) Details of security for the secured short-term borrowings:

Loans repayable on demandfrom banks: Axis Bank Cash Credit - 35,703.12 State Bank of Hyderabad 60,388,277.00 31,088,507.00 State Bank of India 78,122,359.00 8,581,986.00 South Indian Bank 10,033,095.00 9,953,824.00

Total - from banks 148,543,731.00 49,660,020.12

NOTE 8 SHORT-TERM BORROWINGS:-




Particulars

Particulars Nature of security

Secured by Book debts of the companay

As at31.03.2012

`

As at31.03.2012

`

As at31.03.2011

`

As at31.03.2011

`


56

(ii) Details of short-term borrowings guaranteed by some of the directors or others:

Loans repayable on demand from banks - - Loans repayable on demand from other parties - - Loans and advances from related parties - - Deposits Other loans and advances - -

(iii) The Company have not defaulted in any of the above repayment obligations.

ParticularsAs at

31.03.2012`

As at31.03.2011

`


57

NOTE 9 OTHER CURRENT LIABILITIES:-

(a) Current maturities of Non Convertible Debentures (Ref. Note Below) 1,150,000.00 - (b) Current maturities of Long Term Debt from Banks (Ref. Note Below) 727,397,827.00 690,154,996.90 (c) Current maturities of Long Term Debt - Others (Ref. Note Below) 240,839,376.00 232,318,515.32 (d) Interest accrued and due on borrowings 13,985,577.00 10,257,990.31 (e) Income received in advance (Unearned revenue) (f) Unpaid dividends (g) Application money received for allotment of securities and due for refund and interest accrued thereon - - (h) Unpaid matured deposits and interest accrued thereon - - (i) Unpaid matured debentures and interest accrued thereon - - (j) Other payables (i) Statutory remittances (Contributions to PF and ESIC, Withholding Taxes, Excise Duty, VAT, Service Tax, etc.) 4,755,745.00 2,163,978.00 (ii) Payables on purchase of fixed assets (iii) Contractually reimbursable expenses (iv) Interest accrued on trade payables (v) Interest accrued on others (vi) Trade / security deposits received (vii) Advances from customers (viii) Others Staff Vehicle Fund 91,940.00 85,940.00 Gain on Portfolio Assigned to Banks/Financial Institution in advance 5,690,298.00 14,030,708.00 Expenses Payable 4,102,824.66 5,001,532.80 Leave Travel Allowance Payable 1,025,724.00 1,138,840.00 Staff Incentive Payable 14,682,383.00 9,061,113.00 Auditors Remuneration Payable 404,323.00 297,425.00 Directors Remuneration Payable - - NPS Lite Swavalambam 42,664,700.00 - Total 1,056,790,717.66 964,511,039.33




ParticularsAs at

31.03.2012`

As at31.03.2011

`


58

(a) Non Convertible Debentures Secured 1,150,000.00 - Unsecured - -

SUB TOTAL 1,150,000.00 -

(b) Term loans From banks Secured 727,397,827.00 690,154,996.90 Unsecured - -

SUB TOTAL 727,397,827.00 690,154,996.90

(c) From other parties Secured 101,199,996.00 200,259,901.00 Unsecured 128,028,098.00 3,979,996.00

229,228,094.00 204,239,897.00 (c) Deferred payment liabilities Secured Unsecured (d) Deposits Secured Unsecured (e) Loans and advances from related parties (Refer Note 25.9) Secured - - Unsecured 11,280,439.78 28,000,000.00

11,280,439.78 28,000,000.00 (f) Other loans and advances (Vehicle Loan) Secured 330,842.22 78,618.32 Unsecured - - 330,842.22 78,618.32 Total 969,387,203.00 922,473,512.22

ParticularsAs at

31.03.2012`

As at31.03.2011

`

Current maturities of loan term debts


59

NOTE 10 SHORT-TERM PROVISIONS:-

(a) Provision for employee benefits: (i) Provision for bonus 4,413,842.00 - (ii) Provision for compensated absences 10,485,264.00 11,588,826.00 (iii) Provision for gratuity (net) 6,261,829.00 4,570,612.00 (iv) Provision for post-employment medical benefits (v) Provision for other defined benefit plans (net) (vi) Provision for other employee benefits 21,160,935.00 16,159,438.00

(b) Provision - Others: (i) Provision for taxes [(Net of Advance Tax paid during the year Rs. 1,10,00,000) - Previous Year - Rs.30,000,00] Income Tax 11,375,971.00 4,187,671.00 Service Tax - - (vii) Provision for proposed equity dividend - - (ix) Provision for Royalty Commitments 9,200,600.00 - (x) Provision for Microfinance receivables - General (Standard) 23,144,412.00 20,768,358.00 (x) Provision for Microfinance receivables - Sub Standard & Doubtfull 13,284,777.00 3,715,219.00 57,005,760.00 28,671,248.00 Total 78,166,695.00 44,830,686.00




ParticularsAs at

31.03.2012`

As at31.03.2011

`


60

M/S. ESAF MICROFINANCE AND INVESTMENTS PRIVATE LIMITED(Formerly Pinnai Finance & Investments (P) Ltd.)

#5A, 5th FLOOR, No. 8 & 9 GANGADEESWARA KOIL STREET, PURASAWALKAM, CHENNAI - 600 084.


NOTE 11 A: FIXED ASSETS :-

A. Tangible Assets GROSS BLOCK

Balanceas at

1 April, 2011 (`)

Additions(`)

Disposals(`)

Acquisitions throughbusiness combinations

(`)

(a) Land free hold 19,333,219.00 19,720,413.00 - -

(b) Buildings own use 1,820,489.00 10,569,000.00 - -

(c) Plant & equipments owned

6,556,714.60 1,044,571.00 - -

owned 21,488,477.77 1,975,450.00 - -

(e) Vehicle owned 5,555,665.00 2,091,345.00 235,214.00 -

owned 2,935,022.00 479,938.00 - -

(g) Computer & accesso-ries owned

16,953,102.40 4,587,364.15 - -

Total 74,642,689.77 40,468,081.15 235,214.00 -

42,646,241.00 32,928,744.77 - -

A. Tangible Assets ACCUMULATED DEPRECIATION AND IMPAIRMENT

Balanceas at

1 April, 2011 (`)

Depreciation/ amortisation

expense for the year (`)

Eliminated on disposal of as-

sets (`)

-tion as held for sale

(`)

(a) Land free hold - - - -

(b) Buildings own use 9,852.00 31,337.00 - -

(c) Plant & equipments owned

478,664.00 306,132.00 - -

owned2,229,092.00 1,275,528.00 - -

(e) Vehicle owned 1,120,119.00 500,693.00 84,374.00 -

owned261,493.00 135,857.00 - -

(g) Computer & accesso-ries owned

3,683,063.00 2,406,070.00 - -

Total 7,782,283.00 4,655,617.00 84,374.00 -

4,290,630.00 3,519,199.00 (27,546.00) -


61

GROSS BLOCK

as held for sale(`)

increase(`)

Effect of foreign currency ex-

change differ-ences (`)

Borrowing cost capitalised

(`)

Otheradjustments

(`)

Balance as at 31 March, 2012

(`)

- - - - - 39,053,632.00

- - - - - 12,389,489.00

- - - - - 7,601,285.60

- - - - - 23,463,927.77

- - - - - 7,411,796.00

- - - - - 3,414,960.00

- - - - - 21,540,466.55

- - - - - 114,875,556.92

- - - - - 74,642,689.77

ACCUMULATED DEPRECIATION AND IMPAIRMENT NET BLOCK

Impairment losses recog-

nised in state-

and loss (`)

-pairment losses

recognised in Statement of

(`)

Other adjust-ments

(`)

Balanceas at

31 March, 2012

(`)

Balanceas at

31 March, 2012(`)

Balanceas at

31 March, 2011(`)

- - - - 39,053,632.00 19,333,219.00

- - - 41,189.00 12,348,300.00 1,810,637.00

- - - 784,796.00 6,816,489.60 6,078,050.60

- - - 3,504,620.00 19,959,307.77 19,259,385.77

- - - 1,536,438.00 5,875,358.00 4,435,546.00

- - - 397,350.00 3,017,610.00 2,673,529.00

- - - 6,089,133.00 15,451,333.55 13,270,039.40

- - - 12,353,526.00 102,522,030.92 66,860,406.77

- - - 66,860,406.77 66,860,406.77 38,355,611.00


62

NOTE 11 B: FIXED ASSETS :- (CONTD.)

B. Intangible Assets GROSS BLOCK

Balanceas at

1 April, 2011 (`)Additions (`) Disposals (`)

Acquisitions throughbusiness combinations (`)

(a) Intellectual Property Rights

55,530,750.00 - -

(b) Market Creation cost 44,424,600.00 - -

Total 99,955,350.00 -

99,955,350.00 - -

B. Intangible Assets ACCUMULATED DEPRECIATION AND IMPAIRMENT

Balanceas at

1 April, 2011 (`)

Depreciation/ amortisation

expense for the year (`)

Eliminated on disposal of as-

sets (`)

-tion as held for sale (`)

(a) Intellectual Property Rights

33,318,450.00 11,106,150.00 - -

(b) Market Creation cost 26,654,760.00 8,884,920.00 - -

Total 59,973,210.00 19,991,070.00 - -

39,982,140.00 19,991,070.00 - -


63

GROSS BLOCK

for sale (`)

Effect of foreign cur-rency exchange differ-

ences (`)

Borrowing cost capitalised (`)

Otheradjustments (`)

Balanceas at

31 March, 2012 (`)

- - - - 55,530,750.00

- - - - 44,424,600.00

- - - - 99,955,350.00

- - - - 99,955,350.00

ACCUMULATED DEPRECIATION AND IMPAIRMENT NET BLOCK

Impairment losses

and Loss (`)

Other adjustments (`)

Balanceas at

31 March, 2012 (`)

Balanceas at

31 March, 2012 (`)

Balanceas at

31 March, 2011 (`)

- - 44,424,600.00 11,106,150.00 22,212,300.00

- - 35,539,680.00 8,884,920.00 17,769,840.00

- - 79,964,280.00 19,991,070.00 39,982,140.00

- - 59,973,210.00 59,973,210.00 59,973,210.00


64

NOTE 12 NON CURRENT INVESTMENTS :-

Trade Investments at Cost Investment in Equity Shares of M/s Alpha Microfinance Consultants (P) Ltd. 500,000.00 500,000.00 (50,000 Shares of Rs.10/- each fully paid up - Previous Year 50,000 Shares) Investment in Equity Shares ofM/s ESAFHealthcare Services (P) Ltd. 500,000.00 500,000.00 (5,000 Shares of Rs.100/- each fully paid up - Previous Year 5,000 Shares) Total 1,000,000.00 1,000,000.00

NOTE 13 CURRENT INVESTMENTS:-

Mutual Fund Investments 4511.943 Units of HDFC Cash Management Fund - Savings Plan - Growth 100,000.00 - 100,000.00 -




Particulars

Particulars

As at31.03.2012

`

As at31.03.2012

`

As at31.03.2011

`

As at31.03.2011

`


65

NOTE 14 LONG-TERM LOANS AND ADVANCES:-

(a) Loans and advances to related parties (Refer Note 25.9) Unsecured, considered good 2,629,022.50 2,656,476.00 (b) Security deposits Secured, considered good Unsecured, considered good 80,806,680.00 73,875,993.36 (c) Loans and advances to employees Secured, considered good Unsecured, considered good 6,777,895.75 6,457,923.00 (d) Prepaid expenses - Unsecured, considered good - - (e) Balances with government authorities Unsecured, considered good (i) Service Tax credit receivable - - (f) Microfinance Loans:- Un secured, considered good Income Generation Loan (Non Current) 556,632,654.41 -

Other Loans - -

Sub Total 556,632,654.41 - Total 646,846,252.66 82,990,392.36




ParticularsAs at

31.03.2012`

As at31.03.2011

`


66

NOTE 15 TRADE RECEIVABLES:--

a) Trade Receivables from Microfinance Activity:- Unsecured, Considered Good Income Generation Loan (Current) 1,558,602,189.88 1,632,628,600.44 Other Loans 99,413,121.96 300,787,045.00

Sub Total 1,658,015,311.84 1,933,415,645.44

b) Other Trade receivables outstanding on Services rendered:- Commission Receivable from Pension Fund Regulatory and Development Authority 4,628,400.00 - Commission Receivable from National Insurance Company 49,828.00 176,539.00 Doubtful - -

Sub Total 4,678,228.00 176,539.00

Total 1,662,693,539.84 1,933,592,184.44

Note:-1.The Company is an aggregator for the National Pension System Swavalamban Scheme of the Pension FundRegulatory and Development Authority.

2. Microfinance Assets derecognised on account of Securitisation of receivables to various banks comes to Rs. 59,87,79,864.76. (For the previous year it comes to Rs. 15,32,22,560.56)

ParticularsAs at

31.03.2012`

As at31.03.2011

`





67

NOTE 16 CASH AND CASH EQUIVALENTS :-

(a) Cash on hand 855,657.75 3,855,003.25 (b) Cheques, drafts on hand (c) Balances with banks (i) In current accounts 178,716,099.08 117,430,224.07 (ii) In EEFC accounts - - (iii) In deposit accounts (Refer Note (i) below) 4,384,458.93 -

(iv) In earmarked accounts - Unpaid dividend accounts - - - Unpaid matured debentures - - - Share application money received for allotment of securities and due for refund - -

Total 183,956,215.76 121,285,227.32

Notes:- (i) Balances with banks include unencumbered Fixed deposits amounting to Rs. 43,84,458.93/- (ii) Security Deposits with Banks and Financial institutions against Loans and securitisation transactions are shown separately according to their maturity buckets.

ParticularsAs at

31.03.2012`

As at31.03.2011

`





68

NOTE 17 SHORT-TERM LOANS AND ADVANCES:-

(a) Capital Advances (Advance for Land & Building) Unsecured, considered good 19,930,000.00 - (b) Security deposits Secured, considered good Unsecured, considered good 131,522,441.00 47,813,693.80 (c) Loans and advances to employees Secured, considered good Unsecured, considered good - - (d) Prepaid expenses - Unsecured, considered good 2,255,581.80 2,471,185.97

(e) Balances with government authorities Unsecured, considered good (i) Service Tax credit receivable 48,142.50 - (ii) TDS Receivables 1,382,458.00 1,261,473.00 (iii) Income Tax Refund claim AY 2009-10 177,650.00 177,650.00

Sub Total 1,608,250.50 1,439,123.00

Total 155,316,273.30 51,724,002.77

ParticularsAs at

31.03.2012`

As at31.03.2011

`





69

NOTE 18 OTHER CURRENT ASSETS:-

(a) Accruals (i) Interest accrued on Financing activitiy 3,365,978.49 - (b) Others (i) Insurance claims 329,077.00 41,130.00 (ii) Others Rent Deposit 15,625,530.00 15,211,350.00 Telephone Deposit 306,753.00 298,845.03 Staff Advance 4,821,991.64 2,023,153.00 Advance for Income Tax Other Deposits 41,080.00 30,617.00

Total 24,490,410.13 17,605,095.03

NOTE 19 INCOME FROM OPERATIONS:-

Interest on Loans 583,884,388.65 493,152,311.51 Processing Fees on Loans 36,457,182.00 - Gain on Portfolio assigned 14,646,940.00 13,619,174.00 Group Mentoring & Monitoring Charges 572,475.00 9,148,950.00

Total 635,560,985.65 515,920,435.51 Note:- As per the ICAI guidance note, Operating income would include revenue arising from the Company's operating activities - principal or ancillary revenue generating activities, but which is not revenue from sale of products and rendering of services.

Particulars

Particulars

As at31.03.2012

`

For the year ended31.03.2012

`

As at31.03.2011

`


`





70

NOTE 20 OTHER INCOME:-

(a) Interest income 9,967,871.77 7,304,374.38 (b) Dividend income: from current investments Mutual funds 1,290,989.09 308,086.24 from long-term investments - -

(c) Other non-operating income Income from PFRDA as Aggregator 4,628,400.00 - Microinsurance Administration Revenue 1,011,803.45 11,349,768.32 Commission on Insurance 63,451.76 2,295,223.00 Miscellaneous Income 30,601.00 47,892.00 Profit/(Loss) on Sale of Assets (Net) (20,840.00) 68,402.00

Total 16,972,277.07 21,373,745.94

NOTE 21 FINANCE COSTS:-

(a) Interest expense on: (i) Borrowings 240,170,754.84 222,995,580.40 (ii) Others - Interest on payments of taxes 101,582.00 - - Processing Fee on Borrowings 13,646,396.00 19,646,186.18 - Rating Charges 536,087.00 - - Debenture Trustee fees 65,000.00 -

Total 254,519,819.84 242,641,766.58

Particulars

Particulars


`


`


`


`





71

NOTE 22 EMPLOYEE BENEFIT EXPENSES:-

Salaries and wages 137,832,233.10 122,721,808.00Contributions to provident and other funds:- Gratuity 6,627,939.00 4,927,115.00Bonus 4,413,842.00 -EPF Administration Expenses 679,743.00 496,371.00EPF Employers Contribution 7,655,633.00 5,590,752.00ESI Employers Contribution 4,064,364.61 1,104,896.00KEWF Employers Contribution 68,600.00 -Staff Insurance 1,269,278.00 760,035.00ESI Arrear Expenses 1,457,590.79 -Employee Benefit Expenses (Refer Note 25.14) 16,980,000.00 -Staff welfare expenses 26,785,616.51 36,240,684.00

Total 207,834,840.01 171,841,661.00

ParticularsFor the year ended

31.03.2012`


`





72

NOTE 23 ADMINISTRATION AND OTHER EXPENSES:-

Water and Electricity charges 2,173,073.50 1,773,490.00 Rent including lease rentals 13,440,137.00 10,836,988.00 Repairs and maintenance - Buildings 807,257.50 648,803.50 Repairs and maintenance - Computer Hardware 280,404.00 132,750.00 Insurance 596,860.00 392,457.30 Rates and taxes 89,791.00 64,484.00 Telephone and Internet Expenses 3,814,194.05 3,707,556.02 Travelling and conveyance 33,547,680.45 29,400,908.03 Printing and stationery 4,536,630.99 6,955,264.00 Business promotion 772,480.00 1,131,697.00 Legal and professional 401,210.00 584,027.50 Payments to auditors (Refer Note (i) below) 1,431,374.91 1,150,714.00 Office Maintenance 1,246,436.50 887,939.50 Counterfeit Note 2,500.00 - Consultation fee 2,235,420.00 2,721,604.00 Postage & Courier Charges 391,424.00 326,820.00 ROC Expense 22,660.00 1,023,900.00 Bank Charges 618,472.05 1,243,543.83 Hospitality 376,563.58 240,329.82 Website Creation Charges/ Server Space Rent 107,670.70 45,450.00 Books & Periodicals 227,312.00 227,864.00 General Body Meeting Expenses 242,737.58 174,006.00 Board Meeting Expenses 206,801.00 270,722.00

Contd.

ParticularsFor the year ended

31.03.2012`


`





73

Directors Sitting fees 240,000.00 225,000.00 Vehicle Maintenance 2,299,587.00 1,897,990.96 Software Implementation Expenses 204,126.22 406,286.00 Service Tax input Unclaimable 998,820.14 - Transportation 194,902.00 457,771.00 Anniversaries and Celebrations 1,755,389.00 728,087.00 Meeting Expense 824,061.57 625,436.00 Fees and Subscription 844,230.00 821,114.00

Total 74,930,206.74 69,103,003.46

Notes:- (i) Payments to the auditors comprises (net of service tax input credit): As auditors - statutory audit 800,000.00 661,800.00 For taxation & Representation matters 200,000.00 165,450.00 For Certification services 300,000.00 248,175.00 Reimbursement of expenses 131,374.91 75,289.00

Total 1,431,374.91 1,150,714.00

NOTE 24. BAD DEBTS AND PROVISIONS ON MICROFINANCE ACTIVITY:-

Provision for Microfinance Loans:- Provision for Standard Assets 8,056,254.00 9,125,652.00 Provision for Loan Loss 9,569,558.00 1,603,657.00 Loans Written Off 1,702,272.00 - Total 19,328,084.00 10,729,309.00

Particulars

Particulars


`


`


`


`


74

NOTE 25 ADDITIONAL INFORMATION TO THE FINANCIAL STATEMENTS:-

25.1 Contingent liabilities and commitments (to the extent not provided for) (i) Contingent liabilities (a) Claims against the Company not acknowledged as debt (give details)

(i) Income Tax:- - On 08-02-2012, the Company has received a show cause notice from the Income Tax Officer, Company Ward – II(1), Chennai, relating to the following unpaid Income Tax demands. Against this, the Company has gone for Appeal and it is pending to be settled.

Section Assessment Year Regular u/s 143(1) 2009-10 2,22,315

Regular u/s 143(3) 2009-10 28,402

Regular u/s 115WE (3) 2009-10 21,237

Regular u/s 115WE 2009-10 64,702

(ii) Service Tax:- On 27-07-2011, the Company was served with a summons by the Directorate General of Central Excise Intelligence in connection with a survey conducted, seeking clarifications on Income Heads like Gain from portfolio assignment, Group mentoring & monitoring Charges etc. The Company has suitably responded to the said summons and provided datas relating to the said income heads. No demands were raised against the company till date, but the matter is yet to be settled.

(ii) Commitments #

(a) Estimated amount of contracts remaining to be executed on capital account and not provided Tangible assets (M/s Infrasoft Tech India Limited, Mumbaitowards implementation of the Core Banking Solution termed Omni Enterprise) 25,25,000 -(b) Uncalled liability on shares and other investments partly paid - -(c) Other commitments - -

NOTE PARTICULARS

As at 31 March2012(INR)

Income Tax Claims Pending








75

25.2 Disclosures required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006

(i) Principal amount remaining unpaid to any supplier as at the end of the accounting year - - (ii) Interest due thereon remaining unpaid to any supplier as at the end of the accounting year - - (iii) The amount of interest paid along with the amounts of the payment made to the supplier beyond the appointed day - - (iv) The amount of interest due and payable for the year - - (v) The amount of interest accrued and remaining unpaid at the end of the accounting year - - (vi) The amount of further interest due and payable even in the succeeding year, until such date when the interest dues as above are actually paid - -

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

25.3 Disclosures on foreign currency exposures:-

I. Earnings and outgo in Foreign Currency:

A: Earnings:-

International Labour Office, 4 Route des Morillons, CH-1211, Geneva 22, Switzerland. 1,664,332.00 34,980.00 14-09-2011 59.73.488 (Nature - Grant for Shramjyothi Project of ILO) B: Outgo:- Paid to Dexia Microcredit Fund, L-1470, Luxembourg, 69 Route. 1,833,260.00 40,202.50 06-27-2011 (Nature - Guarantee Fee payment) 989,158.00 18,731.25 12-10-2011 0275789445

Grameen Foundation, 1101, 15th St. NW, 3rd FIO, Washington DC 420,849.00 9,227.40 28-06-2011 (Nature - Guarantee Fee payment)

South IndianBank

Ollukkara,Thrissur

Citi Bank NA50, C.P.

RamaswamyRoad,

AlwarpetChennai

ParticularsAs at 31 March

2012(INR)



76

II. The year-end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

Receivable in Foreign currency Receivable in Foreign currency

INR US Dollars INR US Dollars

13,97,463 26,312 4,22,848 9,415

The above receivables are from International Labour Office, Geneva towards Shramjyothi Project.

25.4 Asset Classification and Provisioning:-

The Company has created in its books a provision as per the estimates made by the management in this regard and subject to the norms stated in the Non-Banking Financial (Non Deposit Accepting or holding) Companies Pruden-tial Norms (Reserve Bank) Directions, 2007. After following the Reserve Bank prudential norms, the Company has this year accounted for the provision amounting to Rs. 1,51,25,812/- which adds up to an accumulated provision of Rs. 3,96,09,389/-.

Apart from the Staff loans and Staff Vehicle loans, the company is not providing any kind of loans to its employees. On the Staff loans and Staff vehicle loans, the company is charging a rate of interest at 18% diminishing and the maximum duration of the loan is 18 months. The Company as a policy has not created any provisions on Staff loans. Also in the case of Staff vehicle loans outstanding to Rs. 10,28,948/- as on the report date, the vehicles are hypothecated in the name of the Company.

Provision calculations are made on Gross Portfolio.

The Loss assets written off during the year comes to Rs. 17,02,272/-

Provisioning Norms:-

Standard Assets Less than 12 weeks 1 0.25

Sub Standard Assets Over 12 - 25 weeks 10 0.25

Sub Standard Assets Over 25 - 50 weeks 50 10

Doubtful Assets Over 50 weeks past due 100 100

Loss Assets As estimated 100 100

Asset Classification Period of OverdueProvision Policyof the Company

Provision as per RBIPrudential Norms


77

Particulars

Standard Assets:- Current Advances 2,314,441,176 23,144,412.00 5,786,103

Non Current Advances 568,019,990 5,680,200 1,420,050

Sub Standard Assets (Current - 3 months to 6 months) 14,456,121 1,445,612.00 36,140

Sub Standard Assets (Current - 6 months to 1 year) 8,087,656 4,043,828.00 808,766

Doubtful Assets 5,295,337 5,295,337.00 5,295,337

Additional provision for contingencies - 2,500,000.00 -

Total 2,910,300,280 42,109,389.00 13,346,396

Add: Employee Loans 6,777,896

Less: Derecognised Portfolio - Assigned 598,779,865

Prepayments not due 94,243,427

Grand Total 2,224,054,884

25.5 Disclosure pursuant to RBI Notification DNBS. 200/CGM (PK) - 2008 dt. 01-08-2008

(i) Capital to Risk Assets Ratio (CRAR) (All amounts in Rs.)

As a prudent practice Company is maintaing a CRAR/CAR of 23.57% which is more than the RBI requirement for NBFCs having asset size of more than 100 crore (Systemically Important NBFC). The workings are as detailed below:-

Tier- I Capital (Net of securitisation collaterals) 515,164,304 457,651,310

Tier - II Capital (Net of Securitisation collaterals) (28,738,039) (9,327,709)

Total Capital 486,426,265 448,323,601

Total Risk weighted Assets 2,379,079,278 2,059,182,866

CRAR 20.45% 21.77%

CRAR Tier - I Capital as a percentageof total risk weighted Assets (%) 21.65% 22.22%

CRAR Tier - II Capital as a percentage of total risk weighted Assets (%) -1.21% -0.45%

Asset Classification

Particulars 31.03.2012 31.03.2011

Gross Amount in Rs.Provision Policyof the Company

Provision as per RBIPrudential Norms


78

(ii) Exposure to Real Estate sector (Direct & Indirect) The Company does not have any direct or indirect exposure to real estate sector as on 31st March 2011 and 2012. (III) Asset Liability Management Maturity Pattern of major assets and liabilities as on 31st March 2012 (in Rs. Crores)

Upto 1 month 14.65 12.10

Over 1 month to 2 months 16.11 16.67

Over 2 months to 3 months 18.07 8.38

Over 3 months to 6 months 48.83 29.62

Over 6 months to 1 year 97.65 44.93

Over 1 year to 3 year 27.09 85.68

Over 3 years to 5 years 0.00 7.91

Over 5 years 0.00 0.00

Total 222.40 205.29

The ALM information is as per the report and figures compiled by the Management.

25.6 Debt Equity Ratio (DER)

Debt : (A) Loans from Banks / Institutions 1,899,499,806.90 - -

Cash Credits from Banks 148,543,731.00

Non convertible Debentures 4,845,000.00 2052888537.90 2052888537.90

Equity : (B)

Equity share capital 500,000,000.00

Reserves & Surplus 71,099,566.35 571,099,566.35

Less : Intangible Assets (Net) 19,991,070.00 551,108,496.35

Debt Equity Ratio (A/B) 3.73

Particulars

Particulars Figures (Rs.) Sub Totals Totals

Assets Liabilities

Advances Borrowings


79

25.7 Assignment of Portfolio to Banks and Financial Institutions:-In the year under consideration the Company has entered into assigment transactions with Banks and Financial institutions and the details are as under:-

Number of Loan accounts assigned during the year 66,985.00 30,866.00

Book value of Loan assets assigned during the year 590,040,059.40 310,780,148.00

Sale Consideration for the assignment received during the year 622,878,934.00 33,840,030.00

Total gain on account of assignements to be amortised overthe life of receivables 6,306,530.00 27,649,882.00

Gain recognised in the Profit & Loss account during the year 14,646,940.00 13,619,174.00

Quantum of credit enhancements provided during the year 66,966,513.00 37,505,465.00

25.8 Segment Reporting:-The Company is only involved in the business segment of Microfinance lending and the only geographical segment is the Republic of India. Accounting Segment Reporting requirements as per Accounting Standard 17 are not applicable.

25.9 Related Party Disclosures:- A. List of related parties are given below:-

Key Management Personnel K.Paul Thomas Managing Director

Relative of Key Management Personnel Mareena Paul Spouse of Mr.K.Paul Thomas

Relative of Key Management Personnel Mercy Mathew Sister of Mr.K.Paul Thomas

Entities in which the Key Management personnel can exercise control or having substantial interest:-

1 ESAF Retail (P) Ltd K.Paul Thomas, Director

2 ESAF Swasraya Producers Company Ltd. K.Paul Thomas, Director

3 ESAF Healthcare Services (P) Ltd K.Paul Thomas, Director

4 ESAF Society K.Paul Thomas, Secretary

Particulars

Name of the EntitySl.No.

Status of Key Management Personnel




80

B. Transactions with the above parties during the reporting period:- (Amount in Rs.)

Remuneration to Mr. K.Paul Thomas 4,902,400.00

Option Shares Issuance of 1,98,000 shares worth 19,80,000

Remuneration of Mrs. Mareena Paul 460,140.00

Remuneration of Mrs. Mercy Mathew 1,24,080

Receivable Outstanding Balances:-

ESAF Retail (P) Ltd 280,645.00

ESAF Swasraya Producers Company Ltd. 856,353.50

ESAF Healthcare Services (P) Ltd 1,492,024.00

Payable Outstanding Balances:-

ESAF Society 11,280,439.78

Royalty payable 9,200,600.00

25.10 Details of rental arrangements:-The Company has taken on rent Branch premises for periods ranging from 11 months to 5 years. The rental arrangements are cancellable after giving one months notice and the agreements provides for an annual increase of 5% on an yearly basis. For the reporting year the rental expenses comes to Rs. 1,34,40,137 (Previous year 1,08,36,988).

25.11 The Company has not capitalised any borrowings as per the provisions of Accounting Standard - 16 and hence no disclosures are applicable. 25.12 There are no discontinuing operations for the company and therefore the diclosures under Accounting Standard 24 are not applicable. 25.13 Employee Benefit Plans

a) Defined contribution Plans:- Employees Provident Fund

The Company makes Provident Fund contributions for all qualifying employees. For the year under consideration the company has made a EPF contribution of Rs. 76,55,633 (Previous Year - 55,90,752).

Employees State InsuranceThe Company has brought all eligible employees under the purview of Employee State Insurance Scheme. For the year under consideration it has made an ESI contribution of Rs. 40,64,364.61 (Previous Year - 11,04,896).

b) Defined Benefit Plans:- Staff Insurance Scheme

For those employees outside the purview of ESI are covered under the Group medical insurance policy of M/s Oriental Insurance Company. For the year under consideration, the company has made a premium payment of Rs. 12,69,278 (Previous year Rs. 7,60,035).

GratuityThe Company has funded the Provision for Gratuity outstanding as on 31st March 2011, Rs. 45,70,612, by forming a Gratuity Trust termed ESAF Employees Gratuity Fund Trust on 23-03-2012.


81

For the year under consideration, a provision of Rs.66,27,939 has been made. 25.14 Employee Share Based payments:-

Based on the approval by the Board of Directors to issue Employee Benefit Shares, the company has issued 15,00,000 shares of the face value of Rs. 10 each to ESAF Staff Welfare Trust formed for the benefit of employees.

Options outstanding at the beginning of the year 1,500,000 15,000,000

Options exercised during the year 1,500,000 15,000,000

Options outstaning at the end of the year

Option shares numbering 1,98,000 amounting to Rs.19,80,000 is allotted during the year to the Promoter (Refer Note 25.19)

25.15 The Company is in the process of implementing a CORE Banking system termed Omni Enterprise of M/s Infrasot Tech India (P) Ltd, Mumbai, which will provide an integrated platform for accounts and ushering in a great deal of sophistication in the process.

25.16 Adhering to the recommendations of the Quality Review Board of the Institute of Chartered Accountants of India, the auditors of the Company M/s A.John Moris & Co. has come up with the rotation of the signing partner. Accordingly instead of CA P.Ganesan who was the signing partner for the last three years, CA.G.Kumar will be the signing partner from the reporting year onwards.

25.17 The Revised Schedule VI has become effective from 1st April, 2011 for the preparation of financial statements.This has significantly impacted the disclosure and presentation made in the financial statements. Previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.

Particulars No. of Shares Amount (in Rs.)


82

25.18 Disclosure of frauds reported during the year vide DNBS PD.CC.NO. 256/03.10.042/2011-12 dated March 02,2012

(A) Person involved Staff Customer 186 1447403 0 0 0 0 186 1447403

0 0

Staff 9 372867 3 911104 2 1262760 14 2546731

0

Total 195 1820270 3 911104 2 1262760 200 3994134

(B) Type of fraud Misappropriationand criminal breach of trust 186 1447403 0 0 0 0 186 1447403

0

Fraudulent encash/manipulation of books of accounts 0

0

Unauthorisedcredit facility extended 0

0

Cheating and forgery 9 372867 3 911104 2 1262760 51 2546731 Total 195 1820270 3 911104 2 1262760 237 3994134

The data compiled is based on the information made available by the company and it includes decreed cases and settled cases where recoveries are effected. In the case of staff frauds an amount of Rs.8,45,225 is already recov-ered and also an additional provision of Rs. 25,000,00 is made by the Company.

Particulars

Less than Rs. 1 Lakh

No. Value in Rs. No. Value in Rs. No. Value in Rs. No. Value in Rs.

Rs. 1 Laksh to Rs. 5 Lakhs

Rs. 5-25 Lakhs Total


83

25.19 Earnings per share Basic

Continuing operations & Total Operations Net Profit attributable to equity Shareholders (Amount Rs.) (A1) 41,466,319.13 12,896,461.41 Net Profit attributable to equity Shareholders and all dilutive potential equity shareholders(Amount Rs.) (A2) 41,466,319.13 12,896,461.41 Weighted Average Equity Shares outstanding during the year.(Nos.) (B1) 68,678,000.00 37,821,416.67 Basic earnings per share Rs. (A1/B1) 0.60 0.34 Option Shares Eligible (C1) 442,530.00 453,398.00

Weighted Average Equity Shares outstanding for Diluted Earnings per Share.(Nos.) (D1= B1+C1)) 69,120,530.00 38,274,814.67 Diluted earnings per share Rs. (A2/D1) 0.60 0.34 Nominal Value per share Rs. 10.00 10.00

The diluted earnings per share has been computed by dividing the Net Profit After Tax available for Equity Share-holders by the weighted average number of equity shares, after giving dilutive effect of the outstanding Warrants and Stock Options for the respective periods.

Option Shares eligibility of the Promoters:-

The Promoter of the company and Business leader of erstwhile microfinance activities of ESAF Society, was eligible for sweat equity in the form of warrants for 30 lakhs equity shares of the value of Rs 10 each per share at free of all cost on 28-03-2008 as per the decision of the General Body meeting held on 05-03-2008 (30 warrants each comprising of 1 lakhs shares each), none of which were converted into Equity shares of the Company. The Board meeting dated 21-03-2012, subject to approval in a General Meeting decided to cancel all the said warrants and declare them null and void. Instead of this and subject to approval from General Meeting, the Board decided to issue 3,000,000 (Three million) equity shares in the form of Option Shares to Mr. Paul Thomas.K, who is the promoter of the Company. This option shares shall be issued without any consideration, subject to the condition that the amount of shares issued in a particular year will not exceed an amount equal to the lesser of either: (1) 1,000,000 (One million) equity shares amounting to Rs. 10,000,000 (Rupees one Crore only); or (2) equity shares corresponding to an amount equal to 10% of the net profit before tax for that particular year. Based on that criteria 6,40,530 nos of equity shares are due for issue for the financial years ended 31st March,2012 as sweat equity shares, of which, 1,98,000 equity shares have been already issued during the year under review, in accordance with the adequacy of profits in the ensuing years.

The Company has not issued any Preference shares.

The Company doesn`t have any discontinued operations


2012(INR)



84

25.20 Royalty Commitments-

As on March 31,2008 through a Business Transfer Agreement the Company had taken over all the assets and liabilities of Microfinance business,hitherto carried on under the name and style Micro Enterprise Deveopment by ESAF Society. The entire business was taken over lock stock barrel. The liabilities were agreed to be settled through a back to back agreement to enable ESAF to settle the same with lenders either on its due dates or on the dates which the demand is made, till the time the liabilities are duly settled. It is also agreed that, subject to the possibility of generating adequate profits, the company will pay an annual royalty of Rs.40 per customer, for all the customers taken over and being acquired by the company in the next 5 years and this may be extended to 10 years in accordance with mutual discussions with the parties involved.

Till the reporting date the acumulated Royalty obligations are as detailed below:-

Royalty per member agreed (in Rs.) 40.00

Year Members Amount (Rs.)

2008-09 230015 9,200,600

2009-10 300017 12,000,680

2010-11 434425 17,377,000

2011-12 457193 18,287,720

Total 56,866,000

Out of the total committed liability of Rs.5,68,66,000/-, Rs. 9,200,600/- is being provided for and the balance of Rs. 47,66,5400/- will be provided for in the subsequent year/s. This partial provision is being resorted keeping in mind the need to augment Net worth.


2012(INR)



85

25.21 Disclosure Pursuant to Reserve Bank of India Notification DNBS.193DG(VL) - 2007 Dated 22nd February 2007:Schedule to the Balance Sheet of a non-deposit taking non-banking financial company (as required in terms of paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007)

(Rs. in lakhs)

Liabilities side :

Loans and advances availed by the nonbanking 1 finanical company inclusive of interest accrued thereon but not paid: Amount outstanding Amount overdue

(a) Debentures : Secured 48.45 - : Unsecured - - (other than falling within the meaning of public deposits*) (b) Deferred Credits - - (c) Term Loans 20480.80 - (d) Inter-corporate loans and borrowing - - (e) Commercial Paper - - (f) Other Loans (specify nature) - - * Please see Note 1 below

Assets side :

2 Break-up of Loans and Advances including bills receivables(Other than those included in (4) below)

(a) Secured - (b) Unsecured 22,240.55

3 Break up of Leased Assets and stock on hire and other assets counting towards AFC activities

(i) Lease assets including lease rentals under sundry debtors: (a) Financial lease - (b) Operating lease -

(ii) Stock on hire including hire charges under sundry debtors: (a) Assets on hire - (b) Repossessed Assets -

(iii) Other loans counting towards AFC activities (a) Loans where assets have been repossessed - (b) Loans other than (a) above -

Particulars


86

4 Break-up of Investments : Current Investments : 1. Quoted : (i) Shares : (a) Equity - (b) Preference - (ii) Debentures and Bonds (iii) Units of mutual funds 1.00 (iv) Government Securities - (v) Others (please specify) -

2. Unquoted : (i) Shares : (a) Equity - (b) Preference - (ii) Debentures and Bonds - (iii) Units of mutual funds - (iv) Government Securities - (v) Others (please specify) -

Long Term investments :

1. Quoted : (i) Shares : (a) Equity - (b) Preference - (ii) Debentures and Bonds - (iii) Units of mutual funds - (iv) Government Securities - (v) Others (please specify) -

2. Unquoted : (i) Shares : (a) Equity 10.00 (b) Preference - (ii) Debentures and Bonds - (iii) Units of mutual funds - (iv) Government Securities - (v) Others (please specify) -

5 Borrower group-wise classification of assets financed as in (2) and (3) above: Please see Note 2 below

1. Related Parties ** (a) Subsidiaries - - -

(b) Companies in the same group - - -

(c) Other related parties - 26.29 26.29 2. Other than related parties - 22,214.26 22,214.26

Total


87

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

1. Related Parties **

(a) Subsidiaries - -

(b) Companies in the same group 5.00 5.00

(c) Other related parties

2. Other than related parties - -

Total 5.00 5.00

** As per Accounting Standard of ICAI (Please see Note 3) 7 Other information

(i) Gross Non-Performing Assets (a) Related parties (b) Other than related parties 278.39

(ii) Net Non-Performing Assets

(a) Related parties

(b) Other than related parties 170.54

(iii) Assets acquired in satisfaction of debt -

PROXY FORM

I/We ……………………………..of……………………………………………………………………………………...being a

of ……………………………………………………………….or failing him………………………..as my/our proxy to attend

th day

of September, 2012 at 12.00 Noon or at any adjournment thereof.

Registered Folio No:

Signed this................…………………….......................day of.....................................................………………2012

Signature of Member………………....................................................................

Date of receipt of proxy form:

Whether the form is complete in all respect

Mode of receipt

`1.00

CORPORATE OFFICE:Hepzibah Complex, Mannuthy P.O, Thrissur, Kerala. 680 651, India

Tel / Fax: +91 487 2373813. E-mail: [email protected]

REGISTERED OFFICE:No.5-A, Vth Floor, No. 8 & 9, Gangadeeswara Koil Street

Purasawalkam, Chennai. 600084, IndiaTel.:+91 444 3560790. E-mail: [email protected]

ESAF MICROFINANCE & INVESTMENTS (P) LTD.

/ESAFMicrofin/esafmicrofin

www.emfil.org

For hand crafted products (corporate stationaries) made by ourSangam Members contact: [email protected]

Documents

THINKING AHEAD - ESAF Microfinance (EMFIL)emfil.org/ar2012.pdf · notes forming part of financial statements 40. ... itqyvj jcu nghv vjg rncpgv ugtkqwun[ fgrngvgf qh gpxktqpogpvcn