Rating - Spandana

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• Industry Overview and Spandana’s positioning
• Product Suite
• Key financial and operating metrics
• Investors, Bankers and Rating
• Key Strengths of Spandana
• Industry Overview and Spandana’s positioning
• Product Suite
• Key financial and operating metrics
• Investors, Bankers and Rating
• Key Strengths of Spandana
Industry
Overview
What is
Microfinance
and MFI ?
Large Unmet
Demand
Growth path
• Retail financial services landscape in India is dotted by following key players –
• Govt/ Public Sector: Banks, District Credit Cooperatives, Regional Rural Banks etc
• Private Sector: Indian Banks, Foreign Banks, Non-Banking Finance Companies, including
Microfinance Institutions (MFIs), Urban Coop Banks etc
• Unorganized players: Moneylenders, Pawn brokers etc.
• Microfinance is the provision of micro-credit and other financial services to low-income households
• Microfinance Institutions (MFIs) are the client servicing interface, working predominantly with women and
providing doorstep financial services
• Non-Banking Finance Companies/ Societies/ Trusts/ Coops are the dominant legal form of MFIs
• * Only 5% of habitations in India have a Commercial Bank branch, only 40% of population has savings
Bank account – large gaps in financial inclusion exist
• Estimated demand of Microfinance is INR 333,000 crore (USD 74 billion) against which, only 10% has
been reached – including private sector MFIs and govt.’s SHG-Bank linkage programme
• Microfinance business model has now been well proven with over a decade of successful track record
• MFIs have shown an aggregated growth of over 100% year-on-year for the last 5 years
• Being a disaggregated industry, large players with sizeable operations and established track record of
scaling-up the loan portfolio, will continue to grow at a fast pace
* Size of Financial Exclusion: Dr. D Subbarao, Governor, Reserve Bank of India, June 2010
Large
scale
Leader in
operational
efficiencies
Proven track
record
• Spandana is the 6th largest MFI in the world, and 2nd largest in India in terms of number of clients
• Started operations in 1998 at Guntur, Andhra Pradesh and steadily grew at a compounded annual growth
rate of about 100% since then – mainly due to high degree of customer connect
• Scale of operations*: 4.5 mn clients, about 12,000 on roll trained staff, over 1,600 branches in 12
States of India with Asset Under Management (AUM) of about Rs.4,000 crore (USD 0.9 Bn)
• Operating expense ratio at sub 6% level against the industry average of about 12%
• Good portfolio quality with a cumulative repayment rate of 99.9% shows that the business model has
shown its robustness over the last 10 years
• Staff productivity at over 400 clients per staff against an industry average of 252**
•
•
•
•
Strong management team lead by a dynamic leader, founder and Promoter Mrs. Padmaja Reddy
Disbursed over Rs.13.7 thousand crore (USD 3 Bn) cumulatively since inception
Most profitable MFI with highest Return on Assets (7%+ against an industry average of 3.5%)
Optimum Capitalization also ensures one of highest Returns on Equity, presently at 50%+ levels
Rating/
Grading
• ***CRISIL MFI grading: mfR1 (highest rating grade; first MFI to achieve this distinction)
• CRISIL Rating of debt and bank facilities: A-/Stable/P1’ (best in the industry)
Sustained
growth model
• New products under pilots and testing are ready for scale-up
• States where operations started in last 2 ys are ready for scale-up, many new potential states available
• Over 42 Banking relationships across Public / Private/ Foreign Banks
* as on June 30, 2010
** M-CRIL Analytics, 2009
***CRISIL: India's leading Ratings, Research, Risk and Policy Advisory company (www.crisil.com)
• Industry Overview and Spandana’s positioning
• Product Suite
• Key financial and operating metrics
• Investors, Bankers and Rating
• Key Strengths of Spandana
General Loan
(Abhilasha)
Emergency
loan
(Samruddhi)
Group Loan
(Pragathi)
Agri Family
Loan
(Dharani)
Individual
Loan
(Sphoorty)
Farm Equipment
(Tractor) Loan
Nature of
Loan
Group
Group
Group
Group
Individual
Individual
Purpose of
Loan
For income
generation
activities
For emergency
cash flow
needs
For income
generating
activities
For agriculture and
allied activities
For small
business
activities
For purchase of
farm equipments
such as tractors
Typical
Customer
Wage labourers
(both skilled
and unskilled)
formed in a
group of 10
women
Existing
customers
Low-income
clients with
slightly better
well being than
Abhilasha
customers
Loan Size
Rs 2,000 to
Rs 20,000
Rs 2,000 to
Rs 10,000
Rs 15,000 to Rs
25,000
Rs 5,000 to Rs
30,000
Rs 21,000 to
Rs 200,000
Rs 50,000 to Rs
350,000
Loan Tenor
50 weeks
50 weeks
12 to 24 months
11 months
12 to 24
months
3 years
Repayment
Terms
weekly equated
installments
Interest monthly;
principal semiannually
Monthly
Monthly
Product Suite
weekly equated monthly equated
installments
installments
Small and
Small and
micro
marginal farmers
entrepreneurs
and tenant farmers with co-obligant
guarantee
Farmers and
young
entrepreneurs with
hypothecation of
vehicle
Loans are serviced at the customer locations (slums/ villages) with complete transparency – disclosure of all terms
of loan, no hidden charges in the name of value added services
• Industry Overview and Spandana’s positioning
• Product Suite
• Key financial and operating metrics
• Investors, Bankers and Rating
• Key Strengths of Spandana
Particulars
No. of Branches
Mar-07
295
% Growth
No. of Employees
1,911
% Growth
No. of Clients (mn)
0.97
% Growth
No. of Borrowers (mn)
0.92
% Growth
Cum. loan disbursed (Rs mn)
17,833
% Growth
Gross Loan Portfolio (Rs mn)
3,916
% Growth
Total Income (Rs mn)
608
% Growth
Profit after Tax (Rs mn)
% Growth
26
Mar-08
435
Mar-09
944
Mar-10
1,533
47%
117%
62%
3,024
6,373
10,428
58%
111%
64%
1.24
2.5
4.2
28%
105%
64%
1.19
2.4
3.7
30%
104%
52%
29,756
59,959
119,758
67%
102%
100%
7,313
18,683
35,567
87%
151%
90%
1,339
3,556
7,241
120%
166%
104%
271
903
2,035
942%
233%
125%
• Sustained growth in all operating and financial metrices
• Spandana is the first MFI to cross PAT of Rs.2 Bn (USD 45 mn)
Branches
88%
p.a.
Gross loan Portfolio
(Rs. mn)
120%
p.a.
Profit after Tax
(Rs. mn)
175%
p.a.
1998
2004
Guntur,
Andhra Pradesh
2005
Growth across
Andhra Pradesh
2006
Karnataka
• Registered as • Transformation
a society
to a nonunder
deposit taking
Societies
NBFC
Registration
• Reached 0.1
Act, 1860
MM borrowers
Orissa, Maharashtra,
Chhattisgarh
Tamil Nadu
• Annual
disbursement
crossed Rs 1Bn
• Pioneered portfolio
sale in the industry
• Pilot launch of • First round of PE
Agri Family
infusion by JM
Loan
Financial and Lok
Capital
• Exclusive tie-up
with Western Union
Money Transfer
• CRISIL rating
upgraded to mf2
• Received
CRISIL rating of
mf3
2007
• Pilot launch of Farm
Equipment Loan
2008
Rajasthan,
Madhya Pradesh
• Second round of
PE infusion by
Valiant Capital
Partners
2009
Jharkhand, Goa,
Gujarat, Uttar
Pradesh
• Reached 3mn
borrowers in
August
2010
Consolidation
• Reached 3.7
mn borrowers
in March
• Reached 1mn
borrowers
• Annual
disbursement
crossed INR
10Bn
New Product Pilot and Testing
Registered
as a Society
4
13
Planned new state
entries
Post
Conversion to
NBFC
2 Yr CAGR in
Loan Book:
28%
34
110
386
722
Post External
Equity Funding
3 Yr CAGR in
Loan Book:
109%
916
Number of Borrowers ('000s)
1,189
2,432
3,703
• In every new state that
Spandana enters, within
a few years, contiguous
growth strategy helps in
rapid scale-up
Karnataka – Entry in FY05
Tamil Nadu – Entry in FY06
Gross Loan Portfolio (Rs MM)
Gross Loan Portfolio (Rs MM)
5,130
4 Yr CAGR (07-10) : 74%
4 Yr CAGR (07-10) : 166%
3,000
1,970
• Despite the growth, the
Company has been able
to maintain its asset
quality
• The Company has
successfully increased
its geographical
presence from only 3
states in March 2007 to
12 states in 2010
1,280
560
Sep-07
550
Mar-08
Sep-08
Mar-10
60
180
Sep-07
Mar-08
Sep-08
Maharashtra – Entry in FY07
Orissa – Entry in FY07
Gross Loan Portfolio (Rs MM)
Gross Loan Portfolio (Rs MM)
2,842
4 Yr CAGR (07-10) : 144%
4 Yr CAGR (07-10) : 231%
190
Sep-07
Mar-08
20
Sep-08
2,390
760
710
80
Mar-10
Mar-10
Sep-07
230
Mar-08
Sep-08
Mar-10
Rajasthan
Madhya Pradesh
Jharkhand
• 9 branches
• 100 branches
• 6 branches
• 233 villages
• 2,976 villages
• 107 villages
• 20,559 clients
• 269,226 clients
• 7,240 clients
Gujarat
Chhattisgarh
• 7 branches
• 36 branches
• 37 villages
• 1,652 villages
• 2,375 clients
• 84,350 clients
Maharashtra
Orissa
• 125 branches
• 114 branches
• 6,024 villages
• 8,209 villages
• 382,537 clients
• 353,777 clients
Goa
Andhra Pradesh
• 3 branches
• 787 branches
• 65 villages
• 37,772 villages
• 3,802 clients
• 2,159,469 clients
Karnataka
• 222 branches
• 9,630 villages
• 571,479 clients
New states (post 2008)
Old states (pre-2007)
State of origin (pre-2006)
Tamil Nadu
• 121 branches
• 3,599 villages
• 337,291 clients
All figures in INR million
Profit & Loss Account
FY 2007
FY 2008
FY 2009 FY 2010
469
1,133
3,424
7,004
Other Income
26
141
143
237
Total Income
Expenditure
495
1,274
3,567
7,241
Financial expenses
148
417
1,182
2,210
Personnel expenses
143
233
587
1,144
67
81
165
362
6
9
26
54
89
75
187
360
453
815
2,147
4,130
Profit before tax
43
459
1,420
3,111
Tax
16
189
517
1,075
Profit after tax
27
270
903
2,036
-
-
216
939
27
270
1,119
2,975
6
54
181
407
21
216
939
2,568
• Annualized portfolio Return (APR) at
26.5%. [against industry avg. of 28%]
Income
Income from Operations
Operating and other expenses
Depreciation
Provisions and write offs
Total Expenditure
Balance in P & L brought fwd
Amount available for appropriation
Transfer to statutory reserve
Balance carried to balance sheet
• Provisions and write-offs include a 1%
standard asset charge – higher than
the RBI prescribed norms
• Return on Assets at 7%+ [against
industry average of 3.5%]
• Return on Equity at 52% [highest in
the industry]
• Audited by one of the top-4 Audit firms
• 1USD = 46 INR (approx)
Earnings per share
Basic and diluted - Rs.10/ share
• Operating expense ratio at 5.1%
[against industry average of 12%]
3
29
80
152
Balance Sheet
FY 2007
All figures in INR million
FY 2008 FY 2009 FY 2010
Sources of funds
Share Capital
86
434
134
135
Reserves and surplus
65
450
2,647
4,716
Shareholders' funds
151
884
2,781
4,851
Subordinated loan (unsecured loan)
195
200
185
-
Secured loans
2,751
4,726
14,761
21,944
Total
3,099
5,813
17,727
26,795
Fixed assets
24
38
86
115
Investments
6
14
2,951
1
Deferred tax asset, net
-
-
37
95
448
1,013
2,724
7,766
2,698
4,883
12,471
21,301
29
77
130
190
3,175
5,973
15,325
29,257
Current liabilities
93
45
367
1,962
Provisions
14
167
304
712
107
212
671
2,674
Net current assets
3,068
5,760
14,654
26,583
Total
3,099
5,813
17,727
26,795
Application of Funds
Cash and bank balances
Loan portfolio (excluding assigned portfolio)
Other current assets
Current assets, loans and advances
Current liabilities and provisions
• Industry Overview and Spandana’s positioning
• Product Suite
• Key financial and operating metrics
• Investors, Bankers and Rating
• Key Strengths of Spandana
Investors
Bankers: Spandana focuses on
diversified fund sources so that
the cost of borrowing is reduced.
Spandana is supported by 48
Bankers and financial
institutions.
Some of the relationships are
over five year old –FWWB,
SIDBI, ICICI Bank, HDFC Bank
and ING Vyasya Bank
Public sector Banks have been
showing increasing interest is
taking exposure with us.
EPS: Rs.152
(Face Value Rs.10)
At different stages, institutional investors have joined
Spandana and contributed to its growth.
As on March 31, 2010, Spandana has a paid-up Share
Capital of Rs.13.5 crore (USD 3 mn)
The major funding instruments are Term Loans, Portfolio
Sales (bilateral assignments and Securitisation), Capital
Markets (NCDs) and Money Market (CPs) products.
Highest rating & grading in the industry (by CRISIL) –
• Rating of debt & bank facilities ‘A-/Stable/P1’
• Grading of institutional ability: mfR1
• Ms. G Padmaja Reddy
Founder, promoter and Managing Director of Spandana - She has been instrumental in building
Spandana into one of the leading MFIs famed for its scale, efficiency, productivity and profitability
• Dr. Rajiv Behari Lall
CEO & MD of IDFC. He earlier worked as Partner at Warburg Pincus, as ED with Morgan Stanley, as a
Policy Advisor and Economist at the World Bank, ADB, and in academia.
• Mr. V.P. Shetty
Executive Chairman of JM Financial Limited- Asset Reconstruction Company – earlier worked as GMVijaya Bank, Chairman and MD-UCO Bank, Chairman & MD-Canara Bank, Chairman & MD with IDBI.
• Mr. Vikram S Rathore
ED-SIDBI – over 30 years of experience in Commercial & Development Banking
• Ms. Supritha Shetty
JGM-ICICI Bank - heads the Rural Risk, Policy and Compliance of ICICI Bank
• Dr. Venkateswara Reddy Cardiologist with a long standing experience in teaching Medicine
• Mr. Harinder Sawhney
Executive Director of JM Financial's Private Equity Fund
• Dr. Bala Deepthi
Practicing Doctor of Medicine – represents youth on the board of Spandana
• Ms. M. Asha Latha,
Head of HR & Admin at Spandana - has earlier worked in Health Administration
• Mr. Vishal Mehta
From Lok Capital – rich experience in fund raising, investments and portfolio strategy
• Industry Overview and Spandana’s positioning
• Product Suite
• Key financial and operating metrics
• Investors, Bankers and Rating
• Key Strengths of Spandana
Strong Management Team
Years of diversified experience
Significant Business
Growth Potential
Highly Efficient Employee
Workforce
Geographical and product
expansion coupled with new
initiatives
Highest productivity per
employee; lowest operating cost
in the industry
Established Capability to
Scale
Exceptional Financial
Performance
From 3 to 12 states and portfolio
growth of 369%, in two years
4-year PAT CAGR of 56%
Streamlined and Efficient
Processes
High quality asset portfolio
(almost Zero Net NPAs)
Diversified
Product Offerings
Continuous development of
innovative products
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