ANNUAL REPORT 2014 - Swadhaar€¦ · started during the year, with outsourcing our document ......

SWADHAAR FINSERVEANNUAL REPORT 2014

TABLE OF CONTENTS

04 27

03 18

06 32

08

CHAIRPERSON’S MESSAGE

AUDITORS' REPORT VISION, MISSION, VALUES

FINANCIALS FROM THE MANAGING DIRECTOR

PANORAMA

• Swadhaar Expanding the Frontiers

• Opening Doors

• Our People

• Glimpses & Insights

• Innovation

• Operational Performance

DIRECTORS' REPORT

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The core commitments of the team and the investors have not changed whether it was the euphoric upswing of the latter part of the last decade or through the bleak times that we faced at the onset of and immediately after the crisis of 2010.

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CHAIRPERSON’S MESSAGE

My association with Swadhaar will be coming to an end this year. It has been my privilege to work closely with the leading team at Swadhaar since its establishment and guide as well as learn from them during the ups and downs that the microfinance sector has seen in the recent past years. It gives me great pleasure to present to you a very positive picture of the company’s achievements both during the last year and since its inception seven years ago.

What has struck me is that the core commitments of the team and the investors have not changed whether it was the euphoric upswing of the latter part of the last decade or through the bleak times that we faced at the onset of and immediately after the crisis of 2010.

It is this core commitment I believe, that has been the cornerstone of the rising graph that we have seen over the last two years. And it is this, I think, that lies at the heart of all that Swadhaar symbolises and stands for.

I would like to elaborate on some of the key features that characterise this company and which will stand it in good stead irrespective of whether the external environment is conducive for growth or challenging.

The things that come to my mind stem primarily from the fact that Swadhaar, like many of the bigger and stable companies in the MFI sector has a long-term outlook and perspective, and did not try to reap excessive short-term gains when the going was good. Foremost among these values imbibed by Swadhaar is a steadfast commitment to good governance principles based on a clear commitment to keep the customer first. The highest standards of governance are now firmly entrenched in the processes and culture of the company. An equally important character of the company has been its willingness to adapt and innovate based on a clear vision of where it sees the sector heading.

The following pages contain innumerable examples of Swadhaar’s exemplary approach and vision, so I will only elaborate on two of them – transparency and innovation.

The importance given to client education by the team at Swadhaar is an outstanding example of this first attribute. It was one of the early players in the sector to begin education of customers and developed an

outstanding customer education kit and related procedures. It is also perhaps one of the leaders in embedding education into the core of its business rather than leaving it as a necessary, but not critical activity on the periphery. The company’s high ratings in various certification processes, is indeed a reflection of this core value.

The other striking feature I want to mention is the group’s ability to take initiative and stay ahead of the curve. A stellar example is the conceptualisation and introduction of the Mobile Wallet project, which has necessitated a rich blend of overcoming mental barriers in the minds of clients and teaching them the basics of mobile telephony and banking in one go. I believe that the rich learnings from dealing with over 13,000 clients in this space will be a benchmark for the Indian MFI sector as a whole.

In conclusion I would like to thank my colleagues on the Board and the leadership team that has led and guided Swadhaar over the past seven years and helped me to come in touch with some remarkable people with unbridled energy who have played an impactful role in transforming the lives of thousands of people across the western region.

I am stepping down now as I feel that after six years, a change would be good for the company. It is also time for the founder, having built a capable, professional management team, to lead and strategically steer the company as its Executive Chairperson. I am delighted to say here that all the investors unanimously agreed with the choice of appointing Veena Mankar as the new Chair. I congratulate her and wish her continued success.

I will follow the Swadhaar story closely and will always be available if it needs my assistance in any way.

I congratulate Team Swadhaar for the exemplary results for this year and wish them every success for the future.

Lalita D. GupteChairperson of the Board

May 29, 2014

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Mission StatementTo make available, responsible and efficient financial services to economically vulnerable and underserved urban households, enabling them to attain financial security and meet their aspirations.

Our Vision To be thepreferred providerof microfinancialservices.

Our Values Our values reflect who we are as an organisation and the manner in which we aim to achieve our mission. We have consolidated our values to identify a few ‘core’ values that will convey what Swadhaar stands for in simple words that have relevance across the organisation, at all staff levels.

Customer FirstResponsibilityExcellenceIntegrity

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FROM THE MANAGING DIRECTOR

A Positive Industry Environment

We, as Indians, have experienced a difficult economic phase last year, despite growth rates that look better than most of the world. The microfinance industry however, experienced robust growth. The industry not only revived, but matured as this upswing took place in an environment that was more challenging than the first industry boom, pre-2010. There was also a diversification in the profile of providers, as many banks rolled out direct channels and created Business Correspondent (BC) alliances to serve this market beyond the push of priority sector lending targets.

Not withstanding the lapse of the MFI Bill, a more regulated operational environment is emerging, laying down the framework of inter-connectivity and encouraging specialisation, which will both limit risk as well as improve efficiency.

Even as the sector searches for more appropriate mechanisms and systems, each organisation is establishing its own benchmarks and focus that in turn will help the emergence of a more organised, stable all- India MFI network. This augurs well for the future of the industry and the ultimate objective of a multi-product, seamless service to clients.

Swadhaar’s Performance & Outlook

Swadhaar, from the outset, had focused on stable growth coupled with sustainability, transparency and client- centricity. Innovation has always been an important facet of our business model, with Swadhaar taking a long term view that sees innovation as an investment in the future. We have been ahead of the industry curve in this aspect, whether it was in designing individual loans for micro-businesses, communication tools for client education, working with ITZ Cash or Airtel Money.

In 2013-14 we have ended the year with a portfolio size of ` 2035.91 million (including a managed portfolio of ` 303.88 mn) serving 156,529 clients and a profit after tax of ` 13.42 mn. These figures in themselves do not tell the complete story. We expanded our footprint from Maharashtra and Gujarat into two more states of Rajasthan and Madhya Pradesh adding 18 new branches. The drive to render branches paperless was started during the year, with outsourcing our document

management and digitisation of all client files. Meghwadi in Mumbai became the first paperless branch and in the next year all branches will be covered.

Our client-centric approach was rewarded with a Certification from the SMART Campaign on Client Protection, making us one amongst the first and very few institutions globally to receive this.

We were able to easily attract debt funding needed to grow, though the cost remained high. Relationships were started with a number of public sector banks in the past year. We also made our first listed NCD issue. The focus this year would be to reduce the funding cost, and pass on the benefit to clients.

Swadhaar had earlier followed the individual lending model in small joint liability groups (JLG), most suited to the urban context. However, with expansion to smaller cities and with pressures to reduce cost, centre-based group lending was introduced last year in several branches. This enabled the company to reduce operating costs, though at the expense of some client-centric features. So long as margin constraints dictate, the expansion will continue with this product, restricting the JLG loans to Mumbai and a few larger cities, where heterogeneity of the population makes the centre-based product less suitable.

We are looking to deepen our penetration into the states of MP and Rajasthan, whilst also entering the semi-urban districts in all four states.

The Financial Literacy and Inclusion Centres launched with Swadhaar FinAccess in 2012 were expanded to 10 branches last year. Along with adding new centres, the focus is on embedding of education and literacy programmes within the day-to-day functioning of the branches, which provides stronger growth for us, whilst widening the impact in the communities that benefit from our work.

The mobile banking pilot started in 2012-13, crossed enrollment of over 13,000 clients during the year. Whilst usage needs to be deepened across a variety of transactions that clients undertake, repeat repayments using the Mobile Wallet and the agent network has been impressive at over 60% every month. Training and handholding clients to overcome their fears and

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inhibitions in using this new financial channel have been critical in getting repeat usage. The Mobile Wallet is now available to clients at eight branches. The transaction and training costs still remain high, and Swadhaar is working closely with Accion, under a GSMA grant to streamline and standardise processes, build a scalable training methodology and document our experiences. This will help in replication of our mobile banking initiative outside Mumbai, whilst also giving others the chance to benefit from our learnings. Experience in rolling this out across eight branches has also given us the confidence of managing the change that comes with introduction of new technology.

Last year’s achievements, while being significant in themselves, have more importantly, laid a long-term base for expansion over time and built confidence that the team is nimble and adaptable. These are critical characteristics for the environment we find ourselves in – where adoption of new technology will provide the edge and there is need to adapt to a fast-changing regulatory environment. Swadhaar stays open to the need to adapt and develop its business model to take advantage of both technology and regulatory changes and is optimistic about the future, all the while staying true to its mission of financial inclusion in a customer- centric manner.

Changes on the Board and Senior Management

In this message, I sadly find myself saying farewell to our Chairperson, Lalita Gupte, who is stepping down for reasons expressed in her message. Swadhaar would not be the company it is today without her guidance, stewardship and high standards of corporate governance. Her decades of financial sector experience stood us in good stead in good times and bad. She has been my mentor and guide, from the time Swadhaar was only an idea in my mind. On behalf of the entire Board, investors and staff of Swadhaar, I express our sincere appreciation of her contribution to Swadhaar and the larger goal of financial inclusion.

I also regretfully say farewell to Siddhartha Chowdri as he moves to USA and to a new organisation, but very much in the development sector. He has been Accion’s representative on our Board since their investment. Thanks to Siddhartha for his support and contribution both on and outside the Board. Siddhartha always held us accountable to the highest standards of a social enterprise whilst urging us to stretch ourselves.

I know I speak for the entire Board and staff, when I say we will miss both, but rest assured in the confidence that we can call upon each of them whenever we need to.

I would also like to acknowledge here the contribution of Abhishek Agrawal as CFO over the last three years. He shouldered responsibility unhesitatingly as part of the senior management and contributed substantially to establishing the robust company we are today. Seconded by Accion, he moved into the role of their Country Head for India, effective January 1, 2014. We will miss him on a daily basis, but welcome him as a Director on our Board and are happy that we continue to have access to his knowledge and experience. In conclusion I would like to thank our investors and my colleagues on the Board, for their confidence, as I take the role of Chairperson of the Board, and try to fill the enormous gap created by Lalita’s exit. I would also like to thank the professional, competent team headed by RajaRam Kamath, and entrust to him the responsibility of running the company on a day-to-day basis, with confidence of his readiness to do so, having shared it with me for the past 2½ years.

To the entire Swadhaar team, shareholders and staff, thank you for your support and contribution in making 2013-14 a year to be proud of and all the best as we look ahead with optimism.

Veena Mankar Managing Director

May 29, 2014

Even as the sector searches for more appropriate mechanisms and systems, each organisation is establishing its own benchmarks and focus that in turn will help the emergence of a more organised, stable all-India MFI network. This augurs well for the future of the industry and the ultimate objective of a multi-product, seamless service to clients.

8

PANORAMA

9

SWADHAAR. EXPANDING THE FRONTIERS Looking back at the journey of Swadhaar over the past seven years, since embarking on the inclusion path as a non-banking finance company, the Company has established a track record of being pioneering and innovative, in the process raising the bar in key areas of client service and protection.

FINANCIAL LITERACY AND EDUCATIONSwadhaar is among the few companies in the sector that have firmly embedded education and essential financial literacy into its core operations. A basic course of 1.5 hours is mandatory for all new clients taking loans. This covers concepts like multiple lending, responsible borrowing, rights and responsibilities as clients and information on customer grievance redressal. Education is made simpler with the aid of a specially created set of aids – in the form of creatively-designed and simply-illustrated posters with stories that resonate with the life situations of clients and appropriate visual material.

TRANSPARENCY AND CLIENT PROTECTIONIn addition to education, Swadhaar has always placed great emphasis on governance, transparency and adherence to a Code of Conduct in the interests of client protection. Both staff training and HR policies are geared towards this, and appropriate customer grievance redressal mechanisms at the branch level and a centralised MIS to capture data from the process have been put in place. Swadhaar’s work in this field was acknowledged when it became one of the first 15 global institutions (five are from India) to receive the Client Protection Certification from SMART Campaign. Earlier it had also received the MFTransparency Seal of Transparency for its product pricing systems and secured a rating of 85.8% in the Code of Conduct Assessment (COCA) undertaken by M-Cril.

INNOVATION AND FLEXIBILITYSwadhaar has always been willing to go beyond the tried and tested systems in its attempt to keep pace with the changing world and harness technology both for expansion and greater efficiency.

The company was one of the earliest to work in the field of urban micro-finance and designed and developed its own model of individual loans for micro businesses. Though emerging regulatory frameworks have limited the growth of this segment, SFPL remains committed to it and is in the process of taking this innovative product forward by exploring new commercial avenues.

Swadhaar has also been at the forefront of integrating technology into its operations. While the creation of a paperless branch in Mumbai is significant, the success of the Mobile Wallet project has set a new industry benchmark. The model has been implemented across eight branches in Mumbai and SFPL is now working with Accion to enable replication so that others in the sector can also benefit from this experience.

1010

EMPOWERINGFATIMABI

This small little store keeps the fire in my kitchen burning as there is no other earning member in the family. With so little education, I do not know how I would have survived were it not for this business.

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Fatimabi Khan (Mumbai, Maharashtra) – Swadhaar 3rd Loan cycle client

Age: 50 yearsEducation: Never went to school

My Background I was born in Mumbai and from a young age helped my parents with the household work, but when I was about 16-17 years, they decided to get me married.

Later my husband moved away and I brought up our children, three daughters and one son and helped them to stand on their feet. Two of my daughters are married and the youngest, who studied up to Std XII is now employed in a private bank. My son too completed a computer course some years ago and has a job.

But, initially, I had so little education, that I really did not know how I would survive.

My TransformationI decided to open a small general store in my house itself. Initially I was limited to selling a few food items for children. The first loan from Swadhaar helped me to develop this little business of mine. Though there were other institutions that were offering loans, their interest rates were so high that I realised I would find it difficult to repay, so I opted for Swadhaar.

Currently, I have taken my 3rd loan from Swadhaar. Each loan has helped me to increase my business, buy additional stock, and even renovate my shop. As a result the business is doing well. Going beyond my business, I also received an insurance policy, which I now realise is a very good thing. In case something happens to me, it will help my family repay my loan. I am secure in the knowledge that I will not leave behind any debt for my children.

One Unique ExperienceOne really interesting thing that has happened in the last year is that we now repay our loan through our mobile phone (Airtel Money). Initially I was a little scared to use the mobile phone and was worried that my money may disappear (Gayaab Ho Jayega), but after I was given training and support to use the mobile money I understood how it works. Now I repay each monthly installment without having to leave my home / shop and at my convenience.

OPENING DOORS

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OPENING DOORS

I live with my husband and two small children in Gotri, Vadodara, Gujarat. As he does not have a regular job, we were finding it very difficult to manage within his monthly earnings of ` 3,000. I was keen that my children get a good education and so wanted to start a small business to cover their fees and our monthly expenses.

My dream became a reality after I met Swadhaar’s loan officer and got a loan of ` 8,000. I started with selling imitation jewellery as it was the wedding season, and after the second cycle, with an enhanced loan of ` 14,000, I was able to begin manufacturing jewellery as well.

Today I make a monthly profit of about ` 4,500, and among other things, am able to pay my children’s school fees regularly.

Kavitaben Arvindbhai Baria(Vadodara, Gujarat)

Swadhaar transformed my life in multiple ways. On the business front, the loan I received helped to expand my shop and from merely selling garlands near the temple opposite my house, today I sell all types of puja related items as well.

Before taking the loan, I received training from Swadhaar where all the terms, conditions, interest rates, the importance of small savings etc. were explained to us.

On the personal front, I renovated my house and during the monsoon do not have to worry about leaking roofs and wet floors. But more importantly, Swadhaar taught me the importance of saving small amounts for the future too.

Kalavati Prabhu Sonawane (Mumbai, Maharashtra)

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OPENING DOORS

I used to work with a manufacturer of cane chairs, earning ` 200 a day, and always dreamt of starting my own business rather than working for someone else. I knew I had the skills, but I never had the money to do so.

Swadhaar helped me turn this dream into a reality. I could purchase the raw materials I needed, and within no time my husband and I became independent and self-employed, earning more than ever before.

The flexibility offered by Swadhaar to pay monthly installments has made things much easier for us. We do not have to leave work and go to pay the installment. I have also noticed that if we have any concerns we can go to the branch and talk to the branch manager. Our complaints get resolved immediately.

Rekha Kumar (Ajmer, Rajasthan)

I am married with four children and had to also take care of my ailing father. We were finding it difficult on my husband’s earnings as an auto driver. A loan from Swadhaar helped us turn the corner. Since I was good at designing rakhis, I entered that business and over the last four years, through three loan cycles, I have been able to grow it slowly and steadily. From selling rakhis, I moved to designing and even manufacturing them. Today I earn nearly ` 4,000-4,500 per month.

My father passed away recently, but thanks to Swadhaar, I could ensure proper medical care for him in his last days without falling deeply into debt.

One important thing is that Swadhaar offers us flexibility – there are few group meetings and the loan officer comes to our doorstep to collect installments too.

Maherajbanu Abdul Hamid Khan Pathan

(Vadodara, Gujarat)

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OUR PEOPLE

Board of Directors (Up to May 29, 2014)

Ms. Lalita D. GupteChairperson(Promoter’s Nominee)

Ms. Veena MankarManaging Director(Promoter)

Ms. Anita RamachandranIndependent Director

Mr. Anal JainIndependent Director

Mr. Siddhartha ChowdriNominee Director, Accion International

Ms. Valérie KindtNominee Director, Accion International

Mr. Srinivas Bhaskar RaoNominee Director, Indian Family Trust

Mr. RajaRam KamathExecutive Director & Chief Executive Officer

Board of Directors (From May 29, 2014)

Ms. Veena MankarFounder & Chairperson

Ms. Anita RamachandranIndependent Director

Mr. Anal JainIndependent Director

Ms. Valerie KindtNominee Director, Accion International

Mr. Abhishek AgrawalNominee Director, Accion International

Mr. Srinivas Bhaskar RaoNominee Director, Indian Family Trust


Technical Service Provider

Accion

Auditors

Haribhakti & Company

Bankers / Financial Institutions

Central Bank of IndiaState Bank of IndiaBank of BarodaUCO Bank Maanaveeya Holdings & Investments Pvt LtdRatnakar Bank LtdIDBI Bank LtdGruh FinanceDevelopment Credit BankStandard Chartered BankMAS Financial Services LtdReliance Capital LtdAxis Bank LtdYES Bank Ltd

Senior Management Team

Ms. Veena MankarFounder & Chairperson


Ms. Soju Annie GeorgeVice President

Ms. Reena SenVice President – Finance

Mr. Venkateshwara PrabhuVice President – Human Resources and Product Development

Ms. Preeti TelangVice President – Customer Service, Client Protection & Training

Mr. Atanu BhaumikGeneral Manager – Information Technology

Mr. Mukesh ManjkholaGeneral Manager – Commercial & Business Development

Mr. S. PasupathyConsultant – Risk Management, Quality Control and Internal Audit

Ms. Anshu MundhraCompany Secretary

Registered Office

Tenement 1/3 & 1/4,Old MHB Colony, Anand Nagar, Nehru Road, Santacruz (E), Mumbai – 400055

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GLIMPSES & INSIGHTS

Women’s Day Programme (New Perspectives)

“The Women’s Day Programme was one of a kind. It helped us in striking the right balance between our professional and personal lives."

- Sangeeta Sharma, AGM – Accounts

SMILES ALL AROUND

Developing a common work culture and ethic is a core task for a multi-locational organisation like Swadhaar. It helps develop a sense of belonging, provides opportunities for personal growth and promotions, spreads happiness at work whilst also creating an environment conducive to work-life balance.

“We have tried to build organisational transparency and leadership established by respect, not fear. We aim to bring a smile on people’s faces. Individuals working should be confident, fearless and happy,” says Venkateshwara Prabhu, GM – HR, while outlining some of the initiatives.

Voice of Swadhaar (Direct Interaction with CEO)

“HR blurred all lines between senior management and field staff who were encouraged to speak to the CEO.”

- Parin Vithlani, AGM – Training

Thank you Cards (Express your Appreciation)

“These small sensitive cards cut across lines and built a very strong bridge between Head Office and the field. Receiving a card from a colleague motivates one to perform better.”

- Jayant Bhosale, AGM – Admin

Training Programmes (Developing Right Attitude)

“At Swami Sukhbodanaandji’s talk we learnt that we should always respond but never react to any situation. Our responses are in our control.”

- Vishakha Shah, Internal Audit Manager

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INNOVATION

Teaching financially-excluded sections of the population the principles of saving and banking is difficult enough! Teaching them to implement these through contemporary, cutting-edge mobile banking technology multiplies the challenge many times over!

Nevertheless, this year, Swadhaar built on the success of the Mobile Wallet project introduced in association with Airtel Money as a pilot last year. The result – the scheme now covers eight branches in Mumbai with almost 13,000 clients.

It has not been easy. For every Rajeshree Bane, who overcame initial hesitation and is now not only paying her installments, but also electricity bills and phone recharge through the mobile, there are many like Tohan Lahu Bhosale, who are hesitant and worried about using the new system.

But this has not deterred the Swadhaar team. This year, the company plans to improve training modules, use 'peer educators' to spread awareness among customers and build a robust MIS.

*Swadhaar was one of the recipients of the Finnoviti 2013 Awards for innovation The Mobile Wallet Product.'

“Am worried that my money will get lost”.

“We cannot use the mobile phone, so will not be able to make repayment”

“I do not have a mobile phone”

“Am comfortable with the current process, I do not want to change”.

Rajeshree Bane (Borivili, Mumbai)

When we were given the option of repayment through Airtel Money, we were a bit hesitant initially. However with training and support from the loan officer and trainer we realised that it was not as difficult as we thought. We started paying our installment and now also use it for paying electricity bills, phone recharge, etc. I feel other women should also use it.

Tolan Lahu Bhosale (Bhandup, Mumbai)

Forget using mobile for repayment, I am not comfortable in using the mobile phone generally. I told the loan officer that I do not want a SIM card, at the branch they tried to explain to me and my group, but I did not take it. The loan officer comes to us and collects the EMI, I am happy with this service.”

Other common reservations:

VOICES

AN AWARD* WINNING INNOVATION

17

Active Clients

Mar10

Mar11

Mar12

Mar13

Mar14

0 30000 60000 90000 120000 150000 180000

27391

56727

80201

96600

156529

OPERATIONAL PERFORMANCE

New Geographies

Swadhaar entered two new states, Madhya Pradesh and Rajasthan, almost doubled its network to 42 branches and expanded its staff strength to 425.

Despite the rise in operational expenses as a result of expansion, total income rose by over 50% to ` 383.77 million. Net Profit went up by 15% to ` 13.42 million. OSS and PAR ratios also showed an improvement.

Enhanced Efficiency

The number of clients rose by over 60% to 156,529 and the loan portfolio rose by almost 80% to ` 2035.91 million.

Portfolio Expansion

Mar10 Mar11 Mar12 Mar13 Mar140

20

40

60

80

100

120

OSS Ratio PAR>30%

48.65

79.14

101.78105.90 104.53

0.91 1.09 2.03 1.19 1.14

Total Income (` in millions)Net Profit (` in millions)

Mar11

Mar10

Mar12

Mar13

Mar14

-50 25 100 175 250 325 400

39.26

115.76

191.82

251.59

383.77

-40.98

-29.4

6.56

11.63

13.42

Number of Branches

20

30

40

50

Mar10 Mar11 Mar12 Mar13 Mar14

27

38 39

24

42

Field Staff Total Staff

Mar11

Mar10

Mar12

Mar13

Mar14

0 100 200 300 400 500

144328

425

425

369

425

254

252

205

295

Os portfolio (` in millions)

Mar10

Mar11

Mar12

Mar13

Mar14

0 420 840 1260 1680 2100

195.64

504.05

786.04

1151.942035.91

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DIRECTORS' REPORT

Dear Members,

Your Directors are pleased to present before you Swadhaar FinServe’s Annual Report for the financial year 2013-14, it’s seventh year of operations, along with the audited Balance Sheet as at March 31, 2014 and the Profit and Loss Account for the year ended March 31, 2014.

This Report also provides a perspective on activities and achievements during the year on social and operational parameters. The social objectives of putting the client first and empowering her to manage her financial affairs are embedded in our culture and processes. We are proud to state that this year this commitment was recognised in the “Certificate for Client Protection” received from the SMART Campaign.

OUTREACH AND GROWTH

The year gone by has seen Swadhaar continue along the path of steady growth, in line with the overall performance of the sector which seems to have overcome the impact of the upheavals of a few years ago. With a profit before tax of ` 16.63 million and net profit of ` 13.42 million, we closed the year, registering an increase of nearly 15.42% in net profit. More significantly, we almost doubled our branch network and entered two new states, so we now have 42 branches across Maharashtra, Gujarat, Madhya Pradesh and Rajasthan. Our outstanding portfolio has now crossed ` 2,035 million covering a client base of 156,529 (a growth of 77% and 62% respectively).

As at March 31, 2014

JLG Loans (Including Top Up

Loans)IBL Loans Total

Number of Active Clients 153,473 3,056 156,529

Assets Under Management - Outstanding Loan Portfolio (In ` 000 )

1,985,202 50,705 2,035,907

Number of Loan Officers 242 12 254

Number of Outlets 40 2 42

The outstanding portfolio includes ` 303.88 million for 34,224 Joint Liability loan clients (JLG) sold to Financial Institutions and managed for collections on their behalf.

OPERATING AND FINANCIAL PERFORMANCE

RESULT `(000)

Results Year Ended March 31, 2014

Year Ended March 31, 2013

A) Total Income 383,768 251,112

B) Total Expenses 367,141 237,096

C) Profit for the year (A-B) 16,627 14,016

D) Deferred Tax Adjustment (3,422) 67

E) Current Tax Adjustment 5,831 2,319

F) Short provision for earlier years 795 -

Excess of Total Income over Expenditure (C-D-E) 13,423 11,629

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PERFORMANCE RATIOS RESULT

Financial Efficiency

Results As at March 31, 2014


Operational Self-Sufficiency = Total Operating Income / Total Operating Expenses

104.53% 105.90%

Total Operating Cost Ratio (Annualised) = Total Operating Expenses excl. Financial Cost / Avg. Outstanding Portfolio (Assets Under Management)

11.24% 15.74%

Yield on Portfolio (Annualised) = Income from Portfolio / Avg. Outstanding Portfolio

26.08% 30.91%

Weighted Average Cost of Borrowing (Interest cost + Other Cost on Debt) / Outstanding Portfolio

16.65% 16.12%

Financial Margin (Interest Rate Charged – Weighted Average Cost of Borrowing)

9.35% 9.88%

Capital Adequacy Ratio (Tier I Capital + Tier II Capital) / Risk Weighted Assets

23.20% 34.33%

Personnel Efficiency

Personnel Efficiency As at March 31, 2014


Number of Active Loan Clients per Loan Officer = Number of Active Loan Clients / Total Loan Officers

616 471

Loan officers as % of total staff 57.60% 55.56%

Personnel Quality



Qualifying Assets As per RBI Circular for MFI-NBFC

90.10% 88.04%

Loan Loss Rate = Amt of Loans Written Off / Avg Outstanding Portfolio (Assets Under Management)

0.16% 0.92%

Portfolio in Arrears > 30 days = Amount Past Due > 30 Days / Outstanding Portfolio (Assets Under Management)

1.14% 1.19%

Portfolio in Arrears > 90 days = Amount Past Due > 90 Days / Outstanding Portfolio (Assets Under Management)

0.79% 1.01%

Risk Coverage Ratio = Loan Loss Reserve / Amount Past Due >30 days

71.33% 81.76%

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SOCIAL PERFORMANCE & CUSTOMER PROTECTION

Swadhaar receives SMART Campaign Certification for Client Protection

One of the highlights of this year was the receipt of the Client Protection Certification from SMART campaign on December 9, 2013. This placed Swadhaar among the first set of institutions to do so globally. Till date the SMART Campaign has certified 15 organisations globally, of which five are from India. The receipt of this certification is a reaffirmation of Swadhaar’s commitment to promote growth and institutional development with a client-centric approach and responsible practices.

In the words of the SMART Campaign, being certified means “….they have successfully undergone a thorough evaluation of their practices by one of the partnering, licensed third-party financial rating agencies and proven adherence to all of the standards of the seven Client Protection Principles”.

The Client Protection Principles are:

1) Appropriate product design and delivery

2) Prevention of over-indebtedness

3) Transparency

4) Responsible pricing

5) Fair and respectful treatment of clients

6) Privacy of client’s data

7) Mechanism of complaint resolution

The senior management believes that this was possible because each employee of the company implemented these principles in their daily work and ably demonstrated this to the external valuating agency.

FINANCIAL EDUCATION AND COMMUNICATION

Client Communication Tools

In 2012-13, Swadhaar launched Financial Education from a customer protection perspective. Different communication materials are used ranging from posters at all branches to pictorial tools used by the branch and field staff to explain aspects of the loan process to clients. The focus is to convey critical information to clients in an easily understood and consistent format. In the current year the communications were integrated into various parts of the loan disbursement process.

Posters

All SFPL branches now prominently display a consolidated and complementary set of five posters that communicate through visuals and graphics along with information in the local vernacular language. This helps clients to immediately identify and read important information.

Flipcharts

Swadhaar has also developed a set of simple visual flipcharts that are used as tools by the loan officer during group formation and the branch executive during disbursement. These comprise simple visuals and pictorial examples to enable even those with low formal literacy levels to grasp the information easily. Most of these tools were developed in collaboration with Swadhaar FinAccess (SFA), our partner organisation.

Over the last two years SFPL has sought to integrate such a Financial Education module into loan disbursement programme and are happy to note that with consistent efforts, this was embedded into the company’s basic functioning during 2013-14.

Moreover, with Swadhaar’s entry into new two geographies viz. Rajasthan & MP, we have successful launched these client communication tools in the local languages there and these have been accepted very well by the customers.

21

Global Impact Investing Ratings System (GIIRS) Rating

As in the past year, Swadhaar will participate in the GIIRS Rating exercise in this year too – and will complete the process in June 2014. The GIIRS is a comprehensive and transparent system for assessing the social and environmental impact of companies and funds with a ratings and analytics approach analogous to Morningstar investment rankings and Capital IQ financial analytics.

Code of Conduct Assessment

In May 2013, Swadhaar secured a rating of 85.8% in the Code of Conduct Assessment (COCA) undertaken by M-Cril. The assessment was completed with thorough due diligence that included interactions with the entire senior management team and extensive field and branch visits.

Successful completion of this assessment is an indication that the company has successfully addressed key aspects of client protection and good governance as well as the key social risks involved in micro-finance.

INFORMATION TECHNOLOGY

In 2012-13, we had begun an exercise of IT transformation with selection of a Core Banking System based on Infrasoft’s ‘Omni’ software. Implementation was completed during the year under review and we are happy to state that Swadhaar now has a strong IT system in place that will take care of business needs and manage growth effectively.

HUMAN RESOURCES

As of March 31, 2014, Swadhaar had 425 employees, of which 295 were in the field and branch offices and 130 at the head office and back office. Firmly believing that people are its most valuable resource, Swadhaar’s Human Resources department undertook a number of initiatives to engage the staff on a regular basis.

Being a multi-locational organisation, the aim was to build a common culture, sense of belonging, provide opportunities for personal growth and promotions, spread happiness at work whilst also creating an environment conducive to work-life balance.

Some of these initiatives were:

Grooming Leaders

With the aim of strengthening and building leaders from within, Swadhaar held three workshops for existing and emerging leaders in the organisation during the year. These were led by external trainers.

The Town Hall events in which senior management teams meet with all the staff across all regions have now become a regular programmes and have greatly enhanced the interaction within the organisation.

Voice of Swadhaar

A new quarterly initiative, ‘Voice of Swadhaar’, was launched this year under which the CEO was available at pre-announced times to speak directly to the staff on a dedicated line. Staff members were encouraged to call and interact directly with him, provide feedback or raise issues. Each issue raised was addressed by the concerned department with a specific timeline. This initiative enhanced levels of direct first-hand information flowing to the management.

Employee Emergency Loan

This year we introduced a new ‘Employee Emergency Loan’ to help staff members deal with sudden emergencies. A simple application process (even through an SMS), speedy turnaround (within 24 hours) and ensuring that designated officers can be contacted even on holidays to avail of this facility, helped many an employee receive timely support when it was most required.

MOBILE WALLET

Swadhaar’s partnership with Airtel Money to offer a bank account facility through the mobile expanded significantly this year. Launched as a pilot initiative last year, the Mobile Wallet scheme now covers eight branches in Mumbai with almost 13,000 clients.

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As many as 85% of these are active accounts having made at least one repayment to Swadhaar, while the number of repeat users on a monthly basis is now averaging 65%. However, the number of clients who also use the wallet for other third party transactions is still low, at around 8%.

In recognition of the commitment and excellent work done by Swadhaar, GSMA has given a grant through Accion to further strengthen this project. This will include improvement of training modules, taking the training closer to the customers through 'peer educators' and building a robust MIS.

Recognition and Awards

During the year under review, Swadhaar was one of the recipients of the Finnoviti 2013 Awards for innovation –The Mobile Wallet Product.

Swadhaar also received the highly-respected MFTransparency Seal of Transparency which is awarded by the international organisation to providers of microfinance who become transparent in their product pricing.

DATA SHARING WITH CREDIT BUREAUS

In addition to the three credit bureaus – CIBIL, High Mark and Equifax Credit Bureau – to whom Swadhaar already reports its client data, this year we also started reporting to the newly started Experian. All loan sanctions are subject to meeting the requirements on maximum loan outstanding, number of MFI’s as lenders, as well as a satisfactory report from the Credit Bureau.

MEMBERSHIP WITH INDUSTRY ASSOCIATIONS

Swadhaar is a member of both industry associations, Micro Finance Institutions Network (MFIN) and Sa-Dhan, which are the ‘voice’ of microfinance institutions and advocates for pro-sector regulations. Swadhaar complies with all requirements of the MFIN-Sa-Dhan Common Code of Conduct and its senior management takes an active role in initiatives of these associations.

SHARE CAPITAL

During the year under review, Small Industries Development Bank of India (SIDBI), became a shareholder and now holds 3,000,000 (three million only) equity shares in the company. SIDBI thus becomes the first quasi-government body to pick up a stake in Swadhaar.

The table below reflects the shareholding pattern as on March 31, 2014:

Name of Shareholder Total Number of shares %

Promoters & Promoters' Family & Friends

Domestic 2,685,841 4.91%

Foreign 374,583 0.69%

Total 3,060,424 5.60%

Accion Africa Asia Investment Company* 19,650,000 35.94%

Michael and Susan Dell Foundation 6,452,250 11.80%

Mauritius Unitus Corporation 2,312,500 4.23%

M V Mauritius Limited 8,325,114 15.23%

Indian Family Trust 6,960,000 12.73%

Swadhaar FinServe Employee Welfare Trust 4,919,625 9.00%

SIDBI 3,000,000 5.49%

Total Shares 54,679,913 100.00%

*This is the investment vehicle through which Accion International has invested in Swadhaar.

23

NCD transaction

Swadhaar raised funds of ` 295 million through issuance of Non-Convertible Debentures (NCD), which is now listed at BSE. This opens a new window for Swadhaar to raise funds.

BANKERS AND LENDERS

New Banking Relationships

During the year Swadhaar established fresh relationships with six banks, i.e. State Bank of India, Bank of Baroda, UCO Bank, IndusInd Bank, Yes Bank and Axis Bank.

It currently has lending relationships with 11 banks and four Non Banking Finance Companies.

EMPLOYEE STOCK OPTION SCHEME 2010 AND ASSOCIATE STOCK OPTION SCHEME 2010

The company has an Employee Welfare Trust set up to manage and implement the Employee Stock Option (ESOP) Scheme.

During the year under review, the company has not granted any option under the Employee Stock Option Scheme 2010 and Associate Stock Option Scheme 2010.

The information pertaining to these is contained in the Notes to Accounts.

REGISTRAR AND TRANSFER AGENT

TSR Darashaw Limited is the Registrar & Transfer Agent (RTA) for the company. Its address and contact details are as mentioned below:

TSR DARASHAW LIMITED6-10 Haji Moosa Patrawala Industrial Estate20, Dr. E. Moses Road, MahalaxmiMumbai – 400 011

INSTITUTIONAL SUPPORT Accion

Swadhaar received technical assistance (TA) from Accion in several areas, including risk management, technology, process improvements and internal audit, as the company grew towards a systemically important size. As part of various TA projects, Accion’s technology team selected a new Core Banking System (CBS) to propel the company's growth and a new MIS for timely reporting. Further, management controls were improved and the internal audit department was strengthened.

IFC

Swadhaar is a partner for the International Finance Corporation (IFC), the private sector financing arm of the World Bank and received support from the IFC for availing technical assistance from Accion.

In addition, Swadhaar management benefited from several IFC knowledge and development initiatives, including an exposure visit for its senior management to CARD, an MFI in Phillippines and an IFC partner.

STATUTORY DISCLOSURES

The information required under Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules 1975 is not annexed, as there are no employees under the same.

The Companies (Disclosures of Particulars in Report of Board of Directors) Rules 1988 require the disclosure of particulars regarding conservation of energy in Form A and Technology Absorption in Form B prescribed by the Rules. Your company, not being a manufacturing company, is advised that Forms A&B are not applicable.

24

BOARD OF DIRECTORS

The Board of Directors of the company met seven times during the year.

Name of Director / Designation No. of meetings eligible to attend Meetings attended

Ms. Lalita D. Gupte Chairperson

7 7

Ms. Veena Mankar Managing Director

7 7

Ms. Anita Ramchandran Independent Director

7 4

Ms. Geeta Dutta Goel Nominee Director

1 1

Mr. Siddhartha Chowdri Nominee Director

7 4

Mr. Srinivas Rao Nominee Director

7 7

Ms.Valérie Kindt Nominee Director

7 3

Mr. RajaRam Kamath Executive Director & Chief Executive Officer

5 5

Mr. Anal Jain Independent Director

5 3

There are three Committees of the Board:

1. The Audit Committee met four (4) times during the year and constituted the following Directors: Mr. Srinivas Rao, Mr. Siddhartha Chowdri, Ms. Anita Ramchandran and Mr. Anal Jain.

2. The Nominations, Compensation and Governance Committee constituted the following Directors: Ms. Lalita D Gupte, Ms. Anita Ramchandran, Mr. Srinivas Rao and Mr. Anal Jain.

3. The Risk Committee constituted the following Directors: Ms. Valeri Kindt, Mr. Srinivas Rao, Mr. Siddhartha Chowdri and Ms. Anita Ramchandran.

There are two Committees of the Management:

1. The ALCO Committee met 12 times during the year and constituted the following Members: Mr. RajaRam Kamath, Mr. Abhishek Agrawal and Ms. Reena Sen.

2. The Finance Committee met 16 times during the year and constituted the following: Ms. Veena Mankar, Mr. RajaRam Kamath, Mr. Abhishek Agrawal and Ms. Reena Sen.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors confirm:

• That in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

• That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period;

25

• That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

• That the Directors have prepared the annual accounts on a going concern basis.

ACKNOWLEDGEMENTS

The Directors wish to thank all the staff for their dedication and efforts in the past year. The Directors would also like to record their deep appreciation for the support during the past financial year of the shareholders, institutions and bankers that have helped the company grow and build a strong foundation.

Registered Office: For and on behalf of the Board,

Tenement 1/3 & 1/4, Old MHB Colony, Anand Nagar, Nehru Road, Santacruz (E),

Mumbai – 400 055

Veena Mankar Managing Director DIN-00004168

Date : May 29, 2014

RajaRam Kamath Executive Director & Chief Executive OfficerDIN-06542196

26

SMART Campaign Certification

"...have successfully undergone a thorough evaluation of their practices by one of the partnering, licensed third-party financial rating agencies and proven adherence to all of the standards of the seven Client Protection Principles."

27

INDEPENDENT AUDITORS' REPORT

TO THE MEMBERS OF SWADHAAR FINSERVE PRIVATE LIMITED

Report on the Financial Statements

We have audited the accompanying financial statements of Swadhaar Finserve Private Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2014, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 (“the Act”). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on other Legal and Regulatory Requirements

1. As required by the Companies (Auditors’ Report) Order, 2003 (“the Order”) issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by Section 227(3) of the Act, we report that:

a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b. in our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

c. the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account;

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d. in our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Act;

e. As the Company is a Private Limited Company, the provisions of clause (g) of sub-section (1) of Section 274 of the Act is not applicable to the Company.

For Haribhakti & CoChartered AccountantsFirm Registration No.103523W

Sumant SakhardandePartnerMembership No.034828

Place: MumbaiDate : May 29, 2014

29

ANNEXURE TO INDEPENDENT AUDITORS’ REPORT

[Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements’ in the Independent Auditors’ Report of even date to the members of Swadhaar Finserve Private Limited on the financial statements for the year ended March 31, 2014]

(i) (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

(b) The fixed assets of the company have been physically verified by the management during the year and no material discrepancies between the book records and the physical inventory have been noticed. In our opinion, the frequency of verification is reasonable.

(c) In our opinion and according to the information and explanations given to us, a substantial part of fixed assets has not been disposed of by the Company during the year.

(ii) The Company did not have any inventories during the year therefore clause 4(ii) of the Companies (Auditors’ Report) Order 2003, as amended, is not applicable to the Company for the current year.

(iii) As informed, the Company has neither granted nor taken any loans, secured or unsecured to companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions stated in paragraph 4 (iii)(b),(c) and (d) of the order are not applicable.

(iv) In our opinion and according to the information and explanations given to us, there exists an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of fixed assets, and with regard to the sale of services. During the course of our audit, we have not observed any continuing failure to correct major weakness in internal control system of the Company.

(v) (a) According to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Companies Act, 1956 that need to be entered into the register maintained under Section 301 have been so entered.

(b) None of the transactions made in pursuance of such contracts or arrangements exceed the value of Rupees five lakhs in respect of any one such party in the financial year.

(vi) In our opinion and according to the information and explanations given to us, the company has not accepted any deposits from the public within the meaning of Sections 58A and 58AA of the Act and the rules framed there under.

(vii) In our opinion, the Company has an internal audit system commensurate with the size and nature of its business.

(viii) The Central Government of India has not prescribed the maintenance of cost records under clause (d) of sub-section (1) of Section 209 of the Act for any of the products of the company.

(ix) (a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees’ state insurance, income-tax, service tax, cess and other material statutory dues applicable to it though there has been a slight delay in few cases.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees’ state insurance, income-tax, service tax, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable.

(c) According to the information and explanation given to us, there are no dues of income tax, service tax, and cess which have not been deposited on account of any dispute.

(x) In our opinion, the accumulated losses of the Company are not more than fifty percent of its net worth. Further, the Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in repayment of dues to a financial institution, bank or debenture holders.

(xii) According to the information and explanations given to us and based on the documents and records produced to us, the company has not granted loans & advances on the basis of security by way of pledge of shares, debentures and other securities.

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(xiii) In our opinion, the Company is not a chit fund or a nidhi / mutual benefit fund / society. Therefore, the provisions of clause (xiii) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003, as amended, are not applicable to the Company.

(xiv) In our opinion, the Company is not dealing in or trading in shares, securities, debentures and other investments. Accordingly, the provisions of clause (xiv) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003, as amended, are not applicable to the Company for the current year.

(xv) In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions during the year.

(xvi) In our opinion, the term loans have been applied for the purpose for which the loans were raised.

(xvii) According to the information and explanations given to us and on an overall examination of the balance sheet of the Company, we report that no funds raised on short-term basis have been used for long-term investment.

(xviii)According to the information and explanation given to us, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956.

(xix) According to the information and explanations given to us, during the period covered by our audit report, the Company had issued 590 debentures of Rs.5,00,000 each. The Company has created charge in respect of debentures issued.

(xx) The Company has not raised money by way of public issue during the year.

(xxi) According to the information and explanations given to us, seven instances of fraud, amounting to Rs.1,01,178 (of which Rs. 74,370 recovered) were identified and reported by the entity during the year. The nature of frauds were mainly relating to misappropriation of cash by employees of the company.

For Haribhakti & Co Chartered Accountant Firm Registration No.103523W

Sumant SakhardandePartnerMembership No.034828

Place: Mumbai Date : May 29, 2014

31Swadhaar FinServe Private Limited

STEADY GROWTH

Swadhaar continued along the path of steady growth, in line with the overall performance of the sector which seems to have overcome the impact of the upheavals of a few years ago.

32 Annual Report 2014

Balance Sheet As at March 31, 2014

(Amount in `)

Particulars Note No.



I. EQUITY AND LIABILITIES1. Shareholders’ funds

a) Share capital 3 497,602,880 467,602,880 b) Reserves and surplus 4 (13,711,471) (26,850,917)

2. Non-current liabilitiesa) Long-term borrowings 5 754,665,144 401,314,882 b) Long-term provisions 6 6,304,716 3,824,050

3. CURRENT LIABILITIESa) Short-term borrowings 7 47,582,030 - b) Other current liabilities 8 895,424,658 545,096,440 c) Short-term provisions 9 24,834,775 16,402,438 Total 2,212,702,733 1,407,389,771

II. ASSETS1. Non-current assets

a) Fixed assets 10 15,753,220 12,295,437 Tangible assets 7,762,180 6,640,806 Intangible assets 7,991,040 5,654,631

b) Non-current investments 11 546,559 546,559 c) Deferred tax assets (net) 12 8,174,746 4,752,595 d) Long Term Loans and Advances 656,713,535 354,525,843

Loans under financing activity 13 650,706,469 347,266,184 Others 14 6,007,066 7,259,660

e) Other non current Assets 15 135,572,045 132,261,826 2. Current assets

a) Current Investments 11 1,100,142 - a) Cash and Bank balances 16 259,541,695 421,974,255 b) Short-term loans and advances 1,083,725,486 463,203,485

Loans under financing activity 13 1,081,322,999 460,758,278 Others 17 2,402,487 2,445,207

c) Other current assets 18 51,575,305 17,829,771

Total 2,212,702,733 1,407,389,771

Significant Accounting Policies & Notes to Accounts referred to above form an integral part of financial statements.

1 to 41

As per our report of even date attached For and on behalf of the Board of Directors For Haribhakti & Co Swadhaar Finserve Pvt Ltd Chartered Accountants

Sumant Sakhardande Veena Mankar RajaRam Kamath Partner Managing Director Executive Director & Chief Executive Officer

Place : Mumbai Anshu Mundhra Date : May 29, 2014 Company Secretary


(Amount in `)

Statement of Profit & Loss Account for the year ended March 31, 2014

Particulars Note No.

For the year Ended March 31, 2014

For the year Ended March 31, 2013

A. Revenue from operations 19 377,864,182 247,744,561

B. Other income 20 5,904,123 3,367,799

I Total Revenue (A +B ) 383,768,305 251,112,360

II ExPENSES:

Employee benefits expense 21 98,720,217 88,093,653

Finance costs 22 188,050,646 84,576,022

Depreciation and amortization expense 10 6,070,603 4,410,148

Loan Loss Provisions 23 5,365,379 1,551,318

Other expenses 24 68,934,285 58,465,124

Total Expenses 367,141,131 237,096,264

III Profit before tax (I-II) 16,627,175 14,016,096

IV Tax expense:

(1) Current tax 5,830,660 2,318,880

(2) Deferred tax (Income)/ Expenses (3,422,151) 67,431

(3) Short (Excess) provision for earlier years 795,809 –

V Profit for the year 13,422,856 11,629,785

VI Earnings per equity share: Basic and Diluted Earning Per Share (Face Value of ` 10 each)

25

0.25 0.23

Significant Accounting Policies & Notes to Accounts referred to above form an integral part of financial statements.

1 to 41





Cash Flow Statement for the year ended March 31, 2014

(Amount in `)

Particulars As at March 31, 2014


PROFIT BEFORE TAx 16,627,175 14,016,096

Add:Depreciation 6,070,603 4,410,148 Loss on sale of assets - 1,462,446 Loan Loss Provisions 5,365,379 1,551,318 Less:Profit on sale of Mutual Fund units (1,100,142) - Operating Profit before working capital changes 26,963,016 21,440,007 (Increase)/ Decrease Other current assets (33,745,534) (14,133,242)(Increase)/ Decrease Short term loans and advances 42,720 165,560 (Increase)/ Decrease in Loan portfolio (924,005,006) (96,246,213)(Increase)/ Decrease long term loans and advances 783,457 174,423 Increase/ (Decrease) in Short term provision 3,971,006 1,084,891 Increase/ (Decrease) in Long term provision 1,576,620 733,492 Increase/ (Decrease) in Long term Borrowing 353,350,263 217,161,966 Increase/ (Decrease) in Short term Borrowing 47,582,030 - Increase/ (Decrease) in Other current liability 350,328,217 316,703,160 Cash flow from operating activities (173,153,211) 447,084,044 Less : Taxes Paid (6,157,332) (897,672)Net Cash Generated from Operations (179,310,544) 446,186,372 Purchase of Investment 10,000,000 - Sale of Investment (10,000,000) - Investment in Fixed Deposits (102,040,123) (161,761,826)Purchase of Fixed Assets (9,528,387) (7,893,006)Proceeds from sale of Fixed Assets - 23,560 Net Cash from Investing Activities (111,568,510) (169,631,272)Proceeds from Issue of Share Capital 30,000,000 - Share Issue Expenses (283,410) - Cash Flows from Financing Activities 29,716,590 -

Net increase in cash and cash equivalents (261,162,464) 276,555,100

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEARBalance with Bank- Current a/c 198,178,370 47,321,184 Balance with Bank- Fixed Deposit 159,300,000 30,000,000 Cash on hand 1,568,654 5,170,740 Total Cash and cash equivalents at beginning of year 359,047,024 82,491,924 Cash and cash equivalents at end of period 97,884,561 359,047,024 Balance with Bank- Current a/c 64,173,862 198,178,370 Balance with Bank- Fixed Deposit 32,500,000 159,300,000 Cash on hand 1,210,699 1,568,654




1 to 41Significant Accounting Policies & Notes to Accounts referred to above form an integral part of financial statements


Significant Accounting Policies and Notes to Accounts for the year ended March 31, 2014

NOTE 1: NATURE OF BUSINESS

The Company is Non-banking Financial Company – MFI registered with the Reserve Bank of India (“RBI”) under section 45-IA of the Reserve Bank of India Act, 1934 and primarily engaged in lending and related activities. The Company received the Certificate of Registration from the RBI on May 9, 2008, enabling the Company to carry on business as a Non-banking Financial Company. It had applied to RBI for reclassification as a NBFC – MFI. The revised certificate of classification as NBFC – MFI was received on October 4, 2013.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

A. Basis of Preparation of Financial Statements:

The accompanying financial statements are consistently prepared under the historical cost convention, and accrual basis of accounting, in accordance with the generally accepted accounting principles in India (“Indian GAAP”) and conform to the statutory requirements, circulars and guidelines issued by the RBI from time to time to the extent they have an impact on the financial statements and current practices prevailing in India. The financial statements comply in all material respects with the Accounting Standards (“AS”) notified by the Companies (Accounting Standards) Rules, 2006 and relevant provisions of the Companies Act, 1956 (“the Act”), to the extent applicable.

B. Use of Estimates:

The preparation of the financial statements in conformity with the generally accepted accounting principles require the management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying financial statements. Any differences of actual results to such estimates are recognised in the period in which the results are known / materialised.

C. Revenue Recognition:

a) Interest income is recognised and accounted on accrual basis as per the agreed terms except in case of Non Performing Assets outstanding for more than 90 days, which is recognised on receipt basis.

b) All other incomes are recognised on accrual basis, except in case of bad debts recovered, cheque bouncing charges, late payment charges, foreclosure charges and application money, which are accounted as and when received.

c) On sale of receivables under asset assignment arrangement, the profit arising on account of sale is recognised over the life of the receivables assigned on an accrual basis in proportionate to EMI payable to the bank and loss, if any, arises on account of sale is accounted immediately.

d) On securitisation transactions of portfolio under the PTC route (pass through certificates), the Company has followed the provisions specified by Reserve Bank of India (RBI) in its guidelines on Securitisation Transactions. The amortisation of cash profit arising out of securitisation transaction is done as per method suggested in securitised guidelines as mentioned above.

D. Fixed assets & Depreciation:

Fixed Assets are stated at cost less accumulated depreciation and impairment, if any. The cost of fixed assets comprises purchase price and any other incidental cost of bringing the asset to its working condition for its intended use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefit / functioning capability from / of such assets.

For assets purchased and sold during the year, depreciation is being provided on pro rata basis by the Company. On all assets, except as mentioned below, depreciation has been provided using the Straight line method at the rates specified in Schedule XIV to the Companies Act, 1956:

a) Assets costing ` 5,000/- or less are fully depreciated in the year of purchase.

b) Improvements to Leased Assets are amortized over the lease period from the date of cost incurred.



E. Intangible Assets & Amortisation:

Expenses incurred on Computer Software having enduring benefits are capitalised and will be amortized over a period of 3 years on a pro rata basis from the date of purchase.

Expenses incurred on securing an irrecoverable right to use and acquire statutory rights in the trade mark / name “Swadhaar” and Logo in perpetuity from Swadhaar FinAccess, having enduring benefits, are capitalised as an intangible asset with an amortisation period of 5 years on straight line basis, as per terms of the agreement.

F. Investments:

Investments are classified into current and non-current investments. Investments that are intended to be held for one year or more are classified as non-current investments and investments that are intended to be held for less than one year are classified as current investments.

Non-current investments are valued at cost. Provision for diminution in value of Non-current investments is made if in the opinion of management such a decline is other than temporary.

Current investments are valued at cost or market value, whichever is lower. Profit / loss on sale of securities is determined based on the Weighted Average cost of the securities sold.

G. Employee Benefits:

Short term employee benefits

Short term employees’ benefits are recognised as an expense at the undiscounted amounts in the profit & loss account for the year in which the related services are rendered.

Long term employee benefits

I) Provident Fund:

In accordance with law, all employees of the Company are entitled to receive benefits under the provident fund. The Company contributes an amount, on a monthly basis, at a determined rate (currently 12% of employee’s basic salary) to the Pension Scheme administered by the Regional Provident Fund Commissioner (RPFC) and the Company has no liability for future provident fund benefits other than its annual contribution.

Contribution payable to the recognised provident fund, which is a defined contribution scheme, is accounted for on accrual basis.

II) Gratuity:

Gratuity is post employment benefit and is in the nature of Defined Benefit Plan. The Liability recognised in the balance sheet in respect of gratuity is the present value of defined benefit obligation at the balance sheet date, together with the adjustments for unrecognised actuarial gain or losses and the past service costs. The defined benefit obligation is calculated at or near the balance sheet date by an independent actuary. Based on actuarial calculations, which include assumptions about demographics, early retirement, salary increases and interest rates, actuarial gain or loss is recognised in the statement of Profit and Loss.

III) Leave Encashment:

Leave encashment is in the nature of long term benefit. It is calculated based on unutilised leave available to the employees as at the Balance Sheet date by an independent actuary.

H. Operating Leases:

Lease payments in respect of operating lease are recognised as an expense in the statement of profit and loss account on accrual basis over the lease term, in accordance with the AS 19, “Leases” issued by the Institute of Chartered Accountants of India.

I. Taxation:

Income-tax expense comprises current tax (i.e. amount of tax for the period determined in accordance with the income-tax law), deferred tax charge or credit (reflecting the tax effect of timing differences between accounting income and taxable income for the year).



I) Current Tax:

Provision for current tax is made on the basis of estimated taxable income for the accounting year in accordance with the Income Tax Act, 1961.

II) Minimum Alternate Tax (MAT):

Provision for tax expense (MAT) is accounted when tax payable as per provision for Sec.115JB of Income Tax Act, 1961 is higher than the tax payable under normal provision of the Act. MAT credit entitlement is recognized in accordance with the “Guidance Note on Accounting for credit available in respect of Minimum Alternate Tax under the Income-tax Act, 1961” issued by The Institute of Chartered Accountants of India.

III) Deferred Tax:

Deferred tax expense or benefits is recognised on timing differences being the difference between taxable and accounting income and are capable of reversal in one or more future periods. The deferred tax charge or credit and the corresponding deferred tax assets and liabilities are measured using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax assets are recognised only to the extent there is reasonable certainty that the asset can be realised in future; however, where there is unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognised only if there is a virtual certainty of realisation of the assets. Deferred tax assets are reviewed as at each balance sheet date and written down or written-up to reflect the amount that is reasonable/virtually certain (as the case may be) to be realised.

J. Debenture Redemption Reserve:

In terms of Circular no. 04/2013 dated February 11, 2013 issued by the Ministry of Corporate Affairs, No Debenture Redemption Reserve is to be created for privately placed debentures of Non-Banking Finance Companies.

K. Provision and Contingencies:

The Company creates a provision when there is present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation.

A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources.

When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that the outflow of resources would be required to settle the obligation, the provision is reversed.

Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an economic benefit will arise, the asset and related income are recognised in the period in which the change occurs.

L. Impairment of Assets:

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit which the asset belongs to, is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognized in the profit and loss account. If at the balance sheet date there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount subject to a maximum of depreciable historical cost.

M. Finance Expenses:

Expenditure incurred for raising borrowed funds including ancillary costs incurred in connection with the arrangement of borrowings, which is not eligible for capitalisation, is fully charged to the statement of profit and loss on incurrence. Likewise, expenditure incurred on funds raised through securitisation transactions (pass through certificates route) are also fully charged to the profit and loss account on incurrence.


N. Foreign Currency Transactions:

Foreign currency transactions are recorded at the rates of exchange prevailing on the date of the transaction. Exchange differences, if any arising out of transactions settled during the year are recognised in the profit and loss account. Monetary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rate on that date.

O. Provision for Doubtful Debts:

The provisioning norms followed by the Company are more stringent than those prescribed by the Reserve Bank of India and are as follows:

No. of days portfolio Provision outstanding overdue (days) (% on outstanding principal)

0-30 0.25%

31-60 10%

61-90 30%

91-120 30%

121-150 60%

151-180 60%

>181 100%

Provisioning in respect of managed portfolio will be done subject to the maximum guarantee given to respective assignee bank or financial institution. Provisioning in respect of assigned portfolio in sell out transactions and portfolio sold out in securitisation transactions (pass through certificates route) will not be done.

Under exceptional circumstances including natural disasters, Management may renegotiate loans by rescheduling repayment terms for customers who have defaulted in repayment but who appear willing and able to repay their loans under a longer term agreement.



NOTE 3: SHARE CAPITAL (Amount in `)



Authorised75,000,000 (PY 75,000,000) Equity Shares of ` 10/- each

750,000,000 750,000,000

Issued, Subscribed & Paid up

Equity Shares of ` 10/- each

54,679,913 equity shares with face value of ` 10/- each fully paid-up, (PY 51,679,913)

546,799,130 516,799,130

(Less) Amount recoverable from Employee Welfare Trust [Face value of ` 10/- on 4,919,625 shares (PY 4,919,625) allotted to the Trust]

49,196,250 497,602,880 49,196,250 467,602,880

Total 497,602,880 467,602,880

Issue of Equity Shares:

During the year , the company had raised additional capital of ` 30,000,000/- by the way of issue of 3,000,000 equity shares of ` 10/- each to Small Industries Development Bank of India (SIDBI).

Loan to Swadhaar FinServe Employee Welfare Trust:

In accordance with the Guidance Note on Accounting for Share based Payments issued by Institute of Chartered Accountants of India (‘ICAI’), the face value of equity shares issued to EWT till March 31, 2014 have been duly shown as deduction from the issued, subscribed and paid up capital and Security premium account. Accordingly, these shares are also not considered for calculating basic EPS.

3.1 Reconciliation of Equity Shares outstanding at the beginning and at the end of the financial year

Particulars As at March 31, 2014 As at March 31, 2013

Number (Amt. in `) Number (Amt. in `) Shares outstanding at the beginning of the year 51,679,913 516,799,130 51,679,913 516,799,130 Shares Issued during the year 3,000,000 30,000,000 - - Shares outstanding at the end of the year 54,679,913 546,799,130 51,679,913 516,799,130

3.2 Terms/ Rights Attached to equity Shares

The Company has only one class of equity shares having a par value of ` 10/- per share. Each holder of equity shares is entitled to one vote per share. In case of further issue of shares, the same shall be offered to all the shareholders on identical terms on a proportionate basis.

During the year ended March 31, 2014, the Company has not declared / paid any dividend to equity shareholders.

3.3 Details of Shareholders Holding more than 5% shares in the company

Name of Shareholder As at March 31, 2014 As at March 31, 2013 Total No. of

Shares % Total No. of

Shares %

Accion Africa Asia Investment Company 19,650,000 35.94% 19,650,000 38.02%

M V Mauritius Limited 8,325,114 15.23% 8,325,114 16.11%

Padmini Benefit Trust 6,960,000 12.73% 6,960,000 13.47%

Michael & Susan Dell Foundation 6,452,250 11.80% 6,452,250 12.49%

Swadhaar FinServe Employee Welfare Trust 4,919,625 9.00% 4,919,625 9.52%

Promoters, Family & Friends 3,060,424 5.60% 3,060,424 5.92%

Small Industries Development Bank of India (SIDBI)

3,000,000 5.49% - 0.00%

Notes on Financial Statements for the year ended March 31, 2014


Employee Stock Option Scheme and Associate Stock Option Scheme:

a) During the year, the Company has not granted options to the employees or the associates. (PY-1,005,000 shares).

b) Method of accounting for ESOS & ASOS:

The company has adopted Black-Scholes Options Pricing Model in accounting for employee and associate cost on account of ESOS & ASOS respectively. Option is offered with the intrinsic value of the shares based on stock value of ` 13/- per share & the exercise price was fixed by the compensation committee of the Company was ` 13/- per share. The difference between the stock value & the exercise price is being amortized as employee compensation cost over the vesting period. The total amount to be amortized over the vesting period is Nil. Accordingly, the company has not taken any impact in statement of profit & loss towards Compensation cost.

c) Salient Features: Options have been granted under the schemes as follows:



Outstanding at the beginning of the year

2,678,494 2,903,920

Lapsed during the year 20,662 115,156

Options vested during the year 140,588 110,270

Outstanding at the end of the year 2,517,244 2,678,494

d) As the options are granted using intrinsic value method at an exercise price ` 13/- equivalent to stock value therefore no employee compensation cost or charge will arise in the books.

e) The fair value of the options based on the Black Scholes Option pricing model is as follows:

Variables Grant Date - December 21, 2011 and February 22, 2012 Vest-1 Vest-2 Vest-3 Vest-4

No. of Shares1. Risk Free Interest Rate 7.68% 7.70% 7.71% 7.74%

2. Expected Life (Years) 2.89 3.39 3.89 4.39

3. Expected Volatility 0.00% 0.00% 0.00% 0.00%

4. Dividend Yield 0.00% 0.00% 0.00% 0.00%

5. Price of the underlying share in market at the time of option granted

11 11 11 11

Option Fair Value ( ` ) 2.12 2.45 2.76 3.07

Vesting % 10% 20% 30% 40%

NOTE 4: RESERVES AND SURPLUSParticulars As at

March 31, 2014As at

March 31, 2013(Amt. in `) (Amt. in `)

A. Securities Premium ReservesOpening Balance 52,315,214 52,315,214

Less Share issue expenses 283,410 - Closing Balance 52,031,804 52,315,214

B. SurplusOpening balance (82,803,095) (92,106,922)

(+) Net Profit for the year 13,422,856 11,629,784 (-) Transfer to Statutory Reserves 2,684,571 2,325,957

Closing Balance (72,064,810) (82,803,095)





(Amt. in `) (Amt. in `)

C. Statutory ReserveOpening Balance 3,636,964 1,311,007 (+) Statutory Reserve for the year 2,684,571 2,325,957

Closing Balance 6,321,535 3,636,964

Total (A+B+C) (13,711,471) (26,850,917)

Statutory Reserve:

An amount of ` 2,684,571/- (PY ` 2,325,957/-) (20% of profits after tax) has been transferred to the Statutory Reserve Fund in accordance with the provisions of Section 45-IC of the RBI Act, 1934.

NOTE 5: LONG TERM BORROWINGS

Long Term BorrowingsAs at

March 31, 2014 (Amt. in `)


(Amt. in `)

Secured Borrowings

Bonds/ Debentures

Secured Non-Convertible Debentures 29,50,00,000 -

Term LoansA. Loan From banks 39,35,09,588 21,06,75,616

B. Loan from Financial Institutions 6,61,55,556 19,06,39,265

Total (A+B) 75,46,65,144 40,13,14,882

"Current maturities of long term debts " of ` 781,592,721/- (PY ` 475,956,463/-) under the head "other current liabilities" (Note no. 8) is secured long term borrowings.

Terms And Conditions Of Borrowings As at March 31, 2014

Name of Lending institution

Amt. outstanding Terms and Conditions

(Amt. in `) Repayment terms including moratorium Other Terms and conditions

Bank of Baroda 183,400,000 33 months from the date of disbursement

Secured against hypothecation of Book Debts with Margin and Cash Collateral

Central Bank Of India-1 12,092,552 5 yrs including 1 yr moratorium (monthly installments)


Central Bank Of India-2 41,542,060 5 yrs including 3months moratorium (Quarterly installments)


Development Credit Bank Ltd-1

17,500,012 15 months including 2 months moratorium on principal

Secured against hypothecation of Book Debts and Cash Collateral


25,000,000 26 months including 2 months moratorium










Gruh Finance-1 14,261,997 66 months including 6 months moratorium (Monthly Repayment)


Gruh Finance-2 22,821,097 60 months from the date of disbursement




IDBI Bank-1 40,000,006 36 months including 6 months moratorium (Monthly Repayment)


IDBI Bank-2 100,000,000 36 months including 6 months moratorium (Monthly Repayment)


Indusind Bank 48,913,043 24 months including 2 months moratorium


Maanaveeya Holdings & Investments Pvt. Ltd-1

40,002,000 3 yrs including 1 year moratorium (Half yearly Installment - Interest served on quarterly rest)

Secured against hypothecation of Book Debts with Margin

Maanaveeya Development & Finance Pvt Ltd-2

40,000,000 36 months, repayement in 12 quarterly installments - interest to be paid on monthly basis


MAS Financial Services Ltd.-1

13,888,886 18 months Secured against hypothecation of Book Debts and Cash Collateral









Ratnakar Bank Ltd-1 2,641,558 2 yrs including 6 months moratorium (Monthly Repayment)

Secured against hypothecation of Book Debts with Margin and Cash Collateral + Leverage of Accion Guarantee covering 45% of total loan amount.



Reliance Capital 117,460,291 18 months from the date of disbursement




State Bank of India 42,956,010 26 months from the date of disbursement


UCO Bank 75,000,000 45 months from the date of disbursement


Yes Bank 50,000,000 22 months from the date of disbursement


Total 1,241,257,865

Applicable Interest Rate ranges from Base Rate + 275 to 450 basis points

SECURED NON-CONVERTIBLE DEBENTURESDate of allotment Amt. in ` Redemption

Period Interest RateAs at March 31, 2014 As at March 31, 2013

11 November 2013 to 13 November 2013 2,95,000,000 - 13 May 2015 14.70%

Total 2,95,000,000 -

The above NCD is secured by exclusive hypothecation of Book Debts created out of the funds provided by debenture holder.

The applicable coupon rate for Non-Convertible Debenture is 14.70% per annum payable semi-annually.

Redemption Option dates for NCD are as follows:

1. May 13, 2015

2. May 13, 2016

3. May 13, 2017

Out of the three above, the investor and the company have an understanding for opting the third option.

Terms and Conditions of Borrowings as on March 31, 2013

Name of Lending institution Amt. outstanding Terms and Conditions(Amt. in `) Repayment terms

including moratoriumOther Terms and conditions

Central Bank Of India-1 23,958,325 5 yrs including 1 yr moratorium (monthly installments)


Central Bank Of India-2 50,000,000 5 yrs including 3months moratorium (Quarterly installments)



20,769,232 15 months including 2 months moratorium on principal





Standard Chartered Bank

12,500,000 8 equal quarterly installments, starting after 3 months from the first drawdown


11,250,000

7,500,00090,000,000



Name of Lending institution Amt. outstanding Terms and Conditions(Amt. in `) Repayment terms

including moratoriumOther Terms and conditions







Gruh Finance-1 17,964,809 66 months including 6 months moratorium (Monthly Repayment)






IDBI Bank 80,000,002 36 months including 6 months moratorium (Monthly Repayment)


IFMR Capital Finance Private Limited (“IFMR Capital”)

18,426,186 12 months Secured against hypothecation of Book Debts with Margin and Cash Collateral

MV Microfin Pvt Ltd 25,000,000 12 Months (annual installment)


Maanaveeya Holdings & Investments Pvt. Ltd-1

40,000,000 3 yrs including 1 year moratorium (Half yearly Installments - Interest served on quarterly rest)


Maanaveeya Development & Finance Pvt Ltd-2

66,670,000 36 months, repayement in 12 quarterly installments - interest to be paid on monthly basis


MAS Financial Services Ltd-1


MAS Financial Services Ltd-2






Reliance Capital 100,000,000 18 months from the date of disbursement


Standard Chartered Bank 37,500,000 8 equal quarterly installments, starting after 3 months from the first drawdown


26,250,000

17,500,000

Total 877,271,345

Applicable Interest Rate ranges from Base Rate + 275 to 450 basis points



NOTE 6: LONG TERM PROVISIONSParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

a) Provision for employee benefitsGratuity (unfunded)(refer to note no. 26) 3,067,323 2,508,291 Leave Encashment (unfunded) (refer to note no. 26) 1,429,804 412,216

b) Others Loan Loss Provisions 1,807,589 903,543 Total 6,304,716 3,824,050

NOTE 7: SHORT TERM BORROWINGSParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

SecuredOverdraft with Bank 47,582,030 -

Total 47,582,030 - Overdraft is secured against fixed deposit placed with the bank

NOTE 8: OTHER CURRENT LIABILITIESParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Current Maturities of Long Term Borrowings 781,592,721 475,956,463 Interest Accrued but not due on borrowings 18,965,647 3,579,178 Advance Collection from clients 11,989,491 18,494,991 Client Insurance Premium -Payable 3,849,879 2,386,259 Outstanding Liability for Expenses 3,043,682 1,305,224 Payable on Securitized Portfolio 24,801,902 2,938,146 Unearned Revenue-Managed/Sold out Portfolio 31,739,652 26,237,178 Employee Benefits- Payable 1,306,129 8,284,389 Other Payables 14,719,021 3,211,995 Statutory Dues Payable 3,416,533 2,702,615 Total 895,424,658 545,096,440

NOTE 9: SHORT TERM PROVISIONSParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

a) Provision for employee benefitsGratuity (refer Note no. 26) 651,561 912,602 Leave Encashment Provision (refer Note no. 26) 324,536 242,489 Provision for Bonus 7,650,000 3,500,000

b) Others Loan Loss Provisions 16,208,678 11,747,347 Total 24,834,775 16,402,438



Details of Loan Loss Provisions (included in note no. 6 & 9 under “Loan Loss Provision”):

Details of loan loss provision on: Percentage As at March 31, 2014


(Amt. in `)Loan Loss Provisions:

Non-current 1,807,589 903,543Current 16,208,678 11,747,347

Total 18,016,267 12,650,889 Loan Loss Provisions:a) Standard Assets 5,250,838 2,342,380

0-30 Days 0.25% 4,281,470 1,987,453 (Contingent provision against Standard Asset)31-60 Days 10% 354,351 92,160 61-90 Days 30% 615,017 262,768

b) Non Performing Assets 12,481,297 10,024,669 91-120 days 30% 276,485 250,959 121-180 days 60% 803,699 953,264 181-360 Days 100% 3,336,543 7,003,995 > 360 days 100% 8,064,148 1,803,486 Rescheduled Portfolio 100% 422 12,965

c) Additional Provision 284,132 283,839 Total 18,016,267 12,650,889

Loan Loss Provisions as per norms prescribed by RBI w.e.f. April 01, 2013:

As at 31 March, 2014

As at 31 March, 2013

(Amt. in `)a) Provisioning as per 1% of the outstanding loan portfolio 17,320,295 - b) Provisioning as per loan instalments ageing 9,668,623 - Provisioning to be considered 17,320,295 -

As per RBI policy which is w.e.f. April 01, 2013; the aggregate loan loss provision to be maintained at any point of time shall not be less than the higher of

a) 1% of the outstanding loan portfolio OR

b) 50% of the aggregate loan installments which are overdue for more than 90 days and less than 180 days and 100% of the aggregate loan instalments which are overdue for 180 days or more

However, the Company is making provision as mentioned below which is more stringent than those prescribed by RBI.

No. of days portfolio outstanding overdue Provision (% on outstanding principal) 0-30 0.25%

31-60 10%61-120 30%

121-180 60%>180 100%



Provisioning in respect of managed portfolio will be done subject to the maximum guarantee given to respective assignee bank or financial institution. Provisioning in respect of assigned portfolio in sell out transactions and portfolio sold out in securitisation transactions (pass through certificates route) will not be done.

Under exceptional circumstances including natural disasters, Management may renegotiate loans by rescheduling repayment terms for customers who have defaulted in repayment but who appear willing and able to repay their loans under a longer term agreement.



NO

TE 1

0: F

IxED

ASS

ETS

Not

es o

n Fi

nanc

ial S

tate

men

ts fo

r the

yea

r end

ed M

arch

31,

201

4

Fixe

d A

sset

FY

2013

-14

Fixe

d As

sets

Gros

s Bl

ock

Accu

mul

ated

Dep

reci

atio

nNe

t Blo

ck

Bala

nce

as a

t Ap

ril 0

1,

201

3

Addi

tions

Disp

osal

Bala

nce

as a

t M

arch

31,

20

14

Bala

nce

as a

t Ap

ril 0

1,

2013

Depr

ecia

tion

char

ge fo

r th

e y

ear

Dedu

ctio

nBa

lanc

e as

at

Mar

ch 3

1,

2014

Bala

nce

as

at M

arch

31,

20

13

Bala

nce

as

at M

arch

31,

20

14A

. T

ANGI

BLE

ASS

ETS

Fur

nitu

re a

nd F

ixtur

es

2,7

89,1

48

1,7

20,2

47

4,5

09,3

96

1,5

12,9

58

889

,804

2

,402

,762

1

,276

,191

2

,106

,634

O

ffice

equ

ipm

ent

1,1

42,1

46

1,0

06,7

24

2,1

48,8

70

256

,697

2

32,5

51

489

,247

8

85,4

49

1,6

59,6

22

Com

pute

r 7

,617

,355

1

,184

,476

8

,801

,830

5

,033

,708

1

,282

,316

6

,316

,023

2

,583

,647

2

,485

,807

L

ease

Hol

d Im

prov

emen

t 2

,133

,163

2

02,8

82

2,3

36,0

45

237

,644

5

88,2

84

825

,927

1

,895

,519

1

,510

,118

T

otal

(A)

13,

681,

812

4,11

4,32

9 -

17,

796,

141

7,0

41,0

06

2,9

92,9

54

- 1

0,03

3,96

0 6

,640

,806

7

,762

,180

B.

INTA

NGIB

LE A

SSET

S C

ompa

ny L

ogo

294

,777

-

294

,777

1

36,1

62

58,

955

- 1

95,1

17

158

,615

9

9,66

0 C

ompu

ter s

oftw

are

10,

962,

984

5,4

14,0

58

16,

377,

042

5,4

66,9

68

3,0

18,6

94

8,4

85,6

62

5,4

96,0

16

7,8

91,3

80

Tot

al (B

) 11

,257

,761

5

,414

,058

-

16,

671,

819

5,6

03,1

30

3,0

77,6

49

- 8

,680

,779

5

,654

,631

7

,991

,040

Tot

al (A

+B)

24,

939,

573

9,5

28,3

87

- 3

4,46

7,96

0 1

2,64

4,13

6 6

,070

,603

-

18,

714,

739

12,

295,

437

15,

753,

220

Fixe

d A

sset

FY

2012

-13

Fixe

d As

sets

Gros

s Bl

ock

Accu

mul

ated

Dep

reci

atio

nNe

t Blo

ckBa

lanc

e as

at

April

01,

20

12

Addi

tions

Disp

osal

Bala

nce

as a

t M

arch

31,

20

13

Bala

nce

as a

t Ap

ril 0

1,

2012

Depr

ecia

tion

char

ge fo

r th

e y

ear

Dedu

ctio

nBa

lanc

e as

at

Mar

ch 3

1,

2013

Bala

nce

as

at M

arch

31,

20

12

Bala

nce

as a

t 31

, Mar

ch

2013

A.

TAN

GIBL

E A

SSET

S F

urni

ture

and

Fixt

ures

3

,074

,684

2

87,4

65

(573

,001

) 2

,789

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1

,431

,131

2

58,1

67

176

,341

1

,512

,958

1

,643

,553

1

,276

,191

O

ffice

equ

ipm

ent

1,4

70,7

61

231

,788

(5

60,4

03)

1,1

42,1

46

382

,130

9

5,23

3 2

20,6

66

256

,697

1

,088

,630

8

85,4

49

Com

pute

r 7

,340

,416

2

76,9

39

- 7

,617

,355

3

,588

,020

1

,445

,688

-

5,0

33,7

08

3,7

52,3

94

2,5

83,6

47

Lea

se H

old

Impr

ovem

ent

5,1

55,2

76

887

,843

(3

,909

,956

) 2

,133

,163

3

,020

,298

3

77,6

93

3,1

60,3

47

237

,644

2

,134

,978

1

,895

,519

T

otal

(A)

17,

041,

137

1,6

84,0

35 (

5,04

3,36

0) 1

3,68

1,81

2 8

,421

,579

2

,176

,780

3

,557

,354

7

,041

,006

8

,619

,555

6

,640

,806

B.

INTA

NGIB

LE A

SSET

S C

ompa

ny L

ogo

294

,777

-

- 2

94,7

77

77,

207

58,

955

- 1

36,1

62

217

,570

1

58,6

15

Com

pute

r sof

twar

e 4

,754

,013

6

,208

,971

-

10,

962,

984

3,2

92,5

56

2,1

74,4

12

- 5

,466

,968

1

,461

,457

5

,496

,016

T

otal

(B)

5,0

48,7

90

6,2

08,9

71

- 1

1,25

7,76

1 3

,369

,763

2

,233

,367

-

5,6

03,1

30

1,6

79,0

27

5,6

54,6

31

Tot

al (A

+B)

22,

089,

927

7,8

93,0

06 (

5,04

3,36

0) 2

4,93

9,57

3 1

1,79

1,34

2 4

,410

,148

3

,557

,354

1

2,64

4,13

6 1

0,29

8,58

2 1

2,29

5,43

7


NOTE 11: INVESTMENTSNon Current Investments As at March

31, 2014As at March

31, 2013(Amt. in `)

Other Investmentsa) Investment in Equity instruments: 500,000 500,000

Investment in Alpha Microfinance Consultants Pvt. Ltd. 50000 (PY 50000) equity shares with face value of ` 10/- Each

b) Other - Swadhaar Employee Welfare Trust (Corpus fund) # 46,559 46,559

Aggregate amount of unquoted investment 546,559 546,559

# In the financial year 2009-10, the company had created Swadhaar FinServe Employee Welfare Trust for the purpose of promoting employee welfare activities and for administration, management, implementation and all other matters incidental to any stock option plans.



(Amt. in `)

Current InvestmentsInvestment in Mutual Fund (IDFC Mutual Fund): 1,100,142 -

As of March 31, 2014, NAV was of ` 1559.4679 with 706.812 units.

NOTE 12: DEFERRED TAx ASSETParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Deferred Tax AssetDifference in WDV of assets 198,728 198,234 Bonus 717,766 Gratuity Provision 1,149,135 1,057,056 Compensated absence provision 542,091 202,304 Provision for doubtful assets 5,567,027 3,295,002 Net Deferred Tax Asset 8,174,746 4,752,595

NOTE 13: LOANS UNDER FINANCING ACTIVITYParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Loans under financing activityNon-current 650,706,469 347,266,184 Current 1,081,322,999 460,758,278

Total 1,732,029,468 808,024,462 Loans under financing activityStandard Assets: 1,718,367,239 796,778,713

0-30 Days 1,712,773,672 794,981,226 31-60 Days 3,543,509 921,595 61-90 Days 2,050,058 875,892

Non Performing Assets 13,662,229 11,245,749 91-120 Days 921,618 836,529





(Amt. in `)

121-180 Days 1,339,498 1,588,774 181-360 Days 3,336,543 7,003,995 > 360 days 8,064,148 1,803,486 Rescheduled Portfolio 422 12,965

Total 1,732,029,468 808,024,462

The Company has adopted the following criterion of categorizing its portfolio a) Standard Assets: portfolio which has remained overdue for a period of 90 days or less

b) Non Performing Asset: portfolio which has remained overdue for a period of more than 90 days

NOTE 14: LONG TERM LOANS & ADVANCES Particulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Deposits Asset (Unsecured) 5,744,411 6,527,868 Rent Deposit 5,114,500 4,681,500 Other Deposit 629,911 1,846,368

Other Loans and Advances 262,655 731,792 Tax Deducted At Source (Net of provision for tax of ` 89,45,349) (PY: ` 23,18,880)

238,697 707,834

Loan to Employee Welfare Trust (EWT) 23,958 23,958 Total 6,007,066 7,259,660

NOTE 15: OTHER NON CURRENT ASSETSParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Fixed Deposit (maturity more than 12 months) - Non-Lien Fixed Deposit 20,000,000 Lien Fixed Deposit 135,572,045 112,261,826

Total 135,572,045 132,261,826

NOTE 16: CASH & BANK BALANCESParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

A. Cash and Cash EquivalentsBalance with BanksIn Current Account 64,173,862 198,178,370 In Deposit Account (maturity less than 3 months)

Non-Lien Fixed Deposit 32,500,000 159,300,000 Cash on hand 1,210,699 1,568,654

Total (A) 97,884,561 359,047,024





(Amt. in `)

B. Others bank balancesMaturity more than 3 months but less than 12 monthsNon-Lien Fixed Deposit - 7,430,395 Lien Fixed Deposit 161,657,134 55,496,835 Total (B) 161,657,134 62,927,230

Total (A +B ) 259,541,695 421,974,255

Lien against borrowings from Banks/ Financial Institutions

NOTE 17: SHORT-TERM LOANS & ADVANCESParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

a) Advances Recoverable in Cash or Kind - 155,853

Secured, considered goodAviva Insurance Company Ltd. - 155,853

b) Others (specify nature) 2,402,487 2,289,354 Advance Against Salary 296,985 93,294 Advance Against Expenses 75,091 189,244 Loan to Employees 2,030,411 2,006,816

Total 2,402,487 2,445,207

NOTE 18: OTHER CURRENT ASSETSParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Interest Accrued on Fixed Deposit 15,416,229 4,922,725

Interest Accrued but not due on Loan Portfolio 26,494,213 11,340,600

Interest Receivables on loans 518,020 184,747

Prepaid Expenses 638,339 683,116

Other Receivables 8,318,536 629,191

Cenvat Credit Availed 189,968 69,392

Total 51,575,305 17,829,771

NOTE 19: REVENUE FROM OPERATIONSParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

A. Interest IncomeInterest from loan portfolio 311,272,434 221,313,752 Interest on Fixed Deposit 27,187,113 8,552,117 Other Interest 287,587 283,234 Total (A) 338,747,135 230,149,103





(Amt. in `)

B. Other Financial Services:Processing fee 19,930,509 13,489,921 Income from securitised transaction 18,841,532 3,662,228 Other operating income 345,006 443,309 Total (B) 39,117,047 17,595,458

Total (A + B) 377,864,182 247,744,561

NOTE 20: OTHER INCOMEParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Profit on sale of Mutual Fund units 1,100,142 - Reimbursement for resources used for training 2,299,999 1,433,764 Other Misc. Income 294,057 46,780 Fees for Business consultancy project 2,209,926 1,887,255

Total 5,904,123 3,367,799

NOTE 21: EMPLOYEE BENEFIT ExPENSESParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Salaries, incentives and commission 76,985,788 70,961,726 Contributions to -

Provident fund 5,014,901 4,071,274 ESIC 1,815,343 1,891,245 Labour Welfare 16,911 18,174

Leave Encashment 1,323,519 (462,883)Exgratia - 520,327 Insurance-Staff 716,437 525,457 Gratuity 805,038 672,885 Training Expenses 258,310 275,713 MD Remuneration 1,998,435 4,001,602 Bonus 6,972,866 3,500,000 Staff welfare expenses 2,812,669 2,118,132 Total 98,720,217 88,093,653

NOTE 22: FINANCE COSTParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Interest expense 160,026,491 68,056,224 Other borrowing costs 28,024,155 16,519,798 Total 188,050,646 84,576,022



NOTE 23: LOAN LOSS PROVISIONParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Loan Loss Expenses 5,365,379 1,551,318 Total 5,365,379 1,551,318

NOTE 24: OTHER ExPENSESParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Administrative Expenses :- Payment to Auditors (refer to note no. 35) 1,383,617 1,052,633 Bad Debts W/off 2,522,013 8,923,256 Banking Charges 273,761 257,318 Cash Handling Charges 2,707,790 1,085,861 Electricity Expenses 1,269,685 1,285,379 Brokerage 246,704 147,000 Insurance Charges 1,922,732 1,850,379 Legal Charges 1,299,712 785,928 Loss on Sale of Fixed Asset - 1,462,446 Memberships & Subscription 670,784 355,585 Office Expenses 665,565 1,370,427 Other Miscellaneous Expense 1,742,147 1,196,863 Rates and Taxes 337,573 178,713 Portfolio Loss 249,706 930,870 Printing & Stationery 6,342,475 3,802,005 Professional Charges 23,798,299 14,381,444 Rent - Premises 12,173,475 9,945,775 Repairs and maintenance 1,827,342 2,319,033 Telephone and Internet 2,395,332 1,981,361 Traveling 7,105,575 5,152,851

Total 68,934,285 58,465,124

NOTE 25: BASIC & DILUTED EARNINGS/(LOSS) PER SHARE:Particulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Net Profit attributable to equity shareholders [A] (`) 13,422,856 11,629,784 Weighted Average number of equity shares issued [B] 53,299,091 51,679,913 Basic Earnings per share [A/B] (`) 0.25 0.23



NOTE 26: EMPLOYEE BENEFITParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

Leave encashment Detailed disclosures of compensated absence is not given in terms of Para 132 of AS15 “Employee Benefits”Current Liability 324,536 242,489 Non-Current Liability 1,429,804 412,216 GratuityGratuity provision has been made based on the actuarial valuation done as at the year end. The details of actuarial valuation as provided by the independent actuary are as follows:

Gratuity Valuation report as at March 31, 2014 Assumptions As at March

31, 2014As at March

31, 2013Mortality Rate the Indian Assured

Lives Mortality (2006-08) Ult table

LIC (1994-96)

Discount Rate 8.80% 8.00%Salary escalation rate 7.00% 5.50%Rate of return (expected) on plan assets 0.00% 0.00%Benefit: as per Gratuity ACT with Limit = 1,000,000 1,000,000Retirement age (Years) 60 60Expected average remaining service 10.88 16.11

I. Data informationNumber of members 431 368Total monthly salaries 2,983,202 2,729,267Average age (years) 29.74 30.24Average Service (years) 2.33 2.35II. Changes in present value of obligationsPVO at beginning of year 3,420,893 2,832,766 Interest cost 319,056 223,231 Current Service Cost 1,023,609 1,112,743 Benefits Paid (507,047) (84,758)Actuarial (gain)/loss on obligation (537,627) (663,089)PVO at end of year 3,718,884 3,420,893 III. Changes in fair value of plan assetsFair Value of Plan Assets at beginning of year - - Expected Return on Plan Assets - - Contributions 507,047 84,758 Benefit Paid (507,047) (84,758)Actuarial gain/(loss) on plan assets - Fair Value of Plan Assets at end of year - IV. Fair Value of Plan AssetsFair Value of Plan Assets at beginning of year - Actual Return on Plan Assets - Contributions 507,047 84,758 Benefit Paid (507,047) (84,758)



Assumptions As at March 31, 2014


Fair Value of Plan Assets at end of year - Funded Status (including unrecognised past service cost) 3,718,884 (3,420,893)Excess of actual over estimated return on Plan Assets - - V. Actuarial Gain/(Loss) RecognisedActuarial Gain/(Loss) for the year (Obligation) 537,627 663,089 Actuarial Gain/(Loss) for the year (Plan Assets) - Total Gain/(Loss) for the year 537,627 663,089 Actuarial Gain/(Loss) recognized for the year 537,627 663,089 Unrecognized Actuarial Gain/(Loss) at end of year -VI. Amounts to be recognised in the balance sheet and statement of profit & loss PVO at end of year 3,718,884 3,420,893 Fair Value of Plan Assets at end of year - Funded Status (3,718,884) (3,420,893)Unrecognized Actuarial Gain/(Loss) - Net Asset/(Liability) recognised in the balance sheet (3,718,884) (3,420,893)VII. Expense recognised in the statement of P & L Current Service Cost 1,023,609 1,112,743 Interest cost 319,056 223,231 Expected Return on Plan Assets - - Net Actuarial Gain/(Loss) recognised for the year (537,627) (663,089)Expense recognised in the statement of P & L 805,038 672,885 VIII. Movements in the Liability recognised in Balance SheetOpening Net Liability 3,420,893 2,832,766 Expenses as above 805,038 672,885 Contribution paid (507,047) (84,758)Closing Net Liability 3,718,884 3,420,893 Current Liability 651,561 912,602 Non-Current Liability 3,067,323 2,508,291

NOTE 27: RELATED PARTY TRANSATIONS

A) Related Party Relationships

a) Enterprise where control exists: Swadhaar FinServe Employee Welfare Trust

B) Enterprise that exercise control:

Accion International

Accion Technical Advisors India

C) Key Management Personnel (KMP): Ms. Veena Mankar - Managing Director

Mr RajaRam Kamath - Director

D) List of Enterprise in which KMP exercise significant influence

Name of the key Managerial Personnel (KMP): Name of the Enterprise in which the KMP exercise significant influence

Veena Mankar Swadhaar FinAccess

E) Relatives of KMP: Mr. Vikas Bhagwan Mankar (Husband of Ms. Veena Mankar)



Not

es o

n Fi

nanc

ial S

tate

men

ts fo

r the

yea

r end

ed M

arch

31,

201

4

Tran

sact

ion

For t

he y

ear e

nded

Mar

ch 3

1, 2

014

For t

he y

ear e

nded

Mar

ch 3

1, 2

013

Ente

rpris

e w

here

co

ntro

l ex

ists

Ente

rpris

e th

at e

xerc

ises

co

ntro

l

Key

Man

agem

ent

Pers

onne

l

List

of e

nter

pris

es

in w

hich

KM

P

exer

cise

s si

gnifi

cant

in

fluen

ce

Ente

rpris

e w

here

co

ntro

l ex

ists

Ente

rpris

e th

at e

xerc

ises

co

ntro

l

Key

Man

agem

ent

Pers

onne

l

List

of e

nter

pris

es in

w

hich

KM

P

exer

cise

s si

gnifi

cant

in

fluen

ce A

ccio

n In

tern

atio

nal:

Gua

rant

ee F

ee

- 3

,062

,384

-

- -

2,6

04,5

25

- -

Acc

ion

Tech

nica

l Adv

isor

s In

dia:

T

rain

ing

Rel

ated

Exp

ense

s

- -

- -

- 6

25,9

65

- -

Tec

hnic

al A

ssis

tanc

e -

6,1

47,7

08

- -

- 5

,547

,114

-

- A

ccio

n Tr

aini

ng E

xpen

ses

reim

burs

emen

t:

Tra

inin

g ex

pens

e re

imbu

rsem

ent r

ecei

ved

- (2

96,2

89)

- -

- (8

47,7

54)

- -

Man

ager

ial R

emun

erat

ion

to V

eena

M

anka

r -

- 1

,998

,435

-

- -

4,0

01,6

02

-

Dire

ctor

s R

emun

erat

ion

to R

ajar

am

K

amat

h -

- 2

,339

,181

-

- -

- -

Sw

adha

ar F

inA

cces

s:

Tra

inin

g Ex

pens

e -

- -

- -

- -

172

,709

P

rintin

g &

stat

ione

ry

- -

- -

- -

- 7

2,64

0 P

rofe

ssio

nal C

harg

es

- -

- 1

10,8

48

- -

- 1

51,0

82

Sha

re C

apita

l: R

ecei

ved

from

Vee

na V

ikas

Man

kar j

oint

ly

with

Vik

as B

hagw

an M

anka

r -

- -

- -

- -

-

ESO

P G

rant

ed to

Vee

na M

anka

r (N

o of

o

ptio

ns)

- -

- -

- -

- -

Not

e: R

eim

burs

emen

t rec

eive

d fig

ures

are

sho

wn

in b

rack

ets.

Out

stan

ding

rece

ivab

le /

paya

ble

with

rela

ted

part

ies:

Tran

sact

ion

For t

he y

ear e

nded

Mar

ch 3

1, 2

014

For t

he y

ear e

nded

Mar

ch 3

1, 2

013

Ente

rpris

e w

here

con

trol

exis

ts

Ente

rpris

e th

at e

xerc

ises

co

ntro

l

Key

Man

agem

ent

Pers

onne

l

List

of

ente

rpris

es in

w

hich

KM

P

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s si

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in

fluen

ce

Ente

rpris

e w

here

con

trol

exis

ts

Ente

rpris

e th

at e

xerc

ises

co

ntro

l

Key

Man

agem

ent

Pers

onne

l

List

of e

nter

pris

es in

w

hich

KM

P

exer

cise

s si

gnifi

cant

in

fluen

ce

Sw

adha

ar F

inSe

rve

Empl

oyee

Wel

fare

Tru

st:

Exp

ense

s re

ceiv

able

(23,

958)

- -

- (2

3,95

8) -

- -

Inve

stm

ent

(46,

559)

- -

- (4

6,55

9) -

- -

Loa

ns &

Adv

ance

s G

iven

(57,

395,

625)

- -

- (5

7,39

5,62

5) -

- -

Acc

ion

Inte

rnat

iona

l -

608

,532

-

- -

768

,973

-

- A

ccio

n Te

chni

cal A

dvis

ors

Indi

a:

Rec

eiva

ble

-

(1,0

15,7

92)

- -

- -

- -

Acc

ion

Trai

ning

Exp

ense

s re

imbu

rsem

ent

- 1

7,41

8 -

- -

(15,

103)

- -

Man

ager

ial R

emun

erat

ion

Paya

ble

- -

- -

- -

- -

Ren

t -

- -

- -

- -

- T

rade

mar

k &

Logo

cha

rges

- -

- -

- -

- -

Not

e: R

ecei

vabl

es fi

gure

s ar

e sh

own

in b

rack

ets.


NOTE 28: FOREIGN CURRENCY TRANSACTIONSParticulars

Expenditure in Foreign Currency



(Amt. in `)

Guarantee Fee payment 3,036,066 2,444,049Travel 170,418 31,658Professional Fees (AVV Sarl and Software Group) 3,288,740 - Training Expenses (WWB) 72,215 - Total 3,206,484 2,475,707

NOTE 29: SEGMENT REPORTING

The company is primarily engaged in the business of Micro financing. All the activities of the Company revolve around the main business. Further, the company does not have any separate geographic segments. As such there are no separate reportable segments as per AS-17 “Segmental Reporting”

NOTE 30: MSMED ACT, 2006

Company has sent letters to suppliers to confirm whether they are covered under Micro, Small and Medium Enterprises Act, 2006 as well as they have filed required memorandum with the prescribed authorities. Out of the letters send to the parties, some confirmations have been received till the date of finalisation of Balance Sheet. Accordingly disclosure treatment has been done.


Principal amount due to suppliers under MSMED Act as at year end Nil

NOTE 31: CONTINGENT LIABILITIES

Claims against the company not acknowledged as debts are Nil

NOTE 32: CAPITAL COMMITMENTS

Estimated amount of contracts remaining to be executed on capital accounts and not provided for ` Nil (Previous year ` NIL).

NOTE 33: IMPAIRMENT OF ASSET

In the opinion of the board of directors, all current assets, loans & advances would be realisable at least of an amount equal to the amount at which they are stated in the balance sheet. Hence no impairment loss has been recognised on fixed assets.

NOTE 34: UTILISATION OF PROCEEDS OF SECURED NON-CONVERTIBLE DEBENTURES

The Company has during the month of November, 2013 raised ` 29,50,00,000/- through private placement of Secured Non-Convertible

Debentures which are listed on Wholesale Debt Market (WDM) segment of the Bombay Stock Exchange (BSE) and as at March 31, 2014, the Company has utilised the entire proceeds of the private issue, net of issue expenses in accordance with the objects stated in the offer document.



NOTE 35: PAYMENT TO AUDITORSParticulars As at March

31, 2014As at March

31, 2013(Amt. in `)

As Auditors:Statutory Audit Fees 830,000 630,000Tax Audit Fees 130,000 120,000In other capacity:Tax related Services 150,000 100,000Other Services (Certification) 98,200 121,034Out of pocket expenses 26,230 20,509Service Tax 152,576 122,555Total 1,387,006 1,114,098

NOTE 36: ANNEx I : ADDITIONAL DISCLOSURE IN NBFC-ND-SI

Items Current Year Previous YearA) CRAR

CRAR (%) 23.20% 34.33%CRAR-Tier I Capital (%) 22.99% 34.17%CRAR-Tier II Capital (%) 0.21% 0.16%

Note : FY 2012-13 is first year for the company as systematic important company (NBFC-ND-SI)

Category Current Year Previous YearB) ExPOSURES: Exposure to Real Estate Sectora) Direct exposure

i) Residential Mortgages - - - Lending fully secured by mortgages on residential property that is or will be occupied by the borrower or that is rented; (Individual housing loans up to `15/- lakh may be shown separately)

- -

ii) Commercial Real Estate - - Lending secured by mortgages on commercial real estates (office buildings, retail space, multipurpose commercial premises, multi-family residential buildings, multi-tenanted commercial premises, industrial or warehouse space, hotels, land acquisition, development and construction, etc.). Exposure would also include non-fund based (NFB) limits;

- -

iii) Investments in Mortgage Backed Securities (MBS) and other securitised exposures -a. Residential, - - b. Commercial Real Estate. - -

b) Indirect ExposureFund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs).

- -



NOTE 37: As required in terms of paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007

Particulars Amount Outstanding Amount OverdueLiabilities side :1) Loans and advances availed by the non-banking financial

company inclusive of interest accrued thereon but not paid:(a) Debentures : Secured 295,000,000 Nil Unsecured (Other than falling within the meaning of public

deposits *)(b) Deferred Credits Nil Nil(c) Term Loans 1,241,257,865 Nil(d) Inter-corporate loans and borrowing Nil Nil(e) Commercial Paper Nil Nil(f) Other Loans (specify nature) Nil Nil

* Please see Note 1 below

Assets side : Amount outstanding2. Break-up of Loans and Advances including bills receivables (Other than those included in

(4) below) : (a) Secured Nil (b) Unsecured 1,732,029,4683. Break-up of Leased Assets and stock on hire and other assets counting towards AFC

activitiesNil

(i) Leased assets including lease rentals under Sundry debtors :(a) Financial lease Nil(b) Operating lease Nil

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

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

1 day to 30/31 days (1 Month)

Over 1 month to 2 months

Over 2 months upto 3 months

Over 3 months to 6 months

Over 6 months to 1 year

Over 1 year to 3 years

Over 3 years to 5 years

Over 5 years

Total (As on March 2013)

C) ASSET LIABILITY MANAGEMENT: Maturity pattern of certain items of assets and liabilitiesLiabilities (L)

Borrowings from Banks

10,97,33,439 6,80,31,986 8,58,17,188 22,19,54,230 34,36,37,908 43,17,67,455 2,78,97,689 - 1,28,88,39,895

Market Borrowings - - - - - - 29,50,00,000 - 29,50,00,000

Assets (A)

Advances 9,77,15,124 9,13,18,377 9,21,03,988 27,82,40,305 52,41,57,540 65,49,38,418 10,41,400 9,23,869 1,74,04,39,021

Investments - - 11,00,141.68 - - - - 5,46,559 16,46,701

(Amount in `)

FY: 2013-14



Assets side : Amount outstanding4. Break-up of Investments : Current Investments: 1. Quoted Nil

(i) Shares:(a) Equity (b) Preference

(ii) Debentures and Bonds Nil(iii) Units of mutual funds Nil(iv) Government Securities Nil(v) Others (Please specify) Nil

2. Unquoted Nil(i) Shares : (a) Equity

(b) Preference(ii) Debentures and Bonds Nil(iii) Units of mutual funds Nil(iv) Government Securities Nil(v) Others (Please specify) Nil

Long Term Investments : 1. Quoted Nil

(i) Shares : (a) Equity(b) Preference

(ii) Debentures and Bonds Nil(iii) Units of mutual funds Nil(iv) Government Securities Nil(v) Others (Please specify) Nil

2. Unquoted Nil(i) Shares : (a) Equity 500,000

(b) Preference (ii) Debentures and Bonds Nil (iii) Units of mutual funds 1,100,142 (iv) Government Securities Nil (v) Others (Corpus Fund in Employee welfare Trust) 46,559

Category Amount net of provisionsSecured Unsecured Total

5. Borrower group-wise classification of assets financed as in (2) and (3) above : Please see Note 2 below 1. Related parties **

(a) Subsidiaries Nil Nil Nil(b) Companies in the same group Nil Nil Nil(c) Other related parties Nil Nil Nil

2. Other than related parties Nil 1,732,029,468 1,732,029,468

Total - 1,732,029,468 1,732,029,468



Category Market Value/Break up or fair value or NAV

Book Value (Net of Provisions)

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 Nil Nil(b) Companies in the same group(c) Other related parties Nil Nil

2. Other than related parties 1,620,429 1,620,429Total 1,620,429 1,620,429** As per Accounting Standard of ICAI (Please see Note 3) Particulars Amount

(i) Gross Non-performing Assets(a) Related Parties Nil(b) Other than related parties Nil

(ii) Net Non-Performing Assets (a) Related Parties Nil (b) Other than related parties Nil

(iii) Assets acquired in satisfaction of debt Nil

Notes:

1. As defined in Paragraph 2(1) (xii) of the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998.

2. Provisioning norms shall be applicable as prescribed in Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007.

3. All Accounting Standards and Guidance Notes issued by ICAI are applicable including for valuation of investments and other assets as also assets acquired in satisfaction of debt. However, market value in respect of quoted investments and break up/fair value/NAV in respect of unquoted investments should be disclosed irrespective of whether they are classified as long term or current in column (5) above.

4. The provisioning norms followed by the Company are more stringent than those prescribed by the Reserve Bank of India are as follows:

No. of days portfolio outstanding overdue Provision (% on outstanding principal)0-30 0.25%31-60 10%61-120 30%121-180 60%>180 100%

Overdue debts outstanding for more than 180 days are written off.



NOTE 38: SOLD OUT PORTFOLIO

During the financial year 2013-14, there were four transactions of portfolio securitisation through PTC route (pass through certificates). The company will continue to collect the EMIs on behalf of the buyers and remitting the same to the buyers as per decided schedule. During the financial year 2012-13, there were four transactions of portfolio sell out. The company will continue to collect the EMIs on behalf of the buyers and remitting the same to the buyers as per decided timelines every month. The brief details of the transaction are indicated below:

Sr. No. ParticularsAs at March

31, 2014As at March

31, 2013(Amt. in `)

1. Group Loan asset sold to Mosec Apollonis on March 23, 2014:Sale consideration received for the Individual group loan asset sold 53,097,522 –Total outstanding book value of the loan asset sold out 47,971,652 –Collection of client EMIs on behalf of Mosec Apollonis will be till Jan-16

2. Group Loan asset sold to Mosec Horkos on March 26, 2014:Sale consideration received for the Individual group loan asset sold 113,731,856 –Total outstanding book value of the loan asset sold out 103,939,878 –Collection of client EMIs on behalf of Mosec Horkos will be till Dec-15

3. Group Loan asset sold to Mosec Callies on July 10, 2013:Sale consideration received for the Individual group loan asset sold 66,724,083 –Total outstanding book value of the loan asset sold out 36,763,215 –Collection of client EMIs on behalf of Mosec Callies will be till May-15

4. Group Loan asset sold to Mosec Perses on August 11, 2013:Sale consideration received for the Individual group loan asset sold 56,884,104 –Total outstanding book value of the loan asset sold out 33,655,889 –Collection of client EMIs on behalf of Mosec Perses will be till May-15

5. Group Loan asset sold to Mosec xxx on March 24, 2013:Sale consideration received for the Individual group loan asset sold

80,789,612

Total outstanding book value of the loan asset sold out 9,006,426 75,270,058Collection of client EMIs on behalf of Mosec XXX will be till Nov-14

6. Group Loan asset sold to Mosec xxxI on March 24, 2013: Sale consideration received for the Individual group loan asset sold 191,994,568Total outstanding book value of the loan asset sold out 59,399,952 174,994,709

Collection of client EMIs on behalf of Mosec XXXI will be till Jan-15

7. Group Loan asset sold to Mosec xxxII on March 27, 2013:Sale consideration received for the Individual group loan asset sold 56,277,163

Total outstanding book value of the loan asset sold out 59,399,952 51,769,968

Collection of client EMIs on behalf of Mosec XXXII will be till Nov-14Group Loan asset sold to DCB (POOL III transaction) on March 22, 2012:

8. Sale consideration received for the Individual group loan asset sold - - Total outstanding book value of the loan asset sold out 6,920,790

Collection of client EMIs on behalf of DCB was till Jan-14



Sr. No. ParticularsAs at March

31, 2014As at March

31, 2013(Amt. in `)

Group Loan asset sold to Swahit 2012 Series 1 on December 31, 2012:

9. Sale consideration received for the Individual group loan asset sold - 75,000,000Total outstanding book value of the loan asset sold out 34,963,320

Collection of client EMIs on behalf of Swahit 2012 Series 1 was till July-13

NOTE 39: DISCLOSURES ON SECURITISATION

Sr. No.

Particulars Mosec xxx

Mosec xxxI

Mosec xxxII

Mosec Calleis

Mosec Perses

Mosac Horkos

Mosac Apollonis

1 No of SPVs sponsored by the NBFC for securitisation transactions

1 1 1 1 1 1 1

2 Total amount of securitised assets as per books of the SPVs sponsored by the NBFC

111.42 695.37 144.68 398.09 361.22 1039.95 479.83

3 Total amount of exposures retained by the NBFC to comply with MRR as on the date of balance sheeta) Off-balance sheet

exposures* First loss - - - - - - * Others - - - - - -

b) On-balance sheet exposures* First loss (In the form of Fixed Deposits)

104.6 197.43 52.00 57.00 63.92 68.64 38.39

* Others - - - - - - - 4 Amount of exposures to

securitisation transactions other than MRRa) Off-balance sheet

exposuresi) Exposure to own securitisations* First loss - - - - - - - * loss - - - - - - - ii) Exposure to third party securitisations* First loss - - - - - - - * Others - - - - - - -

b) On-balance sheet exposuresi) Exposure to own securitisations* First loss - - - - - - - * Others - - - - - - - ii) Exposure to third party securitisations* First loss - - - - - - - * Others - - - - - - -

(Amount in ` Lakhs)



NOTE 40: COST OF BORROWING

1. As stipulated by NBFC-MFI Guidelines issued by RBI, Company has maintained an aggregate margin cap of not more than 12% during the year. The interest cost is calculated on average fortnightly balances of outstanding borrowings.

The average interest cost of borrowing for Swadhaar for FY 2013-14 is 16.65% .

The average interest rate on lending during a financial year does not exceed the average borrowing cost during that financial year plus the margin, within the prescribed cap.

The average interest charged on lending by the Company for FY 2013-14 is 26% for group loan.

2. Company charges processing fee of not more than 1 % of gross loan amount. Processing charges is not included in the margin cap or the interest cap.

3. Company recovers only the actual cost of insurance for the borrower and spouse Administrative charges recovered are as per IRDA guidelines.

NOTE 41: PREVIOUS YEAR FIGURES:

As notified by Ministry of Corporate Affairs, Revised Schedule VI under the Companies Act, 1956 is applicable to the Financial Statements for the financial year commencing on or after April 01, 2011. Accordingly, the financial statements for the year ended March 31, 2014 and March 31, 2013 are prepared in accordance with the Revised Schedule VI. The amounts and disclosures included in the financial statements of the previous year have been reclassified to confirm to the requirements of Revised Schedule VI.

For and on behalf of the Board of Directors Swadhaar Finserve Pvt Ltd

Veena Mankar RajaRam Kamath Managing Director Executive Director & Chief Executive Officer



Swadhaar FinServe Pvt. Ltd.Tenement 1/3 & 1/4, old MHB colonyAnand Nagar, LIG, Nehru RoadSantacruz (E), Mumbai 400055T: +91 22 2626 1234info@ swadhaar.comwww.swadhaar.com

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