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Swadhaar FinServe Fifth Annual Report 2012
S w a d h a a r F i n A c c e s s
Swadhaar FinServeFifth Annual Report 2012
Table of Contents
02 From the Managing Director 06 Mission/Vision/Values 07 Our People 09 Where We Work 11 Effective Financial Inclusion
13 Operational & Financial Highlights
15 Company Growth
18 Employee Initiatives
19 Our Clients 23 Directors’ Report
31 Auditors’ Report
35 Financials
2011-12 has been a year of achievement amidst changes, much of it coloured by the microfi-nance crisis and the regulatory uncertainty in its aftermath. Swadhaar’s business has been nudged in a differ-ent direction by current regulations, but we are proud to say that we have seen renewed opportunity in these changes. Under strong leadership and with a focus on client empowerment and sustainability, we have set ourselves on a path to growth and profitability in core segments.This year started under the shadow of the crisis in the sector. Consequently, we spent much of the first half maintaining regular operations in an uncertain funding environment, as lenders awaited regulatory clarity. In May 2011, the Reserve Bank of India (RBI) laid down the parameters for pri-ority sector eligibility for microfinance (MF) loans. MF is now a standardized product for poor households (HH) with annual incomes below Rs. 60,000 in rural areas and Rs. 120,000 in urban areas; these parameters have now become the very definition of MF in the country.
Much has already been said about the dilemmas these have created for institutions and investors who saw their objective as broader financial inclusion, and certainly our business was directly affected. At Swadhaar, while we did envisage the market for the group product to be an important target segment, it has never been the only one. Indeed, our broader financial inclusion and improvement objectives included individual lending to micro-entrepreneurs in urban areas. As of March 2011, about 30% of the loan portfolio comprised individual loans (IBL) to micro businesses, the majority of whom fell into a HH income bracket higher than those articulated by the RBI as MF loans.
Consequently, Swadhaar has made some distinct strategic and operational choices this year.
First, we re-evaluated our strategy and changed our business mix, reducing the individual loan (IL) portfolio and increasing our focus on the joint liability group loans that can be compliant with new regulations. Swadhaar had originally identified the urban micro-enterprise segment as underserved, and having consider-able business and client improvement potential. Since inception in 2008, we invested significant resources in creating and consolidating our capacity to manage the complexities of individual lending (as distinct from a standardized group loan product). However, as a result of new regula-tions, we can offer IL only in a limited way, upto a maximum of 15% of total assets. As of March 2011, about 60% of our IL clients had HH incomes >Rs 120,000 per annum. We have therefore started to run down Swadhaar’s IL portfolio, reducing it from Rs 135 million as at March 2011 to Rs 68 million by March 2012. This did result in a relative deterioration in portfolio quality in % terms. Although we continue to see the need for the market to be served by IL products, we will only maintain our portfolio on a limited and compliant basis. Along with ACCION, we are examining other alternatives that would enable us to serve this market.
Second, as soon as the RBI guidelines were issued, we also enacted requisite product and process changes. Some changes were a continuation of efforts from 2010, when we had started subscribing to, and providing institu-tional data to Highmark, one of the credit bureaus and during the year also started providing data to a second one, Equifax. Some changes were new: e.g. effective June 2011, we ensured all new MF lending was subject to a check through High-mark and compliant with strictures regarding maximum indebtedness of the client and multiple lending. With an eye to cost reduction, we also consolidated our branch network (though without exiting any locations) especially in terms of administrative rationalization.
From the Managing Director
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Third, we invested in the educa-tion and empowerment of our clients, with sustainable and mutually beneficial relationships being the goal. At Swadhaar, we believe that a critical ingredient in serving the low-income client is useful and effective financial educa-tion, which enables her to make informed and appropriate choices about adoption and use of financial products, thereby increasing the overall effectiveness of financial services. For several decades now, creating access has been equated to achieving Financial Inclusion, ignoring the demand side – are the products being used effectively, are they serving clients’ needs? A combination of access to the right products and capability to effectively use them leads to the intended betterment in clients lives. For eg: loans have long been used as a surrogate for savings or insurance, with clients borrowing for life cycle events rather than saving for these or taking a loan in times of crisis where incomes or assets are affected by death, accident or disaster. Finan-cial Education empowers clients with the knowledge and understanding of the consequences of prudent versus inappropriate financial behaviour.
Our non-profit associate, Swadhaar FinAccess (SFA), provides financial education through structured modules in the communities where we operate – both to existing borrowers and to non-customers. SFA has also devised a specific module for our borrowers that focus on critical elements of good financial behaviour – e.g. provid-ing education about their rights and recourse in the event of grievances, on understanding elements of prudent borrowing and on the importance of maintaining a good credit history. Over the next year, in collaboration with SFA, this module will be introduced to all clients taking a loan. SFA is also taking a proactive approach to finan-cial information and counselling, by establishing Financial Literacy Centres
in selected communities, supplement-ing their mobile financial classes, and providing a permanent source of support for borrowers and others in the community.
The interactions with clients through financial education also help us to develop a deeper understanding of client needs and will enable the devel-opment of products that meet these.
Fourth, even in an uncertain funding environment, we were successful in raising a mix of equity and debt, thus ensuring funding sustainability. We raised Rs. 190 million from our existing investors and this was critical in being able to meet the funding requirements during the year, as bank lending opened up primarily in the last quarter of the year. ACCION International, our largest investor and technical assistance provider, supported the organization on several levels. A team of technical consultants worked collaboratively with Management on several projects during the year, including for streamlining individual lending, strengthening internal audit processes, improving MIS and laying down the requirements for a comprehensive IT infrastructure and software.
Finally, we strengthened our senior management team. Mr. Rajaram Kamath, a professional with over 22 years experience in large established corporates in the areas of consumer goods, mobile telecommuni-cations and insurance, joined our team as Chief Executive Officer. He has the full confidence of our Board, and his vision and experience will be an asset to Swadhaar in the coming years.
Swadhaar became a profitable institution in the past financial year, which was a major accom-plishment. Our investors remain committed to our mission and the changes brought in are evidence of our ability to adapt.
Indeed, crossing the hump to profit-ability is a huge milestone for us this year. And yet we remain alert and focused – for while the storm may have passed, the dust still has to settle for the microfinance landscape. As an organization, we need to position ourselves to take advantage of the evolution in the sector as it stabilizes, being ready to innovate, to adapt and to look for new opportunities. Care-ful growth, improved efficiency and the use of technology and systems to deliver constant improvements in how we serve and build relationships with our customers will be fundamental drivers in managing and succeeding in our business.
I thank the team for their hard work and contributions during the year, our Board of Directors and the senior leadership for their support, encour-agement and guidance during a turbulent year and our investors for their continued faith in our work. I reaffirm our commitment as an orga-nization to work for the benefit of our three main stakeholders – enriching the lives of our clients and of our employees, whilst providing a fair return to our shareholders.
Veena MankarManaging DirectorJune 2012
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Mission Statement
To 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 the preferred provider of microfinancial services.
Our Values
Our Values reflect who we are as an organization 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 organization, at all staff levels.
Customer FirstResponsibilityExcellenceIntegrity
Mission, Vision and Core Values
Our People
Board of Directors
Lalita D. GupteChairperson (Promoter’s Nominee)
Veena MankarManaging Director (Promoter)
Anita RamachandranIndependent Director
Siddhartha ChowdriNominee Director, ACCION International
Valérie KindtNominee Director, ACCION International
Geeta Dutta GoelNominee Director, Michael and Susan Dell Foundation
Srinivas Bhaskar RaoNominee Director, Indian Family Trust
Technical Service Provider
ACCION International
Auditors
Haribhakti & Company
Bankers / Financial Institutions
Ananya Finance for Inclusive Growth Pvt. Ltd.
AXIS Bank
Central Bank of India
HDFC Bank
Maanaveeya Holdings & Investments Pvt. Ltd.
MV Microfin Pvt. Ltd.
Ratnakar Bank Ltd.
Standard Chartered Bank
IDBI Bank Ltd.
GRUH Finance Ltd.
Senior Management Team Veena MankarManaging Director
Rajaram KamathChief Executive Officer(Seconded by ACCION International)
Abhishek Agrawal Chief Financial Officer(Seconded by ACCION International)
Soju Annie GeorgeVice President – Operations
Reena SenFinancial Consultant, Vice President – Finance Atanu BhaumikGeneral Manager – Information Technology
Sitaram PasupathyGeneral Manager – Risk and Compliance
Urmee Mehta General Manager – Strategy and Product Development
Venkateshwara PrabhuGeneral Manager – Human Resources
Swati ApteSenior Consultant
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Registered Office 5/39 Shree Om Co-op Housing Society,Anand Nagar, LIG, Nehru RoadSantacruz (E), Mumbai 400055
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Mumbai
NadiadAhmedabad
Bharuch
Vadodara
Anand
Dakor
PuneKalyan
Nashik
NavsariSurat
Thane
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Where We Work
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Effective Financial Inclusion
For several decades now, micro-finance has addressed the need for financial inclusion as one of creating ‘access’ to finance. However, is simply providing access to finance enough?
The Global Financial Inclusion (Global Findex) Database is a project by the World Bank Research Group to develop indicators that measure how people across 148 countries – includ-ing the poor, women, and rural residents – save, borrow, make pay-ments and manage risk.1 The Findex Data for India shows that only 8% of Indians (15+ years) have taken loans from formal institutions while nearly 20% have borrowed from informal sources. While customers are forced to borrow from informal sources due to the lack of access, there are many cases where they prefer to borrow from these sources despite the avail-ability of formal loans due to factors such as quick availability and flexibility. This is not limited only to credit; while 35% of the population (15+years) has savings accounts with formal institu-tions, only 12% actually save through their accounts.
“Financial inclusion goes beyond the mere availability of services to their adoption and usage.”
Some of the Challenges
There are some inherent challenges in meeting the specific needs of this client segment:
1: CashMost low-income urban households operate almost entirely in the cash economy, using cash and physical assets to meet their financial needs. These informal tools tend to be inse-cure, expensive, and hard to use, and leave households highly vulnerable. Moreover, financial institutions serving this client segment need to invest significantly in handling cash and managing cash-based transactions.
2: High Cost Low-income customers often have to travel long distances during business hours to visit financial institutions, and may have to wait in line for hours before they can be served. This leads to high transportation costs and a possible loss of income for that period of time. For financial service providers, addressing this gap through features like doorstep collections is expensive to deliver and manage.
3: IntimidationUrban low-income households have historically borrowed money from informal sources within their own community. For them, approaching large, formal sources such as banks is difficult both in terms of meeting documentation requirements, and in overcoming the intimidation of approaching such sources.
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Building a Solution
So how should financial service providers make the shift to offering products and services that clients will use, value and truly benefit from? In order to overcome the challenges mentioned above and enable effective financial inclusion in urban India, it is essential to put in place appropriate tools, processes and channels that will connect poor households to affordable and sustainable financial tools.
“In order to differentiate between ‘access to’, and ‘adoption of or usage of’ formal financial services, practi-tioners must grapple with the way that consumers actually use financial services and why.
Putting clients at the center calls for deeper insights into low-income consumers, in-cluding a better understanding of their financial priorities and preferences and the drivers of their financial behavior.”
1: Focus on the client The first step is to move clients to the center of the microfinance discourse,4 with a much greater focus on the customer – what are their needs, how is their day structured, what is the kind of product that they can really use etc. In order to move from ‘access’ to ‘use’, we would need to first deeply understand the customer and then match product features to client’s needs and their economic behaviours. “The key barrier to financial inclusion for the poor is one of design — of how financial products are created and positioned in the market, which con-sumers are targeted and how delivery channels are utilized.”5
2: TechnologyTechnology solutions like mobile banking can provide the key to creating unique solutions to serve clients specific needs. More impor-tantly, they can help reduce the cost of reaching poor people with flexible financial services by shifting majority of cash-based financial transactions into digital form. From the customer’s perspective a few characteristics that need to be considered are acces-sibility, affordability and ease of use/convenience. For the service provider, the focus should be on better use of staff time, faster loan processing, bet-ter controls, and the advantage of not handling cash. Most importantly, the solution should encourage and pro-vide users enough incentives to move away from cash, which is an incredibly versatile medium of exchange.
3: Financial LiteracyBetter product design and the availability of channels both remain incomplete without improving clients understanding of ‘when’ and ‘why’ to use financial services. Financial Literacy education plays a critical role in helping clients understand their needs and budget for them, learning to match the kind of life cycle need with the right kind of financial service product available.
1 The Global Financial Inclusion (Global Findex) Database, World Bank. Asli Demirguc-Kunt and Leora Klapper, 2012, “Measuring Financial Inclusion: The Global Findex”, World Bank Policy Research WP 6025.http://econ.worldbank.org/wbsite/external/extdec/ex-tresearch/extprograms/extfinres/extglobalfin/0,contentMDK:23147627~pagePK:64168176~piPK:64168140~theSitePK:8519639,00.html
2 Diversity Is In by Monique Cohen, May 24, 2012, http://microfinance.cgap.org/2012/05/24/diversity-is-in/#more-5200
3 Diversity Is In by Monique Cohen, May 24, 2012, http://microfinance.cgap.org/2012/05/24/diversity-is-in/#more-5200
4 Diversity Is In by Monique Cohen, May 24, 2012, http://microfinance.cgap.org/2012/05/24/diversity-is-in/#more-5200
5 From Banker to Service Designer: Changing the way we design for Financial Inclusion by Olga Morawczynski and Jan Chipchase : Friday, April 6, 2012http://microfinance.cgap.org/2012/04/06/from-banker-to-service-designer-changing-the-way-we-design-for-financial-inclusion/
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Operational & Financial Highlights
(Rs in million) Operational Performance March 2012 March 2011 March 2010 March 2009 Active Clients 72,646 56,727 27,391 8,234 Joint Liability Group Loan 68,737 47,351 23,585 7,097 Individual Business Loan 3,909 9,376 3,806 1,137 Active Managed Clients - Sold Out Off Balance Sheet Portfolio 7,555 – – – Joint Liability Group Loan 5,984 – – – Individual Business Loan 1,571 – – – Total Active Clients 80,201 56,727 27,391 8,234 (Owned + Managed-Sold Out Portfolio)
Owned - On Balance Sheet Portfolio 711.78 504.05 195.64 56.62 Joint Liability Group Loan 661.51 368.11 144.86 40.10 Individual Business Loan 50.27 135.93 50.78 16.52 Managed - Sold Out Off Balance Sheet Portfolio 74.26 – – – Joint Liability Group Loan 55.80 – – – Individual Business Loan 18.46 – – – Total Outstanding Portfolio (Owned + Managed-Sold Out Portfolio) 786.04 504.05 195.64 56.62 Portfolio in Arrears > 30 days (%) - Gross 2.15% 1.09% 0.91% 1.08% Joint Liability Group Loan 1.45% 0.55% 0.62% 0.39% Individual Business Loan 11.34% 2.56% 1.75% 2.75% Portfolio in Arrears > 30 days (%) - Net of 100% provision for loans more than 181 days old 1.43% 1.09% 0.91% 1.08% Joint Liability Group Loan 1.04% 0.55% 0.62% 0.39% Individual Business Loan 6.76% 2.56% 1.75% 2.75% Total Number of Employees 425 425 328 174Loan Officers 252 254 144 54 Financial Highlights (In Rupees) March 2012 March 2011 March 2010 March 2009 Total Operating and Other Income 191,819,199 115,756,813 39,258,861 11,535,282 Cash Profit (Operating Profit + Depreciation + Provision for Loan Loss) 24,439,130 (18,769,497) (36,326,642) (19,985,891) Net Profit / (Loss) after Depreciation and Provision. 6,555,035 (29,404,677) (40,981,507) (26,043,686) All numbers as on 31st March for each Year.
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Balance Sheet March 2012 March 2011 March 2010 March 2009 Liabilities Share Capital 467,602,880 337,202,500 173,524,240 120,000,000 Reserves & Surplus (Incl Share Premium) (38,480,701) (81,576,205) (66,329,590) (26,964,767) Net Worth 429,122,179 255,626,295 107,194,650 93,035,233Other Liabilities 417,921,230 389,254,734 162,966,090 13,764,606 Total Liabilities 847,043,409 644,881,029 270,160,740 106,799,839 Assets Portfolio - Gross 711,778,249 504,047,112 195,640,261 56,638,507 Loan Loss Provision (Prov on Standard Assets) 11,493,750 3,223,044 524,256 352,535 Net Portfolio 700,284,499 500,824,068 195,116,005 56,285,972 Other Assets 146,758,909 144,056,961 75,044,736 50,513,867 Total Assets 847,043,409 644,881,029 270,160,740 106,799,839 Ratios Financial Efficiency March 2012 March 2011 March 2010 March 2009Cost per Borrower (In Rupees) = Operating Expenses/Avg Number of Active Borrowers 2,691 3,382 4,387 7,797 Operational Self-Sufficiency = Total Operating Income/Total Operating Expenses 104.11% 81.37% 50.24% 35.93%Debt Equity Ratio = Total liability excl. provisions/Net Equity 0.96 1.51 1.50 0.15 Capital Adequacy Ratio = (TIER I Capital + TIER II Capital)/Risk weighted assets) 58.08% 47.90% 50.79% 131.95% Personnel Efficiency March 2012 March 2011 March 2010 March 2009Number of Active Loan Clients per Loan Officer = Number of Active Loan Clients/ Total Loan Officers 318 223 190 142 Joint Group Loan 456 346 291 NA Individual Business Loan 62 80 60 NA Loan officers as % of total staff 59.29% 59.76% 43.90% 31.03% Portfolio Quality March 2012 March 2011 March 2010 March 2009 Loan Loss Rate = Amt of Loans Written Off/ Avg Outstanding Portfolio 1.41% 1.44% 1.89% 0.40%Portfolio in Arrears > 30 days = Amount Past Due > 30 Days/ Outstanding Portolio 2.15% 1.09% 0.91% 1.08%Portfolio in Arrears > 30 days – Net of 100% provision for loans more than 181 days old. = Amount Past Due > 30 Days (net of 100% provisioning on 181 days)/(Outstanding Portolio- portoflio more than 181 days old, 100% provided for) 1.43% 1.09% 0.91% 1.08% *In the year ending 31st March 2012, loans outstanding to Rs 5,204,852 has been provided for 100% provided for, but not written off from the outstanding portfolio. All numbers as on 31st March for each Year.
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Company Growth
March 2009 March 2010 March 2011 March 2012
Active Clients 8,234 27,391 56,727 80,201
Outstanding Portfolio (Rs in million) 56.62 195.64 504.05 786.04
PAR > 30 days (%) 1.08% 0.91% 1.09% 2.15%
OSS Ratio (%) 35.93 50.24 81.37 104.11%
Field Staff 54 144 254 252
Other Staff 122 184 171 173
Total Staff 176 328 425 425
Total Income (Rs in million) 11.53 39.26 115.76 191.82
Net Profit (Rs in million) -26.04 -40.98 -29.40 6.56
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Employee Initiatives
‘Milaap’Swadhaar strongly believes its employees are its greatest assets. In order to build a stronger relationship with employees and give their families a better understanding of their work, Swadhaar launched the ‘Milaap’ initiative. As a part of this, an event is organized at each branch where all employees’ families are invited. A small presentation is made to the families, followed by an interaction between the mentor and families. This gives them a chance to see where their family members work, and also understand more about the company and their career paths. The program has been well received by employees and their families.
Opposite Page Pictures 1– 4: Swadhaar Management Staff at a 4 day residential training programme at the Pegasus Institute, Lonavla, Maharashtra.
Pegasus/Leadership ProgrammeAs a first event of its kind in Swadhaar, a leadership retreat was organized in November 2011, and a team of 24 core management staff was nominated for a residential training program. The intensive four day program focused on team building, soft skills development, and personality assessments. It was a great opportunity for the management team to spend quality time together, learn more about each other and un-derstand how to work better together as a team.
MentoringTo increase the understanding of field operations amongst the senior management staff, and create strong linkages between the Head Office and branches, Swadhaar launched a mentoring program in August 2011. As a part of this program, 10–15 senior managers are appointed as mentors for all Swadhaar branches. The mentors must visit their assigned branches at least once a month, and also meet clients in the field at each visit. The mentors also become additional resources for the branches in case of any problems, and they form a strong channel to communicate any messages to the field staff.
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“Swadhaar will always remain close to my heart. I got the loan when I was in dire need of money. Swadhaar has helped me in expanding my business and I am glad that I can contribute to my grandson’s education.”
General Store Owner
Client: Jahera Mohammed Ibrahim Sheikh
Age: 54 years
Business: General Store Owner
Family: Son, Daughter-in-law and Grandson
Loans with Swadhaar: 1st Loan Cycle (2007)– Rs. 3,0005th Loan Cycle (Current)– Rs. 19,000
Business need: To buy inventory for her store and to contribute to her grandson’s school expenses. The loan has helped Jahera to stock a wider variety of products in her store, and she has now expanded her business to also sell vegetables. This has helped to increase her monthly profit from Rs. 10,000 to Rs. 15,000.
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“Swadhaar enables women to invest in their businesses. Not many people believe that women are capable of running a successful business.”
Vegetable Vendor
Client: Vandana Rajaram Satam
Age: 52 years
Business: Vegetable Vendor
Family: Son, Daughter-in-law and two Grandchildren
Loans with Swadhaar: 1st Loan Cycle (2007)– Rs. 9,0005th Loan Cycle (Current)– Rs. 21,000Also received a Top Up loan– Rs. 5,000
Business need: The loans have helped her to buy vegetables in bulk from Vashi in New Bombay where they are cheaper and then sell them in Malad, which is where she stays. Her monthly profit has increased from Rs. 9,000 to Rs. 15,000.
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“What I really like about Swadhaar is that everything is done on time. The disbursements are done on time and loan officers give us a loan repayment schedule so we know exactly how much we have to pay every month.”
Tailoring Workshop
Client: Shankar Shivram Shinde
Age: 38 years
Business: Tailoring Workshop
Family: Wife and two Daughters
Loans with Swadhaar: 1st Loan Cycle (2008)– Rs. 20,0004th Loan Cycle (Current)– Rs. 25,000
Business need: To buy things like cloth, hangers, stationary etc for his tailoring work-shop. Shankar has used the current loan amount to buy a new sewing machine for his workshop. His profit per month prior to taking the loan was around Rs. 10,000 – 12,000 and has now increased substantially. He now earns Rs. 20,000 per month.
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“I have been taking a loan from Swadhaar since the last five years and have never had any problems. After being associated with Swadhaar I don’t need to depend on anyone for money. The loan officers are very helpful and they are like my family now.”
Bead work and hand embroidery
Client: Ishratjahan Khan
Age: 39 years
Business: Bead work and hand embroidery
Family: Husband and three Children Loans with Swadhaar: 1st Loan Cycle (2007)– Rs. 5,0005th Loan Cycle (Current)– Rs.19,000
Business need: The loans have helped Ishratjahan source material for her work. She helps her husband with his business as well, and plans to use the current loan amount to help him buy a sewing machine. Her profit per month has increased form Rs. 1,000 to Rs. 2,500.
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Directors’ Report
Dear Members,
Your Directors are pleased to present before you the Fifth Annual Report on the business and operations of the company, along with the audited Balance Sheet as at March 31st, 2012 and the Profit and Loss Account for the year ended March 31st, 2012.
The year 2011–12 was the fifth year of operations for Swadhaar FinServe Private Limited (Swadhaar), and the company recorded a growth of 41% in its active clients, and 56% in its outstanding portfolio. As on March 31st, 2012 Swadhaar had 80,201 active clients as compared to 56,727 on March 31st, 2011. Over the same period, the company’s outstanding portfolio grew from Rs 504 million to Rs 786 million. The company took a step towards sustainability with month-on-month profit being recorded for the year; a significant achievement in a year when growth was inhibited by several external factors.
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1. FINANCIALS
1.1 RESULTS
(Amount in Rupees)
Results As at 31st Mar 2012 As at 31st Mar 2011
Operational Income (Net of Service Tax) 179,173,421 111,825,951
Other Income 12,645,778 3,930,862
(A) Total Income 191,819,199 115,756,813
Personnel Expenses 86,631,925 69,277,725
Administrative and Financial Expenses 80,748,144 65,248,585
Loan Loss Prov. & Write off 16,860,810 7,731,819
Depreciation and Amortization 4,223,933 4,014,954
(B) Total Expenses 188,464,812 146,273,083
(C) Profit / (Loss) for the year (A-B) 3,354,387 (30,516,270)
(D) Deferred Tax Adjustment (Asset) & Prior Period Expenses (3,200,648) (1,111,593)
Excess of Total Income over Expenditure (C+D) 6,555,035 (29,404,677)
Transfer to Statutory Reserves (As per RBI guidelines) (1,311,007) –
Balance brought forward from the previous year (81,576,206) (67,946,274)
Statutory Reserves 1,311,007* –
Share Premium 36,540,469 15,774,745
Balance carried to Balance Sheet (38,480,702) (81,576,206) *An amount of Rs. 1,311,007/- (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.
1.2 PERFORMANCE RATIOS Financial Efficiency As at 31st Mar 2012 As at 31st Mar 2011Operational Self-Sufficiency = Total Operating Income/ Total Operating Expenses 104.11% 81.37% Total Operating Cost Ratio (Annualized) = Total Operating Expenses/ Avg Outstanding Portfolio 30.31% 40.66% Yield on Portfolio (Annualized) = Income from Portfolio/ Avg Outstanding Portfolio 29.47% 31.96% Personnel Efficiency As at 31st Mar 2012 As at 31st Mar 2011 Number of Active Loan Clients per Loan Officer= Number of Active Loan Clients/ Total Loan Officers 318 223 Loan officers as % of total staff 59.29% 59.76% Portfolio Quality As at 31st Mar 2012 As at 31st Mar 2011 Loan Loss Rate = Amt of Loans Written Off/ Avg Outstanding Portfolio 1.41% 1.44% Portfolio in Arrears > 30 days= Amount Past Due > 30 Days/ Outstanding Portfolio 2.15% 1.09%Portfolio in Arrears > 30 days - Net of 100% provision for loans more than 181 days old.= Amount Past Due > 30 Days (net of 100% provisioning on 181 days)/ (Outstanding Portfolio–portfolio more than 181 days old, 100% provided for) 1.43% 1.09% *In the year ending 31st March 2012, loans outstanding of Rs 5,204,852 have been 100% provided for but not written off from the outstanding portfolio. 1.3 SHARE CAPITAL During the year, the authorised share capital of the Company was increased from Rs 500,000,000 (Rupees Five Hundred Million) to Rs 750,000,000 (Rupees Seven Hundred Fifty Million only). Further the Company issued 14,679,913 Equity Shares of Face Value Rs. 10/- Each, at a premium of Re 3/- per share. The total capital raised by the share issue was Rs. 19 million. Please refer to the table below for the shareholding pattern as on 31st March 2012: Name Of Shareholder Total No. of Shares PercentagePromoters & Promoters’ Family & Friends 3,060,424 5.92%Accion Africa Asia Investment Company* 19,650,000 38.02%Michael & Susan Dell Foundation 6,452,250 12.49%Mauritius Unitus Corporation 2,312,500 4.47%M V Mauritius Limited 8,325,114 16.11%Indian Family Trust 6,960,000 13.47%Swadhaar FinServe Employee Welfare Trust 4,919,625 9.52%Total 51,679,913 100.00% *This is the investment vehicle through which ACCION International has invested in Swadhaar.
2. OPERATIONS DURING THE YEARSwadhaar closed business for its fifth year of operations on the 31st of March 2012 with 80,201 active clients and an outstanding portfolio of Rs. 786 million.
2.1 LOAN PRODUCTSThe Company offers three loan products and credit-linked life insurance to its clients. Please find below a description of all the products:
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Individual Loan with a Joint Liability (JLG) - SWAHITSwadhaar’s Individual Loan with a Joint Liability (JLG) is a loan offered to women in low-income urban households. The women cross guarantee individual loans for each of two to four other group members. Swadhaar’s target JLG Loan clients include women who own small businesses, work on a commission basis, work as salaried workers or in home-based enter-prises, such as tailoring, beadwork or imitation jewelry. Loan amounts range from Rs. 6,000 to Rs. 34,000.
Top Up Loan (TL)The Top up Loan is a group loan product that is designed to provide supplementary finance to existing clients. It is offered to all Swahit clients with good repayment behaviour to meet mid-term requirements of cash flow to augment their business needs. Loan amounts range from Rs 2,000 to Rs 5,000.
Individual Business Loan (IBL) - SWAYOGSwadhaar’s Individual Business Loan (IBL) is an unsecured working capital loan intended for male and female micro entrepreneurs with businesses including food stalls, small retail stores or “tiffin” services for office goers. A capacity-based lending approach is followed, whereby a thorough evaluation of both the client’s willingness and capacity to repay are taken into account. Loans range from Rs 15,000 to Rs 75,000 and may be used for such purposes as working capital or business expansion.
Swadhaar’s IBL is a part of its non-compliant portfolio, as mandated in the Reserve Bank of India (RBI) regulations. The company is reducing its Individual Loan portfolio to comply with the regulations. The available resources were used for an intensive efficiency study of the IBL processes and a segmentation study of clients that are currently served through the loan.
Credit-linked Life Insurance Clients of both loan products, the Joint Liability Group (JLG) Loan and Individual Business Loan (IBL) are insured through a partner Life Insurance Company for a sum equal to their loan amount. In the event of death, their nominee is entitled to receive the principal amount already repaid by the client. As an added benefit, clients’ spouses are also insured up to a certain limit.
2.2 OUTREACH Swadhaar recorded modest growth in the past year, which came about in a challenging climate in the microfinance sector. In March 2012, the company had a total of 39 branches in Maharashtra and Gujarat, with an outstanding portfolio of Rs.786 million covering 80,201 clients.
As at March 31st 2012 JLG Loans IBL Loans Total (Including Top Up Loans) Number of active clients 74,721 5,480 80,201Outstanding Loan Portfolio (In Rupees ) 717,310,792 68,729,206 786,039,999Number of Loan Officers 164 88 252Number of Outlets 26 13 39
The outstanding portfolio includes Rs. 55,803,885 for 5,984 Joint Liability loan clients and Rs. 18,457,865 for 1,571 Individial Loan clients; sold off to
Financial Institutions and managed for collections on their behalf.
2.3 INTERNAL AUDITSwadhaar’s Internal Audit Department serves as an important source of internal control. It provides an independent appraisal of all Swadhaar’s activities with an aim to ensure compliance with various legal aspects and the company’s internal policies & procedures. In addition, the department’s objective is to add value and improve the company’s operational efficiency and its systems of internal controls. Branch & field audits are conducted regularly, on a quarterly basis. The Department also conducts “Management Audits” of other departments such as Human Resources, Compliance, Accounts and Finance and provides critical inputs.
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The Internal Audit Department places its summarized results of audit activities and findings at regular intervals before the Audit Committee of the Board and Managing Director, and follows up with the concerned departments for timely resolution of pending tasks.
2.4 RISK MANAGEMENTKeeping in mind the need for an independent department to oversee the organization wide risk, a new Risk Management Department was formed during the year, under the charge of a ‘General Manager’. The role of the department is primarily to identify critical areas to which the company is exposed and suggest measures to improve control and monitoring mechanisms. Through this the company aims to work towards mitigating the risks faced by it, particularly operational risks.
Swadhaar has had some instances of fraud in the last year. Detailed investigations have been conducted for each case and the strictest actions have been taken against those involved, including criminal cases filed which are being legally pur-sued. The primary objective was to ensure that both the clients’ and Company’s rights and interests remain safeguarded. Swadhaar has also done a detailed review of each instance to identify areas for improvement and process strengthening.
2.5 DATA SHARING WITH CREDIT BUREAUSIn order to address client over-indebtedness and build a strong appraisal capacity for potential clients, Swadhaar reports all its client data to two credit bureaus. It has been sharing its client information with the Credit Information Bureau (India) Limited (CIBIL) since June 2010 and with the Highmark Credit Bureau since January 2011. Swadhaar now also reports its data to the Equifax Credit Bureau.
2.6 CUSTOMER PROTECTION In November 2011, Swadhaar underwent its second Smart Campaign Assessment. The Smart Campaign is a global effort to unite microfinance leaders around a common goal: to keep clients as the driving force of the industry. The Campaign was formed to bring people together across microfinance to implement a common code of conduct that governs how clients should be treated and to help implement client protection safeguards within the industry’s operations. The Smart Campaign is housed at ACCION International’s Center for Financial Inclusion.
The Smart Campaign team evaluated Swadhaar’s operations, processes and policies on the basis of seven Client Protection Principles. Swadhaar’s assessment was ‘generally favorable’ with a score of ‘adequate to more than adequate’ on 5 of the 7 principles.
As part of a customer protection initiative to improve communication to clients and introduce a basic financial literacy module as a part of the loan process, Swadhaar has piloted an initiative to introduce a compulsory financial education module for all its clients. This initiative has been undertaken in partnership with Swadhaar FinAccess (SFA), and will be rolled out across all Joint Liability Group Branches.
2.7 HUMAN RESOURCESStaffSwadhaar has always placed its employees first and considers them one of the Company’s most valuable assets. As of March 31, 2012, it had a staff of 425, including 362 branch and regional staff members, a head office staff of 49 and Hub staff of 14.
Performance Management System and Career PlanningSwadhaar has put in place a well-defined Performance Management System (PMS) to assess all departments and employees annually on the basis of Key Result Areas (KRAs). An institution-wide exercise was conducted in the last quarter of 2011-12 to define and document KRAs for all departments based on the organization’s goals over the next financial year. The departments KRAs were then translated into individual KRAs for each team member. The criteria for annual performance evaluation were further defined in relation to the KRAs and were communicated to each employee at the beginning of the financial year.
Special attention is given to career planning for all Swadhaar staff, especially at the field level. Clear career paths are communicated to employees, and they are encouraged to pursue special skills / educational training to enable them to move up their career path.
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TrainingSwadhaar gives importance to providing regular internal training to its employees, and additionally encourages them to enhance their knowledge and skills by attending external training courses. New staff at all levels undergo an induction-training programme that includes field visits, along with rigorous training on their responsibility areas. Refresher trainings are organized at regular intervals to take into account any changes in policies and processes.
In March 2012, a management offsite was organized for a period of two days. As a part of this workshop, the organiza-tion’s primary goals for the next financial year were identified, and a strategic plan was drawn up to arrive at action items for each department.
In the past year, Swadhaar also organized two TOTs (Training of Trainers) for its management staff in collaboration with ACCION. These focused on the delivery of soft skills trainings and capacity building. Of these, one training was conduct-ed at an industry level, with two of Swadhaar’s managers nominated along with other MFIs. The second training was an intensive 3 day workshop conducted exclusively for Swadhaar staff.
2.8 MEMBERSHIP WITH INDUSTRY ASSOCIATIONSIn response to the sector crisis, the role of Industry associations like Micro Finance Institutions Network (MFIN), and Sa-dhan has become particularly important over the last year. Swadhaar’s senior management has been closely involved in these industry efforts and will continue to do so over the coming year. Swadhaar complies with all requirements of the MFIN- Sadhan Common Code of Conduct, and has made internal changes to its processes wherever required.
Swadhaar’s Managing Director, Mrs. Veena Mankar, was elected to the Sa-dhan Board of Directors as a member during the year.
3. BANKERS AND LENDERSSwadhaar has drawn term loan facilities for on-lending purposes from Ananya Finance for inclusive growth Pvt. Ltd., Axis Bank Ltd., Central Bank of India, HDFC Bank Ltd., Maanaveeya Development & Finance Pvt. Ltd., MV Microfin Pvt. Ltd., Standard Chartered Bank, Ratnakar Bank Limited, IDBI Bank Limited and GRUH Finance Limited. Swadhaar has met all its commitments towards repayment of interest and principal installments to its lenders despite the adverse market conditions, regulatory constraints and difficulty in availing fresh loans. The company has banking relationships with Axis Bank Ltd, Bank of Baroda, Central Bank of India, Development Credit Bank, HDFC Bank Ltd. Standard Chartered Bank, Ratnakar Bank Limited and IDBI Bank Limited. HDFC Bank Ltd is its main banker.
4. EMPLOYEE STOCK OPTION SCHEME 2011 AND ASSOCIATE STOCK OPTION SCHEME 2011 The Company has an Employee Welfare Trust set up to manage and implement the Employee Stock Option (ESOP) Scheme. The purpose of the scheme is to provide employees with ownership in the organization and participate in the value creation as the company grows. During the year under review the Company granted options under the Employee Stock Option Scheme 2011. These were done both as a top-up to employees with existing ESOPs and as a first time allotment to employees who completed one year in the organization as on 31st March, 2012. The information pertaining to these is contained in the Notes to Accounts.
5. REGISTRAR AND TRANSFER AGENTTSR Darashaw Limited are the Registrar & Transfer Agent (RTA) for the Company. Their address and contact details are as mentioned below:
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TSR DARASHAW LIMITED6-10 Haji Moosa Patrawala Industrial Estate20, Dr. E. Moses Road, MahalaxmiMumbai – 400 011
6. STATUTORY DISCLOSURESThe information required under Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Em-ployees) 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 par-ticulars 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.
7. BOARD OF DIRECTORSThe Board of Directors of the company met Eight (8) times during the year. Name of Director/ Designation No. of meetings eligible Meetings attended to attendMs. Lalita D. Gupte, Chairperson 8 6Ms. Veena Mankar, Managing Director 8 8Ms. Anita Ramchandran, Independent Director 8 7Ms. Geeta Dutta Goel, Nominee Director 8 6Mr. Siddhartha Chowdri, Nominee Director 8 8Mr. Srinivas Rao, Nominee Director 8 8Ms.Valérie Kindt, Nominee Director 8 2
There are three Committees of the Board:1. The Audit Committee met six times during the year and constitutes the following Directors: Ms. Geeta Dutta Goel, Mr.Srinivas Rao, Mr.Siddhartha Chowdri and Ms. Anita Ramchandran 2. The Finance Committee met three times during the year and constitutes the following Directors: Ms. Lalita D Gupte, Ms. Veena Mankar, Ms. Anita Ramchandran and Mr. Srinivas Rao 3. The Compensation Committee met two times during the year and constitutes the following Directors: Ms. Lalita D Gupte, Ms. Anita Ramchandran and Mr. Srinivas Rao 8. 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;
– That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act 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.
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9. ACKNOWLEDGEMENTSThe Directors wish to thank all the staff for their commitment and hard work. 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,5/39 Shree Om Co-op Housing SocietyAnang Nagar, LIG, Nehru Road Lalita D. Gupte Anita Ramachandran Santacruz (E), Mumbai 400 055 Chairperson Director Date: June 28th, 2012
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Auditors’ Report
To The Members of Swadhaar FinServe Private Limited
1. We have audited the attached Balance Sheet of Swadhaar FinServe Private Ltd (‘the Company’) as at March 31, 2012 and also the Statement of Profit and Loss and the Cash Flow statement for the year ended on that date annexed there-to. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
2. We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
3. As required by the Companies (Auditor’s Report) Order, 2003, (as amended), issued by the Central Government of India in terms of sub-section (4A) of Section 227 of ‘The Companies Act, 1956’ of India (the ‘Act’) and on the basis of such checks of the books and records of the company as we considered appropriate and according to the information and explanations given to us, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.
4. Further to our comments in the paragraph 3 above, we report that: i. We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary
for the purposes of our audit; ii. 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 and proper returns adequate for the purposes of our audit have been received from branches not visited by us.
iii. 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
iv. In our opinion, the balance sheet, statement of profit and loss and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956.
v. On the basis of the written representations received from the directors, as on March 31, 2012, and taken on record by the Board of Directors, we report that none of the directors is disqualified as on March 31, 2012 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.
vi. In our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, 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, 2012; 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 cash flow statement, of the cash flows for the year ended on that date.
For Haribhakti & Co.Chartered Accountants Firm Registration No.103523W
Rakesh RathiPartnerMembership No. 45228
Place : MumbaiJune 21, 2012
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Annexure To Auditors’ Report
Referred to in paragraph 3 of the Auditors’ Report of even date to the members of Swadhaar FinServe Private Limited on the financial statements for the year ended 31st March, 2012
i. a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
b) All the fixed assets have not been physically verified by the management during the year but there is a regular programme of verification which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. As informed, no material discrepancies were noticed on such verification.
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. According to the information and explanation given by the management, the Company does not have any inventory therefore clause (ii) of paragraph 4 of the Companies (Auditor’s Report) Order 2003, as amended by the Companies (Auditor’s Report) (Amendment) Order 2004 is not applicable to the Company for the current year.
iii. a) As informed, the Company has granted unsecured loan to Swadhaar Employee Welfare Trust, covered in the register maintained under section 301 of the Companies Act, 1956.
b) In our opinion and according to the information and explanations given to us, the terms and conditions for such loans are not, prima facie, prejudicial to the interest of the Company.
c) This Provision stated is not applicable to the company d) This Provision stated is not applicable to the company e) As informed, the Company has not taken any loans, secured or unsecured from 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)(f)and (g) 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 inventory, fixed assets and with regard to the sale of goods and services. During the course of our audit, we have not observed any continuing failure to correct 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) In our opinion and according to the information and explanations given to us, the transactions made in pursuance of such contracts or arrangements exceeding value of Rs. five lakhs have been entered into during the financial year at prices which are reasonable having regard to the prevailing market prices at the relevant time.
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. Since the company is engaged in service sector, clause 4(viii) of the Companies (Auditor’s Report) Order, 2003 (as amended) are not applicable to the Company.
ix. a) The Company is regular in depositing with appropriate authorities undisputed statutory dues including provident fund, employees’ state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues except applicable to it. The company is regular in depositing profession tax except in one branch on a few occasions.
b) According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, investor education and protection fund, employees’ state insurance, income-tax, wealth-tax, service tax, sales-tax, customs duty, excise duty, 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.
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c) According to the information and explanation given to us, there are no dues of income tax, sales-tax, wealth tax, ser-vice tax, customs duty, excise duty and cess which have not been deposited on account of any dispute.
x. As the company is registered for a period less than five years, clause (x) of paragraph 4 of the Companies (Auditor’s Report) Order, 2003, as amended by the Companies (Auditor’s Report) (Amendment) Order, 2004, is not applicable to the company for the current year.
xi. In our opinion and according to the information and explanations given to us, the Company has not defaulted in repay-ment 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.
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.
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, no debentures have been issued by the company during the year.
xx. The Company has not raised money by way of public issue during the year.
xxi. According to the explanation and information given to us, eight instances of fraud, amounting to Rs 166,672 (of which Rs 90,362 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. There are seven other suspected cases of fraud, which are under investigation; the management till date is in the process of concluding on the amount. In the opinion of the management the amount of loss would be Rs 3,337,351 of which Rs 1,588,068 has been provided in the books. Further a claim of Rs 1,495,000 has been lodged with the insurance agency.
For Haribhakti & Co.Chartered AccountantsFirm Registration No.103523W____________________Rakesh RathiPartnerMembership No. 45228Place: MumbaiJune 21, 2012
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Financials
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SWADHAAR FINSERVE PRIVATE LIMITEDBALANCE SHEET AS AT 31st MARCH 2012 (Amount in Rupees) Particulars Note No. As at 31st March, 2012 As at 31st March, 2011I. EQUITY AND LIABILITIES 1 Shareholders’ funds
a. Share capital 3 467,602,880 337,202,500 b. Reserves and surplus 4 (38,480,701) (81,576,205)
2 Non-current liabilities a. Long-term borrowings 5 317,013,839 198,958,333 b. Deferred tax liabilities (Net) 11 – – c. Other Long term liabilities – – d. Long-term provisions 6 2,187,015 1,818,028
3 Current liabilities a. Short-term borrowings – – b. Trade payables – – c. Other current liabilities 7 95,531,355 186,976,995 d. Short-term provisions 8 14,682,771 4,724,422
TOTAL 858,537,158 648,104,073 II. ASSETS 1 Non-current assets
a. Fixed assets 10,298,582 12,906,649 Tangible assets 9 8,619,555 10,849,524 Intangible assets 9 1,679,027 2,057,125
b. Non-current investments 10 546,559 546,559 c. Deferred tax assets (net) 11 4,820,026 1,619,378 d. Long Term Loans and Advances 413,596,259 201,329,042
Loans under financing activity 13 404,764,926 192,994,182 Others 12 8,831,333 8,334,860
e. Other non current Assets (deposits under lien with banks) 14 26,996,835 15,000,000 2 Current assets
a. Cash and Bank balances 15 88,922,319 96,172,310 b. Short-term loans and advances 309,648,048 312,796,992
Loans under financing activity 13 307,013,323 311,052,930 Others 16 2,634,725 1,744,062
c. Other current assets 17 3,708,529 7,733,144 TOTAL 858,537,158 648,104,073 Significant Accounting Policies & Notes to Accounts referred to above form an integral part of financial statements. As per Our Attached Report of Even Date For and on behalf of the Board of For Haribhakti & Co Swadhaar FinServe Pvt Ltd Chartered Accountants Rakesh Rathi Lalita D Gupte Veena Mankar Partner Chairperson Managing Director Mumbai, INDIA Boston, USA June 28th 2012 June 21st 2012 Place : Mumbai, INDIA Anshu Mundhra Date : June 28th 2012 Company Secretary
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SWADHAAR FINSERVE PRIVATE LIMITED STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31 MARCH 2012 (Amount in Rupees) Particulars Note No. As at 31st March, 2012 As at 31st March, 2011I Revenue from operations 18 179,173,421 111,825,951 II Other income 19 12,645,778 3,930,862 III Total Revenue (I + II) 191,819,199 115,756,813 IV Expenses: Employee benefits expense 20 86,631,925 69,277,725 Finance costs 21 41,130,736 25,191,093 Depreciation and amortization expense 9 4,223,933 4,014,954 Loan Loss Provisions 22 16,860,810 7,731,819 Other expenses 23 39,617,408 40,057,492 Total Expenses 188,464,812 146,273,083
V Profit before exceptional and extraordinary items 3,354,387 (30,516,270) and tax (III-IV) VI Tax expense: 1. Current tax – – 2. Deferred tax 11 (3,200,648) (1,111,593) VII Profit (Loss) for the period from continuing 6,555,035 (29,404,677)
operations (V-VI) VIIIProfit (Loss) for the period 6,555,035 (29,404,677) IX Earnings per equity share: 24 Basic and Diluted Earning Per Share 0.16 (1.00)
(Face Value of Rs. 10 each) Significant Accounting Policies & Notes to Accounts referred to above form an integral part of the financial statements.
As per Our Attached Report of Even Date For and on behalf of the Board of For Haribhakti & Co Swadhaar FinServe Pvt Ltd Chartered Accountants Rakesh Rathi Lalita D Gupte Veena Mankar Partner Chairperson Managing Director Mumbai, INDIA Boston, USA June 28th 2012 June 21st 2012 Place : Mumbai, INDIA Anshu Mundhra Date : June 28th 2012 Company Secretary
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SWADHAAR FINSERVE PRIVATE LIMITED STATEMENT OF CASH FLOW FOR THE YEAR ENDED 31 MARCH 2012 (Amount in Rupees) Particulars As at 31st March, 2012 As at 31st March, 2011 Cash Flows from Operating Activities Net Profit before Taxes 3,354,387 (30,516,270)+ Depreciation and amortization 4,223,933 4,014,954 + Loss on assets 168,737 –+ Net Prior Period Income – – + (Increase)/Decrease in Net Loan Portfolio (207,731,137) (308,406,851)+ (Increase)/Decrease in other current assets 9,982,370 (9,460,144)+ Increase/(Decrease) in other current liabilities (30,080,578) 76,918,098 Cash generated from Operating Activities (220,082,289) (267,450,213) Net Cash from Operating Activities (220,082,289) (267,450,213) Cash Flows from Investing Activities (Increase)/Decrease in long-term invest. – (541,559) (Increase)/Decrease in Fixed assets (1,784,602) (8,072,101) Net Cash from Investing Activities (1,784,602) (8,613,660) Cash Flows from Financing Activities + Receipt of Term Loan 170,000,000 243,700,100 - Term Loan repayment (110,546,079) (92,056,237)+ Increase/(Decrease) in Equity (Net of EWT) 130,400,380 163,678,260 + Share Premium (Net of EWT) 36,540,469 14,158,061 Net Cash from Financing Activities 226,394,770 329,480,184
Net change in cash and due from banks 4,527,880 53,416,311 Cash & Cash Equivalents at the beginning of the year 110,878,636 57,462,325 Cash & Cash Equivalents at the end of the year 115,406,515 110,878,636 Cash in hand 4,658,101 1,959,015 Balance at Bank 110,748,414 108,919,620 115,406,515 110,878,636 As per Our Attached Report of Even Date For and on behalf of the Board of For Haribhakti & Co Swadhaar FinServe Pvt Ltd Chartered Accountants Rakesh Rathi Lalita D Gupte Veena Mankar Partner Chairperson Managing Director Mumbai, INDIA Boston, USA June 28th 2012 June 21st 2012 Place : Mumbai, INDIA Anshu Mundhra Date : June 28th 2012 Company Secretary
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SWADHAAR FINSERVE PRIVATE LIMITEDSIGNIFICANT ACCOUNTING POLICIES AND NOTES TO ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2012:
NOTE 1 : NATURE OF BUSINESS:
The Company is Non-banking Financial Company (NBFC) 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 9th May 2008, enabling the Company to carry on business as a Non-banking Financial Company. It has applied to RBI for reclassification as a NBFC - MFI.
NOTE 2 : SIGNIFICANT ACCOUNTING POLICIES:
1.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.
2.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 recognized in the period in which the results are known / materialized.
3.Revenue Recognition:a. Interest income is recognized 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 recognized on receipt basis, as per Company Provisioning Policy.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. Collection charges are recognised on date of installment. Company has stopped collecting collection charges on Joint
Liability Group loans from June’2011, as per RBI guidelines. d. 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.
4.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 capitalized 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 Rs. 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.c) Fixed Assets purchased from Swadhaar FinAccess are depreciated over a period of 4 years.
5. Intangible Assets & Amortization:Expenses incurred on Computer Software having enduring benefits are capitalized 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 “Swad-haar” and Logo in perpetuity from Swadhaar FinAccess, having enduring benefits, are capitalized as an intangible asset with an amortization period of 5 years on straight line basis.
6. 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.
40
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.
7. Employee Benefits:Short term employee benefits Short term employees’ benefits are recognized 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 benefitsa) Provident Fund:In accordance with law, all employees of the Company are entitled to receive benefits under the provident fund. The Com-pany 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 ac-crual basis.
b) 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 unrecognized actuarial gain or losses and the past service costs. The defined benefit obligation is calcu-lated at or near the balance sheet date by an independent actuary. Based on actuarial calculations, which include assump-tions about demographics, early retirement, salary increases and interest rates, actuarial gain or loss is recognized in the Profit and Loss Account.
c) Leave Encashment:Leave encashment is in the nature of short term benefit. It is calculated based on unutilized leave available to the employ-ees as at the Balance Sheet date by an independent actuary.
Every confirmed employee/ full time consultant is entitled to 12 working day’s earned or privileged leave in a year. Earn Leave will be credited to an employee’s leave account on 1st January for the service put in by him during the previous calendar year. Earned or Privilege Leave (EL) can be accumulated for a maximum of 2 years (i.e. maximum of 24 EL can be accumulated). Accumulated EL over and above 24 days can be en-cashed at the rate of basic pay drawn as on 31st of March or as per the last basic pay drawn at the time of final settlement in case of resignation / retirement / termination.
8. 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 period).
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.
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/virtu-ally certain (as the case may be) to be realised.
9. Operating Leases:Lease payments in respect of operating lease are recognized 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.
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10. 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 prob-ably 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 prob-able 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.
11. 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 as-set 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.
12. 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 profit and loss account on incurrence.
13. 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. Mon-etary assets and liabilities denominated in foreign currencies as at the balance sheet date are translated at the closing exchange rate on that date.
14. 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 outstanding overdue (days) Provision (% 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 will not be done.
Under exceptional circumstances including natural disasters, Management may renegotiate loans by rescheduling repay-ment terms for customers who have defaulted in repayment but who appear willing and able to repay their loans under a longer term agreement. Provisioning on such rescheduled loans will be subject to management decision.
15. Recognition of income from loan servicing and deferred income on sold out portfolio transactions:During the financial year, there were three transactions of portfolio sell out. The income on sellout is parked in income from deferred revenue account. The liability to collect the funds lies with Swadhaar. The collected funds need to be repaid to the buyers as per the agreed recovery schedule. Any shortfall in the receivables will be borne by the company to the extent of Cash Collateral or clean up option (restricted to 10%).Therefore, the company will recognize the income on loan servic-ing in the proportion of agreed recovery schedule.
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NOTE 3 : SHARE CAPITAL (Amount in Rupees)Share Capital As at 31st March 2012 As at 31st March 2011Authorised 75,000,000 (PY 50,000,000) 750,000,000 500,000,000 Equity Shares of Rs.10 each Issued, Subscribed & Paid up Equity Shares of Rs.10 each
51,679,913 equity shares with face value of Rs 10 each fully paid-up, (PY 37,000,000 shares at premium of Re 1 each) and 14,679,913 shares at premium of Rs 3 516,799,130 370,000,000
(Less) Amount recoverable from Employee Welfare Trust [Face value of Rs 10 on 4,919,625
shares (PY 3,279,750) allotted to the Trust] 49,196,250 467,602,880 32,797,500 337,202,500 Total 467,602,880 337,202,500 Rights issue of Equity Shares: During the year, the Company has raised additional capital of Rs. 146,799,130 /- by way of rights issue of 14,679,913 equity shares of Rs. 10/- each at a premium of Re 3/- per share. Out of this, 1,639,875 shares were issued to Swadhaar FinServe Employee Welfare Trust. Loan to Swadhaar FinServe Employee Welfare Trust: In the current financial year, the Company has lent an amount of Rs. 21,318,375/- (PY Rs 23,453,914/-) to Swadhaar Fin-Serve Employee Welfare Trust (the Trust) to enable the Trust to subscribe to 1,639,875 equity shares (PY 2,132,174), each of face value Rs. 10/- at a premium of Re. 3/- during the current financial year in the Company. The trust has been formed for the purpose of promoting employee welfare activities including, inter alia, administration, management, implementation and all other matters incidental to the Employee Stock Options to be introduced by the Company from time to time.
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 31st March 2012 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. Note 3.1 Reconciliation of Equity Shares outstanding at the beginning and at the end of the financial year 2011–12 Particulars As at 31st March 2012 As at 31st March 2011 Number Amount Number Amount Shares outstanding at the beginning of the year 37,000,000 370,000,000 17,352,424 173,524,240 Shares Issued during the year 14,679,913 146,799,130 19,647,576 196,475,760 Shares bought back during the year – – Shares outstanding at the end of the year 51,679,913 516,799,130 37,000,000 370,000,000 Note 3.2 Terms/ Rights Attached to equity Shares The Company has only one class of equity shares having a par value of Rs. 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 identi-cal terms on a proportionate basis. During the year ended 31 March 2012, the Company has not declared/ paid any dividend to equity Shareholders. Note 3.3 Details of Shareholders Holding more than 5% shares in the company Name of Shareholder As at 31st March 2012 As at 31st March 2011 Total No. of Shares % Total No. of Shares % Accion Africa Asia Investment Company 19,650,000 38.02% 12,950,000 35.00%Michael & Susan Dell Foundation 6,452,250 12.49% 4,227,250 11.43%M V Mauritius Limited 8,325,114 16.11% 2,312,500 6.25%Indian Family Trust 6,960,000 13.47% 5,660,000 15.30%Swadhaar FinServe Employee Welfare Trust 4,919,625 9.52% 3,279,750 8.86%
Employee Stock Option Scheme and Associate Stock Option Scheme:
a. During the year, the Company has granted 1,005,000 (Previous Year - 2,101,000) Employee Stock Options to employ-ees and Associate Stock Options to associates of the Company. During the year stock options were granted to Consul-tant and some of the employees.
b. Method of accounting for ESOS & ASOS: The company has adopted Black- Scholes Options Pricing Model in accounting for employee and associate cost on ac-count of ESOS & ASOS respectively. Option is offered with the intrinsic value of the shares based on stock value of Rs 13 per share & the exercise price was fixed by the compensation committee of the Company was Rs 13 per share. The difference between the intrinsic 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 profit & loss account towards Compensation cost.
c. Salient Features: Options have been granted under the schemes as follows: Particulars As at 31st March 2012 As at 31st March 2011 Outstanding at the beginning of the year 2,101,000 – Options Granted during the year 1,005,000 2,101,000 Lapsed during the year 202,080 – Options vested during the year 1,784,412 – Outstanding at the end of the year 2,903,920 2,101,000
d. As the options are granted using intrinsic value Rs. 13 at an exercise price Rs. 13 equivalent to intrinsic 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 - 21st December, 2011 and 22nd February, 2012 No. of Shares Vest-1 Vest-2 Vest-3 Vest-4 1. 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 (Rs.) 2.12 2.45 2.76 3.07 Vesting % 10% 20% 30% 40%
NOTE 4 : RESERVES & SURPLUS (Amount in Rupees)Reserve & Surplus As at 31st March 2012 As at 31st March 2011 A. Securities Premium Account Opening Balance 15,774,745 2,764,260 Add : Securities premium credited on Share issue(Issue
of 14,679,913 Shares @ premium of Rs.3/- each) 44,039,739 18,500,000 (Less) Amount recoverable from Employee Welfare Trust (Premium of Re 3 on 1,639,875 shares (PY premium of Re 1 on 3,279,750 shares) 4,919,625 39,120,114 3,279,750 15,220,250
Less Total Share issue expenses 2,579,645 2,209,765 Closing Balance 52,315,214 15,774,745 B.Surplus Opening balance (97,350,950) (67,946,274) (+) Net Profit/(Net Loss) For the current year 6,555,035 (29,404,677) (+) Transfer from Reserves – – (–) Proposed Dividends – – (–) Interim Dividends – – (–) Transfer to Reserves 1,311,007 – Closing Balance (92,106,922) (97,350,950)C.Statutory Reserve 1,311,007 Total (A+B+C) (38,480,701) (81,576,205)
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Share Issue Expenses: Share issue expenses are charged off in its entirety in the year in which it is incurred. Considering the compliance of provi-sions of section 78 of the Companies Act, 1956 such issue expenses are reduced from the security premium account. Statutory Reserve: An amount of Rs. 1,311,007/- (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 (Amount in Rupees)Long Term Borrowings As at 31st March 2012 As at 31st March 2011 Term loans A. Loan From banks 217,013,839 98,958,333 B. Loan From Financial Institutions 100,000,000 100,000,000Total 317,013,839 198,958,333
All long term borrowings are secured borrowings. “Current maturities of long term debts” of Rs 28,111,104/- (PY Rs 86,712,689) under the head “other current liabilities” (Note no. 7) is secured long term borrowings payable within next 12 months. Status of Existing & Proposed Lenders As on 31st March 2012 Name of Lending institution Amt outstanding Terms and Conditions (Rs. In Mn) Repayment terms including moratorium Other Terms and conditionsAnanya Finance for Inclusive Growth Pvt Ltd 1.11 18 Months (Monthly Installments) Secured against hypothecation of Book Debts
Central Bank Of India 36.46 5 yrs including 1 yr moratorium Secured against hypothecation of (Monthly Installments) Book Debts with Margin and Cash Collateral
MV Microfin Pvt Ltd 27.00 2 yrs including 1 year moratorium (Half Yearly Secured against hypothecation of Installments - Interest served on quarterly rests) Book Debts and Cash Collateral
Maanaveeya Development & Finance Pvt Ltd 80.00 3 yrs including 1 year moratorium (Half yearly Secured against hypothecation of Installment - Interest served on quarterly rests) book debts with Margin Ratnakar Bank Ltd -1 30.56 2 yrs including 6 months moratorium Secured against hypothecation of (Monthly Repayment) Book Debts with Margin and Cash Collateral + Leverage of Accion Guarantee covering 45% of total loan amount. Ratnakar Bank Ltd -2 50.00 2 yrs including 6 months moratorium Secured against hypothecation of (Monthly Repayment) Book Debts with Margin and Cash Collateral + Leverage of Accion Guarantee covering 45% of total loan amount.
IDBI Bank 100.00 36 months including 6 months moratorium Secured against hypothecation of (Monthly Repayment) Book Debts and Cash Collateral Gruh Finance 20.00 60 months including 6 months moratorium Secured against hypothecation of (Monthly Repayment) Book Debts and Cash Collateral Total 345.13 Applicable Interest Rate is Base Rate + 150 to 375 basis points
Status of Existing & Proposed Lenders As on 31st March 2011 Name of Lending institution Amt outstanding Terms and Conditions (Rs. In Mn) Repayment terms including moratorium Other Terms and conditionsAnanya Finance for Inclusive Growth Pvt Ltd 7.78 18 Months (monthly installments) Secured against hypothecation of Book Debts
FWWB India 3.61 18 Months (monthly installments) Secured against hypothecation of Book Debts Central Bank Of India 48.96 5 yrs including 1 yr moratorium Secured against hypothecation of (monthly installments) book debts with Margin
MV Microfin Pvt Ltd 37.00 2 yrs including 1 year moratorium (half yearly Secured against hypothecation of installments - Interest served on quarterly rest) Book Debts with Cash Collateral
Maanaveeya Development & Finance Pvt Ltd 100.00 3 yrs including 1 year moratorium (Half yearly Secured against hypothecation of Installment - Interest served on quarterly rest) book debts with Margin Ratnakar Bank Ltd -1 50.00 2 yrs including 6 months moratorium Secured against hypothecation of (Monthly Repayment) Book Debts with Margin, Cash Collateral and USD 1 Mn Accion Guarantee
HDFC Bank Ltd 3.47 18 Months (Quarterly installments) Secured against hypothecation of Book Debts with Margin and Cash Collateral Axis Bank Ltd 2.86 24 Months (monthly installments) Secured against hypothecation of Book Debts with Cash Collateral
DCB Bank Ltd 7.00 19 months (monthly installments) Secured against hypothecation of Book Debts with Cash Collateral
Standard Chartered Bank 25.00 24 Months (annual installment) Secured against hypothecation of Book Debts and $3.75M Accion Guarantee
Total 285.67 Applicable Interest Rate is Base Rate + 150 to 375 basis points
NOTE 6 : LONG TERM PROVISIONS (Amount in Rupees)Long Term Provisions As at 31st March 2012 As at 31st March 2011 a. Provision for employee benefits
Gratuity (unfunded)(refer to note no. 25 ) 2,069,732 1,566,077 Leave Encashment (unfunded) (refer to note no. 25 ) 117,283 181,951
b. Others (Specify nature) Fringe Benefit Tax 2008-09 – 70,000 Total 2,187,015 1,818,028
NOTE 7 : OTHER CURRENT LIABILITIES (Amount in Rupees)Other Current Liabilities As at 31st March 2012 As at 31st March 2011 Current Maturities of Long Term Debts 28,111,104 86,712,689 Interest Accrued but not due on borrowings 3,884,692 1,288,583 Advance Collections / Margin Money 28,787,693 54,709,621 Client Insurance Premium- Payable 2,384,796 1,409,317 Outstanding Liability for Expenses 1,749,458 288,885 Payable on Assigned Portfolio 9,271,616 31,289,950 Unearned Revenue-Managed/Sold out Portfolio 4,887,096 3,115,916 Employee Benefits- Payable 1,478,210 780,834 Repayment Account for Cheques 7,439,544 227,542 Professional Fees - Payable 2,914,506 3,082,319 Other Payables 2,419,544 1,742,547 Statutory Dues Payable 2,203,096 2,328,793 Total 95,531,355 186,976,995
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Auditor’s remuneration: ( included as part of “Others Payable” in Note No. 7 above) (Amount in Rupees)Particulars As at 31st March 2012 As at 31st March 2011As Auditors: Statutory Audit Fees 450,000 390,000Tax Audit Fees 120,000 110,000In other capacity: Other tax related Services 102,000 – Any other (including Certification) 60,000 50,000Out of pocket expenses 9,393 6,108Service Tax 76,364 57,280Total 817,757 613,388
NOTE 8 : SHORT TERM PROVISIONS (Amount in Rupees)Short Term Provisions As at 31st March 2012 As at 31st March 2011a. Provision for employee benefits
Gratuity - Provision (refer to note no. 25 ) 763,034 452,327 Incentives - Provision 1,200,000 – Leave Encashment - provision(refer to note no. 25) 1,212,987 1,049,051
b. Others Business Loss 13,000 –
Loan Loss Provisions 11,493,750 3,223,044 Total 14,682,771 4,724,422
Loan Loss Provisions : (included in note no. 8 above under “Loan Loss Provisions”) (Amount in Rupees)Details of loan loss provision on: Percentage As at 31st March 2012 As at 31st March 2011a. Standard Assets 2,390,991 1,758,592
0-30 Days 0.25% 1,741,240 1,244,917 (Contingent provision against Standard Asset)# 31-60 Days 10% 257,322 121,427 61-90 Days 30% 392,429 392,248
b. Sub-Standard Assets (91-180 Days) 3,270,980 1,142,321 91-120 days 30% 446,787 338,098 121 - 180 days 60% 2,824,192 804,223
c. Doubtful Assets/Lost Assets (>180 Days) 100% 5,204,852 14,177 181-360 Days 100% 5,195,311 14,177 > 360 days 100% 9,541 –
d. Additional Provision 540,769 –
e. Rescheduled Portfolio 86,158 307,954 Total 11,493,750 3,223,044 #Contingent Provision against Standard Assets During the current year company has made a provision of Rs 1,741,240/- being 0.25% of its standard assets as per the notification NO DNBS PD.CC.No.207/ 03.02.002 /2010-11 dated January 17, 2011 issued by RBI
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1,4
61,4
57
Tota
l 4
,092
,55
8
95
6,23
2
–
5,0
48,
790
2
,035
,433
1
,33
4,33
0
–
3,3
69,
763
2
,057
,125
1
,679
,027
To
tal
21,
04
8,6
03
1,9
00,7
58
(8
59,
438)
2
2,0
89,
925
8
,141
,95
4
4,2
23,9
33
574
,545
1
1,79
1,3
42
12,
90
6,6
49
10
,29
8,5
82
Inta
ngib
le A
sset
s &
Am
ortiz
atio
n:A
tota
l cos
t of I
NR
29
4,77
7/- h
ad b
een
incu
rred
in F
Y 2
010-
11 fo
r sec
urin
g an
irre
cove
rabl
e rig
ht to
use
and
acq
uire
sta
tuto
ry ri
ghts
in th
e tr
ade
mar
k/ n
ame
“Sw
adha
ar”
and
Logo
in
perp
etui
ty fr
om S
wad
haar
Fin
Acc
ess.
It is
exp
ecte
d th
at fu
ture
eco
nom
ic b
enefi
ts w
ill c
ontin
ue to
flow
to o
ur e
nter
pris
e, a
s “S
wad
haar
” is
a w
ell r
ecog
nise
d br
and
in u
rban
mic
rofin
ance
. A
ccor
ding
ly, t
he c
ost i
s be
ing
reco
gnis
ed a
s an
inta
ngib
le a
sset
in o
ur b
ooks
of a
ccou
nts
with
an
amor
tizat
ion
perio
d of
5 y
ears
on
stra
ight
line
bas
is.
Im
pairm
ent o
f Ass
et:
In th
e op
inio
n of
the
Boa
rd o
f Dire
ctor
s, a
ll cu
rren
t ass
ets,
loan
s &
adv
ance
s w
ould
be
real
izab
le a
t lea
st o
f an
amou
nt e
qual
to th
e am
ount
at w
hich
they
are
sta
ted
in th
e ba
lanc
e sh
eet.
Hen
ce n
o im
pairm
ent l
oss
has
been
reco
gniz
ed o
n fix
ed a
sset
s.
Cap
ital C
omm
itmen
ts:
E
stim
ated
am
ount
of c
ontr
acts
rem
aini
ng to
be
exec
uted
on
capi
tal a
ccou
nts
and
not p
rovi
ded
for R
s N
il (P
revi
ous
year
Rs
NIL
).
48
NOTE 10 : NON CURRENT INVESTMENTS (Amount in Rupees)Non Current Investments As at 31st March 2012 As at 31st March 2011Other Investments a. Investment in Equity instruments: 500,000 500,000
Investment in Alpha Microfinance Consultants Pvt. Ltd. 50000 (PY 50000) equity shares with face value of Rs. 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 pro-moting employee welfare activities and for administration, management, implementation and all other matters incidental to any stock option plans and as of 31st March 2012 it has invested Rs. 46,559/- which is treated as non-current investments. NOTE 11 : DEFERRED TAX ASSET/LIABILITY (Amount in Rupees)Deferred Tax As at 31st March 2012 As at 31st March 2011Opening Balance 1,619,378 507,785 Deferred Tax Liability (45,731) (453,750) Depreciation (45,731) (453,750)Deferred Tax Asset 4,865,757 2,073,128 Preliminary Expenses – 73,140 Provision for bad debts 2,984,282 995,921 Provision for retirement benefits 875,325 623,687 Leave Encashment 411,053 380,380 Provision on standard Assets 595,097 – Total Deferred Tax 4,820,026 1,619,378 Net Deferred Tax Asset/(Liability) 3,200,648 1,111,593
NOTE 12 : LONG TERM LOANS & ADVANCES (Amount in Rupees)Long-term loans and advances As at 31st March 2012 As at 31st March 2011Security Deposits Secured, considered good with service providers 6,702,290 6,859,185 Other Loans and Advances Secured, considered good -Tax Deducted At Source 2,129,043 1,475,675 Total 8,831,333 8,334,860
NOTE 13 : LOANS UNDER FINANCING ACTIVITY (Amount in Rupees)Loans under financing activity As at 31st March 2012 As at 31st March 2011Loans under financing activity Non - current 404,764,926 192,994,182 Current 307,013,323 311,052,930 Total 711,778,249 504,047,112 Loans under financing activity Standard Assets: 700,377,119 474,875,251 0-30 Days 696,495,802 472,111,891 31-60 Days 2,573,219 1,326,966 61-90 Days 1,308,098 1,436,394 Sub - Standard Assets (91 - 180 Days) 6,196,278 2,727,765 91-120 Days 1,489,291 1,221,293 121-180 Days 4,706,987 1,506,472
49
(Amount in Rupees)Loans under financing activity As at 31st March 2012 As at 31st March 2011Doubtful Assets / Lost Assets (>180 Days) 5,204,852 24,313 181-360 Days 5,195,311 24,313 > 360 days 9,541 – Managed Portfolio – 26,419,783 Total 711,778,249 504,047,112 NOTE 14 : OTHER NON CURRENT ASSETS (Amount in Rupees)Other non Current Assets As at 31st March 2012 As at 31st March 2011Fixed Deposits under Lien 26,996,835 15,000,000 Total 26,996,835 15,000,000 NOTE 15 : CASH & BANK BALANCES (Amount in Rupees)Cash and bank Balances As at 31st March 2012 As at 31st March 2011 (A) Cash and cash equivalents
a. Balances with banks in current accounts 47,321,184 8,144,398 b. Bank deposits upto 12 months maturity 31,430,395 77,209,171 c. Stamp papers in Hand 512,639 293,694 d. Cash on hand 4,658,101 1,959,015
(B) Others bank balances Bank Deposits (Lien FDs with upto 12 months maturity) 5,000,000 8,566,031 Total 88,922,319 96,172,310
NOTE 16 : SHORT - TERM LOANS & ADVANCES (Amount in Rupees)Short-term loans and advances As at 31st March 2012 As at 31st March 2011 a. Loans and advances to related parties
Unsecured, considered good 23,958 23,958 Loan to Employee Welfare Trust (EWT) 23,958 23,958
b. Advances Recoverable in Cash or Kind 141,421 10,902 Secured, considered good Aviva Insurance Company Ltd. 128,975 10,902 Doubtful 12,446 –
c. Others (specify nature) 2,469,346 1,709,202 Advance Against Salary 179,090 8,179 Advance Against Expenses 139,422 77,853
Loan to Employees 2,150,834 1,623,170 Total 2,634,725 1,744,062
NOTE 17: OTHER CURRENT ASSETS (Amount in Rupees)Other Current Assets As at 31st March 2012 As at 31st March 2011Interest Accrued on Fixed Deposit 1,832,062 891,000 Interest Receivable on Assigned Portfolio – 4,132,060 Interest Receivables on loans 330,467 1,239,156 Interest Receivable Staff 1,473 – Prepaid Expenses 536,340 407,171 Other Receivables 1,008,186 689,765 Fringe Benefit Tax – 70,000 Cenvat Credit Availed – 303,992 Total 3,708,529 7,733,144
50
Assignment of Loans: During the last financial year, the Company had sold loans through direct assignment. The information on direct assignment activity of the Company as an originator is as shown below: (Amount in Rupees)Particulars As at 31st March 2012 As at 31st March 2011Total book value of the loan asset assigned – 26,419,783 Sale consideration received for the loan asset assigned – 29,999,890Cash margin placed with banks outstanding – 4,500,000 Portfolio loan assigned and outstanding – 26,419,783 Recognition of Receivables and payables of assigned and sold out loan portfolio:This amount represents the managed portfolio on behalf of DCB. The liability to manage and collect the funds lies with Swadhaar. The collected funds needed to be repaid to DCB over the year. Any shortfall in the receivables was borne by Swadhaar. Therefore, SFPL had recognized the payable to DCB with equivalent receivables from clients. The income from the managed portfolio has been recognized based on the agreed recovery schedule. Rescheduled Portfolio: Management had decided to reschedule the portfolio in Garibnagar area of Kherwadi GL branch for 36 clients as a major fire destroyed the houses of a number of clients on March 11, 2011. More than 50% of the clients were in their third cycle and above. Their loans were rescheduled by way of a repayment waiver of 3 months. These clients had an outstanding loan portfolio of Rs. 86,158/- as on 31st March 2012 on which 100% provision had been made.
Sold out Portfolio: (Amount in Rupees)Particulars As at 31st March 2012 As at 31st March 2011a. Individual Loan asset sold to WITFIN on 9th January, 2012:
Sale consideration received for the Individual loan asset sold 39,999,012 – Total book value of the loan asset sold out 36,743,870 – Collection of client EMIs on behalf of WITFIN will be till Dec-12
b. Group Loan asset sold to DCB (POOL II transaction) on 9th March, 2012: Sale consideration received for the Individual loan asset sold 44,436,098 – Total book value of the loan asset sold out 42,351,964 – Collection of client EMIs on behalf of DCB will be till Jan-13
c. Group Loan asset sold to DCB (POOL III transaction ) on 22nd March, 2012: Sale consideration received for the Individual loan asset sold 19,998,571 – Total book value of the loan asset sold out 18,160,704 –
Collection of client EMIs on behalf of DCB will be till Jan -14
NOTE 18 : REVENUE FROM OPERATIONS (Amount in Rupees)Revenue from operations As at 31st March 2012 As at 31st March 2011Interest Income 159,441,220 84,521,983 Other Financial Services: 19,732,201 27,303,969 Processing fees (Net of service tax) 14,619,844 15,997,092 Income from loan servicing 3,842,818 – Other operating income 1,269,539 11,306,877 Total 179,173,421 111,825,951
51
NOTE 19 : OTHER INCOME (Amount in Rupees)Other Income As at 31st March 2012 As at 31st March 2011 Interest on Fixed Deposit 7,410,511 3,924,990 Consulting Fees (IL research) 2,703,617 –Advertising Income 1,851,308 – Reimbursement of training expenses 557,015 – Misc. Income 101,870 5,871 Interest on Income Tax refund 21,457 – Total 12,645,778 3,930,862
NOTE 20 : EMPLOYEE BENEFIT EXPENSES (Amount in Rupees)Employee Benefit Expenses As at 31st March 2012 As at 31st March 2011a. Salaries, incentives and commission 71,889,688 56,647,073 b. Contributions to -
i. Provident fund 4,581,397 4,592,670 ii. ESIC 1,954,521 1,538,778 iii. Labour Welfare 19,416 17,913
c. Leave Encashment 378,437 870,196 d. Exgratia 710,998 436,500 e. Insurance-Staff 386,919 69,639 f. Retirement Benefit 1,064,386 956,432 g. Training Expenses 585,450 218,679 h. MD Remuneration 3,538,895 3,000,000 i. Staff welfare expenses 1,521,819 929,846 Total 86,631,925 69,277,725
NOTE 21 : FINANCE COST (Amount in Rupees)Finance Cost As at 31st March 2012 As at 31st March 2011Interest expense 37,338,289 21,877,272 Other borrowing costs 3,792,447 3,313,821 Total 41,130,736 25,191,093
NOTE 22 : LOAN LOSS PROVISION (Amount in Rupees)Loan Loss As at 31st March 2012 As at 31st March 2011Loan Loss Expenses 16,860,810 7,731,819 Total 16,860,810 7,731,819
NOTE 23 : OTHER EXPENSES (Amount in Rupees)Other Expenses As at 31st March 2012 As at 31st March 2011a. Rent Staff – 70,000 b. Honorarium – 2,316 c. Administrative Expenses :- 39,617,408 39,985,176
Advertisement 181,300 826,641 Audit fees 628,710 551,500 Banking Charges 1,051,092 1,096,719 Business Expense 507,711 224,053 Electricity Expenses 1,080,369 954,198 Infrastructure Charges 444,003 1,026,216 Insurance Charges 1,518,767 387,784 Legal Charges 51,641 98,393
52
(Amount in Rupees)Other Expenses As at 31st March 2012 As at 31st March 2011 Loss on Sale of Asset 168,737 –
Octroi charges 9,013 9,145 Office Expenses 827,866 938,663 Other Miscellaneous Expense 951,535 386,161 Portfolio Loss 68,440 252,499 Printing & Stationery 3,410,234 3,767,031 Professional Charges 12,099,488 13,664,295 Rent - Premises 9,207,867 7,972,569 Repairs and maintenance 1,494,459 857,086 Telephone and Internet 2,094,522 2,414,773
Traveling 3,821,652 4,557,449 Total 39,617,408 40,057,492
NOTE 24 : BASIC & DILUTED EARNINGS/(LOSS) PER SHARE: (Amount in Rupees)Particulars As at 31st March 2012 As at 31st March 2011Net Profit/(Loss) attributable to equity shareholders [A] (Rs) 6,555,035 (29,404,677)Weighted Average number of equity shares issued [B] 40,560,926 29,460,131 Basic Earnings/(Loss) per share [A/B] (Rs.) 0.16 (1.00)
NOTE 25 : EMPLOYEE BENEFIT Leave encashment valuation report as at 31st March 2012I Assumptions As at 31st March 2012 As at 31st March 2011Mortality Rate LIC (1994-96) LIC(1994-96) Discount Rate 8.00% 8.00%Salary escalation rate 5.00% 5.00%Rate of return (expected) on plan assets 0.00% 0.00%Withdrawal rate 4.61% 1% throughout Retirement age 60 60Expected average remaining service 15.09 25.54 I Data information Number of members 404 413Total monthly salaries 3,009,094 3,171,212 Average age 29.53 29Average Leave balance 4.37 II Changes in present value of obligations PVO at beginning of year 221,530 806,527Interest cost 6,781 58,837Current Service Cost 655,960 555,879 Benefits Paid (273,523) (142,133) Actual (gain)/loss on obligation (480,737) (1,057,580) PVO at end of year 130,011 221,530III Changes in fair value of plan assets Fair Value of Plan Assets at beginning of year – – Expected Return on Plan Assets – – Contributions 273,523 142,133 Benefit Paid (273,523) (142,133) Actuarial gain/(loss) on plan assets – – Fair Value of Plan Assets at end of year – – IV Fair Value of Plan Assets Fair Value of Plan Assets at beginning of year – – Actual Return on Plan Assets – – Contributions 273,523 142,133
53
(Amount in Rupees)Assumptions As at 31st March 2012 As at 31st March 2011Benefit Paid (273,523) (142,133)Fair Value of Plan Assets at end of year – – Funded Status (130,011) (221,530) Excess of actual over estimated return on Plan Assets – – V Actuarial Gain/(Loss) Recognized Actuarial Gain/(Loss) for the year (Obligation) 480,737 1,057,580 Actuarial Gain/(Loss) for the year (Plan Assets) – – Total Gain/(Loss) for the year 480,737 1,057,580 Actuarial Gain/(Loss) recognized for the year 480,737 1,057,580 Unrecognized Actuarial Gain/(Loss) at end of year – – VI Amounts to be recognized in the balance sheet and statement of P &L account PVO at end of year 130,011 221,530 Fair Value of Plan Assets at end of year – – Funded Status (130,011) (221,530)Unrecognized Actuarial Gain/(Loss) – – Net Asset/(Liability) recognized in the balance sheet (130,011) (221,530) VII Expense recognized in the statement of P & L A/C Current Service Cost 655,960 555,879 Interest cost 6,781 58,837 Expected Return on Plan Assets – – Net Actuarial Gain/(Loss) recognized for the year – (1,057,580) Expense recognized in the statement of P & L A/C (480,737) (442,864) VIII Movements in the Liability recognized in Balance Sheet Opening Net Liability 221,530 806,527 Expenses as above 182,004 (442,864) Contribution paid (273,523) (142,133) Closing Net Liability 130,011 221,530 IX Short Term Compensated Absence Liability Valuation date. 31/03/2012 31/03/2011No of Days 3,234 3,779Amount * 1,200,259 1,231,002 * Not included in the Net Liabilities under Item No. VIII
Gratuity: The company does not have a funded gratuity scheme for its employees as at 31st March 2012 and 31st March 2011. Gratuity 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 31st March 2012 Assumptions As at 31st March 2012 As at 31st March 2011 Mortality Rate LIC (1994-96) LIC(1994-96)Discount Rate 8.00% 8.00%Salary escalation rate 5.00% 5.00%Rate of return (expected) on plan assets 0.00% 0.00%Withdrawal rate 4.61% 1%throughoutBenefit: as per Gratuity ACT with Limit = 1,000,000 1,000,000Retirement age (Years) 60 60Expected average remaining service 15.09 31 I Data information Number of members 404 413Total monthly salaries 3,009,094 3,195,940Average age (years) 29.53 29Average Service (years) 2.01 2
54
55
Assumptions As at 31st March 2012 As at 31st March 2011 II Changes in present value of obligations PVO at beginning of year 2,018,404 1,061,972 Interest cost 151,471 84,958 Current Service Cost 990,651 572,122 Benefits Paid (250,024) – Actuarial (gain)/loss on obligation (77,737) 299,352 PVO at end of year 2,832,766 2,018,404 III Changes in fair value of plan assets Fair Value of Plan Assets at beginning of year – – Expected Return on Plan Assets – – Contributions 250,024 – Benefit Paid (250,024) –Actuarial gain/(loss) on plan assets – – Fair Value of Plan Assets at end of year – –IV Fair Value of Plan Assets Fair Value of Plan Assets at beginning of year – – Actual Return on Plan Assets – – Contributions – – Benefit Paid 250,024 –Fair Value of Plan Assets at end of year (250,024) –Funded Status (2,832,766) (2,018,404)Excess of actual over estimated return on Plan Assets – – V Actuarial Gain/(Loss) Recognized Actuarial Gain/(Loss) for the year (Obligation) 77,737 (299,352)Actuarial Gain/(Loss) for the year (Plan Assets) – – Total Gain/(Loss) for the year 77,737 (299,352)Actuarial Gain/(Loss) recognized for the year 77,737 (299,352) Unrecognized Actuarial Gain/(Loss) at end of year – – VI Amounts to be recognized in the balance sheet and statement of profit & loss account PVO at end of year 2,832,766 2,018,404 Fair Value of Plan Assets at end of year – – Funded Status (2,832,766) (2,018,404) Unrecognized Actuarial Gain/(Loss) – – Net Asset/(Liability) recognized in the balance sheet (2,832,766) (2,018,404) VII Expense recognized in the statement of P & L A/C Current Service Cost 990,651 572,122 Interest cost 151,471 84,958 Expected Return on Plan Assets – – Net Actuarial Gain/(Loss) recognized for the year (77,737) 299,352 Expense recognized in the statement of P & L A/C 1,064,386 956,432 VIII Movements in the Liability recognized in Balance Sheet Opening Net Liability 2,018,404 1,061,972 Expenses as above 1,064,386 956,432 Contribution paid (250,024) – Closing Net Liability 2,832,766 2,018,404
NO
TE 2
6 : R
ELA
TED
PA
RTY
TR
AN
SA
TIO
NS
(A
mou
nt in
Rup
ees)
As
at 3
1st M
arch
, 201
2
A
s at
31s
t Mar
ch, 2
011
Tr
ansa
ctio
n E
nter
pris
e E
nter
pris
e K
ey
List
of e
nter
pris
es
Ent
erpr
ise
Ent
erpr
ise
Key
Li
st o
f ent
erpr
ises
whe
re c
ontr
ol
that
exe
rcis
es
Man
agem
ent
in w
hich
KM
P
whe
re c
ontr
ol
that
exe
rcis
es
Man
agem
ent
in w
hich
KM
P
ex
ists
co
ntro
l P
erso
nnel
ex
erci
ses
sign
ifica
nt
exis
ts
cont
rol
Per
sonn
el
exer
cise
s si
gnifi
cant
in
fluen
ce
in
fluen
ce
Sw
adh
aar
Fin
Ser
ve E
mp
loye
e W
elfa
re T
rust
:
Tow
ards
Exp
ense
s
–
–
–
–
11,
030
–
–
–
To
war
ds In
vest
men
t –
–
–
–
4
1,55
9
–
–
–
Tow
ards
inte
rest
free
Loa
n (R
e-in
vest
ed
in Is
sue
of S
wad
haar
’s S
hare
Cap
ital
(Incl
. Sec
urity
Pre
miu
m)
21,
318,
375
–
–
–
2
23,
453,
914
–
–
–
Acc
ion
Inte
rnat
ion
al:
Gua
rant
ee F
ee
–
2,2
77,2
90
–
–
551
,093
–
– A
ccio
n T
ech
nic
al A
dvi
sors
Ind
ia:
Pro
fess
iona
l Cha
rges
–
6
1,76
8
–
–
7
5,00
0
– –
Te
chni
cal A
ssis
tanc
e
–
3,3
61,4
92
–
–
2
,842
,14
4
–
–A
ccio
n T
rain
ing
Exp
ense
s re
imb
urs
emen
t:
Trai
ning
exp
ense
reim
burs
emen
t rec
eive
d
–
(1,
169,
873)
–
–
(85
0,9
62)
–
–M
anag
eria
l Rem
un
erat
ion
to
Vee
na
Man
kar
–
–
3
,53
8,8
95
–
–
3
,000
,000
–
Sw
adh
aar
Fin
Acc
ess:
Ren
t –
–
–
–
–
–
81,
255
Dep
osit
–
–
–
–
–
–
100
,000
Tr
aini
ng E
xpen
se
–
–
–
46,
138
–
–
2,2
20
Trad
emar
k &
Log
o ch
arge
s
–
–
–
–
–
–
1
08,
09
4 E
lect
ricity
–
–
–
9
87
–
–
–
Sh
are
Cap
ital
:
Rec
eive
d fro
m V
eena
Vik
as M
anka
r Joi
ntly
with
Vi
kas
Bha
gwan
Man
kar
–
–
5
20,0
00
–
–
4
95,0
00
–
ES
OP
Gra
nted
to V
eena
Man
kar (
No
of o
ptio
ns)
–
–
200
,000
–
–
1,0
00,0
00
–
Not
e: ‘R
eim
burs
emen
t rec
eive
d fig
ures
are
sho
wn
in b
rack
ets.
56
57
Ou
tsta
nd
ing
rec
eiva
ble
/ p
ayab
le w
ith
rel
ated
par
ties
:
(A
mou
nt in
Rup
ees)
As
at 3
1st M
arch
, 201
2
A
s at
31s
t Mar
ch, 2
011
Tr
ansa
ctio
n E
nter
pris
e E
nter
pris
e K
ey
List
of e
nter
pris
es
Ent
erpr
ise
Ent
erpr
ise
Key
Li
st o
f ent
erpr
ises
whe
re c
ontr
ol
that
exe
rcis
es
Man
agem
ent
in w
hich
KM
P
whe
re c
ontr
ol
that
exe
rcis
es
Man
agem
ent
in w
hich
KM
P
ex
ists
co
ntro
l P
erso
nnel
ex
erci
ses
sign
ifica
nt
exis
ts
cont
rol
Per
sonn
el
exer
cise
s si
gnifi
cant
in
fluen
ce
in
fluen
ce
Sw
adh
aar
Fin
Ser
ve E
mp
loye
e W
elfa
re T
rust
:
Exp
ense
s re
ceiv
able
(2
3,95
8)
–
–
–
(23,
958)
–
–
–
In
vest
men
t (4
6,55
9)
–
–
–
(46,
559)
–
–
–
Loan
s &
Adv
ance
s G
iven
(5
7,3
95,6
25)
–
–
–
(3
6,07
7,25
0)
–
–
–
Acc
ion
Inte
rnat
ion
al
–
46
9,92
2
–
–
–
5,5
1,0
93
–
–
Acc
ion
Tec
hn
ical
Ad
viso
rs In
dia
:
Pro
fess
iona
l Cha
rges
–
5
5,15
0
–
–
–
–
–
–
Tech
nica
l Ass
ista
nce
–
–
–
–
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NOTE 27 : FOREIGN CURRENCY TRANSACTIONS: Expenditure in Foreign Currency (on accrual basis): (Amount in Rupees)Particulars As at 31st March 2012 As at 31st March 2011Guarantee Fee payment 1,962,192 1,104,375 Admin fee – 90,360Travel 154,508 3,602Total 2,116,700 1,198,337 NOTE 28: 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 other than India. As such there are no separate reportable segments as per AS-17 “Segmental Reporting”
NOTE 29 : 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 finalization of Balance Sheet. Particulars As at 31st March 2012Principal amount due to suppliers under MSMED Act as at year end Nil NOTE 30: CONTINGENT LIABILITIES:
Claims against the company not acknowledged as debts are Nil NOTE 31 : As required in terms of paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007 FY: 2011-12Particulars Amount Outstanding Amount Overdue Liabilities side: 1 Loans and advances availed by the non-banking financial company inclusive of interest accrued thereon but not paid: a. Debentures : Secured Nil Nil
: Unsecured (Other than falling within the meaning of public deposits *) b. Deferred Credits Nil Nil c. Term Loans 345,124,943 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 outstanding
2. Break-up of Loans and Advances including bills receivables (Other than those included in (4) below) : a. Secured Nil b. Unsecured 711,778,249
3. Break up of Leased Assets and stock on hire and other assets counting towards AFC activities Nil 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
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Particulars Amount Outstanding Amount Overdue4 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 Nil iv. Government Securities Nil v. Others (Corpus Fund in Employee welfare Trust) 46,559.00
5. Borrower group-wise classification of assets financed as in (2) and (3) above: Please see Note 2 below Amount net of provisions Category Secured Unsecured Total 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 711,778,249 711,778,249 Total – 711,778,249 711,778,249
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 Category Market Value/Break up or fair Book Value (Net of Provisions) value or NAV 1. Related parties **
a. Subsidiaries Nil Nil b. Companies in the same group c. Other related parties Nil Nil
2. Other than related parties 502,697 502,697 Total 502,697 502,697 ** As per Accounting Standard of ICAI (Please see Note 3)
7. Other information (Please see Note 4) 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
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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 32: PREVIOUS YEAR FIGURES: As notified by Ministry of Corporate Affairs, Revised Schedule VI under the Companies Act, 1956 is applicable to the Fi-nancial Statements for the financial year commencing on or after 1st April, 2011. Accordingly, the financial statements for the year ended March 31, 2012 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 Swadhaar FinServe Pvt Ltd Lalita D Gupte Veena Mankar Anshu MundhraChairperson Managing Director Company SecretaryMumbai, INDIA Boston, USA June 28th 2012 June 21st 2012
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Image Courtesy:
Pages 1 and 12: mCube Pages 4, 5, 30, 32, 35 & 61: John Rae for ACCION International Pages 10 & 11: http://www.flickr.com/photos/handheld-films/7222341960/ (modified by mCube) Pages 8, 19, 20, 21 & 22: Vibhuti Bhandari
Front Cover Image Courtesy:1: http://www.flickr.com/photos/meanestindi-an/4245025712/in/set-72157594428155937/2: Hersh Acharya3, 4, 6 & 8: Vibhuti Bhandari5 & 7: mCube9: John Rae for ACCION International
Back Cover Image Courtesy:10 & 17: Vibhuti Bhandari13: http://www.flickr.com/photos/meanestin-dian/4198454817/in/set-72157594428155937/11, 14 & 15: John Rae for ACCION International16 : http://www.flickr.com/photos/meanestin-dian/4377349892/in/set-72157594428155937/12 & 18: mCube
Swadhaar FinServe Pvt. Ltd.5/39 Shree Om Co-op Housing Society,Anand Nagar, LIG, Nehru RoadSantacruz (E), Mumbai 400055
T: +91.22.6137.8700 F: +91.22.6137.8797
info@ swadhaar.comwww.swadhaar.com
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Swadhaar FinServe Pvt. Ltd.5/39 Shree Om Co-op Housing Society,Anand Nagar, LIG, Nehru RoadSantacruz (E), Mumbai 400055T: +91.22.6137.8700 | F: +91.22.6137.8797info@ swadhaar.comwww.swadhaar.com
