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SAIJA FINANCE PRIVATE LIMITED

Analyst Contacts:

Vibha Batra [email protected] +91-124-4545302 Saket Kumar [email protected] +91-133-7150111 Aarushi Garg [email protected] +91-124-4545395 Relationship Contacts: Jayanta chatterjee [email protected] +91- 98450 22459 Website: www.icra.in

GRADING ICRA has assigned the MFI grading of Saija Finance Private Limited at M2 (pronounced M two). The grading is valid till February 2015. M2 Indicates that in ICRA’s current opinion, the Graded MFI’s ability to manage its microfinance activities in a sustainable manner is high. ICRAs MFI Grading is not a comment on any specific debt servicing capability of the MFI.

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mailto:[email protected]:[email protected]:[email protected]:[email protected]://www.icra.in/

ICRA Grading Rationale Saija Finance Private Limited

ICRA Rating Services Page 2

Grading Rationale The M2 grading favourably factors in Saija’s experienced management team and their adequate knowledge of the area of operations; its ability to raise equity from two investors in nascent stage of operations taking overall Net Worth to Rs 26.61 crores as on December 31, 2013; strong investor profile (Accion International holds 40.61% stake in the company and provides technical and management support to the company). The grading also factors in Saija’s prudent credit policies; strong Management Information systems and good internal audit processes which have enabled the company to maintain good asset quality indicators so far( 0+ delinquencies of 0.11% as on 31st December 2013). ICRA has also noted the improvement in Saija’s funding profile with the company adding six lenders in FY14 taking overall number of lenders to nine as on January 31, 2014, however the company would need to diversify its funding sources at relatively lower costs (Weighted average cost of funds for FY14 till Jan-14 was around 14.9%) to scale up operations profitably going forward. The grading also factors in Saija’s reasonable track record of around five years albeit on a small scale (portfolio of Rs 43 crores as on January 31, 2014) and its geographically concentrated nature of operations with 100% of the portfolio concentrated in the state of Bihar. ICRA has noted management’s intention to grow its portfolio at a CAGR of over 90% over the next three years and reduce the concentration risk by bringing down the share of portfolio in Bihar to 50% by March 31, 2015 and 30% by March 31, 2016 by diversifying into the states of Uttar Pradesh and Jharkhand. It would also be important for the company to recruit and train personnel going forward, in line with the planned branch expansion and replacing existing employees especially at field level. Ability of the company to secure funds going forward (both debt as well as equity) to achieve business growth and broad base its second line of management would be critical from a grading perspective.

Company Background Saija Finance Private Limited (Saija) is an NBFC MFI that started its microfinance operations in November 2007 but as a programme under Saija Vikas, a society formed in July 2007 by the promoters- Mr. S.R Sinha and Ms. Rashmi Sinha. The NBFC, Saija Finance Private Limited was formed in April 2008 and has been granted the NBFC-MFI license in December, 2013 by RBI. The company follows the Grameen Model of lending. SAIJA offers two types of JLG loans — Saija Karobar Rin (constituting 12% of total portfolio as on December 31, 2013) and Saija Mahila Rin( group loans to women) (88% of total portfolio as on December 31, 2013). As of 31st January 2014 Saija had operations in five districts of Bihar with seven branches. The company serves 38,997 active clients with a net worth of Rs. 26.61 crore and the portfolio outstanding of Rs. 41.36 crore as on Dec-13 on an asset base of Rs. 49.10 crore as compared to a portfolio of Rs. 24.93 crore on an asset base of Rs. 29.14 crore as on March, 2013. Saija reported a net surplus of Rs. 1.39 crore in 9M FY2014 as compared to a loss of Rs. 0.40 crore in FY2013.

Table 1: Shareholding Pattern Shareholders 31 Jan 2014 31st March 2013 31 March, 2012

No. of Shares

%age

No. of Shares

%age

No. Of Shares

% age

Promoters 22,24,750 7.10% 20,00,000 6.38% 20,00,000 50.50%

Accion Gateway LLC 1,960,396 6.26% 1,960,396 6.26% 1,960,396 49.50%

Accion Africa Asia Investment Company

10,762,808 34.35% 10,762,808 34.35% - -

PI 8,507,943 27.15% 8,507,943 27.15% -

Pragati india Fund Limited 2,233,335 7.13% 2,233,335 7.13%

Saija Management and Employee Welfare Trust

5,645,252 18.01% 5,870,000 18.73% - -

Total 3,13,34,482 100.00% 3,13,34,482 100.00% 39,603,960 100.00%

First round of equity in the company happened in October 2010 when Accion International infused Rs 2 crore for a 49.5% stake in the company while the second round of equity infusion took place in May 2012, when Accion Africa Asia Investment company and PI International LP infused Rs 10.8 crore and Rs 10.7 crore respectively.



Table 2: Highlights of Operations Jan-14 Dec-13 Jun-13 Mar-13 Mar-12 Mar-11

No of States 1 1 1 1 1 1

No. of districts 5 5 5 5 5 5

Total Branches* 7 7 7 7 7 7

Total Active Borrowers 41,719 38,997 35,611 30,489 5,702 16,210

Total Groups* 4275 4,016 3,704 3,207 766 2054

Credit Portfolio (Owned) (Rs. cr) 43.12 41.36 25.72 24.58 0.69 9.79

Growth (%) (Annualised) 90% 91% 18% 3472% -93%

Disbursements (Cr.) 55.15 47.14 10.03 40.89 7.30 20.30

Growth (%) (Annualised) 62% 54% -2%

No. of Employees 132 119 119 120 72 101

Field Officers 80 72 72 77 46 61

Active Borrowers per branch 5,960 5,571 5,087 4,356 815 2,316

Active Borrowers per Field Officer 521 542 495 396 124 266

* As on Jan-14 Saija utilizes a group lending methodology under Joint Liability Group model, wherein the group members undertake the responsibility of forming the group, joint liability, and repayments. Loans are extended under 2 products of the company i.e. Saija Karobar Rin (which is a loan to a group constituted 12% of the total portfolio as on Dec 2013) and Saija Mahila Rin (which is a JLG loan to a group of women and constituted 88% of total portfolio as on Dec-13 ) and both the products are for income generating purposes. The former is extended to groups of 4–6 men and women and the latter to groups of 10–15 women. The loans are extended for tenure of 46 weeks to 2 years depending on the size of the loan at a reducing interest rate of 26% per annum. The loans are repayable in weekly, fortnightly, and monthly instalments. Around 90% of the portfolio is on fortnightly basis, the company is also planning to start Micro Enterprise Loan segment from the next financial year

Disbursement Trends



Summary Grading Rationale Parameters Overall Comments

Business Risk

Operating Environment Over the past couple of years, flow of capital and funding to the MFI sector has shown a steady improvement. RBI has also brought in several prudential regulations for NBFCs in the microfinance business and also created as a separate category - NBFC-MFIs -for focussed prudential regulation. Regulatory changes brought about by RBI for NBFCs engaged in microfinance in the past couple of years including introduction of mandatory use of credit bureaus and debt ceilings for borrowers has been a positive from a credit perspective. As the operating environment is improving, MFIs are expected to expand their presence in under penetrated geographies , venture into individual loans and other secured and unsecured loan products, while remaining focused on politically and communally sensitive borrower groups. Maintaining control over asset quality by building strong systems without compromise on internal audit and controls and building adequate cushions to absorb event risks would be important for the MFIs.

Governance Structure, Management and Systems

Saija had a seven member board as on December, 2013, four investor directors (2 representatives each from ACCION and Pragati), two independent directors of which one have Banking and Finance expertise and second is a renowned economist. The board meets on a quarterly basis. The Saija Board is actively involved in strategy formulation and also approves the company’s business plan. The Board is also involved in areas related to HR and Training, Social Performance Initiatives as well as introduction of new products. Though the management is experienced, the company would have to broad base its second line of management to achieve the planned business growth. ICRA has taken cognizance of Saija’s good loan monitoring and collection mechanisms supported by strong Management Information Systems (MIS), Risk Management and Internal Audit Processes. Saija has been conducting monthly internal audit of all its branches and has put in place a branch rating model and the incentives of staff being linked to the audit scores. The company has also formalised training procedures and manuals at all levels. Saija has also put in a formal grievance redressal mechanism in place.

Scalability (in relation to business plans)

Saija plans to grow at a CAGR of 90% over the next 3 years, and would need larger lines from to diversify its funding profile further. Though the management is experienced, the company would have to broad base its second line of management to achieve the planned business growth. It would also be important for the company to recruit and train personnel going forward, in line with the planned branch expansion and the portfolio growth. Asset Quality Though Saija is in growth phase and its track record is moderate, it has been able to maintain sound asset quality with over 99.90% repayment rates till December 2013. Further, Saija’s good origination processes, all incremental sanctions taking place post credit bureau checks and rigorous supervision by operations team & regular follow up audits by Internal Audit Department have also helped the company to maintain asset quality indicators. So far, Saija has not been affected by any political or external environmental issues. However, Saija is currently operating from only in few districts of Bihar which exposes the company to geographical concentration risks. ICRA has noted management’s intention to grow its portfolio at a CAGR of over 90% over the next three years and reduce the concentration risk by bringing down the share of portfolio in Bihar to 50% by March 31, 2015 and 30% by March 31, 2016 by diversifying into the states of Uttar Pradesh and Jharkhand. Company’s ability to maintain the current asset quality while growing and diversifying would be a key grading sensitivity going forward



B Financial Risk

1 Liquidity and Funding Profile

Though Saija diversified its resource profile in the current financial year added 7 new lenders(two Public sector banks, one private sector banks and six NBFCs,) taking the overall lender list of 9 lenders as on January 2014)and raised Rs. 32.66 crore during the FY2014 (Till Date) at a weighted average cost of around 14.95% with the share of bank funding in the overall funding increasing from 14% as on March 31, 2013 to 42% as on December 31, 2013, its financial flexibility is moderate and the company would need larger lines from banks as well as tap the debt market to meet its growth plans. Owing to the shorter tenor of assets vis-a-vis liabilities, the company had an adequate liquidity profile, however regular flow of funds is crucial to maintain as well as grow business operations and would have a key bearing on its liquidity profile.

2 Capitalisation The company is currently adequately capitalised, (Net Worth of Rs. 26.61 crores as on December 31, 2013) owing to two rounds of equity infusion in the past. Though the present leveraging levels were low at 0.78 times as on December 31, 2013, given that the company plans to grow at a CAGR of 90% over the medium term, gearing levels are expected to rise to around 4.5-5 times over the medium term. Maintaining prudent levels of capitalisation going forward would remain a key grading sensitivity

3 Profitability Saija turned profitable in 9M,FY2014 and reported a net profit of Rs.1.39 crores on an asset base of Rs. 49.10 crores in 9M,FY2014, as compared to net loss of Rs.0.40 crores on an asset base of Rs. 29.14 crores in 2012-13. Saija charges an interest rate of 26% across all its loan products on reducing balance basis, and with the cost of funds being around 14.59%, Saija’s interest spreads were 10.10% in 9MFY2014. With increased operating efficiencies due to scale up of portfolio, the company was able to bring down its cost to income ratio from 108% in FY2013 to 60% in 9MFY2014 and thus reported profits. Going forward, Saija’s profitability indicators are expected to improve as the company leverages its net worth to scale up operations provided the company is able to keep its credit costs under control.



Strengths

Focus of the company on areas of moderate penetration(Bihar , Uttar Pradesh, Jharkhand)

Experienced Management Team and Strong Investor Profile

Good Loan origination, Credit appraisal , Risk Management, Internal Audit and MIS systems

Adequate capitalization to support medium term Comfortable asset quality indicators

Company has been able to maintain good asset quality indicators( PAR of 99.89% as on Dec-13) so far, albeit on a small portfolio

Challenges

To reduce Geographical Concentration Risk with 100% portfolio concentrated in the State of Bihar in and around Patna, , and Ability of company to expand into other geographies while maintaining asset quality indicators yet to be seen

To diversify the funding profile and reduce the cost of funds from present levels (10.44% in

9M2014)

Ability to improve profitability indicators by reducing operating expenses and maintaining the low

credit costs.

Ability to recruit and train personnel to meet the expansion plans and attrition rates especially at

field level

To improve diversity in earning profile



Business Risk Profile Operating Environment Over the past couple of years, flow of equity capital and debt funds into the MFI sector have shown a steady improvement. While larger MFIs have witnessed support from equity investor and lenders, the same for smaller, and regionally concentrated MFIs, continues to remain a challenge. As a result, the pace of recovery of these MFIs continues to be weaker than expected. Funding remained tighter as compared to the pre-AP crisis period, which has resulted in modest growth in the loan portfolio of the smaller MFIs over the last 2 years. RBI has also introduced several prudential regulations for NBFCs in the microfinance business; it has also created as a separate category - NBFC-MFIs -for focussed prudential regulation to this segment. ICRA notes that the regulatory changes brought about by the RBI for NBFCs engaged in microfinance in the past couple of years, including introduction of mandatory use of credit bureaus and debt ceilings for borrowers would be a positive for the sector in the long term, but could strain short-to-medium term growth. In the two years since these regulatory changes were introduced, most of the leading NBFC-MFIs and SHGs have started contributing data to the credit bureaus. This has helped in checking the number of loans, quantum of loans and credit track record of a borrower. These checks have helped in reducing incidence of overleveraging as well as filtering of delinquent borrowers-these measures are likely to have a good long term impact on credit quality of the MFIs. MFIs have taken steps towards reorienting its products and processes in line with the RBI regulations. Post the RBI guidelines, which placed a ceiling on lending rates and interest margins, MFIs have taken several initiatives to cut operating costs including optimization of branch costs and manpower, increase in loan sizes and automation of processes, among others. Taking advantage of the RBI norm of fixing loan tenure at least at 24 months for loans of more than Rs.15,000 and the option to be given to borrowers on frequency of payment, many MFIs migrated to fortnightly and monthly repayment frequencies and, also higher loan amount. Despite these positives, return on equity for MFIs is likely to register only a moderate improvement because of the interest rate ceiling. The sector would continue to need fresh equity for growth, as ICRA expects the pace of growth to be higher than the pace of internal capital generation in the medium term. While sector-focused and social investors could continue to invest in MFIs that demonstrate strong performance, ability of the sector to attract financial investors needs to be observed. As the operating environment improves, MFIs are also expected to venture into individual loans and other secured and unsecured loan products, while remaining focused on politically and communally sensitive borrower groups. Maintaining control over asset quality by building strong systems without compromise on internal audit and controls and building adequate cushions to absorb event risks would be important for NBFC-MFI’s credit profile.



Governance Structure, Management and Systems Board Structure and Processes Board of Directors as of January, 2014:

Name Designation Brief Profile

Mr. S.R. Sinha Chairman & MD Founding managing director of Maharishi Housing Development Finance Limited

Mr. Ravishankar Independent Director

Founder director of Brickworks ratings

Mr. Shaibal Gupta

Independent Director

Economist by profession, Founder member-secretary of ADRI, advisory position in many committees, was a director in Andhra Bank.

Mr. Carlos Eduardo Castello

Nominee Director (Accion)

Consultant for the Society for Elimination of World Poverty. 25 years of experience at ACCION providing technical and management assistance in microfinance.

Mr. Johannes Manndorff


Consultant for microfinance in various organisations in south Africa and Europe.

Mr. Narayanan Shadagopan

Nominee Director (Pragati)

Partner at Toscafund, London based investment management company.

Mr. Kshitij Puri Nominee Director (Pragati)

Worked with Bank of America, ICICI Bank and Tishman Speyer.

Apart from these, company has also appointed Mr. Rahul priyadarshi (Deputy general Manager – SIDBI) in its board as a Nominee Director from SIDBI for which the resolution was being circulated in the mid of February. Saija had a seven member board as on December 2013, four investor directors (2 representatives each from ACCION and Pragati), two independent directors of which one has Banking and Finance expertise and second is a renowned economist. The board meets on a quarterly basis. The Saija Board is actively involved in strategy formulation and also approves the company’s business plan. The Board is also involved in areas related to HR and Training, Social Performance Initiatives as well as introduction of new products. The company also receives technical assistance from investor ACCION. Mr. S.R. Sinha is the promoter of the company and is holding the position of Managing Director and Chairman. Mr. Sinha has over 25 years of experience in retail banking, housing finance and insurance. Mr S.R. Sinha is assisted by functional Heads (Core Team Members) who have been associated with the company for over 5 years. Ms Rashmi Sinha (Promoter) had been on board from inception till May 2012 and now continues to be a permanent invitee.



Systems and Processes IT Systems The company is using an the MIS system developed by Infra Softec This software is integrated with financial accounting module. The MIS system is robust and captures client level data including attendance, borrower’s repayment track record and other personal and financial details of the borrower. The Pre disbursement data is entered at the Head Office while the Post disbursement data is entered on a daily basis at the branches on the real time basis with no time lag. The branches are connected to the HO through internet, however data entry is done at H.O. only. Power and data backup is available at the HO. Data backup is automated 3 times a day and is stored in 3 different locations i.e. Online Google Drive, Tape Device which is kept with IT department and CMD and on weekly basis in Bank’s fire proof locker and the recovery of data is being done on fortnightly basis. The software captures various information of the borrowers which are easily accessible like Personal detail of the borrower, Business detail, financial detail, present status of the borrower, attendance tracking, repayment schedule, LUC status etc. Data is available group wise as well as centre wise. The CDS sheet for every centre meeting is being originated in the software and is extracted in the Branch by the branch manager in advance and on the basis of that only Field officers collect instalments at the centres. IT department send a report on the infrastructure development and issues in the IT system of the company to the board of directors on monthly basis while a quarterly presentation of the same is made in every board meeting of the company. Credit Bureau Checks Company is using both the credit bureaus i.e. Highmark and Equifax but Highmark is being used in most of the cases. The CB check is done before a borrower is considered for the loan and is being done at the branch level by the field executives only, the report for which is being attached in the file. But the same report is not being captured in the MIS as of now as the entry in the MIs of a case is done only when it has been approved while if a case is not a success in CB check it is being rejected outright. Grievance Redressal Number Company has provided a grievance redressal number on every loan passbook which can be reached by the borrower for any query and complaint of their. This number is not a toll free number as of now but company is planning to introduce a toll free number going forward. Internal Audit Process Saija has developed a comprehensive system of internal audit where both head office and all the branches are being audited on regular basis.

Head Office: HR, Admin, Finance and Accounts and IT are being audited quarterly.

Branch Audit: Each branch is being audited on monthly basis. Branch audit plan is comprehensive audit plan which comprises of 6 days. 4 days is dedicated for group visit, client feedback and observing field process like promotion, CGT and GRT, 1 day for branch registers and checking of loan document file and other branch upkeeps and 1 day for report writing. The areas which are checked by the internal auditors are such as Staff strength and HR related issue at branch, Group meeting, Field Process: Promotion, CGT and GRT, Branch monitoring by branch supervisors, Insurance claim verification, Physical cash verification, Branch Registers, Verification of Loan Documents, Checking clients loan track with credit bureaus.

The company has 4 employees in the internal audit team consisting of 3 Internal Audit executives and 1 Internal Audit Head.The internal audit executives select a sample of around 15-20 groups per branch per month which are being audited and that counts to 50% of groups being checked on annually basis for each branch in the company. All the aspects of the loan sanctioning, disbursement and collection process are being audited by the executives which includes field visits, attending the disbursal process, talking to the customers, checking the LUCs, checking all the registers being maintained at the branch, attending CGT and GRT being conducted during that period etc. The company follows the branch scoring system and the department scoring system for the head office based on the results of the internal audit.



Client Protection Practices The company has developed a robust client protection practices in place, which is reflected in its relatively conservative credit policies. Some of the key highlights of the credit policies of Saija are as follows.

Loan application captures family’s outstanding loans

Borrower wise cash flow analysis is part of the disbursement form

Residential status is being checked on compulsory basis for all the borrowers

Signature of spouse is mandatorily taken on application form for all female borrowers

Insurance is compulsory for spouse and the borrowers in both types of loans.

Company also checks various ratios for each individual borrower like Instalment to Residual income and Income to Instalment ratios for which there are various standards which should be strictly followed in every case i.e. income to instalment should not be less than 2.5 times and instalment to residual income should not be more than 75% in any case.

The company has also put in a good grievance redressal mechanism in place with a dedicated phone line for grievances a record of which is being kept at the head office. Incentive structure for loan officers is also based on various factors other than loan acquisition like Branch grading by Internal Auditor, Loan application form etc. Accounting Policies Saija books interest income on the industry-accepted Internal Rate of Return (IRR) basis. Saija’s Provisioning policy is also as per the RBI norms.



Scalability

Jan-14 Dec-13 Jun-13 Mar-13 Mar-12 Mar-11

No of States 1 1 1 1 1 1

No. of districts 5 5 5 5 5 5

Total Branches* 7 7 7 7 7 7

Total Active Borrowers 41,719 38,997 35,611 30,489 5,702 16,210

Total Groups* 4275 4,016 3,704 3,207 766 2054

Credit Portfolio (Owned) (Rs. cr) 43.12 41.36 25.72 24.58 2.74 9.79

Growth (%) (Annualised) 90% 91% 18% 3472% -73% -

Disbursements (Cr.) 55.15 47.14 10.03 40.89 7.30 20.30

Growth (%) (Annualised) 62% 54% -2%

No. of Employees 132 119 119 120 72 101

Field Officers 80 72 72 77 46 61

Active Borrowers per branch 5,960 5,571 5,087 4,356 815 2,316

Active Borrowers per Field Officer 521 542 495 396 124 266

Portfolio per branch ( Rs crore) 6.16 5.91 3.67 3.51 0.39 1.40

Saija reported a 90% growth in portfolio in FY2014 till January 2014, The no of active borrowers per branch and credit officer also improved with improvement in borrower penetration per branch and shifting towards fortnightly mode of repayment (from weekly) to enable more no of borrowers to be covered per credit officer. The company is based out of Bihar since inception i.e. in and around Patna covering 5 districts with a branch network of 7 but company is planning to open 4 new branches by the end of FY14 out of which 2 will be in Jharkhand (Ranchi), 2 in Bihar (Samastipur and Darbhanga), thereby expanding the geographical reach of the company. Also, management plans to bring down the portfolio concentration in Bihar to 50% by FY2015 and 30% by FY2016. The company has started to scale up operations at a fast pace as it is still in growth phase. However, the company has been following a contiguous expansion strategy (expansion in neighbouring districts) to monitor the portfolio more effectively. Further, extensive surveys are done before entering any village, covering poverty levels, literacy levels, population, various risks in the area, primary occupation of the villagers etc. Extensive community meetings are also conducted before members are admitted.



Access to capital

Rs crore Dec-13 Mar-13 Mar-12

Tier 1 Capital 26.40 24.95 0.30

Tier 2 Capital 0.35 0.06 1.00

Total Capital 26.75 25.01 1.30

Risk Weighted Assets 42.59 25.72 4.20

CRAR ( Reported) 62.82% 97.25% 31.03%

Tier 1 Capital 61.98% 97.00% 7.20%

Tier 2 Capital 0.83% 0.25% 23.83%

Gearing assuming assigned book as debt 0.78 0.11 6.68

First round of equity in the company was done in October FY10 when Accion International picked up 49.5% (for a consideration of Rs. 2 crores) stake in the company while the second round of equity infusion took place in May 2012, when Accion Africa Asia Investment company and PI International LP both picked up 34% stake in the company worth Rs. 10.80 and Rs. 10.70 respectively, thereby taking the total paid up capital of Saija at INR 31.33 crores. Promoters have demonstrate ability to tap capital from external sources and would be willing to access further capital Company will be acquiring funds from various lenders going forward as well and plans to target a gearing of around 3.5 times. Accion on one hand does not have an exit plan from the company and hopes to maintain the stake for the long term while Pragati have an exit plans based on the conditions to be followed by the company according to which company needs to maintain an IRR of 16% once it turns profitable and since the company has turned profitable from this year only so conditions will be enforced. Human Resources Company has a dedicated Human Resource department and Human Resource policy in place which includes all the policies and procedures of the department for the company. Major portion of the compensation of the field employees is fixed while the variable part of the salary is based on various parameters – acquisition of clients, the number of mistakes in the loan application forms of the clients, loan utilization check effectiveness and scores given by the Audit Committee to their branches. The incentives of employees are linked to the scores in the Internal audit All the new joinees have to go through induction and process trainings while the existing employees have to go through monthly refresher trainings The auditors of the company are M/s BSSR and Co (Channel Partner of KPMG). Tie-up of funding sources Access to debt

Rs crore Dec-13 Mar-13 Mar-12

Networth 26.61 25.22 0.68

Term Loans from Banks 8.75 42% 0.40 14% 2.18 48%

Term Loan from FIs 12.10 58% 2.4 86% 2.36 52%

Term Loan from Banks and FIs 20.86 100% 2.80 100% 4.54 100%

Off balance sheet

Total Borrowings (incl Off B/s) 20.86 100% 2.80 100% 4.54 100%

Gearing 0.78 0.11 6.68

(assuming assigned book as debt)

Cost of funds ( From Spreads) 10.44% 11.42% 21.37%

Weighted Average Cost of Borrowings 14.59%



Saija diversified its resource profile in FY2013 and FY2014 added 7 new lenders taking the overall lender list of 9 lenders as on January 2014 and raised Rs 32.66 crore during the FY2014 (till date) at a weighted average cost of around 14.95%. The lender base consists of two Public sector banks, one private sector banks and six NBFCs, The share of Banks in the total funding of the company is at 42% as on December 2013 vis-avis 14% as on March, 2013. Further, though the company has increased the quality and number of lenders in its resource profile, it would require larger lines from banks at competitive rates (specially post the recent change in RBI regulation where the margin cap for all MFIs has been maintained at 12%) to reach the requisite scale of operations. The company would also need to tap other debt market funding sources to diversify its resource profile. The liquidity profile of the company is comfortable owing to the shorter tenor of assets and low gearing, however regular flow of funds is crucial to maintain as well as grow business operations and would have a key bearing on its liquidity profile.



Financial Performance Profitability

Rs crore 9MFY2014 FY2013 FY2012

Net Interest Income 5.32 44% 3.70 1999% 0.18 -89%

(including income from assignment)

Non Interest Income / Fee Income 0.03 -96% 0.82 95% 0.42 256%

Operating Income 5.35 18% 4.51 658% 0.60 -66%

Operating expense 3.20 -35% 4.88 102% 2.41 0%

Operating Profit 2.15 -688% (0.37) -80% (1.82) 180%

Provisions-credit 0.29 - -

PBT 1.86 -607% (0.37) -80% (1.82) 170%

PAT 1.39 -448% (0.40) -77% (1.74) 139%

Saija charges a rate of interest of 26% on reducing balance while processing fees is 1% of the loan amount.

Saija charges an interest rate of 26% across all its loan products on reducing balance basis, and with the cost of funds being around 14.59%, Saija’s interest spreads were 10.10% in 9MFY2014.

Increased operating efficiencies due to scale up of portfolio, helped the company to bring down its cost to income ratio from 108% in FY2013 to 60% in 9MFY2014

Reduction in operating expenses coupled with low credit costs helped the company to report a net profit of Rs.1.39 crore on an asset base of Rs. 49.10 crore in 9M,FY2014, as compared to net loss of Rs.0.40 crore on an asset base of Rs. 29.14 crore in 2012-13

Going forward, Saija’s profitability indicators are expected to improve as the company leverages its net worth to scale up operations provided the company is able to keep its credit costs under control.

KEY RATIOS 31-Dec-13 31-Mar-13 31-Mar-12 31-Mar-11 31-Mar-10

Yield on Average Loans 22.92% 29.76% 26.99% 26.68% 22.77%

Yield on Average Investments 3.31% 0.00% 0.00% 0.00% 0.00%

Yield on Average Earning Assets 20.55% 25.45% 21.84% 23.54% 20.53%

Cost of Average Interest Bearing Funds 10.44% 11.42% 21.37% 12.03% 10.26%

Lending Spreads 12.48% 18.34% 5.62% 14.64% 12.51%

Gross Interest Spread 10.10% 14.03% 0.46% 11.51% 10.27%

PROFITABILITY RATIOS

Interest income / ATA 21.29% 23.53% 18.07% 23.96% 21.49%

Interest Expense / ATA 3.16% 2.41% 16.23% 7.94% 5.02%

Net Interest Margin/Avg. Tot Assets 18.13% 21.12% 1.84% 16.02% 16.46%

Non- interest income/ Avg. total Assets 0.10% 4.67% 4.38% 1.14% 0.46%

Operating expenses / ATA 10.89% 27.88% 25.19% 23.47% 34.36%

Operating expenses / AMA 10.89% 27.88% 25.19% 23.47% 34.36%

Operating Profit / Avg Total Assets 7.34% -2.09% -18.97% -6.30% -17.43%

Operating Profit / Avg Total Assets 6.33% -2.09% -18.97% -6.55% -17.81%

Credit Prov. & Write-offs /ATA 1.00% 0.00% 0.00% 0.25% 0.38%

Prov. & Cont. / ATA 1.00% 0.00% 0.00% 0.25% 0.38%

PBT /Average Total Assets 6.33% -2.09% -18.97% -6.55% -17.81%

Tax / PBT 25.38% -8.68% 4.57% -7.59% 0.42%

APAT/ Average Total Assets 4.73% -2.27% -18.11% -7.05% -17.74%

PAT/ Average Total Assets 4.73% -2.27% -18.11% -7.05% -17.74%

PAT / Average Net worth 7.13% -3.07% -101.70% -23.42% -37.35%

Cost Income Ratio 59.76% 108.11% 405.42% 136.72% 202.97%

ATA- Average total assets, AMA- Average Managed Assets



COMPANY PROFILE—Saija Finance Private Limited

Date of Incorporation April 2008

Constitution Non-Deposit Taking NBFC-MFI

Registered Office B-3/17, Safdarjung Enclave, New Delhi-110029

Corporate Office 3rd Floor, Uma Complex, Fraser Road, Patna, Bihar – 800001

Net Worth (Dec-2013) Rs. 26.61 crore

Number of Branches (Jan-14) 7

Number of active borrowers Jan-14) 41,719

Number of field officers (Jan-14) 80

Balance Sheet size ( Dec-13)(including managed book)

Rs 49.09 crore

Managing Director Mr S.R. Sinha

Auditors BSSR and CO

Shareholding Pattern (Mar-13) Jan-14

% share

Promoters 7.10% Accion Gateway LLC 6.26%

Accion Africa Asia Investment Company

34.35%

PI 27.15%

Pragati india Fund Limited 7.13%

Saija Management and Employee Welfare Trust

18.01%

Total 100.0%

Board of Directors Name Designation

Mr. S.R. Sinha Chairman & MD

Mr. D. Ravishankar Independent Director

Mr. Shaibal Gupta Independent Director

Mr. Carlos Castello Nominee Director (Accion)

Mr. Johannes Manndorff


Mr. Narayanan Shadagopan

Nominee Director (Pragati)

Mr. Kshitij Puri Nominee Director (Pragati)



ICRA Limited

An Associate of Moody's Investors Service

CORPORATE OFFICE

Building No. 8, 2nd Floor, Tower A; DLF Cyber City, Phase II; Gurgaon 122 002

Tel: +91 124 4545300; Fax: +91 124 4545350

Email: [email protected], Website: www.icra.in

REGISTERED OFFICE

1105, Kailash Building, 11th Floor; 26 Kasturba Gandhi Marg; New Delhi 110001

Tel: +91 11 23357940-50; Fax: +91 11 23357014

Branches: Mumbai: Tel.: + (91 22) 24331046/53/62/74/86/87, Fax: + (91 22) 2433 1390 Chennai: Tel + (91 44)

2434 0043/9659/8080, 2433 0724/ 3293/3294, Fax + (91 44) 2434 3663 Kolkata: Tel + (91 33) 2287 8839 /2287

6617/ 2283 1411/ 2280 0008, Fax + (91 33) 2287 0728 Bangalore: Tel + (91 80) 2559 7401/4049 Fax + (91 80)

559 4065 Ahmedabad: Tel + (91 79) 2658 4924/5049/2008, Fax + (91 79) 2658 4924 Hyderabad: Tel +(91 40)

2373 5061/7251, Fax + (91 40) 2373 5152 Pune: Tel + (91 20) 2552 0194/95/96, Fax + (91 20) 553 9231

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