SKS Microfinance Limited

Head Office: 3rd Floor, My Home Tycoon, Block A, 6-3-1192

Kundanbagh, Begumpet, Hyderabad - 500 016, Telangana, India
T: +91 40 4452 6000 F: +91 40 4452 6001
info@sksindia.com I www.sksindia.com

MICROFINANCE

Corporate Identity Number: L65999MH2003PLC250504

May 4, 2016
The Vice President - Listing
National Stock Exchange of India Limited
Exchange Plaza,
Bandra - Kuria Complex
Mumbai - 400 051

The Secretary
BSE Limited
Phiroze Jeejeeboy Towers
Dalai Street
Mumbai-400001.

Dear Sir / Madam,

Sub: Earning Update
This is inform you that Board of Directors of the Company at its meeting held today i.e. May 4,
2016, had approved the audited financial results for the quarter / year ended March 31, 2016 and
the same have been sent to you.
A copy of the Earning Update for the aforesaid quarter / year, which we plan to host on our
website www.sksindia.com is attached for your information and records.
We request you to take the above on record.

Thanking You.
Yours faithfully,
for SKS Microfinance Limited
MUMBA1

Raj endra Patil

Sr. Vice President - Legal & Company Secretary
End: As above.

Registered Office: Unit No. 410, Madhava. Bandra-Kurla Complex, Bandra East, Mumbai - 400 051, Maharashtra, India T: +91 22 2659 2375
Regional Offices: Bengaluru I Bhagalpur I Bhopal I Bhubaneswar I Dehradun I Dharwad I Gulbarga I Hyderabad I Jaipur I Kochi I Kolkata I Lucknow
Nagpur I Patna I Pune I Raipur I Ranchi I Sambalpur I Siliguri I Varanasi I Vizag

EARNINGS UPDATE Q4FY16

MAY 2016

SKS Microfinance Limited

BSE: 533228 NSE: SKSMICRO
Corporate Identity No. L65999MH2003PLC250504

www.sksindia.com
1
This presentation is solely for viewing. No part of it may be circulated, quoted, or reproduced for distribution without prior written approval from SKS Microfinance Limited.

CONTENTS

Particulars

Slide No.

Executive Summary

Investment Hypothesis

Company Overview

Clarity on Major Uncertainties Post AP MFI Crisis

13

Future Strategy

18

Q4FY16 Performance Highlights

24

Review of Financials

31

Financial Architecture

42

Risk Management

46

Capital Structure

48

Annexures

51

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY
Overview

AUM Growth (Non-AP portfolio)

Second largest microfinance company

in India with gross loan portfolio of INR
7,677 Cr., 56 Lakhs members in NonAP states and 1,324 branches

Growing Net Interest Income

INR Cr.

INR Cr.

714
7,677

Lowest lending rate (19.75%) among

MFIs

423

4,171
278

2,837

Companys non-AP Portfolio grew by

84% (YoY) and 24% (QoQ) to INR
7,677 Crs. as of March 31, 2016

158

2,016

PAT of INR 303 Cr. for FY16.

Mar-13

Mar-14

Mar-15

Mar-16

FY-13

FY-14

FY-15

FY-16

*Interest income on Portfolio loans + Excess interest

spread on securitization/Income from Assignment + Loan
processing fees + BC Fee Financial Cost

Attractive Financial Metrics

Balanced Geographical mix

Strong Balance sheet and liquidity

Net worth (INR Cr.)
Capital Adequacy
Cash & Cash equivalent
(INR Cr.)
Gross NPA

Jharkhand
4%
Rajasthan
5%

1,383
23.1%
1,660
0.1%
9.2%
48.3%
25.1%

Return on Asset*

4.2%

Odisha
18%

Note: FY16
Non-AP = excluding states of AP and Telangana
# includes on and off b/s borrowings (excluding processing fees) for
Q4FY16
*includes securitized, assigned and managed loans
Figures rounded off to the nearest digit across the presentation

Karnataka
14%

Uttar
Pradesh
9%
West
Bengal
10%

4.4%

Morgan Stanley SG PTE

Amansa Capital PTE

4.2%

Sandstone

Kerala
6%

Efficiency and Profitability

Marginal cost of borrowing#
Cost to income
Return on Equity

Top 10 Shareholders

Others
6%

Madhya
Pradesh
5%

Diversified Shareholding

Max Life Insurance

Bihar
11%

Note: Portfolio As of March 31, 2016

3.6%

IDFC Mutual Fund

3.4%

Vinod Khosla

3.3%

Tree Line
Maharashtr
a
12%

4.1%

3.0%

Indus Capital Partners

2.8%

Kismet Microfinance

2.7%

Baron Capital

2.5%

Note: Shareholding As of March 31, 2016

INVESTMENT HYPOTHESIS

INVESTMENT HYPOTHESIS
There is a huge demand/ supply gap for microfinance
SKS is the lowest cost MFI lender across the globe
Diversified earnings stream with cross-sell / Non-Loan revenue contributing 9% to PAT
Pan-India presence with no unbalanced geographic sectoral exposure
Strong solvency (Capital Adequacy of 23.1%) and sufficient liquidity

RBIs comprehensive regulatory framework mitigates political and regulatory risks

RBI and MoF acknowledge microfinance as a key component of financial inclusion
Entry barriers and supervisory standards are significantly enhanced thwarting future competition
No credible alternative for microfinance emerges even after 5.5 years of AP MFI Act
PSL requirement of banks to enhance funding availability and value of the franchise
Steady state RoA of 4% still the highest among financial services play
6

THERE IS A HUGE UNMET DEMAND FOR MICROFINANCE

Micro-Credit Demand In India

covered in part by
moneylenders and
informal sources,
but largely untapped

Segment -1
70 mn households in India
with some assets (INR
90/day PPP)

MFIs

Rs. 2,40,000 Crs.

SHG

Rs.87,442 crs
Rs.62,575 crs

27,582

24,017
38,558
2014

59,860
2015

Demand

*Disbursement in INR Crs.

Segment -2 (BPL)
80 mn households in India
with no assets (INR 55/day
PPP)

Assumptions
Target households: 150 mn
Basis: World Bank poverty statistics, India
Avg. credit requirement: Rs 20,000 per household
Basis: EDA Rural Systems, World Bank, Access to Finance
Adjustment for service difficulties: 20%
Basis: adjustment made to reflect inaccessible poor in rural areas (~7%) and half of
underserved urban poor (0.5 x 26% = 13%)
Source: World Bank; Sa-Dhan Bharat Microfinance reports
7

COMPANY OVERVIEW

88

SKS USES GRAMEEN MODEL TO PROVIDE UNSECURED CREDIT AT THE

DOORSTEP OF LOW INCOME RURAL WOMEN

Put loan
officers pic

Survey a village

Recruit members

Deliver doorstep service

Provide training
9

BUILDING BLOCKS OF TURNAROUND POST AP MFI CRISIS

INR crore

Balance Sheet Cleansed

Supply-side Shock Managed

Drawdowns

AP exposure of Rs. 1,360

crore written off/ provided
for

Credit Growth Resumed

3,526

NonAP Gross Loan

Portfolio

2,837

3,503
2,875

1,484
1,185

FY 12

FY 13

FY 14

Cost Structure Optimization

Q3FY11

Q4FY14

Q3FY11

Q3FY12

Q4FY14

Return To Profitability

Var.

70
Branches

Other Opex (INR

crore)
Headcount
Personnel Cost
(INR crore)

2,403

1,255

-48%

51

21

-60%

25,735

8,932

-65%

89

43

-52%

FY12
(13.6) Bn

FY13
(3.0) Bn

FY14
10

DURABLE FOUNDATION FOR SUSTAINABLE GROWTH (1/2)

Market Share Regained
Non-AP Portfolio Outstanding

SKS
Disbursement
share 18%* in
Q3FY16

42.251
28.300

3,945

6,177

14%

Net worth - Rs. 1,383 crs

15%

14.600

1,229

Capital Reinforced

INR Crs.

CAR - 23.1% (RBI Requirement

* Industry
disbursements
for Q3FY16 is
Rs.16,580 crs.

8%

15%)

Others
SKS

Oct10

June12

Dec15

Dec-15 data as per MFIN; (excludes data for Bandhan bank; Equitas -Q1FY16 and Ujjivan -Q2FY16)

Technology Upgraded

Efficiency Gains

Marginal Cost of
Borrowing#

Cost to Income

Refactoring of
In-house lending
system

Installed
Computers at
all branches
with In-House
lending
system

Yrs

2000

Equipped
Loan
Officers with
tablets

Mobile/ digital/
cashless
transactions
74.5%
61.1%

48.3%

47.5%

12.6% 11.9% 10.2%

All branch
connectivity
with daily data
receipt (1,215
remote
locations)

FY14

FY15

FY16

Q4FY16

FY14

FY15

FY16

9.3%

Q4FY16

# On and Off balance sheet loans including processing fee

2012

2014 -15

2015 -16

11

DURABLE FOUNDATION FOR SUSTAINABLE GROWTH (2/2)

Political Risk Mitigation through interest rate reduction
29.25%

4.8% reduction in one year

24.55%

23.55%

22.00%

20.75%
19.75%

Oct-10

Jan-11

Oct-14

Jul-15

Oct-15

Lowest interest rate

charged by any private
sector MFI in the globe

Dec-15

Interest rate on income generation loans

Reduced Borrowing Dependence

Share of borrowing from top 5
banks
74%

Lower State Concentration

Top three states share in GLP

53%
44%

50%

Mar-13

Mar-16

Term loan and cash credit facilities

Sep-10

Mar-16

GLP: Gross Loan Portfolio

12

CLARITY ON MAJOR UNCERTAINTIES

POST AP MFI CRISIS

13

WHAT DOESNT KILL YOU, MAKES YOU STRONGER - POSITIVE DEVELOPMENTS

POST AP MFI CRISIS
Concerns

Clarity
Regulatory clarity RBI to be the sole regulator

Will there be multiple

regulators?

Priority sector status continues

Funding uncertainty?

MFIs are the only indirect priority sector dispensation

No contagion
Will there be contagion?

Since past 5.5 years no other state has followed suit

Collection efficiency maintained despite disbursements being a fraction

Has the operating model

been challenged?

What will be the economics

under regulated interest
rate regime?

of collections during the wind-down mode i.e. Oct2010 to June2012.

No alternative credit delivery model has gained currency.

RoA of 3-4% on a steady-state basis

14

OPERATING MODEL VAILIDITY ESTABLISHED

Collection efficiency of 97% during wind-down mode dispels ever greening myth
Non-AP
Loan
Portfolio

INR crs
3,942
3,526
2,706
2,101
1,635

Q2FY11

Q3FY11

Q4FY11

Q1FY12

1.9 million borrowers repaid loans

without incremental lending

Q2FY12

1,185

1,320

1,229

Q3FY12

Q4FY12

Q1FY13

Internal generation -- and not incremental debt -aids prompt repayment

in Millions

MFI Industry non- AP Portfolio Outstanding (Rs Cr)

No. of non-AP borrowers who repaid on-time

during this period

5.2

Oct10

28,300

No. of non-AP members who availed loans

during this period

3.3

June12

14,600

No. of non-AP members who didnt

receive any incremental credit from SKS
during this period

1.9

15

COMPETITIVE LANDSCAPE CHANGES TO SKS ADVANTAGE

Snapshot of Equifax Credit Bureau*:

INR crore

Institutional
Infrastructure
Credit Bureaus- Equifax & Highmark
are functional
- 95% of MFIs now use
CB reports for
disbursements

No. of loan records - 17.8 Crore

No. of borrower records 7.0 Crore
No. of loan records (live) 4.6 Crore
No. of borrower records (live) 3.3 Crore
No. of MFIs reporting 117
Frequency of sharing the records Weekly

Market Share
Dynamics
2nd, 3rd, 4th and 5th
largest MFI players
with 40% Non-AP
market share are
under CDR.

Sector outstanding
Non-AP Portfolio
Oct 10 28,300
Mar14 24,615
Mar15- 40,138
Dec15- 42,251#

* Source: Equifax (as on Jan 2016)

# Dec-15 data as per MFIN; excludes data for Bandhan bank;
Equitas (Q1FY16) and Ujjivan (Q2FY16)

16

STEADY-STATE ROA OF 4% CAN BE TARGETED

Interest rate
Processing fee

Minimum Alternate Tax @ 21%

21.5

4.5

Marginal Cost of
borrowings: 9.3%.

1.5

Portfolio funded by debt:

1.0

80%

19.75*

7.1

7.4
#

1.7

Financial cost

Operating
cost

Prov. &
Write-off

Taxes

Profit

Revenue

*interest rate charged is 19.75% for new loans effective from 7th Dec15
#Processing fee is calculated based on weighted average portfolio mix of 70% IGL (1 Yr. loan) and 30% LTL (2 Yr. loan).
17

FUTURE STRATEGY

18

A COMPARATIVE STUDY OF STRUCTURAL OPPORTUNITIES & CHALLENGES

CHALLENGES

OPPORTUNITIES

Access to low cost funds/deposits

Bank accounts to customers
Political risk mitigation

SFB

NBFCMFI

Generate Agri-allied/ PSL for banks

Leverage Business Correspondent (BC)
model to offer bank accounts and saving
products to customers without CRR and
SLR drag

CASA can be competitive only in the long

term
CRR and SLR drag
No PSL benefit on bank borrowings
Interbank borrowings capped at 3x Net
Worth
Cannot act as Business Correspondent
(BC) to other banks
Investment in technology, infrastructure
and functional capabilities for banking

Political risk beyond a size

Cannot access deposits

19

SFB - MISSED OPPORTUNITY BUT NOT A SETBACK

Rationale for SFB application

Political Risk mitigation

Sub-20% interest rate mitigates political risk

SKS becomes the lowest cost lender with 19.75%
interest rate

Access to refinance

Access to refinance is now available to NBFCs also

SKS has accessed Rs.100 Cr refinance from
MUDRA @ 10%

Bank accounts for

customers
Migration to cashless
regime to reduce opex

Seed Jan-Dhan accounts of members

Open bank accounts for members as BC for other
banks

Downward adjustment of
risk premium to reduce
cost of borrowings

Lowest borrowing cost in the sector

Highest rating in the MFI sector - A1+ for short
term and A+ for long term
Strong Balance Sheet : Strong solvency and
sufficient liquidity
Relationship premium from credit grantors

Mitigants / Counter Strategies

20

UNMATCHED LEADERSHIP

Parameter

Unique
Operating Model

Extensive Reach

Lowest Cost
Producer

Best of Breed
financial ratios

External
endorsements

Status

Group Lending

100%

Rural customer base

75%

No. of districts

305

No. of customers

5.6 Mn

Interest rate

Lowest interest rate of

19.75% among global
private sector MFI

Opex to GLP

7.1%

Cost to Income

48.3%

Earnings growth

61% yoy

RoA, RoE

4.2%, 25.1%

Rating

Highest Long-term rating (A+) and

Short-term rating (A1+) amongst
NBFC-MFIs

21

THE MOST EFFICIENT MFI IN THE GLOBE

Medium Term Strategic Priorities:

Target %

Metric

Drivers

10

20

30

Marginal
cost of
Borrowing

Sub-20
Interest
Rate to
Borrower

Cumulative
next 2
years salary
increase to
field staff

Balance sheet
strength

Low marginal
cost of borrowing

Stellar
repayment
record

Scale &
Efficiency

Productivity &
Efficiency

40
Cost to
Income
Ratio

*Q4FY16

9.3*

Annualised
earnings
growth

Technology
initiatives

AUM
growth

Scale

Operating
leverage
Non-Loan
revenue

Judicious
sources mix

Status
FY16

50

19.75*

15

48.3

61
22

CREATIVE DISTURBANCE TO ASSET-REVENUE-EARNING CORRELATION

Medium-Term Targets

Earnings
20%
9.3%

Revenues
80%
15%
3.8%

Assets*
85%
10%
1.3%

MFI
Non - MFI
Non-MFI Actuals FY16

90%

*Note: Core microfinance will continue to be more than 90% of credit assets

23

Q4FY16
PERFORMANCE HIGHLIGHTS

24

HIGHLIGHTS OF Q4FY16
Incremental drawdowns of Rs.3,224 Crs. in Q4FY16 (Rs.2,414 Crs. Q4FY15) and full year drawdowns in FY16
were Rs.7,317 Crs. (growth of 46% YoY) excluding origination under managed loans. SKS also originated Rs.326
Crs. and Rs.1,064 Crs. loans under managed portfolio in Q4FY16 and FY16 respectively.
Completed securitization transactions of Rs.1,621 Crs rated as AA (SO) and asset assignment of Rs.507 Crs. in
Q4FY16.

Loan disbursement of Rs.4,066 Crs. in Q4FY16 (growth of 63% YoY and 36% QoQ). Disbursements in FY16 was
Rs.12,088 Crs (growth of 75% YoY).
Non-AP Portfolio grew by 84% YoY and 24% QoQ to Rs.7,677 Crs. as of March 31, 2016.
Marginal Cost of Borrowings* reduced from 9.9% in Q3 FY16 to 9.2% in Q4FY16 and Weighted Average cost of
Borrowings# (historical) also reduced from 11.5% in Q3 FY16 to 11.1% for Q4FY16.

The un-availed deferred tax benefit of Rs.357 Crs. and MAT credit of Rs.97 Crs. will be available to offset tax on
future taxable income.
PAT of Rs. 84 Crs. in Q4FY16 (growth of 108% YoY and 6% QoQ ) and Rs.303 crs for FY16 (growth of 61% YoY).
QoQ PAT movement has been impacted by increase in standard asset provisioning of Rs. 5 Crs and income
deferral of Rs. 6 Crs due to securitization and assignment.

Networth of Rs.1,383 Crs. and Capital adequacy at 23.1% as of March 31, 2016.
Cash & Cash equivalent^ of Rs.1,660 Crs.

Note:
^ Excluding security deposit.
# including processing fee of Rs.2.5 Crs paid on Loans on Balance sheet in Q4FY16.
* Includes on and off b/s borrowings, excluding processing fees.
Figures rounded off to the nearest digit across the presentation. Figures and ratios have been regrouped wherever necessary.

25

OPERATIONAL HIGHLIGHTS
Particulars
Branches#
Centers (Sangam)
- Centers in non-AP States
Employees (i) + (ii) + (iii) + (iv) + (v) + (vi)

Field Staff (i) + (ii) + (iii) + (iv) + (v)

Sangam Managers* (i)

Sangam Manager Trainees(ii)

Branch Management Staff (iii)

Area Managers (iv)

Regional Office Staff (v)

Head Office Staff (vi)

Members in non-AP States (in '000)

Members added (in the quarter) (in 000)

Active borrowers in non-AP States (in '000)

Active borrowers added (in the quarter) (in 000)

No. of loans disbursed (in '000)
Disbursements (for the quarter) (INR Crs.)
Gross loan portfolio Non-AP (INR Crs.) (A+B+C)

Loans outstanding (A)

Securitized/Assigned (B)

Managed loans (C)

Operational Efficiency Non-AP :
Off-take Avg (Disbursements/ No of Loans disbursed) (INR)
Off-take Avg Excluding Cross Sell
Gross loan portfolio/ Active Borrowers (INR)
Gross loan portfolio/ No. of Sangam Managers (Rs. '000)
Active borrowers / No. of Branches
Active borrowers / No. of Sangam Managers

Mar-15

Mar-16

YoY%

Dec-15

QoQ%

1,268
227,125
156,457
9,698
9,416
5,286
777
2,266
99
988
282
4,482
483
3,648
382
1,857
2,494
4,171
2,911
918
342

1,324
246,647
175,774
11,991
11,689
6,884
1,008
2,576
155
1,066
302
5,566
806
4,637
845
2,386
4,066
7,677
4,965
2,023
688

4%
9%
12%
24%
24%
30%
30%
14%
57%
8%
7%
24%
67%
27%
121%
29%
63%
84%
71%
120%
101%

1,300
227,214
156,341
11,086
10,794
6,415
654
2,537
144
1,044
292
4,957
540
4,158
537
1,899
2,980
6,177
5,035
557
586

2%
9%
12%
8%
8%
7%
54%
2%
8%
2%
3%
12%
49%
12%
57%
26%
36%
24%
-1%
263%
18%

13,443
15,473
11,434
8,994
3,214
787

17,049
20,578
16,557
12,141
3,893
733

27%
33%
45%
35%
21%
-7%

15,701
18,184
14,857
10,611
3,563
714

9%
13%
11%
14%
9%
3%

*Sangam Managers are our loan officers who manage our centers (also called Sangams). As of March16, we had 6,323 Sangam Managers in
Non-AP States # Incl. 44 Gold loan branches

26

BORROWER GROWTH IS HIGHER THAN TICKET SIZE GROWTH FOR LAST 3 YEARS

Increase in
No. of
Borrowers

Increase in
Ticket size

Change in Loan
duration^

AUM growth

FY14

26%

4%

8%

41%

FY15

12%

6%

24%

47%

FY16

27%

22%

18%

84%

CAGR last
3 yrs.

21%

10%

16%

56%

Notes:
^ Due to the impact of long term loans ( 2 years duration), which was piloted in FY14 and rolled out in FY15.
27

PRODUCTIVITY GAINS & COST EFFICIENCY ENABLE SKS TO LEVERAGE THE

CONDUCIVE ENVIRONMENT
Best before
AP MFI
crisis

Worst
during AP
MFI crisis

FY14

FY15

FY16

Q4 FY16

Productivity Non-AP:
Borrowers/ SM

489*

287

721

787

733

733

3,640*

1,320

6,275

8,994

12,141

12,141

Offtake Avg.

10,299*

9,237

11,849

12,273

15,024

17,049

Offtake Avg. (Excl Cross-sell)

10,383*

11,021

12,277

14,149

18,102

20,578

Financial Cost %$

6.6%

9.8%

8.3%

8.3%

8.5%

7.7%

Cost of borrowings % (without

processing fees)

9.7%

12.9%

12.7%

12.1%

11.4%

10.8%

10.3%^

16.0%^

13.6%#

12.8%#

11.6%#

11.1%#

Opex/ Gross Loan Portfolio %

10.4%

21.7%

9.6%

9.5%

7.1%

6.5%

Cost to Income Ratio

52.4%

275%

74.5%

61.1%

48.3%

47.5%

Gross NPA%

0.20%*

5.5%

0.1%

0.1%

0.1%

0.1%

Net NPA%

0.16%*

2.9%

0.1%

0.1%

0.04%

0.04%

Collection Efficiency %

99.8%*

94.9%

99.9%

99.8%

99.8%

99.8%

Gross Loan Portfolio/ SM ('000)

Cost Efficiency:

Cost of borrowings %

Credit Quality - Non-AP:

*Enterprise figures - includes figures from AP state

$ Financial expenses to Avg. Gross Loan Portfolio
^Includes processing fee for on and off balance sheet (b/s) funding
# Includes processing fee for on b/s funding only, for FY 14 Rs. 13 Crs, FY15 Rs. 14.3 Crs. FY16 Rs.10.5 Crs. and for Q4FY16 Rs. 2.5 Cr

28

PORTFOLIO MIX

CONCENTRATION NORMS

State

%
17.7%
16.8%

Odisha

State

14.2%
15.2%

Karnataka

12.2%
11.6%

Maharashtra
Bihar

11.1%
11.2%

West Bengal

9.6%
10.9%

5.8%
5.8%

Kerala

4.8%
4.8%

Rajasthan

4.0%
4.1%

Jharkhand
Haryana

1.8%
1.5%

Punjab

1.6%
1.8%

Chattisgarh

1.3%
1.2%

Uttarakhand

1.1%
1.2%

% Cap on Disbursement*
<15%
(20% for Karnataka &
Odisha)
<3 %
(4% for Karnataka &
Odisha)
<1 %
(1.25 % for Karnataka &
Odisha)

POS % Cap of Networth*

75%
(100% for the state of
Odisha, Karnataka and
Maharashtra)
5%
(Only 5% of total operating
districts can go up to 10% of
Networth)
1%
(Only 5% of the total
operating branches can go
up to 2% of Networth )

No disbursement to a
branch with NPA > 1 %
No disbursement to a
branch with onCollection
time collection efficiency of
efficiency
< 95%
15% Cap on portfolio outstanding for each state (20% for Karnataka and
Odisha)
NPA

5.3%
5.3%

Madhya Pradesh

District

Branch

9.4%
8.7%

Uttar Pradesh

Himachal Pradesh

Metric

GLP Q4FY16
GLP Q4FY15

*Subject to tolerance of 10%

Odisha, Karnataka and Maharashtra exposure are at 98%, 79% and 68%
respectively of our networth.

0.1%
0.1%

Delhi
Note: Portfolio percentage are based on proportion of
gross loan portfolio of respective states.

29

VINTAGE OF NON-AP BRANCHES IS 7.1 YEARS

No. of
Branches

Wt. Avg. Vintage

(in Yrs.)*

Karnataka

171

8.1

Odisha

150

7.7

Uttar Pradesh

136

6.9

Bihar

133

6.1

West Bengal

126

Maharashtra

State

PORTFOLIO OUTSTANDING BY ECONOMIC ACTIVITY

Purpose

% Mix

Livestock

32%

Tailoring, Cloth weaving

11%

Grocery stores and other retail outlets

10%

7.4

Agriculture

8%

118

7.6

Trading of Vegetable & fruits

7%

Madhya Pradesh

69

7.6

Rajasthan

59

7.4

Masonry, Painting, Plumbing,

7%

Kerala

53

5.5

Jharkhand

47

6.4

Vehicle repairs

5%

Chhattisgarh

28

5.9

Eateries

4%

Haryana

22

4.8

Trading of Agri-commodities

4%

Punjab

18

6.6

Uttarakhand

12

5.5

Garments & Footwear retailing

2%

Himachal Pradesh

1.3

Trading of Utensils, Plastic items

1%

Delhi

6.7

Scrap business

1%

1,146

7.1

Bangles shop

1%

Other income generating activities

8%

Non-AP

As of Mar 2016
* Excludes 44 Gold Loan Branches.

Electrician, Carpenter and related

30

REVIEW OF FINANCIALS

31

ROBUST FY16 PERFORMANCE EXCEEDS COMBINED PERFORMANCE OF RECOVERY

PERIOD OF FY14 AND FY15
INR Crs.

FY 16 > FY14 + FY15

FY16
FY15

Non -A.P Disbursements

12,063
11,628

>

Non-A.P AUM
7,677

4,769

FY16

7,008

>

6,860

303

4,171

258

>

2,837

FY16

FY14+FY15

FY14

PAT

188
70

FY14+FY15

FY16

FY14+FY15

AND ALSO EXCEEDS COMBINED PERFORMANCE OF CRISIS PERIOD OF FY11, FY12 AND FY13
FY16

FY 16 > FY11+ FY12 + FY13

FY13
FY12

FY11

Non-A.P AUM

Market Cap

7,677
6,041

>

6,949

1,320

2,016

>

1,320

FY11+FY12+FY13

857

3,790

2,706

FY16

5,967

FY16

FY11+FY12+FY13
32

STRONG SOLVENCY AND SUFFICIENT LIQUIDITY

INR Crs.

Networth

Capital Adequacy

1,383

1,292

RBI Requirement

23.1%

1,046
15.0%

Q4FY15

Q3FY16

Q4FY16

Q4FY16

Drawdowns*

Cash and Cash Equivalent^

7,317
1,660
1,437

5,020

886

3,224
2,414
1,478

Q4FY15 Q3FY16 Q4FY16

*Excluding Managed Loans

FY15

FY16

Q4FY15
^ Excluding security deposit

Q3FY16

Q4FY16
33

PAT GROWS TO RS. 303 CRS

INR Crs.

Non-AP Gross Loan Portfolio

Disbursements

84%
YoY
63%
YoY

24%
QoQ

75%
YoY

64%
YoY

2,980

8%
QoQ

4,171

803

4,066
226

Q4FY15 Q3FY16 Q4FY16

FY15

FY16

Q4FY15

84%
YoY

69%
YoY
13%
QoQ

34%
YoY

714

Q4FY16

370

Q4FY15 Q3FY16 Q4FY16

FY15

FY16

PAT
61%
YoY

108%
YoY

26%
YoY

303

404
13%
QoQ

423

207
84

112
Q4FY15 Q3FY16 Q4FY16

Q3FY16

343

Operating Cost

Net Interest Income*

182

1,321

6,177
6,891

64%
YoY

7,677

12,088

36%
QoQ

2,494

Gross Revenue

FY15

FY16

*Interest income on Portfolio loans + Excess interest

spread on securitization/Income from assignment +
Loan processing fees + BC Fee Financial Cost

99

79

112

Q4FY15 Q3FY16 Q4FY16

188

6%
QoQ

320

84

41
FY15

FY16
Tax
Exp:

Q4FY15 Q3FY16 Q4FY16

Rs.
6 Crs

Rs.
24 Crs

Rs.
26 Crs

FY15
Rs.
6 Crs

FY16
Rs.
91 Crs

34

ROBUST EARNINGS MODEL DELIVERS IMPROVED PROFITABILITY

INR Crs.

Q4FY16

YoY%

Q4FY16
As % of Total
Revenue

152

239

58%

65%

263

-9%

25

61

144%

16%

17

256%

13

23

79%

6%

19

22%

14
4
10
8
0.5
226

12
3
15
18
0.2
370

-12%
-42%
49%
117%
-60%
64%

3%
1%
4%
5%
0.1%
100%

14
4
9
16
1.1
343

-16%
-34%
61%
12%
-80%
8%

Financial expenses

85

134

57%

36%

133

1%

Personnel expenses
Operating and other expenses
Depreciation and amortization
Total Operating Cost

60
22
1
84

80
29
3
112

33%
30%
34%

22%
8%
1%
30%

72
25
3
99

12%
19%
4%
13%

Provision & Write-offs

11

14

30%

4%

59%

Total Expenditure

180

260

45%

70%

240

8%

Profit before Tax

Tax expense
Profit after Tax

46
6
41

110
26
84

137%
108%

30%
7%
23%

103
24
79

7%
9%
6%

Particulars
Income from Operations
Interest income on Portfolio loans
Excess interest spread on securitization
/ Assignment
Loan processing fees
Other Income
Income on investments
Recovery against loans written off
Facilitation fees from Cross-sell
BC fees
Other miscellaneous income
Total Revenue

Q4FY15

Q3FY16

QoQ%

35

QOQ PROFITABILITY ANALYSIS

Particulars

INR Crs.

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

FY16

FY15

AUM growth rate (QoQ) Closing

31%

15%

14%

13%

24%

84%

47%

AUM growth rate (QoQ) Monthly Averages

21%

22%

17%

10%

22%

80%

42%

41

61

78

79

84

303

188

-1.3%

51%

27%

2%

6%

61%

169%

Cross sale fee (Facilitation fees)

10.0

12.8

12.7

9.3

14.9

49.7

29.2

Cash & Bank balance (net of security deposit) Avg.

Daily

712

1,036

439

789

681

735

470

AP Recovery

4.0

3.5

3.4

2.5

1.4

10.8

31.3

Income deferred (net*) on account of

Securitisation/assignment

5.8

(0.9)

(1.0)

2.3

8.7

9.1

3.3

Standard Asset Provision (Inc. off b/s provision upto

1%)

9.4

4.9

6.1

7.3

12.5

30.8

12.1

% Securitised & assigned / Non-AP AUM (Based on

Closing figs)

22.0%

9.9%

3.3%

9.0%

26.4%

Average gross interest yield (Non-AP) QTR average

23.24%

23.2%

23.6%

21.7%

21.2%

22.0%

22.9%

Interest rate on new loans

23.55%

23.55%

22.0%

20.75%
& 19.75%

19.75%

PAT
PAT Growth rate ( QoQ)

Non-Core Drivers

Non-Core Drags

*Net of flow back from earlier deferrals

36

PAT GROWS BY 61% YOY

INR Crs.

FY15

FY16

YoY%

FY16
As % of Total
Revenue

566

954

68%

72%

67

110

65%

8%

46

73

60%

5%

Other Income
Income on investments
Recovery against loans written off
Facilitation fees from Cross-sell
BC fees
Other miscellaneous income
Total Revenue

44
26
29
23
2
803

56
15
50
62
2
1,321

27%
-44%
70%
167%
15%
64%

4%
1%
4%
5%
0%
100%

Financial expenses

279

485

74%

37%

Personnel expenses
Operating and other expenses
Depreciation and amortization
Total Operating Cost

232
84
5
320

292
103
8
404

26%
22%
83%
26%

22%
8%
1%
31%

Provision & Write-offs

10

39

285%

3%

Total Expenditure

609

927

52%

70%

Profit before Tax

Tax expense
Profit after Tax

194
6
188

394
91
303

103%
61%

30%
7%
23%

Particulars
Income from Operations
Interest income on Portfolio loans
Excess interest spread on securitization /
Assignment
Loan processing fees

37

STRONG CAPITAL BASE AND ROBUST LIQUIDITY DRIVE SKS BALANCE SHEET
INR Crs.

Particulars
Equity Share Capital
Stock Options Outstanding
Reserves And Surplus
Capital & Reserves
Loan Funds
Payable Towards Assignment/Securitisation
Expenses & Other Payables
Provision For Taxation
Unamortised Loan Processing Fees
Employee Benefits Payable
Interest Accrued But Not Due On Borrowings
Interest Accrued And Due On Borrowings
Provision For Leave Benefits & Gratuity
Statutory Dues Payable
Unrealised Gain On Securitisation Transactions
Provision For Standard And NPA - Non-AP
Provision For Standard And NPA - AP
Liabilities
Total Liabilities
Fixed Assets
Intangible Assets
Investment
Cash And Bank Balances (Incl. Security Deposits)
Trade Receivable
Interest Accrued And Due On Loans
Interest Accrued But Not Due On Loans
Interest Accrued But Not Due On Deposits With Banks
Interest Strip On Securitization Transactions
Portfolio Loans -- Non-AP
Portfolio Loans -- AP
Loans Placed As Collateral
Security Deposits For Rent And Other Utilities
Advances For Loan Cover Insurance
Loans To SKS Employee Benefit Trust
Advance Income Tax
Prepaid Insurance
Other Advances / Other Assets
Total Assets
Note:1 Non-AP Securitized/Managed/Assigned Portfolio
2. Non-AP Gross Loan Portfolio

Q4FY15
126
25
895
1,046
3,280
180
23
2
31
19
10
6
14
3
42
42
0.1
3,652
4,699
5
5
0.2
1,659
9
1
11
8
42
2,824
13
86
4
1
5
14
3
8
4,699
1,260
4,171

Q4FY16
127
25
1,231
1,383
5,130
247
44
2
64
24
38
21
4
124
74
0.1
5,771
7,154
11
5
0.2
1,942
6
0
10
12
124
4,806
11
160
4
1
3
16
4
39
7,154
2,711
7,677

YoY%
1%
-2%
38%
32%
56%
37%
91%
0%
105%
31%
46%
36%
191%
76%
-17%
58%
52%
122%
0%
17%
-26%
-77%
-6%
53%
191%
70%
-17%
85%
3%
10%
-44%
11%
35%
399%
52%
115%
84%

Q3FY16
127
25
1,140
1,292
4,651
57
29
3
48
20
52
20
7
54
63
0.1
5,004
6,295
13
5
0.2
1,085
2
1
12
11
54
4,984
14
51
4
1
5
14
5
34
6,295
1,142
6,177

QoQ%
0.2%
-1%
8%
7%
10%
52%
-50%
32%
20%
-27%
8%
-45%
129%
18%
-22%
15%
14%
-9%
-2%
79%
249%
-66%
-17%
8%
129%
-4%
-22%
212%
0%
-39%
-44%
11%
-25%
15%
14%
137%
24%

38

BEST OF BREED RATIOS

Particulars

Q4 FY15

Q3 FY16

Q4 FY16

24.2%
18.9%
9.1%
8.9%
1.1%
0.6%
19.8%
4.3%

23.5%
19.2%
9.1%
6.8%
0.6%
1.6%
18.1%
5.5%

21.3%
17.3%
7.7%
6.5%
0.8%
1.5%
16.5%
4.9%

Efficiency:
Cost to Income

59.4%

46.9%

47.5%

Asset Quality Non-AP:

Collection Efficiency
Portfolio at Risk >30 Days
Gross NPA
Net NPA
Gross NPA (INR Crs.)
Net NPA (INR Crs.)

99.8%
0.2%
0.1%
0.05%
2.4
1.3

99.8%
0.2%
0.1%
0.1%
6.3
3.0

99.8%
0.1%
0.1%
0.04%
4.1
1.9

3.1
4.5

3.6
4.5

3.7
5.9

Capital Adequacy:

31.7%

23.9%

23.1%

Profitability:
Return on Avg. Assets (Incl. Securitised, Assigned & Managed Loans)
ROE
EPS - Diluted (INR) (Not Annualised)
Book Value (INR)

3.2%
15.9%
3.2
82.9

4.5%
25.5%
6.2
101.6

3.9%
25.3%
6.6
108.6

Spread Analysis (as % of Avg. Gross Loan Portfolio)

Gross Yield
Portfolio Yield*
Financial Cost
Operating Cost
Provision and Write-offs
Taxes
Total Expense
Return on Avg. Gross Loan Portfolio

(I)
(a)
(b)
(c)
(d)
II = (a+b+c+d)
(I) - (II)

Leverage:
Debt : Equity
Debt : Equity (Incl. Securitised, Assigned & Managed Loans)

* Portfolio Yield = (Int. income on portfolio loans + Excess interest spread on securitization and Asset Assignment ) /Avg. GLP

39

OPERATING AND FINANCIAL LEVERAGES PLAY OUT

Particulars

FY15

FY16

23.9%
18.8%
8.3%
9.5%
0.3%
0.2%

23.3%
18.8%
8.5%
7.1%
0.7%
1.6%

18.3%

17.9%

5.6%

5.3%

Efficiency:
Cost to Income

61.1%

48.3%

Asset Quality Non-AP:

Collection Efficiency
Portfolio at Risk >30 Days
Gross NPA
Net NPA
Gross NPA (INR Crs.)
Net NPA (INR Crs.)

99.8%
0.2%
0.1%
0.05%
2.4
1.3

99.8%
0.1%
0.1%
0.04%
4.1
1.9

3.1
4.5

3.7
5.9

Capital Adequacy:

31.7%

23.1%

Profitability:
Return on Avg. Assets (Incl. Securitised, Assigned & Managed Loans)
ROE
EPS - Diluted (INR)
Book Value (INR)

4.3%
21.6%
15.0
82.9

4.2%
25.1%
23.6
108.6

Spread Analysis (as % of Avg. Gross Loan Portfolio)

Gross Yield
Portfolio Yield*
Financial Cost
Operating Cost
Provision and Write-offs
Taxes
Total Expense

Return on Avg. Gross Loan Portfolio

Leverage:
Debt : Equity
Debt : Equity (Incl. Securitised, Assigned & Managed Loans)

(I)
(a)
(b)
(c)
(d)
II =
(a+b+c+d)
(I) - (II)

* Portfolio Yield = (Int. income on portfolio loans + Excess interest spread on securitization and Asset Assignment ) /Avg. GLP

40

SKS BEATS THE GUIDANCE

INR Crs.

FY16
Guidance
Incremental debt requirement

Non-AP Disbursement
Non-AP Gross Loan Portfolio
Profit After Tax
(Post MAT @ 21%)

FY17
Actual

Guidance

7,000

8,385

10,000

10,000

12,063

16,500

6,250

7,677

11,000

290

303

450^

^ Excludes MAT credit recognition

Note on MAT credit recognition:

MAT credit will be recognised from FY17, including unrecognized MAT credit of Rs.97
Crs (as on 31st March16).

Recognition is based on extant guidance note issued by ICAI.

41

FINANCIAL ARCHITECTURE

42

FINANCIAL ARCHITECTURE

INR Crs.

Lenders Mix (On B/S) Devoid Of Dependence Risk

On Balance Sheet*

Diversified Source Mix

Q4FY15

Q3FY16

Q4FY16

State Bank Group

8%

12%

13%

Dena Bank

8%

10%

12%

Yes Bank

15%

14%

10%

SIDBI

7%

9%

8%

IDFC Bank

3%

7%

8%

IDBI Bank

6%

3%

7%

ICICI Bank

7%

4%

5%

HDFC Bank

5%

4%

5%

Bank of Maharashtra

6%

6%

Standard Chartered Bank

3%

HSBC Bank

Q4FY
Q3FY
Q4FY
% Mix
% Mix
% Mix
15
16
16
Term Loans

2,867

61%

3,660

62%

4,307

53%

Securitisation

1,090

23%

610

10%

1,886

23%

Managed
Loans

348

7%

595

10%

708

9%

Assigned

367

5%

NCD

200

4%

400

7%

400

5%

4%

CP

89

2%

503

9%

290

4%

2%

4%

CC

124

3%

89

2%

133

2%

3%

2%

3%

Total

4,718

100%

5,857

100%

8,091

100%

Kotak Mahindra Bank

4%

5%

3%

Andhra Bank

6%

5%

3%

Ratnakar Bank

3%

3%

2%

Mudra

0%

3%

2%

South Indian Bank

2%

1%

2%

Bank of India

4%

3%

2%

Barclays Bank PLC

0%

0%

2%

Citi Bank

2%

2%

1%

Union Bank of India

0%

1%

1%

DCB Bank

1%

1%

1%

Axis Bank

4%

1%

1%

Others

5%

1%

1%

2,990

3,748

4,440

Total

* Includes Term loan and cash credit facilities

Investor Mix (Off B/S) Broad-based

Securitised / Assigned
Yes Bank
IDBI Bank
Bank of India
ICICI Bank
Kotak Mahindra Bank
HDFC Bank
Ratnakar Bank
DCB Bank
IndusInd Bank
Total

Q4FY15
58%
4%
19%
6%
5%
9%
1,090

Q4FY16
32%
22%
16%
11%
9%
8%
2%
2,253
43

SUB 10% MARGINAL COST OF BORROWING

Funding Cost Analysis
Metric

Marginal cost of
borrowing

Wt. avg. cost of

borrowing (on b/s
loans) *

FY14

FY15

FY16

Q4FY15

Q3FY16

Q4FY16

on and off b/s loans (excluding

processing fees)

12.2%

11.7%

10.1%

11.0%

9.98%

9.2%

on and off b/s loans (including

processing fees)#

12.6%

11.9%

10.2%

11.1%

10.0%

9.3%

on b/s loans (excluding

processing fees)

12.9%

12.3%

11.0%

12.0%

10.8%

10.3%

on b/s loans (including

processing fees)#

13.6%

12.6%

11.1%

12.2%

10.9%

10.3%

excluding processing fee paid

& other charges

12.7%

12.1%

11.4%

11.4%

11.3%

10.8%

including processing fee

13.6%

12.8%

11.6%

11.8%

11.5%

11.1%

17.3
3,503
8.3%

16.9
5,020
8.3%

11.6
7,317
8.5%

4.7
2,414
9.1%

1.4
1,478
9.1%

3.6
3,224
7.7%

Loan Processing Fees (INR Crs.)

Drawdowns (INR Crs.)
Financial Cost^
# processing

fees is amortized for marginal cost calculation.

^ Financial expenses to quarterly Avg. Gross Loan Portfolio.

*The above percentages are based on monthly averages. Expenses towards loan processing fees are recognized upfront whereas loan processing fees
received from borrowers are amortized over the period of contract.

Positive ALM Mismatch

Interest Rate Mix of Borrowings*

Avg maturity of liabilities No. of

Avg maturity of assets

Floating

months

Fixed
11.5

61%

57%

53%
4.9

39%

43%

47%

Q4FY15

Q3FY16

Q4FY16

* Excludes managed loans

10.2

9.2
6.3

FY14

5.7

FY15

6.4

6.2

Q3FY16

Q4FY16

ALM data includes Securitized/ Assigned loans

44

EXTERNAL ASSESMENT

Rating Instrument

MFI Grading
Bank Loan Rating (Long-term
facilities)

Rating

Rating Amount Limits

(Rs. Crs.)

Rating Agency

MFI 1

CARE Ratings

CARE A+

CARE Ratings

Q3Y16

Q4FY16

N/A

N/A

4,500

4,500

Bank Loan Rating (Short-term

facilities)

CARE A1+

CARE Ratings

Long-term Debt (NCD)

CARE A+

CARE Ratings

400

400

Short-term Debt (CP/NCD)

CARE A1+

CARE Ratings

200

200

Long-term Debt

[ICRA] A+

ICRA Limited

750

750

Short-term Debt

[ICRA] A1+

ICRA Limited

CARE AA (SO)

CARE Ratings

327

1,731*

ICRA AA (SO)

ICRA Limited

372

589*

Securitisation Pool
*Amount aggregates to 5 transactions rated by CARE Ratings and 2 transactions rated by ICRA

45

RISK MANAGEMENT

46

KEY RISKS AND MANAGEMENT STRATEGIES

Risk
Management

Key Risks

Management
Strategy

Political Risk

Concentration
Risk

Operational Risk

Liquidity Risk

Responsible
lending and fair
pricing

Geographic &
dependence
norms

Cash
management
system and
process controls

Liquidity metrics

o Low cost lender

o Voluntary Cap on
RoA from core
lending
o Robust Customer
grievance redressal
(CGR) Mechanism
with Ombudsman
o Calibrated Growth

o Geographic
concentration
norms
-

Disbursement
Related Caps
Portfolio
Outstanding
Related Caps

o Integrated cash
management system

o Well defined metrics

for

o Product and process

Design

Cash burn

Business continuity

Growth

o ISO Certified Internal

audit

o Borrowing
dependence norms
-

Cap on borrowing
from any single
credit granter (15%
of funding
requirement)
47

CAPITAL STRUCTURE

48

CAPITAL STRUCTURE AS ON 31ST MARCH 2016

Morgan Stanley SG PTE

4.4%

Amansa Capital PTE Limited

4.2%

Sandstone

4.1%

Max Life Insurance Company

FPI, 23.2%

3.6%

IDFC Mutual Fund

3.4%

Vinod Khosla

3.3%

Tree Line

3.0%

Indus Capital Partners

2.8%

Kismet Microfinance

2.7%

Baron Capital Management

2.5%

Alliancebernstein

2.2%

Birla Sun Life Mutual Fund

2.2%

Kismet SKS II

1.9%

Goldman Sachs

1.7%

Wellington

1.7%

William Blair

1.6%

Amundi

1.6%

Kotak

1.5%

Wasatch Funds

1.5%

Vanguard

SHAREHOLDING PATTERN

Foreign
Corporates,
9.8%

Domestic
MFs,
Insurance
co's & FIs ,
18.1%

NRI, 4.3%

FII, 33.5%

1.4%

ICICI Prudential Mutual Fund

1.3%

Morgan Stanley Mauritius

1.3%

GMO

1.2%

SIDBI

1.2%

Credit Suisse Singapore

1.1%

Columbia Threadneedle 1.0%

Others

Domestic
Individuals,
9.4%

Domestic
Corporates,
1.7%

No. of shares -12.7 Crs.

41.8%

Excludes no. of Outstanding ESOPs 0.3 Crs.

Note: The Investment under different accounts by a fund are clubbed
under their respective names
49

ADJUSTED PRICE TO BOOK COMPUTATION

INR

Mar-16
Book value per share (A)

109

Present value of DTA per share (B)^

22

MAT per share (C)*

Book value per share Including PV of DTA and MAT (A+B+C)

139

Adjusted Price to Book Ratio (times)

4.3

Note:
^ Estimated Present Value of Deferred Tax Assets(DTA).
* MAT credit as on Mar 31, 2016 is Rs.97 Crs.
DTA as on Mar 31, 2016 is Rs. 357 Crs.
Discount rate assumed at 10.9% and applied over next 3 years estimated profit.
SKS Market Price as of May 04, 2016 Rs. 596

50

ANNEXURES

51

ANNEXURES - OPERATIONS

52

DIFFERENCES IN LENDING MODEL BETWEEN SHG & JLG

SHG

JLG (SKS)

Model

Savings led (Members collectively save

money for 6 months to avail credit)

Credit led (No savings required, members have

an access to the finance as per the requirement)

Borrowers Segment

Women/Men

Women

Lending Methodology

Group (Size 10-20 members)

Group (5 members)

Loan Processing time

4 Months

1 week

Repayment frequency

Monthly

Weekly

Credit Decision

Group leader decides the quantum of

loan for the member

Entire group and the center decides the quantum

of loan

Credit Bureaus Reporting

Not much information available (RBI

mandated the SHGs to share data from
July 2016)

Weekly sharing of the data with CICs

NPAs

7.4% as on Mar-15

0.1%

SHG Concentration:
Top 5 States

% Mix in Portfolio (Mar-15) Portfolio O/S (Mar-15) INR Crs.

Andhra Pradesh & Telangana

47%

24,187

Tamil Nadu

12%

6,218

Karnataka

11%

5,928

West Bengal

6%

2,864

Kerala

4%

2,237

Others

20%

10,111

Total

100%

51,545

Source: Philip capital report , NABARD

53

PRODUCT OFFERINGS
IGL

MTL

LTL

Other product
offerings^^

Loan portfolio (INR

Crs) / (% Mix)

3,702 (48%)

1,593 (21%)

2,259 (29%)

102 (1%)

Ticket size range

(w.e.f 7th Dec15)

INR 9,100 to
INR 29,565

INR 9,100 to
INR 15,010

INR 30,915 to
INR 49,785

20,951

14,783

36,812

2,422

Completion of CGT /
GRT
Age limit 18 years to
55 years
Maximum limit of
INR. 20,010 for
IGL 1

With IGL - Between

20th to 46th week
With LTL Between
20th to 96th week

Minimum Two IGL

Loan cycle completed
Maximum limit of INR.
38,635 for
LTL 1

With IGL Between

4th to 46th week
With LTL Between
4th to 100th week

104 weeks

25 weeks

Avg. Ticket Size (INR)

For Q4FY16

Eligibility*

Tenure

Annual effective
interest rate
Processing fee (Incl.
Service Tax)

50 weeks

INR 1,786 to
INR 5,001

19.75%
(w.e.f 7th Dec15 for new loans)

19.60% - 20.20%

1.14%

0.94% -1.14%

* Eligibility criteria over and above the criteria prescribed by the RBI
Stopped disbursement of gold loans from January 2016 (Portfolio outstanding as on 31st March 2016 is Rs. 21 Crs.)
^^Loans for Mobile Phones, Solar lamps, Sewing Machines, Bio-Mass Stove, Water-purifier, Solar fan and Bicycle.
54

HIGHLIGHTS - LONG TERM LOANS (LTL)

Product Details
Purpose

Income generating activity

Ticket Size

Rs.30,915 to Rs.49,785

Tenure

104 Weeks

Eligibility

Product design

Equal weekly installment (EWI) similar to IGL

Eg.: IGL Rs.15K Ticket size : Rs. 330 EWI
LTL Rs. 30K Ticket size : Rs. 360 EWI

Minimum Two IGL Loan cycle completed

Maximum limit of INR. 38,635 for LTL 1

Snapshot
LTL

Enterprise

% Mix LTL

Q4FY
15

Q3FY
16

Q4FY
16

Q4FY
15

Q3FY
16

Q4FY
16

Q4FY
15

Q3FY
16

Q4FY
16

127

226

168

1,857

1,899

2,386

6.8%

11.9%

7.1%

28,903

31,968

36,812

13,435

15,689

17,041

Amount of Loan Disbursed ('In Crs.)

367

724

619

2,494

2,980

4,066

14.7%

24.3%

15.2%

Portfolio Outstanding (in Crs.)

675

1,980

2,259

4,171

6,177

7,677

16.2%

32.0%

29.4%

No. of Loans Disbursed in '000

Avg. Ticket Size INR

*Disbursement capped at 25% of overall disbursement

^ Income Generating Loans with ticket size of Rs.9,100 to Rs.29,565 with tenure of 50 weeks
55

INCREASE IN IGL TICKET SIZE LOWERS SHARE OF LTL DISBURSEMENT

Avg. Offtake
st
Product 1 Oct - 8th Dec 7th Dec
Mar 2016
2016

IGL

14,759

LTL

30,339

20,836
36,719

Disbursement Mix %

% Increase
Offtake

Product 1st Oct - 7th 8th Dec Dec 2016 Mar 2016
IGL

42%

61%

19%

LTL

27%

16%

(11%)

MTL

28%

21%

Cross
Sell

2%

3%

Total

100%

100%

41%
21%

% Change

* Revised ticket sizes from 7th December 2016 post RBI notification dated November 26th, 2015

56

LEVERAGING THE DISTRIBUTION STRENGTH

No. of Units Facilitated (in

Lacs)
Gross Fees (after service
tax) INR Crs.
Less: Incentives INR Crs.
Net Fees INR Crs.#
Loan Portfolio INR Crs.
Net Fee Income as % of
PAT
Loan Portfolio Mix

FY15

FY16

Q4FY16

Total

Mobile Solar Sewing

Others
Cycle
Total
phone lamp Machine
^

Mobile Solar Sewing

Others
Total
Cycle
phone lamp Machine
^

8.4

7.1

5.3

1.3

1.0

0.8

15.6

2.0

1.4

0.6

0.5

0.1

4.6

28.3

21.9

18.2

4.1

3.1

2.4

49.7

5.9

4.9

2.2

1.5

0.4

14.9

4.6
23.7
58.3

6.3
12.2
36.3

4.7
10.6
24.6

1.2
2.3
22.0

0.9
1.7
16.8

0.7
1.4
2.3

13.8
28.3
101.9

1.7
3.3
36.3

1.2
2.9
24.6

0.5
1.3
22.0

0.5
0.8
16.8

0.1
0.2
2.3

4.0
8.6
101.9

12.6%

4.0%

3.5%

0.8%

0.6%

0.4%

9.3%

4.0%

3.4%

1.6%

1.0%

0.3%

10.2%

1.4%

0.5%

0.3%

0.3%

0.2%

0.03%

1.3%

0.5%

0.3%

0.3%

0.2%

0.03%

1.3%

# Net fee post the incentive payout and sans transfer pricing of other operating cost.
^Loans for Bio-Mass Stove, Water-purifier and Solar Fans

Penetration Based On Total No. Of Loans

Mobile Phone
Solar Lamp
Sewing Machine
Bicycle
Bio-mass stove
Water Purifier
Solar Fan
Total

FY14

FY15

FY16

2.5%
1.5%
4.0%

7.4%
6.5%
0.2%
0.3%
14.5%

12.7%
9.5%
2.3%
1.9%
0.8%
0.6%
27.9%

Cumulative past
3 years
22.7%
17.6%
2.5%
1.9%
1.1%
0.6%
46.4%

Frequency of Loans Based On Current Member Base

Frequency of
Loans (for the
period)

FY14

FY15

FY16

Cumulative
past 3 years

#1

3.7%

12.3%

21.6%

27.0%

#2

0.2%

1.1%

2.8%

7.2%

#3

0.3%

1.9%

#4

0.4%

#5

0.1%

3.9%

13.4%

24.7%

36.7%

Total

Cumulative Cross-sell Penetration % among our existing Non-AP Member base of 5.57 mn for last 3 years is 46%

57

CREDIT BUREAU DATA

Rejection rate for All Products

23.0%

Rejection rate for Long Term loans

23.0%

46%
38%

15.0%

29%

FY-15

FY-16
FY-15

FY-16

FY-15

Q4-FY16

FY-16

Q4-FY16

Rejection Reasons* - FY16 % Mix

Hit rate^ for all products

^ Hit rate = % of loan
applications with
matching record in
credit bureau

87.0%

83.0%
80.0%

Reasons
Loans from =>2 MFIs
Eligibility < Min Ticket
Size
Outstanding Balance >
60K
Default History

FY-15

FY-16

FY-15

FY-16

Q4-FY16

All Products

LTL

84%

72%

9%

23%

4%

2%

3%

3%

100%

100%

Q4-FY16

Q4-FY16

Total

*Note: Rejections done by based on data inputs from Credit

bureau
Submission of 2 KYCs mandatory (with Primary as Aadhar or Voter id) from October 2014. 75% of our customers have provided Aadhar as

Major Initiatives Impacting Credit Bureau Decision:

KYC (April16) .

Internal CAP of Rs. 60,000 for total indebtness of the borrower for JLG loans, including loans from other MFIs.

58

SKS FINANCIAL INCLUSION COVERAGE

Strong reach in under-banked areas
68% of SKS branches are in RBI underbanked district list
68% of SKS branches are in RBI under-banked districts list

SKS 296 districts

96

RBI 375
districts*

200

175

68%

Weaker & Minority section coverage

Weaker & Minority section coverage

SKS covers 68% of below average &

low
financial
by
SKS covers
68%districts
of below identified
average & low
CRISIL
financial
inclusion districts identified by Crisil
CRISIL level of financial
inclusion

Women

SKS Coverage
of those
districts

High

18%

Above average

15%

Below average

51%

Low

16%

Grand Total

100%

Economically Weaker
section

68%

Minority

71%

16%

100%

* Source: RBI under-banked districts data

[1] Source: CRISIL Inclusix: An index to measure Indias progress on Financial Inclusion, June 2013

. IS SUPPORTED BY ROBUST CUSTOMER CENTRIC PRACTISES

Doorstep Service

Financial literacy

Dedicated customer service

Doorstep delivery (i.e. at Center

meetings)

2 day process consisting of hour-long

sessions designed to educate clients
on SKS processes and credit
discipline.

Toll-free helpline number with seven

different vernacular languages
59

WHAT ARE CLIENTS DOING POST THE ANDHRA PRADESH MFI CRISIS?
Sources of Credit (in the absence of MFI Loans)

70%
60%
50%
40%
30%
20%
10%
0%

Reasons for not repaying MFI loans

59%
37%
29%
22%
12%

Money Lender

SHG

Pawn Broker

Bank

DFC

Interest rates charged by informal sources (in the

absence of MFIs)

Data relates to Andhra Pradesh & Telangana

Source: What are Clients doing post the Andhra Pradesh MFI Crisis?, MicroSave, 2011

Willingness to repay

60

ANNEXURES - FINANCIALS

61

HISTORICALLY, AUM GROWTH IS STRONGEST IN Q4 & NII GROWTH IS

STRONGEST IN Q1
AUM Growth

37%

35%

31%

32%

28%

26%

27%

25%

22%
17%

16%

26%

24%

19%

20%
17%

15%
12%

11%

12%

14%

13%

13%

9%

7%

5%

7%
1%

2%
-3%

QoQ Growth %

NII Growth

-1%

2%

1%
-2%

FY14

FY15

FY16

Reasons:
Deferral of income due to higher volume of securitisation and asset assignment in Q4;
or/and
Higher Cash balances at the end of Q4
62

CASH AND CASH EQUIVALENT BALANCES

INR Crs.

Q1FY16

Q2FY16

Q3FY16

Q4FY16

FY15

FY16

Interest Yielding^

860

255

581

427

314

530

Non Interest
Yielding^^

176

184

208

254

156

205

1,036

439

789

681

470

735

Total

^fixed deposits, excluding margin money deposits.

^^Includes current account and cash balances

Note: Daily Average figures

63

OUR PROVISIONING POLICY

RBI norms for NBFCMFIs
Asset
Classification

Provisioning
Norms

Provisioning
Norms for
Securitized &
Managed loans

SKS compliance

Standard Assets

0-90 days

0-60 days

Sub-Standard Assets

91-180 days

61-180 days

Loss Assets

>180 days

>180 days

Standard Assets

1% of overall Portfolio reduced

by Provision for NPA (If
provision for NPA < 1% of
overall Portfolio)

Sub-Standard Assets

50% of instalments overdue*

50% of outstanding principal*

Loss Assets

100% of instalments overdue*

100% of outstanding
principal/ write-off*

0.30-1% depending on NPA or

as stipulated by RBI,
whichever is higher

1% of outstanding portfolio
as per company provisioning
policy, net-off losses, if any.

* The aggregate loan provision will be maintained at higher of 1% of overall portfolio or sum of provisioning for sub-standard and loss
assets.

64

ANNEXURES - TECHNOLOGY

65

TECH ADVANCEMENTS DRIVEN BY INDUSTRY LEADING PARTNERSHIPS

Initiatives

New Lending
Management Software

TABLETS - Hand held

device for field staff

ERP Implementation

Technology Partner
In-House Team

Solution
SKS SMART

Enterprise Mobility

ERP

Benefits
A robust framework that encompasses
workflow/reporting and analytic engines
Works in online/offline mode to mitigate
connectivity challenges.
Enhances Productivity of SMs- Reduced time
spent at both center meeting and back office
Paper less transaction - Pre-printed loan
application form.

ERP - Automation of financial accounting/

investment management, procurement and
payment process.
Enhanced email security, 99.99% uptime, On
mobile office 365 access.
Additional products such as One-Drive,
Enterprise Skype etc. for easy access of data
and better communication.

Migrated from onpremises email system

to hosted exchange

Office 365

Data Centre Migration

to Cloud

Data Centre Hosting

On-demand capacity scale-up.

Business Continuity Plan.

Network protection

Enterprise Web and

Network Security

Improved performance and reliability of network

infrastructure and applications.
66

ANNEXURES HR

67

ATTRITION RATE AT SANGAM MANAGER LEVEL IS LARGELY CONTRIBUTED BY STAFF WITH

RELATIVELY LOWER PERFORMANCE AND WITHIN 6 MONTHS OF THEIR JOINING

Sangam
Manager
Attrition %

Who?

When?

27% for FY16

Sangam managers who earn lesser average monthly performance incentive i.e. ~Rs.
5,000 vis--vis ~Rs. 7,600 for other Sangam Managers .

~50% of staff who leave the job, decides to leave within 6 Months from joining date.

Why?

Retention
Strategy

Work conditions such as :

Average distance travelled per day is ~30 kms.
Work location is different from home location
Branch Reporting time at 6:30 AM

2ND Best paying job (~Rs.16,000 pm) in the local milieu (1st Govt. Job)
High growth career path No lateral recruitments till 4 levels above loan officer.

68

ANNEXURES - COMPLIANCE

69

COMPLIANCE WITH RBI NBFC-MFI REGULATORY FRAMEWORK (1/2)

NBFCMFIs

RBI norms for NBFC-MFIs

SKS compliance

Qualifying assets to constitute not less than 85% of its

Qualifying assets - 95%

Income generation loans 98%

total assets (excluding cash and bank balances)

At least 50% of loans for income generation activities

Pricing Guidelines

Income of
Borrowers Family

Rural : <=Rs.100,000
Non-Rural : <=Rs. 1,60,000

Ticket Size

<= 60,000 1st cycle

<= Rs.100,000 Subsequent cycle

<= Rs. 100,000

If loan amt. > Rs.30,000, then >= 24 months

Without collateral

Weekly, Fortnightly and Monthly

Indebtedness

Tenure

Collateral

Repayment Model

<= Rs. 60,000

70

COMPLIANCE WITH RBI NBFC-MFI REGULATORY FRAMEWORK (2/2)

RBI norms for NBFC-MFIs

SKS compliance

A. Margin cap 10% above cost of borrowings

B. Avg. base rate of top 5 commercial banks X 2.75
Lower of the A and B.

<= 1% of loan amt.

Actual cost of insurance can be recovered from

Pricing Guidelines

Interest Rate

Processing Fees

Insurance
Premium

Penalty

Security Deposit

borrower and spouse

Administrative charges can be recovered as per IRDA
guidelines

No penalty for delayed payment

No security deposit/ margin to be taken

Interest rate 19.75% w.e.f

7th December15 for new
loans

SKS has never taken

security deposit/ margin

71

SKS LOAN PORTFOLIO QUALIFIES FOR OVERALL PSL TARGET OF 40% AND ALL SUBTARGETS UNDER NEW PSL NORMS

RBI
S.no.

Sector

Category

Agriculture

Target

- Direct Agriculture*

Sub-target

- Direct Small &

Marginal farmers*

Sub-target

SKS
Target for Banks %

Qualifying
Portfolio of SKS %

Explanation

18%
~13.5%*
7% (Mar16)

38%

Livestock, Agri & Allied

8% (Mar17)
100% Loans are to women
beneficiaries (with less than
Rs.1 lac).

Weaker

Target

Micro-enterprises

Target

10%

7% (Mar16)
7.5% (Mar17)

100%

100%

Further, Minority communities

constitute 16% and
economically weaker sections
71% of loan portfolio.
Loans to MFIs for on-lending to
microenterprises.

Note:
* As per RBI notification dated 16th July 2015 Banks are directed to ensure overall direct lending to non-corporate farmers does not fall
below the system wide average of last three years achievement, which is notified as 11.57% as per RBI notification dated 18 th
November 2015. They should also continue to maintain all efforts to reach the level of 13.5% direct lending to beneficiaries..
Refer Slide no.30 for details on purpose wise loan portfolio outstanding.

72

ANNEXURES INTERNAL AUDIT

73

INTERNAL AUDIT PLAYS A CRITICAL ROLE IN ASSESSING PROCESS CONTROLS

Strength

206 strong headcount

ISO 9001:2008 certified process
All branches are inspected monthly based on a 4 tier grading system
Grading linked to incentives/appraisals of field staff
Head Office audit by KPMG

Branches 1,324
Branches per Internal Audit staff 6
Regional Offices 22

Scope

Scope of Audit

Audit area

Frequenc
y

Document
Center
Client
verification
Meeting
Acquisitio
(KYC, Loan
Proces
n
utilization check
s
etc.)

Statutory
Adheren Requirement
High
Monitoring
Fixed
ce to
s
Client Risk
process by
Assets
Process
(Credit
Visits items
supervisor
verific
/
bureau, Fair
*
(Fraud
s
ation^
Policies
practices
s etc.)
etc.)

IGL Branches

Monthly

Gold Loan
Branches

45 days

Regional
Offices

Quarterly

Head office

Quarterly

Note:
* Approximately 30% of the clients are covered by Internal Audit in an year during the branch audits. Clients visited on a sample basis to check for
Loan confirmations, Loan utilization (LUC) , arrears and awareness on Client Protection Principles (CPP)
^ Fixed Assets are verified on Annual basis
74

This report is for information purposes only and does not construe to be any investment, legal or
taxation advice. It is not intended as an offer or solicitation for the purchase or sale of any financial
instrument. Any action taken by you on the basis of the information contained herein is your
responsibility alone and SKS and its subsidiaries or its employees or directors, associates will not be
liable in any manner for the consequences of such action taken by you. We have exercised due
diligence in checking the correctness and authenticity of the information contained herein, but do not
represent that it is accurate or complete. SKS or any of its subsidiaries or associates or employees
shall not be in any way responsible for any loss or damage that may arise to any person from any
inadvertent error in the information contained in this publication. The recipient of this report should
rely on their own investigations. SKS and/or its subsidiaries and/or directors, employees or
associates may have interests or positions, financial or otherwise in the securities mentioned in this
report
Forward Looking Statement
Certain statements in this document with words or phrases such as will, should, etc., and similar
expressions or variation of these expressions or those concerning our future prospects are forward
looking statements. Actual results may differ materially from those suggested by the forward looking
statements due to a number of risks or uncertainties associated with the expectations. These risks
and uncertainties include, but are not limited to, our ability to successfully implement our strategy and
changes in government policies. The company may, from time to time, make additional written and
oral forward looking statements, including statements contained in the companys filings with the
stock exchanges and our reports to shareholders. The company does not undertake to update any
forward-looking statements that may be made from time to time by or on behalf of the company

For any investor relations queries, please email to investor.relations@sksindia.com

75