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Innovative financial solutions for low-income households and the informal market
A n n u a l R e p o r t 2 0 0 7 - 2 0 0 8
Managing efficiently in a challenging environment
Spandana Annual Report 2007-08
CONTENTS
03
Preface
The Context
About Spandana
*
*
Client Case Studies
Managing Director's Report
The Human Resources Development Report
Financial Status
Board Profile
Mission 5
Vision 5
Values 6
Principles 6
What is Micro finance? 07
The Indian Micro finance market – quantum and nature of demand 07
Why don't banks cater to this segment? 07
What are the consequences? 08
How MFI's bridge this gap 08
The Micro finance industry today 08
How do financial services help the poor? 08
Can financial services for the poor be sustainable? 09
The role of interest rates 09
Spandana at a glance 11
Urban/Rural Mix as of March 31, 2008 11
State-wise Presence as of March 31, 2008 11
Operational and financial highlights 12
Comparison with the industry 14
The Micro Finance Program 18
Social Focus 25
27
31
35
Notice 39
Director's Report 47
Auditor's Report 53
Balance Sheet and Profit and Loss Account 57
Cash Flow Statement 59
Schedules to the Accounts and Significant Accounting Policies 61
Disclosure on Prudential Norms as Per RBI Guidelines 77
Balance Sheet Abstract 81
83
Spandana Annual Report 2007-08
CONTENTS
03
Preface
The Context
About Spandana
*
*
Client Case Studies
Managing Director's Report
The Human Resources Development Report
Financial Status
Board Profile
Mission 5
Vision 5
Values 6
Principles 6
What is Micro finance? 07
The Indian Micro finance market – quantum and nature of demand 07
Why don't banks cater to this segment? 07
What are the consequences? 08
How MFI's bridge this gap 08
The Micro finance industry today 08
How do financial services help the poor? 08
Can financial services for the poor be sustainable? 09
The role of interest rates 09
Spandana at a glance 11
Urban/Rural Mix as of March 31, 2008 11
State-wise Presence as of March 31, 2008 11
Operational and financial highlights 12
Comparison with the industry 14
The Micro Finance Program 18
Social Focus 25
27
31
35
Notice 39
Director's Report 47
Auditor's Report 53
Balance Sheet and Profit and Loss Account 57
Cash Flow Statement 59
Schedules to the Accounts and Significant Accounting Policies 61
Disclosure on Prudential Norms as Per RBI Guidelines 77
Balance Sheet Abstract 81
83
Spandana Annual Report 2007-08 05
PREFACE
Spandana is a financial service provider to low income households. Started in 1997, it has grown to become one
of the largest institutions of its kind in India. Spandana envisions itself as a financial service provider to markets
not optimally served. It focuses on poor and unbanked households in rural, semi-urban and urban areas.
The primary focus of Spandana has been economically active poor women. It provides subsidy-free loan
support for a variety of economic activities and emergencies. The former could range from vegetable vending to
running a tailoring shop. The latter may include expenses for trouble free childbirth, education expenses, or
funds required during times of bereavement.
Mainstream finance in India has attempted, with varying degrees of success, to reach the poor. State
involvement has focused priority on financial inclusion. However, considering the scale of poverty as well as the
scope of the informal markets in India, one may safely say that much needs to be done beyond the government
and the existing banking space.
Private initiatives so far have served the purpose of creating strong models for demonstration, with the implicit
expectation that the mainstream would emulate them at scale. Spandana is a unique combination – a strong
model, coupled in recent years with meaningful scale. Spandana arose as a personal response to a clearly
exploitative lending relationship. Through further work, the budding organization realized that it was not alone
in its pursuits. A whole sector was burgeoning with individuals and entities striving to make finance work for the
poor. This led to further learning about microfinance and the state of the practice across the subcontinent.
Spandana, in keeping with its “First Principles” approach, did not adopt any model in its entirety. Rather, it
listened to its clients to better understand their needs, studied and tested existing methodologies, and then
developed its own unique approach to reaching the poor in rural and urban areas. Spandana's operating
methodology has become a benchmark in the sector for efficiency, productivity and profitability, with many
upcoming organizations emulating its processes. Spandana continues to break new ground, set new standards,
overcome hurdles and break myths in the sector.
Presently, Spandana operates as a Non Banking Finance Company incorporated under the Companies Act, 1956
and licensed by the Reserve Bank of India under the Reserve Bank of India Act, 1934 to carry on the business of a
Non Banking Financial Institution. It operates in 75 districts of 8 states, with a total member base of 1,239,651 as
of March 31, 2008.
Spandana envisions itself as a financially self-sustainable Microfinance Institution with a wide base of
ownership. It is committed to strengthening the socio-economic status of low-income households, particularly
women, in rural and urban areas by providing financial services on a continual basis in order to improve
livelihoods, establish identity and enhance self-image. Spandana constantly endeavors to deliver efficient
services to its clients and remunerative returns to its investors by adopting cost-effective methods and by
creating a culture of competence and excellence. Spandana believes and aims to prove that microfinance is
more than charity or social work; it is not about giving handouts to needy women. Rather, Spandana envisions
microfinance as a viable, sustainable business proposition that provides women with the tools they can use
themselves to better their situation on a continual basis. Spandana seeks to be the leading microfinance
service provider, creating market driven & equitable solutions for segments not optimally served. This will
be achieved through a culture of client focus, innovation, efficiency, transparency and excellence for the
benefit of all stakeholders.
Spandana will be recognized as the market leader and preferred service provider in India with 3 million clients,
Rs. 3,000 crore outstanding, operating in 6 states of India.
MISSION
VISION 3:3:6:
Spandana Annual Report 2007-08 05
PREFACE
Spandana is a financial service provider to low income households. Started in 1997, it has grown to become one
of the largest institutions of its kind in India. Spandana envisions itself as a financial service provider to markets
not optimally served. It focuses on poor and unbanked households in rural, semi-urban and urban areas.
The primary focus of Spandana has been economically active poor women. It provides subsidy-free loan
support for a variety of economic activities and emergencies. The former could range from vegetable vending to
running a tailoring shop. The latter may include expenses for trouble free childbirth, education expenses, or
funds required during times of bereavement.
Mainstream finance in India has attempted, with varying degrees of success, to reach the poor. State
involvement has focused priority on financial inclusion. However, considering the scale of poverty as well as the
scope of the informal markets in India, one may safely say that much needs to be done beyond the government
and the existing banking space.
Private initiatives so far have served the purpose of creating strong models for demonstration, with the implicit
expectation that the mainstream would emulate them at scale. Spandana is a unique combination – a strong
model, coupled in recent years with meaningful scale. Spandana arose as a personal response to a clearly
exploitative lending relationship. Through further work, the budding organization realized that it was not alone
in its pursuits. A whole sector was burgeoning with individuals and entities striving to make finance work for the
poor. This led to further learning about microfinance and the state of the practice across the subcontinent.
Spandana, in keeping with its “First Principles” approach, did not adopt any model in its entirety. Rather, it
listened to its clients to better understand their needs, studied and tested existing methodologies, and then
developed its own unique approach to reaching the poor in rural and urban areas. Spandana's operating
methodology has become a benchmark in the sector for efficiency, productivity and profitability, with many
upcoming organizations emulating its processes. Spandana continues to break new ground, set new standards,
overcome hurdles and break myths in the sector.
Presently, Spandana operates as a Non Banking Finance Company incorporated under the Companies Act, 1956
and licensed by the Reserve Bank of India under the Reserve Bank of India Act, 1934 to carry on the business of a
Non Banking Financial Institution. It operates in 75 districts of 8 states, with a total member base of 1,239,651 as
of March 31, 2008.
Spandana envisions itself as a financially self-sustainable Microfinance Institution with a wide base of
ownership. It is committed to strengthening the socio-economic status of low-income households, particularly
women, in rural and urban areas by providing financial services on a continual basis in order to improve
livelihoods, establish identity and enhance self-image. Spandana constantly endeavors to deliver efficient
services to its clients and remunerative returns to its investors by adopting cost-effective methods and by
creating a culture of competence and excellence. Spandana believes and aims to prove that microfinance is
more than charity or social work; it is not about giving handouts to needy women. Rather, Spandana envisions
microfinance as a viable, sustainable business proposition that provides women with the tools they can use
themselves to better their situation on a continual basis. Spandana seeks to be the leading microfinance
service provider, creating market driven & equitable solutions for segments not optimally served. This will
be achieved through a culture of client focus, innovation, efficiency, transparency and excellence for the
benefit of all stakeholders.
Spandana will be recognized as the market leader and preferred service provider in India with 3 million clients,
Rs. 3,000 crore outstanding, operating in 6 states of India.
MISSION
VISION 3:3:6:
Spandana Annual Report 2007-08 07
* Acknowledgements to CGAP, The World Bank and Deutsche Bank
THE CONTEXT
What is Microfinance?
The Indian Microfinance Market – Quantum and Nature of Demand
Why Don't Banks Cater to this Segment?
Microfinance refers to the supply of loans and other basic financial services to the poor. Just like everyone else,
people living in poverty need a diverse range of financial instruments to run their businesses, build assets,
stabilize consumption and manage risk. Financial services needed by the poor include working capital loans,
consumer credit, savings, pensions, insurance and money transfer services.
Microfinance arose due to the reality that the poor rarely access services through the formal financial sector.
Rather, they address their need for financial services through a variety of financial relationships, mostly informal.
Credit is available from informal commercial money-lenders but usually at a very high interest rate. The
microfinance industry evolved as a solution to the erratic and insecure nature of the informal financial sector.
The modern microfinance movement originated during the 1970's in South Asia and Latin America. During this
time, experimental programs began to extend small, unsecured loans to groups of poor women to invest in
microenterprises. These early programs would lend money to women as members of a group with each group
member guaranteeing the repayment of all other members. This approach proved highly successful and the
programs challenged the prevailing conventional wisdom, proving that poor people without collateral could be
"creditworthy."
As the microfinance sector has evolved, the range of products has diversified in order to provide the poor with a
range of services to meet different needs. These products now include credit, savings, money transfers,
microinsurance and much more. In recent years, microfinance has attracted the attention of commercial banks,
mainstream investors and a host of new service providers.
According to World Bank data, over 25% of India's population of over one billion people lives in poverty. Their
access to financial services from banks and other formal institutions is low and the lack of adequate credit
facilities further limits the income generating potential of this group. The primary requirement for credit arises
from the disparity in the inflow and outflow of funds in most poor households. Money required for the repair of
houses and productive assets, health related expenses, education, marriage and rituals relating to life cycle
events like birth and death may not be readily available when the need arises.
Small loans offered by microfinance institutions provide an alternative source of funds and play an important
role in smoothing household cash-flows. The other important demand driver for microcredit in the region is the
intended enterprise of the client. She may require credit either to start a new venture or to expand an existing
one. Moreover, microfinance is sought to replace other – more costly – informal sources of finance. Small loans
are taken for a variety of purposes that can broadly be classified into categories of livestock, agriculture, trade
and service activities.
It is a disheartening reality that India's expansive formal credit system with its vast network and large resources
has not been able to adequately serve the credit needs of the poor, something it was created for. There are
several reasons why banks do not consider the poor as their potential clients and why the poor remain hesitant
to approach them.
Firstly, banks continue to rely on asset collateral as a credit risk mitigation tool. This automatically excludes the
poor from their target clientele as they are more often than not lacking any assets. Secondly, the existing cost
VALUES
PRINCIPLES
Transparency
o Maintaining simplicity and clarity in all activities and operations, so that high standards of fairness can
be established in all dealings.
Responsiveness
o Constantly working to identify the changing needs of clients and potential clients, and developing
suitable products and services to address these needs, thus keeping Spandana ahead of its competitors
Integrity
o Maintaining high standards of conduct, truthfulness and honesty in all dealings, in order to honor the
commitment made to our clients and organization.
Commitment
o Performing all activities and tasks with professionalism and enthusiasm in order to give the highest
level of client satisfaction and optimal efficiency.
Team Spirit
o Working together in order to create synergy that results in exponential growth.
Spandana believes that low-income women play a critical role both in the economics of their households and
their communities. Hence, it is committed to maintaining a special focus on women.
Spandana believes that poor households have risk taking abilities and are rational and judgmental while
assessing and improving their livelihoods. They are creative, innovative and enterprising. Access to credit brings
out these latent capacities. Spandana respects the opinions of its clients and believes in carrying out its business
without compromising our commitment to ethical values, transparency and efficiency.
Spandana has constantly responded to the felt needs of its clients and staff. Many of our clients have been using
the access to finance to significantly improve their livelihoods. The more enterprising ones, our star clients, have
articulated the need for loan products that they can avail of without necessarily being part of a group. Other
clients, either handling difficult economic scenarios or burdened with larger family needs, wish to continue in
the group system because of the solidarity and support it offers. We must respond to both of these stakeholders.
For the women that are ready to take larger doses of credit, we have developed products that treat them as
strong, independent entrepreneurs, hence our increasing focus on individual loans. For the second set of clients,
we continue to provide one of the cheapest, most well designed group loan products in the market. Further, as
an organization that has set benchmarks in the industry, we are constantly reinventing ourselves so that our staff
is stimulated with new challenges and opportunities. A sizable proportion of our staff has reported back to us
saying, “While we are providing for the needs of women-led enterprises, quite a few husbands are requesting
that we consider the requirements of their enterprises too. They want to become clients in their own right and
are eager to prove their capabilities to work hard and perform along with their spouses.” Taking this on board,
and with the strong realization that a large credit need among our existing client families remains unmet, we are
modifying the small business & micro-enterprise loan products to better suit our clients' requirements. We hope
to remain true to our principles of respect, efficiency and system design while developing and deploying these
new products. Not only would they fulfill an existing demand, but they would also energize our staff and help us
build a more diversified portfolio. This is critical, if we are to make further strides as a Non Banking Finance
Company in the market.
Spandana Annual Report 2007-08 07
* Acknowledgements to CGAP, The World Bank and Deutsche Bank
THE CONTEXT
What is Microfinance?
The Indian Microfinance Market – Quantum and Nature of Demand
Why Don't Banks Cater to this Segment?
Microfinance refers to the supply of loans and other basic financial services to the poor. Just like everyone else,
people living in poverty need a diverse range of financial instruments to run their businesses, build assets,
stabilize consumption and manage risk. Financial services needed by the poor include working capital loans,
consumer credit, savings, pensions, insurance and money transfer services.
Microfinance arose due to the reality that the poor rarely access services through the formal financial sector.
Rather, they address their need for financial services through a variety of financial relationships, mostly informal.
Credit is available from informal commercial money-lenders but usually at a very high interest rate. The
microfinance industry evolved as a solution to the erratic and insecure nature of the informal financial sector.
The modern microfinance movement originated during the 1970's in South Asia and Latin America. During this
time, experimental programs began to extend small, unsecured loans to groups of poor women to invest in
microenterprises. These early programs would lend money to women as members of a group with each group
member guaranteeing the repayment of all other members. This approach proved highly successful and the
programs challenged the prevailing conventional wisdom, proving that poor people without collateral could be
"creditworthy."
As the microfinance sector has evolved, the range of products has diversified in order to provide the poor with a
range of services to meet different needs. These products now include credit, savings, money transfers,
microinsurance and much more. In recent years, microfinance has attracted the attention of commercial banks,
mainstream investors and a host of new service providers.
According to World Bank data, over 25% of India's population of over one billion people lives in poverty. Their
access to financial services from banks and other formal institutions is low and the lack of adequate credit
facilities further limits the income generating potential of this group. The primary requirement for credit arises
from the disparity in the inflow and outflow of funds in most poor households. Money required for the repair of
houses and productive assets, health related expenses, education, marriage and rituals relating to life cycle
events like birth and death may not be readily available when the need arises.
Small loans offered by microfinance institutions provide an alternative source of funds and play an important
role in smoothing household cash-flows. The other important demand driver for microcredit in the region is the
intended enterprise of the client. She may require credit either to start a new venture or to expand an existing
one. Moreover, microfinance is sought to replace other – more costly – informal sources of finance. Small loans
are taken for a variety of purposes that can broadly be classified into categories of livestock, agriculture, trade
and service activities.
It is a disheartening reality that India's expansive formal credit system with its vast network and large resources
has not been able to adequately serve the credit needs of the poor, something it was created for. There are
several reasons why banks do not consider the poor as their potential clients and why the poor remain hesitant
to approach them.
Firstly, banks continue to rely on asset collateral as a credit risk mitigation tool. This automatically excludes the
poor from their target clientele as they are more often than not lacking any assets. Secondly, the existing cost
VALUES
PRINCIPLES
Transparency
o Maintaining simplicity and clarity in all activities and operations, so that high standards of fairness can
be established in all dealings.
Responsiveness
o Constantly working to identify the changing needs of clients and potential clients, and developing
suitable products and services to address these needs, thus keeping Spandana ahead of its competitors
Integrity
o Maintaining high standards of conduct, truthfulness and honesty in all dealings, in order to honor the
commitment made to our clients and organization.
Commitment
o Performing all activities and tasks with professionalism and enthusiasm in order to give the highest
level of client satisfaction and optimal efficiency.
Team Spirit
o Working together in order to create synergy that results in exponential growth.
Spandana believes that low-income women play a critical role both in the economics of their households and
their communities. Hence, it is committed to maintaining a special focus on women.
Spandana believes that poor households have risk taking abilities and are rational and judgmental while
assessing and improving their livelihoods. They are creative, innovative and enterprising. Access to credit brings
out these latent capacities. Spandana respects the opinions of its clients and believes in carrying out its business
without compromising our commitment to ethical values, transparency and efficiency.
Spandana has constantly responded to the felt needs of its clients and staff. Many of our clients have been using
the access to finance to significantly improve their livelihoods. The more enterprising ones, our star clients, have
articulated the need for loan products that they can avail of without necessarily being part of a group. Other
clients, either handling difficult economic scenarios or burdened with larger family needs, wish to continue in
the group system because of the solidarity and support it offers. We must respond to both of these stakeholders.
For the women that are ready to take larger doses of credit, we have developed products that treat them as
strong, independent entrepreneurs, hence our increasing focus on individual loans. For the second set of clients,
we continue to provide one of the cheapest, most well designed group loan products in the market. Further, as
an organization that has set benchmarks in the industry, we are constantly reinventing ourselves so that our staff
is stimulated with new challenges and opportunities. A sizable proportion of our staff has reported back to us
saying, “While we are providing for the needs of women-led enterprises, quite a few husbands are requesting
that we consider the requirements of their enterprises too. They want to become clients in their own right and
are eager to prove their capabilities to work hard and perform along with their spouses.” Taking this on board,
and with the strong realization that a large credit need among our existing client families remains unmet, we are
modifying the small business & micro-enterprise loan products to better suit our clients' requirements. We hope
to remain true to our principles of respect, efficiency and system design while developing and deploying these
new products. Not only would they fulfill an existing demand, but they would also energize our staff and help us
build a more diversified portfolio. This is critical, if we are to make further strides as a Non Banking Finance
Company in the market.
Spandana Annual Report 2007-08 09
structures of most banks coupled with various operational restrictions laid down by regulators makes it
uneconomical for them to serve this segment. Their reluctance to experiment with more client-need oriented
products and delivery channels contributes to this problem as well. Thirdly, the operational procedures laid
down for accessing credit are complicated and tedious which the semi-literate poor often find difficult to cope
with. Lastly, many of the banks are inconveniently located in the commercial centers of large towns, thereby
limiting convenient access to the rural and urban slum dwellers.
In the absence of formal sector lending, the poor turn to informal sources in order to meet their credit needs. This
informal market is characterized by exorbitant interest rates and other types of exploitation which often leads
them into a trap of debt and bankruptcy. A portion of this market is now being catered to by NGO MFIs who
realize that providing access to credit is an important intervention for the development of the poor. The
experience of this segment, which started decades ago, has been very encouraging in terms of increasing
demand and securing excellent repayment rates.
Having been established to satisfy the credit needs of the poor, MFIs have developed adequate systems and
procedures for the delivery of financial services to them. The risk involved in lending money without collateral
has been overcome by introducing the concept of group liability and incentivizing repayment through a
promise of continued credit. To suit client cash flows, repayments are usually made in small installments and at
frequent intervals. While helping to maintain a repayment rate of over 95%, this method also enables the service
providers to maintain regular contact with their borrowers for monitoring purposes. Since the MFIs are located
near their customers, they are able to reduce administrative costs and simplify routines. This approach, coupled
with realistic loan pricing, enables them to cover their costs. Since these interest rates are still much lower than
those charged by the informal sector moneylenders, the clients rarely face problems in loan servicing. The need-
based design and regular availability has given rise to a perception amongst the clients that loans will result in
future savings. Funds are usually invested for asset acquisition, business expansion, consumption smoothening
or retiring high cost debt. Microcredit, when performed in a sustainable manner, gives remunerative returns to
the investors and demonstrates that lending to the poor is a sound business proposition.
The microfinance industry, which began in 1976 with the establishment of the Grameen Bank in Bangladesh, is
now a world wide movement comprising thousands of specialist banks, credit unions, cooperatives, village
credit societies, NGO's and charities spanning both the richest and the poorest countries. Their common
purpose is to extend the outreach of banking services, particularly business credit, to those who do not qualify
for normal bank loans. Micro credits are granted at commercially viable interest rates, though they are much
lower than those charged by informal money lenders. Research by Deutsche Bank indicates that worldwide
demand for microcredit is upwards of US$250 billion. Of this global demand, only about 10% is currently being
served. Given the large latent demand for microfinance worldwide, growing awareness and the potential for
credit penetration, the role of MFIs in financial intermediation is set to expand exponentially. Some of the critical
challenges for the industry in the years to come include increasing financial sustainability, establishing
appropriate legal and regulatory mechanisms and improving governance practices. The challenge is to build
the capacity of the financial sector, drawing on lessons from international best practices in micro, small and rural
finance.
With access to savings, credit, insurance and other financial services, low income individuals are more resilient
and better able to cope with the everyday crises they face. Even the most rigorous econometric studies have
What are the Consequences?
How MFI's Bridge this Gap
The Microfinance Industry Today
How do Financial Services Help the Poor?
demonstrated that microfinance can smooth consumption levels and significantly reduce the need to sell
assets to meet basic needs. With access to micro insurance, poor people can cope with sudden increased
expenses associated with death, serious illness and loss of assets.
Access to credit allows poor people to take advantage of economic opportunities that would otherwise be
inaccessible. While increased earnings are by no means automatic, clients have overwhelmingly demonstrated
that reliable sources of credit provide a fundamental basis for planning and expanding business activities. Many
studies show that clients who join and stay in programs have better economic conditions than non-clients,
suggesting a correlation between these programs and economic improvements. A few studies have also shown
that over a long period of time, many clients do actually graduate out of poverty.
By reducing vulnerability and increasing earnings and savings, financial services allow poor households to make
the transformation from daily subsistence living to actual preparation for the future. Households are able to
send more children to school for longer periods and to make greater investments in their children's education.
Increased earnings from financial services lead to better nutrition and better living conditions, which translates
into low incidence of illness. Increased earnings also allow clients to seek out and pay for health care and services
when needed, rather than go without or wait until their health seriously deteriorates.
Microfinance programs have generally targeted low income women. By providing access to financial services
only through women (i.e. making women responsible for loans, ensuring repayment through women,
maintaining savings accounts for women, providing insurance coverage through women), microfinance
programs send a strong message to households as well as to communities. Many qualitative and quantitative
studies have documented how access to financial services has improved the status of women within the family
and the community. Women have become more assertive and confident. In regions where women's mobility is
strictly regulated, women have become more visible and are better able to maneuver within the public sphere.
Women are able to own assets, including land and housing, and play a stronger role in decision making. In some
programs that have been active over many years, there are even reports of declining levels of violence against
women.
Microfinance, or financial services for the poor, can be profitable and thus sustainable. The November 2001 issue
of the Micro Banking Bulletin includes data from 62 self-sufficient MFIs. The average return on assets for this
group is 5.5%, which compares favorably to commercial-bank returns. Indeed, there are grounds for hope that
microfinance can become attractive to mainstream retail banks.
To maintain and increase its services over time, an MFI must charge interest rates high enough to cover the cost
of its loans otherwise the MFI will lose money. Unless it is continually infused with fresh capital from private
donors or governments, its activities will atrophy instead of expand. The problem is that donor and government
money is not reliable and there is not a sufficient supply of it to meet the demand. Commercial investment
funding is available, but MFIs must be sustainable (i.e. profitable) enough to continue, in order to attract this
investment.
There are three kinds of costs the MFI has to cover when it makes micro loans. The first two, the cost of the money
that it lends and the cost of loan defaults, are proportional to the amount lent. For instance, if the cost paid by the
MFI for the money it lends is 10% and it experiences defaults of 1% of the amount lent, then these two costs will
total $11 for a loan of $100, and $55 for a loan of $500. An interest rate of 11% of the loan amount thus covers
both these costs for either loan.
Can Financial Services for the Poor be Sustainable?
The Role of Interest Rates
Spandana Annual Report 2007-08 09
structures of most banks coupled with various operational restrictions laid down by regulators makes it
uneconomical for them to serve this segment. Their reluctance to experiment with more client-need oriented
products and delivery channels contributes to this problem as well. Thirdly, the operational procedures laid
down for accessing credit are complicated and tedious which the semi-literate poor often find difficult to cope
with. Lastly, many of the banks are inconveniently located in the commercial centers of large towns, thereby
limiting convenient access to the rural and urban slum dwellers.
In the absence of formal sector lending, the poor turn to informal sources in order to meet their credit needs. This
informal market is characterized by exorbitant interest rates and other types of exploitation which often leads
them into a trap of debt and bankruptcy. A portion of this market is now being catered to by NGO MFIs who
realize that providing access to credit is an important intervention for the development of the poor. The
experience of this segment, which started decades ago, has been very encouraging in terms of increasing
demand and securing excellent repayment rates.
Having been established to satisfy the credit needs of the poor, MFIs have developed adequate systems and
procedures for the delivery of financial services to them. The risk involved in lending money without collateral
has been overcome by introducing the concept of group liability and incentivizing repayment through a
promise of continued credit. To suit client cash flows, repayments are usually made in small installments and at
frequent intervals. While helping to maintain a repayment rate of over 95%, this method also enables the service
providers to maintain regular contact with their borrowers for monitoring purposes. Since the MFIs are located
near their customers, they are able to reduce administrative costs and simplify routines. This approach, coupled
with realistic loan pricing, enables them to cover their costs. Since these interest rates are still much lower than
those charged by the informal sector moneylenders, the clients rarely face problems in loan servicing. The need-
based design and regular availability has given rise to a perception amongst the clients that loans will result in
future savings. Funds are usually invested for asset acquisition, business expansion, consumption smoothening
or retiring high cost debt. Microcredit, when performed in a sustainable manner, gives remunerative returns to
the investors and demonstrates that lending to the poor is a sound business proposition.
The microfinance industry, which began in 1976 with the establishment of the Grameen Bank in Bangladesh, is
now a world wide movement comprising thousands of specialist banks, credit unions, cooperatives, village
credit societies, NGO's and charities spanning both the richest and the poorest countries. Their common
purpose is to extend the outreach of banking services, particularly business credit, to those who do not qualify
for normal bank loans. Micro credits are granted at commercially viable interest rates, though they are much
lower than those charged by informal money lenders. Research by Deutsche Bank indicates that worldwide
demand for microcredit is upwards of US$250 billion. Of this global demand, only about 10% is currently being
served. Given the large latent demand for microfinance worldwide, growing awareness and the potential for
credit penetration, the role of MFIs in financial intermediation is set to expand exponentially. Some of the critical
challenges for the industry in the years to come include increasing financial sustainability, establishing
appropriate legal and regulatory mechanisms and improving governance practices. The challenge is to build
the capacity of the financial sector, drawing on lessons from international best practices in micro, small and rural
finance.
With access to savings, credit, insurance and other financial services, low income individuals are more resilient
and better able to cope with the everyday crises they face. Even the most rigorous econometric studies have
What are the Consequences?
How MFI's Bridge this Gap
The Microfinance Industry Today
How do Financial Services Help the Poor?
demonstrated that microfinance can smooth consumption levels and significantly reduce the need to sell
assets to meet basic needs. With access to micro insurance, poor people can cope with sudden increased
expenses associated with death, serious illness and loss of assets.
Access to credit allows poor people to take advantage of economic opportunities that would otherwise be
inaccessible. While increased earnings are by no means automatic, clients have overwhelmingly demonstrated
that reliable sources of credit provide a fundamental basis for planning and expanding business activities. Many
studies show that clients who join and stay in programs have better economic conditions than non-clients,
suggesting a correlation between these programs and economic improvements. A few studies have also shown
that over a long period of time, many clients do actually graduate out of poverty.
By reducing vulnerability and increasing earnings and savings, financial services allow poor households to make
the transformation from daily subsistence living to actual preparation for the future. Households are able to
send more children to school for longer periods and to make greater investments in their children's education.
Increased earnings from financial services lead to better nutrition and better living conditions, which translates
into low incidence of illness. Increased earnings also allow clients to seek out and pay for health care and services
when needed, rather than go without or wait until their health seriously deteriorates.
Microfinance programs have generally targeted low income women. By providing access to financial services
only through women (i.e. making women responsible for loans, ensuring repayment through women,
maintaining savings accounts for women, providing insurance coverage through women), microfinance
programs send a strong message to households as well as to communities. Many qualitative and quantitative
studies have documented how access to financial services has improved the status of women within the family
and the community. Women have become more assertive and confident. In regions where women's mobility is
strictly regulated, women have become more visible and are better able to maneuver within the public sphere.
Women are able to own assets, including land and housing, and play a stronger role in decision making. In some
programs that have been active over many years, there are even reports of declining levels of violence against
women.
Microfinance, or financial services for the poor, can be profitable and thus sustainable. The November 2001 issue
of the Micro Banking Bulletin includes data from 62 self-sufficient MFIs. The average return on assets for this
group is 5.5%, which compares favorably to commercial-bank returns. Indeed, there are grounds for hope that
microfinance can become attractive to mainstream retail banks.
To maintain and increase its services over time, an MFI must charge interest rates high enough to cover the cost
of its loans otherwise the MFI will lose money. Unless it is continually infused with fresh capital from private
donors or governments, its activities will atrophy instead of expand. The problem is that donor and government
money is not reliable and there is not a sufficient supply of it to meet the demand. Commercial investment
funding is available, but MFIs must be sustainable (i.e. profitable) enough to continue, in order to attract this
investment.
There are three kinds of costs the MFI has to cover when it makes micro loans. The first two, the cost of the money
that it lends and the cost of loan defaults, are proportional to the amount lent. For instance, if the cost paid by the
MFI for the money it lends is 10% and it experiences defaults of 1% of the amount lent, then these two costs will
total $11 for a loan of $100, and $55 for a loan of $500. An interest rate of 11% of the loan amount thus covers
both these costs for either loan.
Can Financial Services for the Poor be Sustainable?
The Role of Interest Rates
Spandana Annual Report 2007-08 11
ABOUT SPANDANA
Spandana at a GlanceUrban/Rural Mix as of March 31st, 2008
Urban Rural Mix
Rural49%
Urban45%
Semi Urban6%
The third type of cost, transaction costs, is not proportional to the amount lent. The transaction cost of the $500
loan is not much different from the transaction cost of the $100 loan. Both loans require roughly the same
amount of staff time for meeting with the borrower to appraise the loan, process the loan disbursement and
repayments and follow-up monitoring. Suppose that the transaction cost is $25 per loan and that the loans are
for one year. To break even on the $500 loan, the MFI would need to collect interest of $50+$5+$25=$80, which
represents an annual interest rate of 16%. To break even on the $100 loan, the MFI would need to collect interest
of $10+$1+$25=$36, which is an interest rate of 36%. At first glance, a rate this high looks abusive to many
people, especially when the clients are poor. But in fact, this interest rate simply reflects the basic reality that
when loan sizes get very small, transaction costs loom larger because these costs cannot be cut below certain
minimums.
Lending programs that continually subsidize their borrowers will de-capitalize themselves unless they continue
to receive new subsidies from donors or governments. By contrast, MFIs who charge their clients enough to
cover all the loan costs can attract funding from commercial sources and are capable of exponential growth
without relying on scarce and uncertain subsidies as a source of funding. MFIs have to charge rates that are
higher than normal banking rates to keep the service available, but even these rates are far below what poor
people routinely pay to village money-lenders and other informal sources, whose percentage interest rates
routinely rise into the hundreds and even the thousands.
This does not mean, of course, that all high interest charges by MFIs are justifiable. Sometimes MFIs, especially
ones that are funded by donors, are not aggressive enough in containing transaction costs. The result is that they
pass on unnecessarily high transaction costs to their borrowers. Sustainability should be pursued by cutting
costs as much as possible, not just by raising interest rates to whatever the market will bear. Efficiency, therefore,
is key.
State-wise Presence as of March 31st, 2008
State Number Number Number Number Active Staff Loan % ofof of of of Loans Outstanding Out-
Districs Loans Centres Clients (Cr) standing
Andhra Pradesh 23 276 36,303 937,243 983,696 2,025 535.01 73.38
Karnataka 16 79 8,203 208,405 204,629 467 128.30 17.60
Tamil Nadu 5 10 1,369 31,828 31,531 55 17.50 2.40
Maharashtra 6 25 410 25,950 25,219 182 18.75 2.57
Orissa 10 26 1,070 29,159 30,396 172 23.00 3.15
Chhattisgarh 5 9 120 2,821 2,821 39 2.72 0.37
Madhya Pradesh 8 7 193 3,944 3,944 58 3.52 0.48
Rajasthan 2 3 25 301 301 26 0.28 0.04
Total 75 435 47,693 1,239,651 1,282,537 3,024 729 100
Andhra Pradesh 76%
Karnataka 17%
Tamil Nadu 3%
Maharashtra 2%
Orissa 2%
Chhattisgarh <1%
Madhya Pradesh <1%
Rajasthan<1%
Number of Clients
0
100
200
300
400
500
600
Loan Outstanding (Cr)
Andhra Pradesh 73%
Karnataka 18%
Tamil Nadu 2%
Maharashtra 3%
Orissa 3%
Chhattisgarh <1%
Madhya Pradesh <1%
Rajasthan<1%
Spandana Annual Report 2007-08 11
ABOUT SPANDANA
Spandana at a GlanceUrban/Rural Mix as of March 31st, 2008
Urban Rural Mix
Rural49%
Urban45%
Semi Urban6%
The third type of cost, transaction costs, is not proportional to the amount lent. The transaction cost of the $500
loan is not much different from the transaction cost of the $100 loan. Both loans require roughly the same
amount of staff time for meeting with the borrower to appraise the loan, process the loan disbursement and
repayments and follow-up monitoring. Suppose that the transaction cost is $25 per loan and that the loans are
for one year. To break even on the $500 loan, the MFI would need to collect interest of $50+$5+$25=$80, which
represents an annual interest rate of 16%. To break even on the $100 loan, the MFI would need to collect interest
of $10+$1+$25=$36, which is an interest rate of 36%. At first glance, a rate this high looks abusive to many
people, especially when the clients are poor. But in fact, this interest rate simply reflects the basic reality that
when loan sizes get very small, transaction costs loom larger because these costs cannot be cut below certain
minimums.
Lending programs that continually subsidize their borrowers will de-capitalize themselves unless they continue
to receive new subsidies from donors or governments. By contrast, MFIs who charge their clients enough to
cover all the loan costs can attract funding from commercial sources and are capable of exponential growth
without relying on scarce and uncertain subsidies as a source of funding. MFIs have to charge rates that are
higher than normal banking rates to keep the service available, but even these rates are far below what poor
people routinely pay to village money-lenders and other informal sources, whose percentage interest rates
routinely rise into the hundreds and even the thousands.
This does not mean, of course, that all high interest charges by MFIs are justifiable. Sometimes MFIs, especially
ones that are funded by donors, are not aggressive enough in containing transaction costs. The result is that they
pass on unnecessarily high transaction costs to their borrowers. Sustainability should be pursued by cutting
costs as much as possible, not just by raising interest rates to whatever the market will bear. Efficiency, therefore,
is key.
State-wise Presence as of March 31st, 2008
State Number Number Number Number Active Staff Loan % ofof of of of Loans Outstanding Out-
Districs Loans Centres Clients (Cr) standing
Andhra Pradesh 23 276 36,303 937,243 983,696 2,025 535.01 73.38
Karnataka 16 79 8,203 208,405 204,629 467 128.30 17.60
Tamil Nadu 5 10 1,369 31,828 31,531 55 17.50 2.40
Maharashtra 6 25 410 25,950 25,219 182 18.75 2.57
Orissa 10 26 1,070 29,159 30,396 172 23.00 3.15
Chhattisgarh 5 9 120 2,821 2,821 39 2.72 0.37
Madhya Pradesh 8 7 193 3,944 3,944 58 3.52 0.48
Rajasthan 2 3 25 301 301 26 0.28 0.04
Total 75 435 47,693 1,239,651 1,282,537 3,024 729 100
Andhra Pradesh 76%
Karnataka 17%
Tamil Nadu 3%
Maharashtra 2%
Orissa 2%
Chhattisgarh <1%
Madhya Pradesh <1%
Rajasthan<1%
Number of Clients
0
100
200
300
400
500
600
Loan Outstanding (Cr)
Andhra Pradesh 73%
Karnataka 18%
Tamil Nadu 2%
Maharashtra 3%
Orissa 3%
Chhattisgarh <1%
Madhya Pradesh <1%
Rajasthan<1%
Spandana Annual Report 2007-08 13
Op
era
tio
na
l T
ota
l A
nd
hra
K
arn
ata
ka
T
am
iln
ad
u
Ma
ha
rash
tra
O
riss
a
Ch
ha
ttis
ga
rhM
ad
hy
a
Ra
jast
ha
n H
igh
lig
hts
P
rad
esh
Pra
de
sh
Tota
l No
. of
Bra
nch
es
43
5
27
6
79
1
0
25
2
6
9
7
3
No
. of
Ce
ntr
es
47
,69
3
36
,30
3
8,2
03
1
,36
9
41
0
1,0
70
1
20
1
93
2
5
No
. of
Clie
nts
1,2
39
,65
1
93
7,2
43
20
8,4
05
31
,82
82
5,9
50
29
,15
92
,82
13
,94
4 3
01
No
. of
Bo
rro
we
rs1
,18
8,8
61
8
94
,71
2 2
01
,26
0 3
1,4
59
25
,21
9 2
9,1
45
2,8
21
3,9
44
30
1
Act
ive
Lo
an a
cco
un
ts 1
,28
2,5
37
98
3,6
96
20
4,6
29
31
,53
1 2
5,2
19
30
,39
6 2
,82
1 3
,94
4 3
01
Loan
Ou
stst
and
ing
73
1.3
4 5
37
1
28
.27
1
7.5
0
18
.75
2
3.0
0
2.7
2
3.5
2
0.2
8
(in
Cro
res)
% o
f p
ort
folio
10
0 7
3.3
8
17
.60
2
.40
2
.57
3
.15
0
.37
0
.48
0
.04
No
.of
Sta
ff 3
,02
4 2
,02
5 4
67
5
5
18
2
17
2
39
5
8
26
No
. of
Cre
dit
Ass
ista
nts
2,2
23
1,5
00
34
3
44
1
31
1
27
2
5
35
1
8
Ave
rag
e P
ort
olio
pe
r C
A 3
,27
9,7
37
3,5
66
,75
8 3
,74
0,6
52
3,9
77
,75
6 1
,43
1,0
70
1,8
10
,82
8 1
,08
8,8
33
1,0
05
,08
3 1
56
,12
2
No
of
Bo
rro
we
rs p
er
CA
53
5
59
6
58
7
71
5
19
3
22
9
11
3
11
3
17
Sp
an
da
na
Sp
ho
ort
y F
ina
nci
al L
imit
ed
Op
era
tio
na
l Hig
hli
gh
ts M
arc
h 2
00
8
Po
rtfo
lio
(R
s. C
rore
s)
Tota
l A
nd
hra
K
arn
ata
ka
T
am
iln
ad
u
Ma
ha
rash
tra
O
riss
a
Ch
ha
ttis
ga
rhM
ad
hy
a
Ra
jast
ha
nP
rod
uct
wis
e
Pra
de
shP
rad
esh
Gro
up
Le
nd
ing
60
0.8
0
43
4.5
5
11
6.7
9
17
.50
5
.16
2
0.2
7
2.7
2
3.5
2
0.2
8
Ind
ivid
ual
Le
nd
ing
95
.32
6
8.2
1
11
.45
-
1
2.9
3
2.7
3
-
-
-
Farm
Eq
uip
me
nt
Loan
26
.71
2
6.5
7
0.0
3
-
0.1
1
-
-
-
-
Dai
ry L
oan
5.1
3
5.1
3
-
-
-
-
-
-
-
Ag
ri F
amily
Lo
an 3
.38
2
.83
-
-
0
.55
-
-
-
-
Tota
l 7
31
.34
5
37
.29
1
28
.27
1
7.5
0
18
.75
2
3.0
0
2.7
2
3.5
2
0.2
8
No
of
Bo
rro
we
rsTo
tal
An
dh
ra
Ka
rna
tak
a
Ta
mil
na
du
M
ah
ara
shtr
a
Ori
ssa
C
hh
att
isg
arh
Ma
dh
ya
R
aja
sth
an
Pro
du
ct w
ise
P
rad
esh
Pra
de
sh
Gro
up
Le
nd
ing
1,0
93
,21
1
82
4,0
79
1
91
,63
5
31
,45
9
10
,56
9
28
,40
3
2,8
21
3
,94
4
30
1
Ind
ivid
ual
Le
nd
ing
62
,43
5
38
,66
6
9,6
24
-
1
3,4
03
7
42
-
-
-
Farm
Eq
uip
me
nt
Loan
89
0
88
5
1
-
4
-
-
-
-
Dai
ry L
oan
1,5
68
1
,56
8
-
-
-
-
-
-
-
Ag
ri F
amily
Lo
an 6
,39
0
5,1
47
-
-
1
,24
3
-
-
-
-
Tota
l 1
,16
4,4
94
8
70
,34
5
20
1,2
60
3
1,4
59
2
5,2
19
2
9,1
45
2
,82
1
3,9
44
3
01
Av
era
ge
Lo
an
To
tal
An
dh
ra
Ka
rna
tak
a
Ta
mil
na
du
M
ah
ara
shtr
a
Ori
ssa
C
hh
att
isg
arh
Ma
dh
ya
R
aja
sth
an
Ou
tsta
nd
ing
P
rad
esh
Pra
de
shP
rod
uct
wis
e
Gro
up
Le
nd
ing
5,4
75
5
,24
5
6,0
94
5
,56
3
4,8
83
7
,13
7
9,6
49
8
,91
9
9,3
36
Ind
ivid
ual
Le
nd
ing
15
,26
7
17
,64
2
11
,90
2
-
9,6
44
3
6,7
45
-
-
-
Farm
Eq
uip
me
nt
Loan
30
0,1
01
3
00
,22
6
29
0,0
00
-
2
75
,00
0
-
-
-
-
Dai
ry L
oan
32
,71
7
32
,71
7
-
-
-
-
-
-
-
Ag
ri F
amily
Lo
an 5
,29
0
5,4
98
-
-
4
,42
5
-
-
-
-
Tota
l 6
,26
1
6,1
47
6
,37
4
5,5
63
7
,43
4
7,8
91
9
,64
9
8,9
19
9
,33
6
Pa
rtic
ula
rsTo
tal
An
dh
ra
Ka
rna
tak
a
Ta
mil
na
du
M
ah
ara
shtr
a
Ori
ssa
C
hh
att
isg
arh
Ma
dh
ya
R
aja
sth
an
Pra
de
shP
rad
esh
Tota
l No
. of
Bra
nch
es
43
5
27
6
79
1
0
25
2
6
9
7
3
Gro
up
Len
din
g B
ran
ches
33
1
21
3
62
1
0
7
21
8
7
3
Ind
ivid
ual
Le
nd
ing
Bra
nch
es
10
4
63
1
7
-
18
5
1
-
-
No
. of
Clie
nts
1,2
39
,65
1
93
7,2
43
2
08
,40
5
31
,82
8
25
,95
0
29
,15
9
2,8
21
3
,94
4
30
1
No
. of
Fe
mal
e C
lien
ts
1,1
98
,61
3
91
0,2
15
2
05
,65
8
31
,82
8
15
,27
4
28
,57
2
2,8
21
3
,94
4
30
1
No
. of
Mal
e C
lien
ts 4
1,0
38
2
7,0
28
2
,74
7
-
10
,67
6
58
7
-
-
-
No
. of
Bo
rro
we
rs 1
,18
8,8
61
8
94
,71
2
20
1,2
60
3
1,4
59
2
5,2
19
2
9,1
45
2
,82
1
3,9
44
3
01
No
. of
Fem
ale
bo
rro
wer
s 1
,14
7,8
23
8
67
,68
4
19
8,5
13
3
1,4
59
1
4,5
43
2
8,5
58
2
,82
1
3,9
44
3
01
No
. of
Mal
e b
orr
ow
ers
41
,03
8
27
,02
8
2,7
47
-
1
0,6
76
5
87
-
-
-
Spandana Annual Report 2007-08 13
Op
era
tio
na
l T
ota
l A
nd
hra
K
arn
ata
ka
T
am
iln
ad
u
Ma
ha
rash
tra
O
riss
a
Ch
ha
ttis
ga
rhM
ad
hy
a
Ra
jast
ha
n H
igh
lig
hts
P
rad
esh
Pra
de
sh
Tota
l No
. of
Bra
nch
es
43
5
27
6
79
1
0
25
2
6
9
7
3
No
. of
Ce
ntr
es
47
,69
3
36
,30
3
8,2
03
1
,36
9
41
0
1,0
70
1
20
1
93
2
5
No
. of
Clie
nts
1,2
39
,65
1
93
7,2
43
20
8,4
05
31
,82
82
5,9
50
29
,15
92
,82
13
,94
4 3
01
No
. of
Bo
rro
we
rs1
,18
8,8
61
8
94
,71
2 2
01
,26
0 3
1,4
59
25
,21
9 2
9,1
45
2,8
21
3,9
44
30
1
Act
ive
Lo
an a
cco
un
ts 1
,28
2,5
37
98
3,6
96
20
4,6
29
31
,53
1 2
5,2
19
30
,39
6 2
,82
1 3
,94
4 3
01
Loan
Ou
stst
and
ing
73
1.3
4 5
37
1
28
.27
1
7.5
0
18
.75
2
3.0
0
2.7
2
3.5
2
0.2
8
(in
Cro
res)
% o
f p
ort
folio
10
0 7
3.3
8
17
.60
2
.40
2
.57
3
.15
0
.37
0
.48
0
.04
No
.of
Sta
ff 3
,02
4 2
,02
5 4
67
5
5
18
2
17
2
39
5
8
26
No
. of
Cre
dit
Ass
ista
nts
2,2
23
1,5
00
34
3
44
1
31
1
27
2
5
35
1
8
Ave
rag
e P
ort
olio
pe
r C
A 3
,27
9,7
37
3,5
66
,75
8 3
,74
0,6
52
3,9
77
,75
6 1
,43
1,0
70
1,8
10
,82
8 1
,08
8,8
33
1,0
05
,08
3 1
56
,12
2
No
of
Bo
rro
we
rs p
er
CA
53
5
59
6
58
7
71
5
19
3
22
9
11
3
11
3
17
Sp
an
da
na
Sp
ho
ort
y F
ina
nci
al L
imit
ed
Op
era
tio
na
l Hig
hli
gh
ts M
arc
h 2
00
8
Po
rtfo
lio
(R
s. C
rore
s)
Tota
l A
nd
hra
K
arn
ata
ka
T
am
iln
ad
u
Ma
ha
rash
tra
O
riss
a
Ch
ha
ttis
ga
rhM
ad
hy
a
Ra
jast
ha
nP
rod
uct
wis
e
Pra
de
shP
rad
esh
Gro
up
Le
nd
ing
60
0.8
0
43
4.5
5
11
6.7
9
17
.50
5
.16
2
0.2
7
2.7
2
3.5
2
0.2
8
Ind
ivid
ual
Le
nd
ing
95
.32
6
8.2
1
11
.45
-
1
2.9
3
2.7
3
-
-
-
Farm
Eq
uip
me
nt
Loan
26
.71
2
6.5
7
0.0
3
-
0.1
1
-
-
-
-
Dai
ry L
oan
5.1
3
5.1
3
-
-
-
-
-
-
-
Ag
ri F
amily
Lo
an 3
.38
2
.83
-
-
0
.55
-
-
-
-
Tota
l 7
31
.34
5
37
.29
1
28
.27
1
7.5
0
18
.75
2
3.0
0
2.7
2
3.5
2
0.2
8
No
of
Bo
rro
we
rsTo
tal
An
dh
ra
Ka
rna
tak
a
Ta
mil
na
du
M
ah
ara
shtr
a
Ori
ssa
C
hh
att
isg
arh
Ma
dh
ya
R
aja
sth
an
Pro
du
ct w
ise
P
rad
esh
Pra
de
sh
Gro
up
Le
nd
ing
1,0
93
,21
1
82
4,0
79
1
91
,63
5
31
,45
9
10
,56
9
28
,40
3
2,8
21
3
,94
4
30
1
Ind
ivid
ual
Le
nd
ing
62
,43
5
38
,66
6
9,6
24
-
1
3,4
03
7
42
-
-
-
Farm
Eq
uip
me
nt
Loan
89
0
88
5
1
-
4
-
-
-
-
Dai
ry L
oan
1,5
68
1
,56
8
-
-
-
-
-
-
-
Ag
ri F
amily
Lo
an 6
,39
0
5,1
47
-
-
1
,24
3
-
-
-
-
Tota
l 1
,16
4,4
94
8
70
,34
5
20
1,2
60
3
1,4
59
2
5,2
19
2
9,1
45
2
,82
1
3,9
44
3
01
Av
era
ge
Lo
an
To
tal
An
dh
ra
Ka
rna
tak
a
Ta
mil
na
du
M
ah
ara
shtr
a
Ori
ssa
C
hh
att
isg
arh
Ma
dh
ya
R
aja
sth
an
Ou
tsta
nd
ing
P
rad
esh
Pra
de
shP
rod
uct
wis
e
Gro
up
Le
nd
ing
5,4
75
5
,24
5
6,0
94
5
,56
3
4,8
83
7
,13
7
9,6
49
8
,91
9
9,3
36
Ind
ivid
ual
Le
nd
ing
15
,26
7
17
,64
2
11
,90
2
-
9,6
44
3
6,7
45
-
-
-
Farm
Eq
uip
me
nt
Loan
30
0,1
01
3
00
,22
6
29
0,0
00
-
2
75
,00
0
-
-
-
-
Dai
ry L
oan
32
,71
7
32
,71
7
-
-
-
-
-
-
-
Ag
ri F
amily
Lo
an 5
,29
0
5,4
98
-
-
4
,42
5
-
-
-
-
Tota
l 6
,26
1
6,1
47
6
,37
4
5,5
63
7
,43
4
7,8
91
9
,64
9
8,9
19
9
,33
6
Pa
rtic
ula
rsTo
tal
An
dh
ra
Ka
rna
tak
a
Ta
mil
na
du
M
ah
ara
shtr
a
Ori
ssa
C
hh
att
isg
arh
Ma
dh
ya
R
aja
sth
an
Pra
de
shP
rad
esh
Tota
l No
. of
Bra
nch
es
43
5
27
6
79
1
0
25
2
6
9
7
3
Gro
up
Len
din
g B
ran
ches
33
1
21
3
62
1
0
7
21
8
7
3
Ind
ivid
ual
Le
nd
ing
Bra
nch
es
10
4
63
1
7
-
18
5
1
-
-
No
. of
Clie
nts
1,2
39
,65
1
93
7,2
43
2
08
,40
5
31
,82
8
25
,95
0
29
,15
9
2,8
21
3
,94
4
30
1
No
. of
Fe
mal
e C
lien
ts
1,1
98
,61
3
91
0,2
15
2
05
,65
8
31
,82
8
15
,27
4
28
,57
2
2,8
21
3
,94
4
30
1
No
. of
Mal
e C
lien
ts 4
1,0
38
2
7,0
28
2
,74
7
-
10
,67
6
58
7
-
-
-
No
. of
Bo
rro
we
rs 1
,18
8,8
61
8
94
,71
2
20
1,2
60
3
1,4
59
2
5,2
19
2
9,1
45
2
,82
1
3,9
44
3
01
No
. of
Fem
ale
bo
rro
wer
s 1
,14
7,8
23
8
67
,68
4
19
8,5
13
3
1,4
59
1
4,5
43
2
8,5
58
2
,82
1
3,9
44
3
01
No
. of
Mal
e b
orr
ow
ers
41
,03
8
27
,02
8
2,7
47
-
1
0,6
76
5
87
-
-
-
Spandana Annual Report 2007-08 15
Repayment Rate 99.99%
Portfolio At Risk (>30 days) 0.01%
Loan Loss Rate 0.09%
Operating Cost Ratio 13.18%
Administrative cost ratio 5.76%
Personnel Costs as a Percent of Admin Costs 72.07%
No. of Active Borrowers per Staff Member 393
No. of Active Borrowers per Credit Assistant 535
Gross Portfolio Outstanding per Credit Assistant 3,289,857
No. of Clients per Credit Assistant 558
No. of Active Borrowers per Branch 2,733
Return on Assets 7.62%
Return on Equity 44.41%
Yield on Portfolio 22.43%
Operational Self Sufficiency 156.41%
Financial Cost Ratio 7.42%
Capital Adequacy 22.69%
Current Ratio 3.69
Cash to Total Assets 3.23%
Debt Service Coverage Ratio 2.88
Debt to Equity Ratio 5.16
Key Financial Ratios as of March 31st, 2008
COMPARISON WITH THE INDUSTRY
Benchmark data courtesy of the Microfinance Information Exchange (MIX). Benchmark data provided as of stMarch 31 , 2008 unless marked with * in which case 2007 data was used in place of unavailable 2008 data.
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
148,286,681
182,173,408
261,718,932
56,057,212
Share Spandana SKS BASIX
0
Gross Loan Portfolio (US$)
4.43%
Share Spandana SKS BASIX
Portfolio at Risk > 30 Days
0.01% 0.15%
1.21%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
163,955,391
Share Spandana SKS BASIX
0
Total Assets (US$)
350,000,000
400,000,000
208,876,249
336,873,020
67,068,396
Share Spandana SKS BASIX
Return on Assets
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
1.22%
7.62%
2.00%
0.59%
Share* Spandana SKS BASIX
Return on Equity
15.31%
44.41%
4.93%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
11.95%
Spandana Annual Report 2007-08 15
Repayment Rate 99.99%
Portfolio At Risk (>30 days) 0.01%
Loan Loss Rate 0.09%
Operating Cost Ratio 13.18%
Administrative cost ratio 5.76%
Personnel Costs as a Percent of Admin Costs 72.07%
No. of Active Borrowers per Staff Member 393
No. of Active Borrowers per Credit Assistant 535
Gross Portfolio Outstanding per Credit Assistant 3,289,857
No. of Clients per Credit Assistant 558
No. of Active Borrowers per Branch 2,733
Return on Assets 7.62%
Return on Equity 44.41%
Yield on Portfolio 22.43%
Operational Self Sufficiency 156.41%
Financial Cost Ratio 7.42%
Capital Adequacy 22.69%
Current Ratio 3.69
Cash to Total Assets 3.23%
Debt Service Coverage Ratio 2.88
Debt to Equity Ratio 5.16
Key Financial Ratios as of March 31st, 2008
COMPARISON WITH THE INDUSTRY
Benchmark data courtesy of the Microfinance Information Exchange (MIX). Benchmark data provided as of stMarch 31 , 2008 unless marked with * in which case 2007 data was used in place of unavailable 2008 data.
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
148,286,681
182,173,408
261,718,932
56,057,212
Share Spandana SKS BASIX
0
Gross Loan Portfolio (US$)
4.43%
Share Spandana SKS BASIX
Portfolio at Risk > 30 Days
0.01% 0.15%
1.21%
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
5.00%
300,000,000
250,000,000
200,000,000
150,000,000
100,000,000
50,000,000
163,955,391
Share Spandana SKS BASIX
0
Total Assets (US$)
350,000,000
400,000,000
208,876,249
336,873,020
67,068,396
Share Spandana SKS BASIX
Return on Assets
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
1.22%
7.62%
2.00%
0.59%
Share* Spandana SKS BASIX
Return on Equity
15.31%
44.41%
4.93%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
50.00%
11.95%
Spandana Annual Report 2007-08 17
Share Spandana SKS BASIX
Cost per Borrower
11.6
0
5
10
15
20
25
30
7.5
18.7
25.1
Share Spandana SKS BASIX
Borrowers per Staff Member
327
0
50
100
150
250
300
200
350
400
450393
254
157
Share Spandana SKS BASIX
Debt to Equity Ratio
439.96%
0.00%
100.00%
200.00%
300.00%
400.00%
500.00%
600.00%
700.00%
800.00%
900.00%
516.30%
536.31%
849.06%
Share* Spandana SKS BASIX
Operating Expense Ratio
9.61%
0.00%
2.00%
5.08%
9.64%
11.75%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
Share* Spandana SKS BASIX
Profit Margin
9.16%
37.14%
7.91%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
16.50%
Share* Spandana SKS BASIX
Operational Self Sufficiency
110.09%
0.00%
20.00%
40.00%
156.41%
119.75%108.59%
60.00%
80.00%
100.00%
120.00%
140.00%
160.00%
180.00%
Share* Spandana SKS BASIX
Total Expense Ratio
13.04%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
12.45%
17.01%
21.12%
Share* Spandana SKS BASIX
Operating Expense / Loan Portfolio
10.97%
0.00%
2.00%
5.80%
12.33%
14.37%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Spandana Annual Report 2007-08 17
Share Spandana SKS BASIX
Cost per Borrower
11.6
0
5
10
15
20
25
30
7.5
18.7
25.1
Share Spandana SKS BASIX
Borrowers per Staff Member
327
0
50
100
150
250
300
200
350
400
450393
254
157
Share Spandana SKS BASIX
Debt to Equity Ratio
439.96%
0.00%
100.00%
200.00%
300.00%
400.00%
500.00%
600.00%
700.00%
800.00%
900.00%
516.30%
536.31%
849.06%
Share* Spandana SKS BASIX
Operating Expense Ratio
9.61%
0.00%
2.00%
5.08%
9.64%
11.75%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
Share* Spandana SKS BASIX
Profit Margin
9.16%
37.14%
7.91%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
16.50%
Share* Spandana SKS BASIX
Operational Self Sufficiency
110.09%
0.00%
20.00%
40.00%
156.41%
119.75%108.59%
60.00%
80.00%
100.00%
120.00%
140.00%
160.00%
180.00%
Share* Spandana SKS BASIX
Total Expense Ratio
13.04%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
12.45%
17.01%
21.12%
Share* Spandana SKS BASIX
Operating Expense / Loan Portfolio
10.97%
0.00%
2.00%
5.80%
12.33%
14.37%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Spandana Annual Report 2007-08 19
PRODUCTSSpandana has loan, insurance and money transfer programs for its clients, key aspects of the products are outlined below:
Loan Products Terms
General Loan (weekly) Group based lending. 5 to 10 women are formed into joint liability groups. Loan is for income generation and debt relief.
Repayment Frequency: Weekly
Tenor: 50 Weeks (for loans above Rs. 10,000 – 50 to 75 weeks option is given)
Loan Size: Rs. 2,000 to 20,000
Clients: Daily wage laborers both skilled and unskilled and only women.
Interest Rate: 12.5% flat and 1% to 2.0% upfront fees
Individual Loan Individual Lending
Guarantee: PDC's and co-obligant guarantee
Should have a sizeable business/salary/rental income
Repayment Frequency: Monthly
Loan Size: Rs. 21,000 to Rs. 200,000
Clients: SME owners, salaried employees of class IV, etc. (both men and women)
Interest Rate: 21% diminishing in case of second and subsequent cycle clients and 24% in case of new clients and 2% upfront fees
Agri Family Loan Group Based lending. 4 to 6 small and marginal farmers are formed into joint liability groups (both men and women)
Loan is for agriculture and allied activities
Repayment Frequency: interest payable monthly but principle repayments match with harvest.
Tenor: One year
Loan Size: Rs. 5,000 to Rs. 30,000
Clients: small and marginal farmers with land holding of 1 to 10 acres (both men and women).
Interest rate: 18% diminishing and no fees
Dairy Loan Loan is given to milk producers and milk collection agents against guarantee given by the Dairy to which the farmer / agent supplies milk. Dairy deducts loan instalment from the farmer and remit to loan account.
Repayment Frequency: Once in ten/fifteen days to match with the Dairy's payment to milk producers.
Tenor: 10 Months
Loan Size:Rs.20,000 to 100,000
Interest Rate: 18% diminishing and no fees
Spandana Annual Report 2007-08 19
PRODUCTSSpandana has loan, insurance and money transfer programs for its clients, key aspects of the products are outlined below:
Loan Products Terms
General Loan (weekly) Group based lending. 5 to 10 women are formed into joint liability groups. Loan is for income generation and debt relief.
Repayment Frequency: Weekly
Tenor: 50 Weeks (for loans above Rs. 10,000 – 50 to 75 weeks option is given)
Loan Size: Rs. 2,000 to 20,000
Clients: Daily wage laborers both skilled and unskilled and only women.
Interest Rate: 12.5% flat and 1% to 2.0% upfront fees
Individual Loan Individual Lending
Guarantee: PDC's and co-obligant guarantee
Should have a sizeable business/salary/rental income
Repayment Frequency: Monthly
Loan Size: Rs. 21,000 to Rs. 200,000
Clients: SME owners, salaried employees of class IV, etc. (both men and women)
Interest Rate: 21% diminishing in case of second and subsequent cycle clients and 24% in case of new clients and 2% upfront fees
Agri Family Loan Group Based lending. 4 to 6 small and marginal farmers are formed into joint liability groups (both men and women)
Loan is for agriculture and allied activities
Repayment Frequency: interest payable monthly but principle repayments match with harvest.
Tenor: One year
Loan Size: Rs. 5,000 to Rs. 30,000
Clients: small and marginal farmers with land holding of 1 to 10 acres (both men and women).
Interest rate: 18% diminishing and no fees
Dairy Loan Loan is given to milk producers and milk collection agents against guarantee given by the Dairy to which the farmer / agent supplies milk. Dairy deducts loan instalment from the farmer and remit to loan account.
Repayment Frequency: Once in ten/fifteen days to match with the Dairy's payment to milk producers.
Tenor: 10 Months
Loan Size:Rs.20,000 to 100,000
Interest Rate: 18% diminishing and no fees
Spandana Annual Report 2007-08 21
Appraisal
- First cycle loans range from INR 1,000 to 12,000. The CA appraises loan applicants for amounts less
than INR 25,000 while the Branch Manager (“BM”) reviews applications above this amount. Loan
amounts tend to increase with successive cycles, thereby deepening the exposure of Spandana in a
given area over time.
- For first loan applicants, appraisal is based on the member's attendance at training, her discipline in
the group and ability to sustain a good relationship with the group.
- The appropriateness of the loan, both in terms of amount and purpose, is reviewed specific to each
client.
- High loans will be discouraged if it is felt that the business is too small to absorb the demanded
credit.
- For the second and remaining loan cycles the applicants are appraised based on their loan
repayment behaviour, improvement in their economic standing, attendance and discipline at the
centre meetings and the feasibility of the proposed activity. The CA appraises the application and
the BM sanctions it.
Sanction
- The borrower's attendance at meetings is one of the criteria for sanctioning subsequent loans. Each
borrower should have at least 50% attendance to get the subsequent loan.
- Sanction of the loan will be in the second week after receiving the loan application.
Disbursement
- Disbursement of loans occurs at the centre meetings by the CAs after taking an oath in the centre
meeting.
- All remaining group members should attend the centre meeting and express that they accept
responsibility of prompt repayment as agreed.
Repayment
- Loan repayments are made in centre meetings (6 A.M to 11 A.M) and all members present in the
centre meeting should verify the entry in the passbook before they leave the meeting.
- For group loans, the loan together with the service charge is repayable in 50 weeks in 50 equal
installments. 15% flat interest is charged on every loan taken by members and they have to repay
Rs.20 per week as a principal amount and Rs 3 per week as an interest for every Rs.1,000 loan taken.
The CA will put date and sign on each repayment day acknowledging the receipt of the weekly
instalment.
Prepayment
- The members who wish to take the next loan can prepay the outstanding loan amount after 35
weeks and interest for the following 5 weeks.
- She will be given the loan application on the day of prepayment and the loan, if approved, will be
disbursed during the following week's centre meeting.
- Prior to the next loan being released, her ability to repay the loan and also the purpose of loan will be
appraised by the CA.
Loan Procedure - Group Lending
The key steps involved in processing a group loan application are outlined below:
Group Formation
- 10 member groups are formed.
- Basic training is provided to the members covering Spandana's operating procedure.
- A group recognition test is carried out to test their understanding of the training provided.
- If the group passes the test, they become eligible to avail loans and go through the application
process.
Application
- All 10 group members present loan applications together at first centre meeting.
- The Credit Assistant (“CA”) ensures that members understand every aspect of the application.
- Information collected includes the member's name, their husband's name, purpose and size of
group.
- The remaining group members sign the application form as co-guarantors. Every member must be
present for the loans to be disbursed.
General Loan
Individual Loan
Money Transfer Program
Insurance Facilitation
Spandana's main loan product is the General Loan focusing on income generating activities. Members may
borrow up to INR. 12,000 for their first loan and subsequent loan cycles are on the basis of client's repayment
capacity. Loan amount is not determined by the cycle and is decided by the cash flows and loan absorption and
repayment capacity of the client. Loans are disbursed only after thorough appraisal by the Branch Manager. The
BM will visit the client and decide the loan amount. Loans are extended to members for 50 weeks with a weekly
repayment schedule.
Individual loans may be provided to micro-entrepreneurs, salaried people, contract workers and householders
meeting various net monthly income thresholds. Loans may be utilized for a wide range of purposes including
business expansion and working capital requirements, personal loans for debt consolidation, and housing
renovations.
Spandana has entered into an agreement with Western Union for a Money Transfer program. Spandana is
starting Money Transfer services for its rural and semi urban clients in Andhra Pradesh. Under the arrangement,
Spandana will initially leverage its network of 276 branches across the state to offer in-bound money transfer
services to its around 1 million customers. It will later expand to Karnataka, Tamil Nadu, Orissa and Maharashtra
during the next quarter, where the MFI also has a presence.
Spandana provides a life insurance product of Bajaj Allianz to all clients. Keeping borrower welfare and risk
mitigation in mind, life insurance has been made compulsory to all borrowers of Spandana loans. When taking
out a general loan, every borrower and her husband is covered under the life insurance program. However, in the
case of individual loans only the actual borrower is covered. The insurance premium is collected at the time of
the loan disbursement. In case of death of the borrower or her husband, after deducting the outstanding
principal amount and interest amount for five weeks from the sum insured, the rest is given to the family
members of the deceased (borrower or her husband).
Spandana Annual Report 2007-08 21
Appraisal
- First cycle loans range from INR 1,000 to 12,000. The CA appraises loan applicants for amounts less
than INR 25,000 while the Branch Manager (“BM”) reviews applications above this amount. Loan
amounts tend to increase with successive cycles, thereby deepening the exposure of Spandana in a
given area over time.
- For first loan applicants, appraisal is based on the member's attendance at training, her discipline in
the group and ability to sustain a good relationship with the group.
- The appropriateness of the loan, both in terms of amount and purpose, is reviewed specific to each
client.
- High loans will be discouraged if it is felt that the business is too small to absorb the demanded
credit.
- For the second and remaining loan cycles the applicants are appraised based on their loan
repayment behaviour, improvement in their economic standing, attendance and discipline at the
centre meetings and the feasibility of the proposed activity. The CA appraises the application and
the BM sanctions it.
Sanction
- The borrower's attendance at meetings is one of the criteria for sanctioning subsequent loans. Each
borrower should have at least 50% attendance to get the subsequent loan.
- Sanction of the loan will be in the second week after receiving the loan application.
Disbursement
- Disbursement of loans occurs at the centre meetings by the CAs after taking an oath in the centre
meeting.
- All remaining group members should attend the centre meeting and express that they accept
responsibility of prompt repayment as agreed.
Repayment
- Loan repayments are made in centre meetings (6 A.M to 11 A.M) and all members present in the
centre meeting should verify the entry in the passbook before they leave the meeting.
- For group loans, the loan together with the service charge is repayable in 50 weeks in 50 equal
installments. 15% flat interest is charged on every loan taken by members and they have to repay
Rs.20 per week as a principal amount and Rs 3 per week as an interest for every Rs.1,000 loan taken.
The CA will put date and sign on each repayment day acknowledging the receipt of the weekly
instalment.
Prepayment
- The members who wish to take the next loan can prepay the outstanding loan amount after 35
weeks and interest for the following 5 weeks.
- She will be given the loan application on the day of prepayment and the loan, if approved, will be
disbursed during the following week's centre meeting.
- Prior to the next loan being released, her ability to repay the loan and also the purpose of loan will be
appraised by the CA.
Loan Procedure - Group Lending
The key steps involved in processing a group loan application are outlined below:
Group Formation
- 10 member groups are formed.
- Basic training is provided to the members covering Spandana's operating procedure.
- A group recognition test is carried out to test their understanding of the training provided.
- If the group passes the test, they become eligible to avail loans and go through the application
process.
Application
- All 10 group members present loan applications together at first centre meeting.
- The Credit Assistant (“CA”) ensures that members understand every aspect of the application.
- Information collected includes the member's name, their husband's name, purpose and size of
group.
- The remaining group members sign the application form as co-guarantors. Every member must be
present for the loans to be disbursed.
General Loan
Individual Loan
Money Transfer Program
Insurance Facilitation
Spandana's main loan product is the General Loan focusing on income generating activities. Members may
borrow up to INR. 12,000 for their first loan and subsequent loan cycles are on the basis of client's repayment
capacity. Loan amount is not determined by the cycle and is decided by the cash flows and loan absorption and
repayment capacity of the client. Loans are disbursed only after thorough appraisal by the Branch Manager. The
BM will visit the client and decide the loan amount. Loans are extended to members for 50 weeks with a weekly
repayment schedule.
Individual loans may be provided to micro-entrepreneurs, salaried people, contract workers and householders
meeting various net monthly income thresholds. Loans may be utilized for a wide range of purposes including
business expansion and working capital requirements, personal loans for debt consolidation, and housing
renovations.
Spandana has entered into an agreement with Western Union for a Money Transfer program. Spandana is
starting Money Transfer services for its rural and semi urban clients in Andhra Pradesh. Under the arrangement,
Spandana will initially leverage its network of 276 branches across the state to offer in-bound money transfer
services to its around 1 million customers. It will later expand to Karnataka, Tamil Nadu, Orissa and Maharashtra
during the next quarter, where the MFI also has a presence.
Spandana provides a life insurance product of Bajaj Allianz to all clients. Keeping borrower welfare and risk
mitigation in mind, life insurance has been made compulsory to all borrowers of Spandana loans. When taking
out a general loan, every borrower and her husband is covered under the life insurance program. However, in the
case of individual loans only the actual borrower is covered. The insurance premium is collected at the time of
the loan disbursement. In case of death of the borrower or her husband, after deducting the outstanding
principal amount and interest amount for five weeks from the sum insured, the rest is given to the family
members of the deceased (borrower or her husband).
Spandana Annual Report 2007-08 23
Loan Procedure - Individual Lending
The key steps involved in processing an individual loan application are outlined below:
Client Verification
- Clients may be either existing Spandana clients or new clients. They must have either a
stable income generating businesses or be salaried employees meeting certain income
criteria.
- CA's are required to complete a detailed Eligibility Register for each client. Criteria includes
the requirement for the client to have:
o either an existing business or to be a salaried employee;
o own a house or shop, or be guaranteed by co-obligant who owns a house
- The CAs must verify house ownership, meet the guarantor and perform reference checks
with neighbours.
- If the criteria are met the completed form is submitted to the BM and a joint review
followed by a credit analysis is undertaken.
Credit Analysis
- The BM takes primary responsibility for the credit analysis process.
- House and business/place of employment visits are undertaken by the BM.
- Details of the household cash flows are collected.
- Details about the business are collected including fixed assets, working capital and staff. A
detailed inspection of the books is carried out. A comparison of the business to others in
the industry is undertaken.
- Salaried employees receive a visit to the workplace of the client and verification of their
payslip, ID card, attendance records, frequency of transfer, retirement date and other debts.
Loan Approval
- Credit committee formed: comprised of one BM, one senior CA and the CA who originated
the loan. The committee meets twice weekly.
- CA will present the case.
- The credit committee verifies the consistency of purchases and sales, the consistency of
business profits, purpose of the loan, debt-equity ratio. Additionally, the committee
discusses the guarantee level of the loan and analyzes the repayment capacity in order to
assess the risk.
- Requirements for higher loan amounts are as follows:
o Up to Rs. 50,000 - The BM is authorized to approve the loan
o From Rs. 50,001 to 100,000 - The RM is authorized to approve such amounts.
o Loan requests above Rs. 100,000 require that a notice be sent to the HO with information
about the member before sanctioning the loan.
Loan Disbursement
- Know Your Customer checks are undertaken prior to loan disbursement.
- Borrower, spouse and guarantor should all be present.
- Loan conditions are outlined again.
- Loan disbursement occurs twice weekly.
Monitoring and Recovery
- After disbursement, utilization checks are carried out.
- The business is examined to judge whether there has been an improvement in the
physical stock, fixed assets and cash flows.
- Specified repayment dates are created at the time of loan disbursal, recovery is carried
out by the CA at the client's business place or residence.
- If the client defaults on a repayment the guarantor is responsible for making the
payment.
Spandana Annual Report 2007-08 23
Loan Procedure - Individual Lending
The key steps involved in processing an individual loan application are outlined below:
Client Verification
- Clients may be either existing Spandana clients or new clients. They must have either a
stable income generating businesses or be salaried employees meeting certain income
criteria.
- CA's are required to complete a detailed Eligibility Register for each client. Criteria includes
the requirement for the client to have:
o either an existing business or to be a salaried employee;
o own a house or shop, or be guaranteed by co-obligant who owns a house
- The CAs must verify house ownership, meet the guarantor and perform reference checks
with neighbours.
- If the criteria are met the completed form is submitted to the BM and a joint review
followed by a credit analysis is undertaken.
Credit Analysis
- The BM takes primary responsibility for the credit analysis process.
- House and business/place of employment visits are undertaken by the BM.
- Details of the household cash flows are collected.
- Details about the business are collected including fixed assets, working capital and staff. A
detailed inspection of the books is carried out. A comparison of the business to others in
the industry is undertaken.
- Salaried employees receive a visit to the workplace of the client and verification of their
payslip, ID card, attendance records, frequency of transfer, retirement date and other debts.
Loan Approval
- Credit committee formed: comprised of one BM, one senior CA and the CA who originated
the loan. The committee meets twice weekly.
- CA will present the case.
- The credit committee verifies the consistency of purchases and sales, the consistency of
business profits, purpose of the loan, debt-equity ratio. Additionally, the committee
discusses the guarantee level of the loan and analyzes the repayment capacity in order to
assess the risk.
- Requirements for higher loan amounts are as follows:
o Up to Rs. 50,000 - The BM is authorized to approve the loan
o From Rs. 50,001 to 100,000 - The RM is authorized to approve such amounts.
o Loan requests above Rs. 100,000 require that a notice be sent to the HO with information
about the member before sanctioning the loan.
Loan Disbursement
- Know Your Customer checks are undertaken prior to loan disbursement.
- Borrower, spouse and guarantor should all be present.
- Loan conditions are outlined again.
- Loan disbursement occurs twice weekly.
Monitoring and Recovery
- After disbursement, utilization checks are carried out.
- The business is examined to judge whether there has been an improvement in the
physical stock, fixed assets and cash flows.
- Specified repayment dates are created at the time of loan disbursal, recovery is carried
out by the CA at the client's business place or residence.
- If the client defaults on a repayment the guarantor is responsible for making the
payment.
Spandana Annual Report 2007-08 25
MICROFINANCE WITH A SOCIAL FOCUS
Social Responsibility
Spandana is committed to strengthening the socio-economic status of low-income households –
particularly women – in rural and urban areas by providing financial services on a continual basis in
order to improve livelihoods, establish identity and enhance self-image. Spandana believes that low-
income women play a critical role both in the economics of their households and their communities.
Hence, it is committed to maintaining a special focus on women.
Spandana believes that poor households have risk taking abilities and are rational and judgmental
while assessing and improving their livelihoods. They are creative, innovative and enterprising. Access
to credit brings out these latent capacities. Spandana respects the opinions of its clients and believes
in carrying out its business without compromising our commitment to ethical values, transparency
and efficiency.
Spandana places a premium on transparency. To that end, the organization has adopted a policy of
providing printed information on the client passbooks about interest rates with a clearly delineated
payment schedule, explained in terms of both the flat rate and the equivalent diminishing balance
rate along with any upfront charges. Our interest rates are our competitive advantage that we have
gained through cost-efficient operations. We have made it a point to keep the clients informed about
the interest rates that we charge and the exact installments that are due. A well-informed client not
only fits with our core mission of serving the marginalized, she also makes for a less risky client. Full
disclosure also prevents any potential fraud on the part of the staff by misreporting interest rates.
Clients are informed of any changes in the interest rates before they are implemented in the field and
these changes are reflected in the passbooks provided to the clients. Independent organizations have
acknowledged Spandana's commitment to transparency. We have received the highest disclosure
rating of five diamonds from the Mix Market, a web-based information server on microfinance
institutions. In 2004, we met the entry requirements for the Financial Transparency Award from the
Consultative Group to Assist the Poor (CGAP).
Additionally the Branch Managers, during their daily visits to the centers, advise clients against paying
bribes to the staff. Whether such announcements are made or not is verified randomly with the clients
by the Regional Managers and the Divisional Managers. The Branch Managers also make a loan
utilization check exactly one week after disbursement in order to determine whether the amount
reported and disbursed are in fact the same. This prevents phony loans and misreporting of disbursed
amounts by the staff.
The culture of the organization and the nature of the relationship with the clients are best symbolized
by the pledge taken by the Credit Officers during the daily Center meetings. It characterizes the
selfless ethos that all Spandana staff members adopt.
Spandana Annual Report 2007-08 25
MICROFINANCE WITH A SOCIAL FOCUS
Social Responsibility
Spandana is committed to strengthening the socio-economic status of low-income households –
particularly women – in rural and urban areas by providing financial services on a continual basis in
order to improve livelihoods, establish identity and enhance self-image. Spandana believes that low-
income women play a critical role both in the economics of their households and their communities.
Hence, it is committed to maintaining a special focus on women.
Spandana believes that poor households have risk taking abilities and are rational and judgmental
while assessing and improving their livelihoods. They are creative, innovative and enterprising. Access
to credit brings out these latent capacities. Spandana respects the opinions of its clients and believes
in carrying out its business without compromising our commitment to ethical values, transparency
and efficiency.
Spandana places a premium on transparency. To that end, the organization has adopted a policy of
providing printed information on the client passbooks about interest rates with a clearly delineated
payment schedule, explained in terms of both the flat rate and the equivalent diminishing balance
rate along with any upfront charges. Our interest rates are our competitive advantage that we have
gained through cost-efficient operations. We have made it a point to keep the clients informed about
the interest rates that we charge and the exact installments that are due. A well-informed client not
only fits with our core mission of serving the marginalized, she also makes for a less risky client. Full
disclosure also prevents any potential fraud on the part of the staff by misreporting interest rates.
Clients are informed of any changes in the interest rates before they are implemented in the field and
these changes are reflected in the passbooks provided to the clients. Independent organizations have
acknowledged Spandana's commitment to transparency. We have received the highest disclosure
rating of five diamonds from the Mix Market, a web-based information server on microfinance
institutions. In 2004, we met the entry requirements for the Financial Transparency Award from the
Consultative Group to Assist the Poor (CGAP).
Additionally the Branch Managers, during their daily visits to the centers, advise clients against paying
bribes to the staff. Whether such announcements are made or not is verified randomly with the clients
by the Regional Managers and the Divisional Managers. The Branch Managers also make a loan
utilization check exactly one week after disbursement in order to determine whether the amount
reported and disbursed are in fact the same. This prevents phony loans and misreporting of disbursed
amounts by the staff.
The culture of the organization and the nature of the relationship with the clients are best symbolized
by the pledge taken by the Credit Officers during the daily Center meetings. It characterizes the
selfless ethos that all Spandana staff members adopt.
Spandana Annual Report 2007-08 27
One of Spandana's key strengths is the training that is provided to the staff members. The theoretical
training provided at the Head Office is followed by a rigorous one-month training session in the field
wherein the staff members gain valuable hands-on experience. During this phase, strong emphasis is
given to appropriate lending and collection processes which include both technical and behavioral
aspects. The staff members understand that their livelihoods and the company's very existence are
completely dependent on the clients and therefore, they should be treated with utmost respect.
A thorough appraisal process is in place for the selection of clients and also for deciding on the
appropriate amounts to be sanctioned for a loan. This is done by taking into consideration the current
status, both economic and social, of the household. For the Individual Lending product, the appraisal
process even considers financial statements such as balance sheets, profit and loss statements and
cash flow statements in order to determine the appropriate loan amount. This ensures against
problems arising from over-lending.
As Spandana is a client-focused organization, our products are designed to bring value and service to
our client's lives. For example, we have initiated a tie-up with Western Union and UAE Exchange in
order to offer remittance and money transfer services to our clients. We do this by leveraging our large
scale and personal reach in order to offer convenient door-step service through our network of
dedicated credit officers. Additionally, Spandana has partnered with Bajaj Allianz in order to offer
insurance coverage to all of our clients and their spouses. To date, this program has already insured
over two million lives.
The product range and the features associated with each product clearly indicate our client focus and
they are also suited to those clients whose requirements would not otherwise be optimally served. For
instance, the Individual Loan is meant for clients who are lower level public and private sector
employees, small business owners and factory workers. These individuals are not readily served by
other mainstream financial institutions.
Similarly, the Agri-Family Loan is provided primarily to farmers for their non-farm requirements since
the mainstream financial institutions provide only crop loans. Even the repayment of these loans is
tailored to the cash flows of a farm household – interest is collected every month, but principal
repayment happens as and when the crop is sold, be it once or twice in a year.
Any new product that we have added has come from the client feedback reported by the operational
staff and this epitomizes our market-driven approach to financial services. We constantly endeavor to
respond to felt needs of our clients. Our configuration of rural, semi-urban and urban operations and
our product mix (group, individual and agri-family loans) are a testimony to the focus we put on
equitable solutions.
Client Focused Products
CLIENT CASE STUDIES
Giving Credit Where Credit is Due
In the Hands of Our Clients
On its own, a Spandana loan is merely money. But in the hands of our clients, it represents a tool that
allows them to release their latent drive and entrepreneurial spirit. In this way, Spandana loans provide
clients the opportunity to be in control of their circumstances rather than being a victim of them. The
case studies below are but a small sample of the myriad ways in which our clients have used their loans
to enrich their lives, their families and their communities. They are a testament to the notion that
poverty has many definitions. Our clients, though they may be poor by one measure, are nonetheless
rich in spirit, creativity and determination. Our loans give them the resources they need to harness
their ambitions, take control of their destinies and turn their dreams into a reality.
Shehnaz Begum
By any interpretation, Begum's situation was desperate. In 2000, Begum's husband took his own life,
leaving her with three children to raise and no source of income. To make matters even worse, Begum
was shunned by her husband's family and could not rely on them for assistance. Even her own family
was unable to provide for Begum and her three
children in their time of utmost need. The paltry
widower's benefit that she received from the
government upon the death of her husband was
enough to allay her short-term needs but if
Begum was going to be able to provide for her
family in the long term, she would need to be
able to leverage her entrepreneurial instincts.
Although short on material resources, Begum
had ample drive and determination. All she
needed was someone to trust in her vision. That is
where Spandana stepped in.
In 2004, Begum received her first loan from
Spandana amounting to Rs. 7,000. She used these
funds to purchase shoes in bulk from a
wholesaler along with a pushcart. These simple
items were all she needed to get her shoe
business up and running. She set up her cart in
the village market and as business picked up over
the course of the year, Begum realized her
potential and started seeking out new business
opportunities. The following year, she took out
another Rs. 8,000 loan from Spandana and used
Spandana Annual Report 2007-08 27
One of Spandana's key strengths is the training that is provided to the staff members. The theoretical
training provided at the Head Office is followed by a rigorous one-month training session in the field
wherein the staff members gain valuable hands-on experience. During this phase, strong emphasis is
given to appropriate lending and collection processes which include both technical and behavioral
aspects. The staff members understand that their livelihoods and the company's very existence are
completely dependent on the clients and therefore, they should be treated with utmost respect.
A thorough appraisal process is in place for the selection of clients and also for deciding on the
appropriate amounts to be sanctioned for a loan. This is done by taking into consideration the current
status, both economic and social, of the household. For the Individual Lending product, the appraisal
process even considers financial statements such as balance sheets, profit and loss statements and
cash flow statements in order to determine the appropriate loan amount. This ensures against
problems arising from over-lending.
As Spandana is a client-focused organization, our products are designed to bring value and service to
our client's lives. For example, we have initiated a tie-up with Western Union and UAE Exchange in
order to offer remittance and money transfer services to our clients. We do this by leveraging our large
scale and personal reach in order to offer convenient door-step service through our network of
dedicated credit officers. Additionally, Spandana has partnered with Bajaj Allianz in order to offer
insurance coverage to all of our clients and their spouses. To date, this program has already insured
over two million lives.
The product range and the features associated with each product clearly indicate our client focus and
they are also suited to those clients whose requirements would not otherwise be optimally served. For
instance, the Individual Loan is meant for clients who are lower level public and private sector
employees, small business owners and factory workers. These individuals are not readily served by
other mainstream financial institutions.
Similarly, the Agri-Family Loan is provided primarily to farmers for their non-farm requirements since
the mainstream financial institutions provide only crop loans. Even the repayment of these loans is
tailored to the cash flows of a farm household – interest is collected every month, but principal
repayment happens as and when the crop is sold, be it once or twice in a year.
Any new product that we have added has come from the client feedback reported by the operational
staff and this epitomizes our market-driven approach to financial services. We constantly endeavor to
respond to felt needs of our clients. Our configuration of rural, semi-urban and urban operations and
our product mix (group, individual and agri-family loans) are a testimony to the focus we put on
equitable solutions.
Client Focused Products
CLIENT CASE STUDIES
Giving Credit Where Credit is Due
In the Hands of Our Clients
On its own, a Spandana loan is merely money. But in the hands of our clients, it represents a tool that
allows them to release their latent drive and entrepreneurial spirit. In this way, Spandana loans provide
clients the opportunity to be in control of their circumstances rather than being a victim of them. The
case studies below are but a small sample of the myriad ways in which our clients have used their loans
to enrich their lives, their families and their communities. They are a testament to the notion that
poverty has many definitions. Our clients, though they may be poor by one measure, are nonetheless
rich in spirit, creativity and determination. Our loans give them the resources they need to harness
their ambitions, take control of their destinies and turn their dreams into a reality.
Shehnaz Begum
By any interpretation, Begum's situation was desperate. In 2000, Begum's husband took his own life,
leaving her with three children to raise and no source of income. To make matters even worse, Begum
was shunned by her husband's family and could not rely on them for assistance. Even her own family
was unable to provide for Begum and her three
children in their time of utmost need. The paltry
widower's benefit that she received from the
government upon the death of her husband was
enough to allay her short-term needs but if
Begum was going to be able to provide for her
family in the long term, she would need to be
able to leverage her entrepreneurial instincts.
Although short on material resources, Begum
had ample drive and determination. All she
needed was someone to trust in her vision. That is
where Spandana stepped in.
In 2004, Begum received her first loan from
Spandana amounting to Rs. 7,000. She used these
funds to purchase shoes in bulk from a
wholesaler along with a pushcart. These simple
items were all she needed to get her shoe
business up and running. She set up her cart in
the village market and as business picked up over
the course of the year, Begum realized her
potential and started seeking out new business
opportunities. The following year, she took out
another Rs. 8,000 loan from Spandana and used
Spandana Annual Report 2007-08 29
these funds to set up a business collecting and processing scrap materials for resale to centers that
would recycle these items. Begum plowed her additional earnings from the scrap business back into
her pushcart business. She was able to diversify the range of merchandise that she sold in the market
by adding new items to her push cart such as plastic water jugs, plates, mugs and other daily usable
goods.
All told, Begum has received five loans from Spandana totaling Rs. 42,000. Every step of the way,
Spandana has been there to respond to the needs of Begum and her business, even providing an
interim supplemental loan when the expansion of her business required it. Begum now earns Rs.
12,000 a month between her two businesses. She is able to send all three of her children to school and
recently began purchasing gold on her eldest daughter's behalf for marriage purposes. Even after all
of her expenses, Begum now earns enough to save a portion of her daily income and currently has Rs.
20,000 in savings. These days, you can usually find Begum in the nearby market selling her wares. The
area around her pushcart is alive with activity and Begum herself beams with pride and happiness in
being able to provide a life for her children. In the hands of a loving mother, a Spandana loan can make
a child's future brighter.
K Lalitha
In recognition of their special status within the economics of a household, Spandana loans are
focused primarily on women. Nevertheless, a loan which benefits one member of the family will
assuredly benefit all members. In this way, a loan to a
mother is really a loan to the entire family.
Spandana acknowledges and values the
contributions of husbands to the welfare of their
households. Take Lalitha and her husband Ashok
for example. Their first Spandana loan of Rs. 7,000
was used to purchase a small marble polishing
machine that Ashok used to begin his own
marble polishing business. Prior to this, Ashok
was a daily wage laborer earning roughly Rs. 100
per day. Yet due to the vicissitudes of the local
labor market, Ashok was only able to work for 15
days in any given month. This monthly income of
Rs. 1,500 was not enough to support his wife and
their two infant children. The marble polishing
business allowed Ashok to properly control his
working schedule while at the same time
increasing his monthly income.
The success of his marble polishing business was
encouraging and the following year, Lalitha and
Ashok secured a second loan from Spandana
amounting to Rs. 8,000. This loan, together with
Ashok's earnings, was used to purchase a second, much larger marble polishing machine. With his
reputation as a capable marble polisher and his new industrial equipment, Ashok was able to link-up
with several building contractors in the surrounding area who were in need of his services. These
contractors now provide a steady stream of work and Ashok is currently able to earn Rs. 5,000 per
month from his business, an increase of over 200% from his pre-Spandana loan earnings.
Lalitha, seeing her husband's business grow and succeed and not content to sit idle while her husband
earned an income for the family, decided to take yet another loan from Spandana. This one, amounting
to Rs. 10,000, was used to open a small shop where she could sell snack items, eggs, soaps and
detergents. She also used her Spandana loan to purchase a refrigerator for the shop. This allowed her
to sell cold drinks, a major source of income for her business. As Lalitha's shop became more
successful, she sought out and received a fourth loan from Spandana for Rs. 15,000. This larger dose of
credit allowed Lalitha to drastically expand her stock and increase the range of goods that she sells in
her shop. She now sells everything from food and cleaning supplies to basic household goods and
books. She even used her loan to purchase a coin-operated STD phone stall, a valuable resource in her
community. As her business has expanded, she has seen her daily sales increase from Rs. 300 to Rs.
1,000. This wife and mother of two now seeks a fifth loan to expand her business even further. In the
hands of a dedicated husband and wife, a Spandana loan can benefit an entire family.
Malan Bee
When Bee's husband fell ill and was no longer able
to continue earning a living as a construction
worker, the primary responsibility for earning an
income for the family fell upon her. As a woman
with no prior working experience, the prospect
of making a living for her husband and four
children seemed bleak. But Bee is a resourceful
and enterprising woman, factors which would
bode well for the future of her family and her
community.
Bee had learned how to make incense sticks from
her neighbors. Realizing a business opportunity
in this newly acquired skill, she secured a loan
from Spandana for Rs. 8,000 in order to purchase
the raw materials necessary to manufacture
incense sticks. Her business quickly took off and
before long, Bee required a further loan of Rs.
10,000 in order to manufacture enough incense
t o m e e t t h e e v e r - g r o w i n g d e m a n d .
Manufacturing incense is an incredibly labor-
intensive process. Despite her constant efforts,
Bee was only able to produce and sell enough
Spandana Annual Report 2007-08 29
these funds to set up a business collecting and processing scrap materials for resale to centers that
would recycle these items. Begum plowed her additional earnings from the scrap business back into
her pushcart business. She was able to diversify the range of merchandise that she sold in the market
by adding new items to her push cart such as plastic water jugs, plates, mugs and other daily usable
goods.
All told, Begum has received five loans from Spandana totaling Rs. 42,000. Every step of the way,
Spandana has been there to respond to the needs of Begum and her business, even providing an
interim supplemental loan when the expansion of her business required it. Begum now earns Rs.
12,000 a month between her two businesses. She is able to send all three of her children to school and
recently began purchasing gold on her eldest daughter's behalf for marriage purposes. Even after all
of her expenses, Begum now earns enough to save a portion of her daily income and currently has Rs.
20,000 in savings. These days, you can usually find Begum in the nearby market selling her wares. The
area around her pushcart is alive with activity and Begum herself beams with pride and happiness in
being able to provide a life for her children. In the hands of a loving mother, a Spandana loan can make
a child's future brighter.
K Lalitha
In recognition of their special status within the economics of a household, Spandana loans are
focused primarily on women. Nevertheless, a loan which benefits one member of the family will
assuredly benefit all members. In this way, a loan to a
mother is really a loan to the entire family.
Spandana acknowledges and values the
contributions of husbands to the welfare of their
households. Take Lalitha and her husband Ashok
for example. Their first Spandana loan of Rs. 7,000
was used to purchase a small marble polishing
machine that Ashok used to begin his own
marble polishing business. Prior to this, Ashok
was a daily wage laborer earning roughly Rs. 100
per day. Yet due to the vicissitudes of the local
labor market, Ashok was only able to work for 15
days in any given month. This monthly income of
Rs. 1,500 was not enough to support his wife and
their two infant children. The marble polishing
business allowed Ashok to properly control his
working schedule while at the same time
increasing his monthly income.
The success of his marble polishing business was
encouraging and the following year, Lalitha and
Ashok secured a second loan from Spandana
amounting to Rs. 8,000. This loan, together with
Ashok's earnings, was used to purchase a second, much larger marble polishing machine. With his
reputation as a capable marble polisher and his new industrial equipment, Ashok was able to link-up
with several building contractors in the surrounding area who were in need of his services. These
contractors now provide a steady stream of work and Ashok is currently able to earn Rs. 5,000 per
month from his business, an increase of over 200% from his pre-Spandana loan earnings.
Lalitha, seeing her husband's business grow and succeed and not content to sit idle while her husband
earned an income for the family, decided to take yet another loan from Spandana. This one, amounting
to Rs. 10,000, was used to open a small shop where she could sell snack items, eggs, soaps and
detergents. She also used her Spandana loan to purchase a refrigerator for the shop. This allowed her
to sell cold drinks, a major source of income for her business. As Lalitha's shop became more
successful, she sought out and received a fourth loan from Spandana for Rs. 15,000. This larger dose of
credit allowed Lalitha to drastically expand her stock and increase the range of goods that she sells in
her shop. She now sells everything from food and cleaning supplies to basic household goods and
books. She even used her loan to purchase a coin-operated STD phone stall, a valuable resource in her
community. As her business has expanded, she has seen her daily sales increase from Rs. 300 to Rs.
1,000. This wife and mother of two now seeks a fifth loan to expand her business even further. In the
hands of a dedicated husband and wife, a Spandana loan can benefit an entire family.
Malan Bee
When Bee's husband fell ill and was no longer able
to continue earning a living as a construction
worker, the primary responsibility for earning an
income for the family fell upon her. As a woman
with no prior working experience, the prospect
of making a living for her husband and four
children seemed bleak. But Bee is a resourceful
and enterprising woman, factors which would
bode well for the future of her family and her
community.
Bee had learned how to make incense sticks from
her neighbors. Realizing a business opportunity
in this newly acquired skill, she secured a loan
from Spandana for Rs. 8,000 in order to purchase
the raw materials necessary to manufacture
incense sticks. Her business quickly took off and
before long, Bee required a further loan of Rs.
10,000 in order to manufacture enough incense
t o m e e t t h e e v e r - g r o w i n g d e m a n d .
Manufacturing incense is an incredibly labor-
intensive process. Despite her constant efforts,
Bee was only able to produce and sell enough
Spandana Annual Report 2007-08 31
THE MANAGING DIRECTOR'S REPORT
incense to earn about Rs. 70 per day. In order to take her business to the next level, Bee would need
help.
She realized that if she could hire workers to assist her in the production of incense, she would be able
sell enough of her product to increase her daily earnings while at the same time being able to provide
a daily wage to her employees. With her third Spandana loan of Rs. 15,000, Bee purchased additional
supplies and hired three women to assist her in the production of incense. Her employees earn Rs. 10
for every kilogram of incense sticks that they manufacture. Most women are able to produce at least 6
kilograms of incense every day.
Despite this increased output, Bee was still unable to keep up with the demand for her incense.
Appreciating the need to expand her business further, Bee once again turned to Spandana and
received a fourth loan amounting to Rs. 15,000. She used these funds to purchase more raw materials
for manufacturing incense and hired additional employees. Today, Bee has 20 women working under
her making a daily wage through the production of incense. Even her two daughters are now involved
in the business. After deducting all of her business expenses (including raw materials and wages for
her 20 employees), Bee is able to earn Rs. 15,000 per month for her husband and 4 children. The family
lives together in a home that they own and she was even able to provide the funding necessary for her
son to lease his own auto so that he may work as an auto driver. Bee's entrepreneurial spirit, together
with support from Spandana, allowed her to maximize her potential and provide a living to dozens of
women. In the hands of one enterprising woman, a Spandana loan can empower a community.
Management Discussion And Analysis: The Managing Director's Report
Dear Stakeholders,
Spandana's tenth year was a milestone marked by resurgence and progress. After recovering from a
round of losses suffered last year as a result of the Krishna incident, the details of which have been
discussed in previous year's reports, Spandana successfully demonstrated the strength of our model
and the sustainability of our approach.
Without question this has been another extraordinary year for Spandana. In terms of geographical
outreach, the organization expanded into 4 new states and 37 new districts. Moreover, Spandana
opened an additional 140 branches while adding over 300,000 new clients. This remarkable growth
immediately stands out as one of the major achievements of the organization during the 2007-2008
fiscal year.
Indeed, the past year brought substantial diversification to our portfolio in terms of both
geographical focus and product range. In order to address challenges arising from market saturation
and portfolio concentration, Spandana continued to increase its presence in regions outside of
Andhra Pradesh. Whereas Andhra Pradesh comprised roughly 90% of Spandana's total portfolio at
the end of the 2006-2007 fiscal year, our expansion into new states and districts has diluted that
percentage to 75%. This attenuation in Andhra Pradesh was a direct result of our increased focus in
new regions. For example, our exposure in Karnataka was roughly doubled in the last year to
approximately 18% of our total portfolio. The 2007-2008 fiscal year also witnessed impressive gains in
Tamil Nadu, Maharashtra and Orissa. When expanding into these new regions, we sought established
markets where other microfinance organizations had already been operating successfully. We then
sent our most experienced staff into these additional sectors in order to bring their expertise to bear
in an unfamiliar market. Our success in these regions bears witness to their dedication and efforts.
In terms of our product range, our portfolio diversification was evidenced by the expansion of our
individual lending product. This was a product which arose from the felt needs of our clients, many of
whom articulated the need for a loan product that they could avail of without necessarily being part
of a group. Particularly, the individual loan is geared towards established clients who are ready to take
on larger doses of credit; thus acknowledging their status as strong, independent entrepreneurs.
Whereas this product comprised less than 4% of our total portfolio in the 2006-2007 fiscal year, the
individual loan now represents 13% of Spandana's total portfolio. It is also important to note the
introduction of new products during the past year, specifically the farm equipment loan which was
introduced last summer. Since then, roughly 1,000 tractors have been financed and this product
continues to expand and add diversity to our portfolio mix.
Spandana Annual Report 2007-08 31
THE MANAGING DIRECTOR'S REPORT
incense to earn about Rs. 70 per day. In order to take her business to the next level, Bee would need
help.
She realized that if she could hire workers to assist her in the production of incense, she would be able
sell enough of her product to increase her daily earnings while at the same time being able to provide
a daily wage to her employees. With her third Spandana loan of Rs. 15,000, Bee purchased additional
supplies and hired three women to assist her in the production of incense. Her employees earn Rs. 10
for every kilogram of incense sticks that they manufacture. Most women are able to produce at least 6
kilograms of incense every day.
Despite this increased output, Bee was still unable to keep up with the demand for her incense.
Appreciating the need to expand her business further, Bee once again turned to Spandana and
received a fourth loan amounting to Rs. 15,000. She used these funds to purchase more raw materials
for manufacturing incense and hired additional employees. Today, Bee has 20 women working under
her making a daily wage through the production of incense. Even her two daughters are now involved
in the business. After deducting all of her business expenses (including raw materials and wages for
her 20 employees), Bee is able to earn Rs. 15,000 per month for her husband and 4 children. The family
lives together in a home that they own and she was even able to provide the funding necessary for her
son to lease his own auto so that he may work as an auto driver. Bee's entrepreneurial spirit, together
with support from Spandana, allowed her to maximize her potential and provide a living to dozens of
women. In the hands of one enterprising woman, a Spandana loan can empower a community.
Management Discussion And Analysis: The Managing Director's Report
Dear Stakeholders,
Spandana's tenth year was a milestone marked by resurgence and progress. After recovering from a
round of losses suffered last year as a result of the Krishna incident, the details of which have been
discussed in previous year's reports, Spandana successfully demonstrated the strength of our model
and the sustainability of our approach.
Without question this has been another extraordinary year for Spandana. In terms of geographical
outreach, the organization expanded into 4 new states and 37 new districts. Moreover, Spandana
opened an additional 140 branches while adding over 300,000 new clients. This remarkable growth
immediately stands out as one of the major achievements of the organization during the 2007-2008
fiscal year.
Indeed, the past year brought substantial diversification to our portfolio in terms of both
geographical focus and product range. In order to address challenges arising from market saturation
and portfolio concentration, Spandana continued to increase its presence in regions outside of
Andhra Pradesh. Whereas Andhra Pradesh comprised roughly 90% of Spandana's total portfolio at
the end of the 2006-2007 fiscal year, our expansion into new states and districts has diluted that
percentage to 75%. This attenuation in Andhra Pradesh was a direct result of our increased focus in
new regions. For example, our exposure in Karnataka was roughly doubled in the last year to
approximately 18% of our total portfolio. The 2007-2008 fiscal year also witnessed impressive gains in
Tamil Nadu, Maharashtra and Orissa. When expanding into these new regions, we sought established
markets where other microfinance organizations had already been operating successfully. We then
sent our most experienced staff into these additional sectors in order to bring their expertise to bear
in an unfamiliar market. Our success in these regions bears witness to their dedication and efforts.
In terms of our product range, our portfolio diversification was evidenced by the expansion of our
individual lending product. This was a product which arose from the felt needs of our clients, many of
whom articulated the need for a loan product that they could avail of without necessarily being part
of a group. Particularly, the individual loan is geared towards established clients who are ready to take
on larger doses of credit; thus acknowledging their status as strong, independent entrepreneurs.
Whereas this product comprised less than 4% of our total portfolio in the 2006-2007 fiscal year, the
individual loan now represents 13% of Spandana's total portfolio. It is also important to note the
introduction of new products during the past year, specifically the farm equipment loan which was
introduced last summer. Since then, roughly 1,000 tractors have been financed and this product
continues to expand and add diversity to our portfolio mix.
Spandana Annual Report 2007-08 33
As Spandana is a client-focused organization, we have introduced several products to bring value and
service to our client's lives. For example, we have initiated a tie-up with Western Union and UAE
Exchange in order to offer remittance and money transfer services to our clients. We do this by
leveraging our large scale and personal reach in order to offer convenient door-step service through
our network of dedicated credit officers. Additionally, Spandana has partnered with Bajaj Allianz in
order to offer insurance coverage to all of our clients and their spouses. To date, this program has
already insured over two million lives.
The 2007-2008 fiscal year marked an exiting new chapter in Spandana's story as we received our first
round of equity financing from both JM Financial Trustee Company Pvt. Ltd and Lok Capital LLC. By
widening the ownership base of the organization, Spandana has been able to broaden the scope of
our services, improve risk taking ability, increase capital adequacy, enhance strategic thinking at the
top levels and build strong relationships with the mainstream.
In the years to come, Spandana will continue to redefine the scope of microfinance by identifying the
missing markets and reaching all segments that lack access to the formal financial market. This has the
triple benefit of financial inclusion, business growth and risk diversification. Spandana will
simultaneously focus on building senior management, improving governance of the board structure
and broadening Spandana's ownership base.
Going forward, Spandana will seek to expand into new regions while simultaneously developing new
products for existing clients and identifying new segments that are not currently being served.
However, this will not involve reducing services to any member. Instead, since Spandana is a high-
growth organization, our future expansion will be in segments in which Spandana has little or no
exposure at present. The success of the individual lending program, combined with the benefits it
brings in terms of portfolio diversification, will ensure that it becomes a mainstay of our product line.
Additionally, we will continue to expand the reach of our farm equipment loan product.
To ensure geographical diversification, Spandana will continue to focus much of its growth in areas
outside of Andhra Pradesh. The focus in the near future will be on seven neighbouring states:
Karnataka, Maharashtra, Orissa, Tamil Nadu, Madhya Pradesh, Chhattisgarh and Rajasthan. We are well
positioned to become the top service provider in Karnataka and we intend to increase outreach
exponentially in Maharashtra, Orissa, Tamil Nadu, Madhya Pradesh, Chhattisgarh and Rajasthan.
Spandana also seeks to diversify the clientele that it serves and the products that it offers. Part of this
diversification will involve expanding our services to men. Nevertheless, Spandana remains
committed to maintaining its focus on women, even as diversification takes place. As Spandana
evolves the focus on the future will be, as always, on low-income women. Presently, women comprise
97% of our borrowers.
Future Strategy and Focus
As a growing organization, we thoroughly understand the importance of technology, internal
controls and risk management and our focus in the coming year will be to strengthen these
departments in order to be able to sustain projected growth.
In sum, the 2007-2008 fiscal year can be thought of as a proving ground, not only for Spandana as an
organization but for the Indian microfinance sector as a whole. The events of Krishna raised serious
questions about the microfinance sector. Can microfinance institutions absorb losses? Can the sector
confront political instability? Is the market saturated? Will mainstream banks and investors flee at the
first sign of trouble? In each of these instances, Spandana offered resounding answers to the doubters
and proved to the skeptics once and for all that our approach is a valuable and sustainable one.
Ultimately, microfinance is a business predicated upon trust. Our clients must trust us to treat them
fairly while our lenders and investors must trust us to run a business that is sustainable and can
weather the political and financial storms that will invariably confront the industry. Spandana is proud
of our accomplishments over the past year and our resurgence is proof positive that microfinance is a
sustainable business model and an effective tool in the fight against poverty. We thank all of our
stakeholders for their trust and look forward to another successful year setting benchmarks in the
sector.
Sd/-
Padmaja Reddy
Managing Director
Conclusion
Spandana Annual Report 2007-08 33
As Spandana is a client-focused organization, we have introduced several products to bring value and
service to our client's lives. For example, we have initiated a tie-up with Western Union and UAE
Exchange in order to offer remittance and money transfer services to our clients. We do this by
leveraging our large scale and personal reach in order to offer convenient door-step service through
our network of dedicated credit officers. Additionally, Spandana has partnered with Bajaj Allianz in
order to offer insurance coverage to all of our clients and their spouses. To date, this program has
already insured over two million lives.
The 2007-2008 fiscal year marked an exiting new chapter in Spandana's story as we received our first
round of equity financing from both JM Financial Trustee Company Pvt. Ltd and Lok Capital LLC. By
widening the ownership base of the organization, Spandana has been able to broaden the scope of
our services, improve risk taking ability, increase capital adequacy, enhance strategic thinking at the
top levels and build strong relationships with the mainstream.
In the years to come, Spandana will continue to redefine the scope of microfinance by identifying the
missing markets and reaching all segments that lack access to the formal financial market. This has the
triple benefit of financial inclusion, business growth and risk diversification. Spandana will
simultaneously focus on building senior management, improving governance of the board structure
and broadening Spandana's ownership base.
Going forward, Spandana will seek to expand into new regions while simultaneously developing new
products for existing clients and identifying new segments that are not currently being served.
However, this will not involve reducing services to any member. Instead, since Spandana is a high-
growth organization, our future expansion will be in segments in which Spandana has little or no
exposure at present. The success of the individual lending program, combined with the benefits it
brings in terms of portfolio diversification, will ensure that it becomes a mainstay of our product line.
Additionally, we will continue to expand the reach of our farm equipment loan product.
To ensure geographical diversification, Spandana will continue to focus much of its growth in areas
outside of Andhra Pradesh. The focus in the near future will be on seven neighbouring states:
Karnataka, Maharashtra, Orissa, Tamil Nadu, Madhya Pradesh, Chhattisgarh and Rajasthan. We are well
positioned to become the top service provider in Karnataka and we intend to increase outreach
exponentially in Maharashtra, Orissa, Tamil Nadu, Madhya Pradesh, Chhattisgarh and Rajasthan.
Spandana also seeks to diversify the clientele that it serves and the products that it offers. Part of this
diversification will involve expanding our services to men. Nevertheless, Spandana remains
committed to maintaining its focus on women, even as diversification takes place. As Spandana
evolves the focus on the future will be, as always, on low-income women. Presently, women comprise
97% of our borrowers.
Future Strategy and Focus
As a growing organization, we thoroughly understand the importance of technology, internal
controls and risk management and our focus in the coming year will be to strengthen these
departments in order to be able to sustain projected growth.
In sum, the 2007-2008 fiscal year can be thought of as a proving ground, not only for Spandana as an
organization but for the Indian microfinance sector as a whole. The events of Krishna raised serious
questions about the microfinance sector. Can microfinance institutions absorb losses? Can the sector
confront political instability? Is the market saturated? Will mainstream banks and investors flee at the
first sign of trouble? In each of these instances, Spandana offered resounding answers to the doubters
and proved to the skeptics once and for all that our approach is a valuable and sustainable one.
Ultimately, microfinance is a business predicated upon trust. Our clients must trust us to treat them
fairly while our lenders and investors must trust us to run a business that is sustainable and can
weather the political and financial storms that will invariably confront the industry. Spandana is proud
of our accomplishments over the past year and our resurgence is proof positive that microfinance is a
sustainable business model and an effective tool in the fight against poverty. We thank all of our
stakeholders for their trust and look forward to another successful year setting benchmarks in the
sector.
Sd/-
Padmaja Reddy
Managing Director
Conclusion
Spandana Annual Report 2007-08 35
HUMAN RESOURCES
DEVELOPMENT REPORT
Spandana's position as a market leader in the Indian microfinance sector is a testament to the efforts
of our staff. The organization lays great emphasis on managing them efficiently and effectively. Our
credit assistants, branch managers and mid-level hierarchy of regional and divisional managers are
together responsible for the incredible growth achieved by Spandana during the life of the
organization. They have ensured that our unprecedented growth has not come at the expense of
portfolio quality. Our staff are imbued with the company values upon joining the organization and
this is reflected in everything that they do. Even as our staff has grown to over 4,000 in number, we
have not allowed any dilution in the messages sent out to our personnel during training and in the
course of their induction into operations.
The human resources functions are carried out by a separate department within the organization. The
HR Department has been established with a mandate for undertaking the critical functions required
for good human resource management, namely: Recruitment, Motivation, Capacity Building,
Performance Appraisal and Incentives. Clear policies and procedures have been laid out in the
organization's HR manual which draws upon the experiences of well managed organizations across
sectors as well as Spandana's own insights.
The hallmarks of Spandana's HR policy are clear assignment of responsibility, accountability,
continuous skill development, competitive salaries and maintaining the utmost levels of integrity. Our
staff are provided with properly defined performance targets which is appraised properly and
incentivized with attractive benefits. Spandana provides ample potential for growth within the
organization with the possibility of rising in a short time from the position of credit officer to branch
manager, regional manager, divisional manager and beyond. We have a passionate and dedicated
staff as a result.
We also have a culture of transparency and a democratic feedback system which allows all personnel
to directly speak with management. We collect paper based feedback every month on all issues, from
suggested changes in operations to any personal demands that staff may have. This reinforces their
sense of ownership of our operations and thereby their commitment to the organization. Our very low
staff turnover numbers are a testament to this fact.
As we have achieved ever greater scale, we are confident that we have successfully surmounted the
obstacles of transmitting the values and strengths of our organizational culture to an ever increasing
staff. At its core, Spandana is an organization that arose from an expressed need. As a client-focused
organization, Spandana attributes its success to the ability of its staff to learn about the needs of our
borrowers and respond to them. Our success over the years and continued existence in the future is
dependent on the ability of our staff to constantly learn and grow along with our clients.
Spandana Annual Report 2007-08 35
HUMAN RESOURCES
DEVELOPMENT REPORT
Spandana's position as a market leader in the Indian microfinance sector is a testament to the efforts
of our staff. The organization lays great emphasis on managing them efficiently and effectively. Our
credit assistants, branch managers and mid-level hierarchy of regional and divisional managers are
together responsible for the incredible growth achieved by Spandana during the life of the
organization. They have ensured that our unprecedented growth has not come at the expense of
portfolio quality. Our staff are imbued with the company values upon joining the organization and
this is reflected in everything that they do. Even as our staff has grown to over 4,000 in number, we
have not allowed any dilution in the messages sent out to our personnel during training and in the
course of their induction into operations.
The human resources functions are carried out by a separate department within the organization. The
HR Department has been established with a mandate for undertaking the critical functions required
for good human resource management, namely: Recruitment, Motivation, Capacity Building,
Performance Appraisal and Incentives. Clear policies and procedures have been laid out in the
organization's HR manual which draws upon the experiences of well managed organizations across
sectors as well as Spandana's own insights.
The hallmarks of Spandana's HR policy are clear assignment of responsibility, accountability,
continuous skill development, competitive salaries and maintaining the utmost levels of integrity. Our
staff are provided with properly defined performance targets which is appraised properly and
incentivized with attractive benefits. Spandana provides ample potential for growth within the
organization with the possibility of rising in a short time from the position of credit officer to branch
manager, regional manager, divisional manager and beyond. We have a passionate and dedicated
staff as a result.
We also have a culture of transparency and a democratic feedback system which allows all personnel
to directly speak with management. We collect paper based feedback every month on all issues, from
suggested changes in operations to any personal demands that staff may have. This reinforces their
sense of ownership of our operations and thereby their commitment to the organization. Our very low
staff turnover numbers are a testament to this fact.
As we have achieved ever greater scale, we are confident that we have successfully surmounted the
obstacles of transmitting the values and strengths of our organizational culture to an ever increasing
staff. At its core, Spandana is an organization that arose from an expressed need. As a client-focused
organization, Spandana attributes its success to the ability of its staff to learn about the needs of our
borrowers and respond to them. Our success over the years and continued existence in the future is
dependent on the ability of our staff to constantly learn and grow along with our clients.
SPANDANA SPHOORTY FINANCIAL LIMITED
th5 Annual Report 2007-2008
Board of Directors
Ms. Padmaja Reddy Gangireddy Managing Director
Mr. Lall Rajiv Behari Director
Mr. Dilip Kothari Director
Mr. Rahul Gupta Independent Director
Mr. Harinder Sawhney Director
Mr. M.V. Narendra Prasad Whole Time Director
Mr. G. Venkateswara Reddy Independent Director
Mr. Y.S.N. Murty Independent Director
Mr. R.M Nair SIDBI Nominee Director
Mr. T. Krishna Prasad ICICI Nominee Director
Ms. Malleswari. G Company Secretary
Auditors M/s. BSR & Companynd5, Merchant, Towers, 2 Floor
Road No. 4, Banjara Hills
Hyderabad - 500 034.
Registered & Administrative Office Plot No: 79, Care Crystal
Vinayaknagar Colony,
Gachibolwli, Hyderabad - 500 032.
Phone: 040 - 4438 6648
Fax: 040 - 4438 6666
E-mail: [email protected]
Bo
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Spandana Annual Report 2007-08 37
SPANDANA SPHOORTY FINANCIAL LIMITED
th5 Annual Report 2007-2008
Board of Directors
Ms. Padmaja Reddy Gangireddy Managing Director
Mr. Lall Rajiv Behari Director
Mr. Dilip Kothari Director
Mr. Rahul Gupta Independent Director
Mr. Harinder Sawhney Director
Mr. M.V. Narendra Prasad Whole Time Director
Mr. G. Venkateswara Reddy Independent Director
Mr. Y.S.N. Murty Independent Director
Mr. R.M Nair SIDBI Nominee Director
Mr. T. Krishna Prasad ICICI Nominee Director
Ms. Malleswari. G Company Secretary
Auditors M/s. BSR & Companynd5, Merchant, Towers, 2 Floor
Road No. 4, Banjara Hills
Hyderabad - 500 034.
Registered & Administrative Office Plot No: 79, Care Crystal
Vinayaknagar Colony,
Gachibolwli, Hyderabad - 500 032.
Phone: 040 - 4438 6648
Fax: 040 - 4438 6666
E-mail: [email protected]
Bo
ard
of
Dir
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ors
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Spandana Annual Report 2007-08 37
FINANCIAL STATUS
Bankers
1. ICICI Bank Ltd.
2. HDFC Bank Ltd.
3. Indian Overseas Bank.
4. ING Vysya Bank.
5. Small Industries Development Bank of India (SIDBI).
6. Industrial Development Bank of India (IDBI).
7. AXIS Bank Limited.
8. The Hongkong Shanghai Banking Corporation Ltd.
9. BNP Paribas.
10. Yes Bank Limited
11. Centurion Bank Of Punjab
12. Development Credit Bank
13. Standard Chartered Bank
14. Punjab&Sind Bank
15. Development Credit Bank Limited
16. Karnataka Bank Limited
17. The Bank Of Rajasthan Limited
18. Karur Vysya Bank Limited
19. CITI Bank Limited
SPANDANA SPHOORTY FINANCIAL LIMITED(Formerly Spandana Sphoorty Innovative Financial Services Limited)
Registered office: Plot No: 79, Care Crystal
Vinayaka Nagar Colony, Gachibowli, Hyderabad. Pin: 500 032.
Notice is hereby given that the Fifth Annual General Meeting of the Company will be held at
Registered Office: Plot No: 79, Care Crystal, Vinayaknagar Colony, Gachibolwli, Hyderabad 500 032 on
Friday, 1st August 2008, at 11:30 A.M. to transact the following business:
Ordinary Business:
1. To receive, consider and adopt the Balance Sheet as at March 31, 2008 and the Profit and Loss
account of the Company for the year ended on that date and the Report of the Directors and the
Auditors thereon.
2. To appoint a Director in the place of Mr. M.V.Narendra Prasad, who retires by rotation and being
eligible for re-appointment.
3. To appoint a Director in the place of Mr. G.Venkateswara Reddy, who retires by rotation and being
eligible for re-appointment.
4. To appoint a Director in the place of Mr. Y.S.N.Murthy, who retires by rotation and being eligible for
re-appointment.
5. To appoint auditors to hold office from the conclusion of this Annual General Meeting until the
conclusion of the next Annual General Meeting and to fix their remuneration, and to pass the
following resolution thereof:
“RESOLVED THAT, M/s. B.S.R & Company Chartered Accountants, be and are hereby appointed as the
Statutory Auditors of the Company to hold office from the conclusion of this Annual General Meeting
to the conclusion of the next Annual General Meeting, on such remuneration as mutually agreed
upon between the Board of Directors and the Auditors.”
Special Business:
6. To consider and, if thought fit, to pass with or without modifications, the following as an Ordinary
Resolution:
“RESOLVED THAT, Mr. Rahul Gupta, who was appointed as additional director of the Company
and who holds office until the date of the Annual General Meeting, pursuant to Section 260 of the
Companies Act, 1956, and Articles of Association of the company and in respect of whom the
company has received a notice from a member under Section 257 of the Companies Act, 1956,
proposing his candidature, be and is hereby appointed as a Director of the company, liable to
retire by rotation.”
NOTICE
Spandana Annual Report 2007-08 39
FINANCIAL STATUS
Bankers
1. ICICI Bank Ltd.
2. HDFC Bank Ltd.
3. Indian Overseas Bank.
4. ING Vysya Bank.
5. Small Industries Development Bank of India (SIDBI).
6. Industrial Development Bank of India (IDBI).
7. AXIS Bank Limited.
8. The Hongkong Shanghai Banking Corporation Ltd.
9. BNP Paribas.
10. Yes Bank Limited
11. Centurion Bank Of Punjab
12. Development Credit Bank
13. Standard Chartered Bank
14. Punjab&Sind Bank
15. Development Credit Bank Limited
16. Karnataka Bank Limited
17. The Bank Of Rajasthan Limited
18. Karur Vysya Bank Limited
19. CITI Bank Limited
SPANDANA SPHOORTY FINANCIAL LIMITED(Formerly Spandana Sphoorty Innovative Financial Services Limited)
Registered office: Plot No: 79, Care Crystal
Vinayaka Nagar Colony, Gachibowli, Hyderabad. Pin: 500 032.
Notice is hereby given that the Fifth Annual General Meeting of the Company will be held at
Registered Office: Plot No: 79, Care Crystal, Vinayaknagar Colony, Gachibolwli, Hyderabad 500 032 on
Friday, 1st August 2008, at 11:30 A.M. to transact the following business:
Ordinary Business:
1. To receive, consider and adopt the Balance Sheet as at March 31, 2008 and the Profit and Loss
account of the Company for the year ended on that date and the Report of the Directors and the
Auditors thereon.
2. To appoint a Director in the place of Mr. M.V.Narendra Prasad, who retires by rotation and being
eligible for re-appointment.
3. To appoint a Director in the place of Mr. G.Venkateswara Reddy, who retires by rotation and being
eligible for re-appointment.
4. To appoint a Director in the place of Mr. Y.S.N.Murthy, who retires by rotation and being eligible for
re-appointment.
5. To appoint auditors to hold office from the conclusion of this Annual General Meeting until the
conclusion of the next Annual General Meeting and to fix their remuneration, and to pass the
following resolution thereof:
“RESOLVED THAT, M/s. B.S.R & Company Chartered Accountants, be and are hereby appointed as the
Statutory Auditors of the Company to hold office from the conclusion of this Annual General Meeting
to the conclusion of the next Annual General Meeting, on such remuneration as mutually agreed
upon between the Board of Directors and the Auditors.”
Special Business:
6. To consider and, if thought fit, to pass with or without modifications, the following as an Ordinary
Resolution:
“RESOLVED THAT, Mr. Rahul Gupta, who was appointed as additional director of the Company
and who holds office until the date of the Annual General Meeting, pursuant to Section 260 of the
Companies Act, 1956, and Articles of Association of the company and in respect of whom the
company has received a notice from a member under Section 257 of the Companies Act, 1956,
proposing his candidature, be and is hereby appointed as a Director of the company, liable to
retire by rotation.”
NOTICE
Spandana Annual Report 2007-08 39
7. To consider and, if thought fit, to pass with or without modifications, the following resolution as an
Ordinary Resolution:
“RESOLVED THAT, pursuant to the provisions of Sections 198, 269, 309 and 310 read with
Schedule XIII of the Companies Act, 1956 and other applicable provisions, if any of the said Act,
including any statutory modification(s) or re-enactment or any notification which the Central
Government may issue from time to time thereof and such other approvals as may be required in
this behalf, the approval of members be and is hereby accorded for the re-appointment of Mr. M.
Venkata Narendra Prasad as Wholetime Director of the Company w.e.f 1st August 2008 till the
ensuing Annual General Meeting as per the following remuneration:
S.No. Particulars Amount (Rs.)
1 Gross Remuneration 16,80,000 p.a
Bonus: As per the rules of the Company.
Other benefits
Mr. M. Venkata Narendra Prasad shall also be entitled to the following benefits:
1. Earned leave: As per the rules of the Company.
2. Company's Contribution to provident fund as per the rules of the Company.
3. Gratuity: As per the rules of the Company.
4. Encashment of leave: As per the rules of the Company.
5. Company car and telephone: Use of the Company's car and telephone at residence for official
purposes, as per the rules of the Company.
The aggregate remuneration inclusive of salary and other benefits payable to Sri M. Venkata
Narendra Prasad, shall always be subject to the overall ceilings laid down in Sections 198 and
309 and other applicable provisions of the Companies Act, 1956.”
8. To consider and, if thought fit, to pass with or without modifications, the following resolution as an
Ordinary Resolution:
“RESOLVED THAT existing Clause V.a of the Memorandum of Association of the Company as to
Share Capital be and is hereby deleted and in its place the following Clause V. a. be substituted:
“The Authorised share capital of the Company is Rs.50,00,00,000 (Rupees Fifty crore only) divided
into 1,64,83,000 (one crore sixty four lacs eighty three thousand only) equity shares of Rs.10
(rupees ten only) each and 3,35,17,000 (Three crores thirty five lacs seventeen thousand only)
compulsorily convertible preference shares of Rs.10/- (Rupees Ten only) each with the power to
increase and reduce the capital of the Company and to divide the shares in the capital for the time
being into several classes and attach thereto respectively, such preferential, deferred, qualified or
special rights, privileges or conditions as may be determined by or in accordance with the Articles
of Association of the Company for the time being and to vary, modify or abrogate any such rights,
privileges or conditions in such manner as may be permitted by the Companies Act, 1956, or by
the Articles of Association of the Company for the time being.”
9. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as a
Special Resolution:
“RESOLVED THAT pursuant to the provisions of Section 31 and other applicable provisions of the
Companies Act, 1956, the Articles of Association of the Company, be and is hereby altered by
deleting the existing Article 3.2 and substituting in its place and instead thereof, the following
new Article 3.2:
“The Authorised Share Capital of the Company is Rs.50,00,00,000 (rupees fifty crore only) divided
into 1,64,83,000 (one crore sixty four lacs eighty three thousand only) equity shares of Rs.10/-
(rupees ten only) each and 3,35,17,000 (three crores thirty five lacs seventeen thousand only)
compulsorily convertible preference shares of Rs.10/- (rupees ten only) each with powers to
increase or reduce the same in accordance with the provisions of the Companies Act, 1956”.
10. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as
an Ordinary Resolution:
“RESOLVED THAT pursuant to the provisions of Section 293 (1)(a) and other applicable
provisions, if any, of the Companies Act, 1956, the Company hereby accords its sanctions and
authorises the Board of Directors of the Company to mortgage and/or charge, in addition to the
mortgages/charges created/to be created by the Company, in such form and manner and with
such ranking and at such time and on such terms as the Board may determine, on all or any of the
movable and/or immovable properties of the Company, both present and future and/or the
whole or any part of the undertaking(s) of the Company together with the power to take over the
management of the business and concern of the Company in certain events of default, in favour of
the Lenders, Agents and Trustees for securing the borrowings of the Company availed/to be
availed by way of Loans (in foreign currency and/or rupee currency) and Securities (comprising
fully/partly convertible Debentures and/or Non-convertible Debentures with or without
detachable or non-detachable Warrants and/or Secured Premium Notes or other debt
instruments),issued or to be issued by the Company and authorizes the board of Directors make
buyout from time to time, subject to the limit upto Rs.2000crores (Rupees Two Thousand Crores
only) together with interest, additional interest, compound interest in case of default,
accumulated interest, liquidated damages, commitment charger, premium on prepayment,
remuneration of the Agents/Trustees, premium (if any) on redemption, all other costs, charges and
expenses and all other moneys payable by the Company in terms of the Loan Agreements/Heads
of Agreements, Debenture Trust Deeds or any other Documents entered into/to be entered into
between the Company and the Lenders/Agents/Trustees in respect of the said loans/
borrowings/debentures and containing such specific terms and conditions and covenants in
respect of enforcement of security as may be stipulated in that behalf and agreed to between the
Board and the Lenders/Agents/Trustees.”
RESOLVED FURTHER THAT for the purpose of giving effect to this resolution, the Board be and is
hereby authorised to finalise, settle and execute such documents/ deeds/ writings/ papers/
agreements as may be required and to do all such acts, deeds, matters and things, as it may in its
absolute discretion deem necessary, proper or desirable and to settle any question, difficulty or
doubt that may arise in regard to creating mortgages/charges as aforesaid.”
Spandana Annual Report 2007-08 41
7. To consider and, if thought fit, to pass with or without modifications, the following resolution as an
Ordinary Resolution:
“RESOLVED THAT, pursuant to the provisions of Sections 198, 269, 309 and 310 read with
Schedule XIII of the Companies Act, 1956 and other applicable provisions, if any of the said Act,
including any statutory modification(s) or re-enactment or any notification which the Central
Government may issue from time to time thereof and such other approvals as may be required in
this behalf, the approval of members be and is hereby accorded for the re-appointment of Mr. M.
Venkata Narendra Prasad as Wholetime Director of the Company w.e.f 1st August 2008 till the
ensuing Annual General Meeting as per the following remuneration:
S.No. Particulars Amount (Rs.)
1 Gross Remuneration 16,80,000 p.a
Bonus: As per the rules of the Company.
Other benefits
Mr. M. Venkata Narendra Prasad shall also be entitled to the following benefits:
1. Earned leave: As per the rules of the Company.
2. Company's Contribution to provident fund as per the rules of the Company.
3. Gratuity: As per the rules of the Company.
4. Encashment of leave: As per the rules of the Company.
5. Company car and telephone: Use of the Company's car and telephone at residence for official
purposes, as per the rules of the Company.
The aggregate remuneration inclusive of salary and other benefits payable to Sri M. Venkata
Narendra Prasad, shall always be subject to the overall ceilings laid down in Sections 198 and
309 and other applicable provisions of the Companies Act, 1956.”
8. To consider and, if thought fit, to pass with or without modifications, the following resolution as an
Ordinary Resolution:
“RESOLVED THAT existing Clause V.a of the Memorandum of Association of the Company as to
Share Capital be and is hereby deleted and in its place the following Clause V. a. be substituted:
“The Authorised share capital of the Company is Rs.50,00,00,000 (Rupees Fifty crore only) divided
into 1,64,83,000 (one crore sixty four lacs eighty three thousand only) equity shares of Rs.10
(rupees ten only) each and 3,35,17,000 (Three crores thirty five lacs seventeen thousand only)
compulsorily convertible preference shares of Rs.10/- (Rupees Ten only) each with the power to
increase and reduce the capital of the Company and to divide the shares in the capital for the time
being into several classes and attach thereto respectively, such preferential, deferred, qualified or
special rights, privileges or conditions as may be determined by or in accordance with the Articles
of Association of the Company for the time being and to vary, modify or abrogate any such rights,
privileges or conditions in such manner as may be permitted by the Companies Act, 1956, or by
the Articles of Association of the Company for the time being.”
9. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as a
Special Resolution:
“RESOLVED THAT pursuant to the provisions of Section 31 and other applicable provisions of the
Companies Act, 1956, the Articles of Association of the Company, be and is hereby altered by
deleting the existing Article 3.2 and substituting in its place and instead thereof, the following
new Article 3.2:
“The Authorised Share Capital of the Company is Rs.50,00,00,000 (rupees fifty crore only) divided
into 1,64,83,000 (one crore sixty four lacs eighty three thousand only) equity shares of Rs.10/-
(rupees ten only) each and 3,35,17,000 (three crores thirty five lacs seventeen thousand only)
compulsorily convertible preference shares of Rs.10/- (rupees ten only) each with powers to
increase or reduce the same in accordance with the provisions of the Companies Act, 1956”.
10. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as
an Ordinary Resolution:
“RESOLVED THAT pursuant to the provisions of Section 293 (1)(a) and other applicable
provisions, if any, of the Companies Act, 1956, the Company hereby accords its sanctions and
authorises the Board of Directors of the Company to mortgage and/or charge, in addition to the
mortgages/charges created/to be created by the Company, in such form and manner and with
such ranking and at such time and on such terms as the Board may determine, on all or any of the
movable and/or immovable properties of the Company, both present and future and/or the
whole or any part of the undertaking(s) of the Company together with the power to take over the
management of the business and concern of the Company in certain events of default, in favour of
the Lenders, Agents and Trustees for securing the borrowings of the Company availed/to be
availed by way of Loans (in foreign currency and/or rupee currency) and Securities (comprising
fully/partly convertible Debentures and/or Non-convertible Debentures with or without
detachable or non-detachable Warrants and/or Secured Premium Notes or other debt
instruments),issued or to be issued by the Company and authorizes the board of Directors make
buyout from time to time, subject to the limit upto Rs.2000crores (Rupees Two Thousand Crores
only) together with interest, additional interest, compound interest in case of default,
accumulated interest, liquidated damages, commitment charger, premium on prepayment,
remuneration of the Agents/Trustees, premium (if any) on redemption, all other costs, charges and
expenses and all other moneys payable by the Company in terms of the Loan Agreements/Heads
of Agreements, Debenture Trust Deeds or any other Documents entered into/to be entered into
between the Company and the Lenders/Agents/Trustees in respect of the said loans/
borrowings/debentures and containing such specific terms and conditions and covenants in
respect of enforcement of security as may be stipulated in that behalf and agreed to between the
Board and the Lenders/Agents/Trustees.”
RESOLVED FURTHER THAT for the purpose of giving effect to this resolution, the Board be and is
hereby authorised to finalise, settle and execute such documents/ deeds/ writings/ papers/
agreements as may be required and to do all such acts, deeds, matters and things, as it may in its
absolute discretion deem necessary, proper or desirable and to settle any question, difficulty or
doubt that may arise in regard to creating mortgages/charges as aforesaid.”
Spandana Annual Report 2007-08 41
11. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as a
Special Resolution:
“RESOLVED THAT pursuant to the provisions of Sections 198, 269, 309 and 310 read with
Schedule XIII of the Companies Act, 1956 and other applicable provisions, if any of the said Act,
including any statutory modification(s) or re-enactment or any notification which the Central
Government may issue from time to time thereof and such other approvals as may be required in
this behalf, the approval of members be and is hereby accorded for the re-appointment of Mrs.
G.Padmaja Reddy as Managing Director of the Company with effect from 19th April 2008 to 18th
April 2013 on the following remuneration:
S.No. Particulars Amount (Rs.)
1. Gross Remuneration 72,00,000 p.a.
Bonus: As per the rules of the Company
Other benefits:
Mrs. Padmaja Reddy G. shall also be entitled to the following benefits:
1. Earned leave : As per the rules of the Company.
2. Company's Contribution to provident fund as per the rules of the Company.
3. Gratuity: As per the rules of the Company.
4. Encashment of leave: As per the rules of the Company.
5. Company car and telephone: Use of the Company's car and telephone at residence for official
purposes, as per the rules of the Company.
The aggregate remuneration inclusive of salary and other benefits payable to Mrs. Padmaja Reddy
Gangireddy, shall always be subject to the overall ceilings laid down in Sections 198 and 309 and
other applicable provisions of the Companies Act, 1956.
For Spandana Sphoorty Financial Limited
Date : 02-07-2008 Sd/-
Place: Hyderabad. Malleswari.G
Company Secretary
Notes:
1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of himself and a proxy need not be a member.
2. The meeting has been called in terms of section 171 of the Companies Act, 1956.
3. The relevant explanatory statement pursuant to the provisions of section 173(2) of the Companies Act, 1956 is annexed hereto.
4. Members are requested to affix their signature at the space provided on the Attendance Slip annexed to the Proxy Form and hand over the slip at the entrance to the place of the Meeting.
5. The Shares of the Company are eligible for Dematerialization. On Circular No: NSDLPI/2008/1396 dated 1st July 2008 the ISIN: INE572J01011 was activated. Any shareholder interested to Dematerialize their shares they can approach the nearest Depository Participant.
6. The registered office of the Company was Changed from 7-1-19/5, Jyothi Bhopal Apartments, Opp: Country Club Road, Begumpet, Hyderabad - 500 016 to Plot No: 79, Care Crystal, Vinayaknagar Colony, Gachibowli, Hyderabad 500 032.
7. Members are requested to communicate their change of address, addressing to Company Secretary, Plot No: 79, Care Crystal, Vinayaknagar Colony, opp: Indiranagar Bus stop, Gachibowli, Hyderabad 500 032.
Spandana Annual Report 2007-08 43
11. To consider and, if thought fit, to pass, with or without modification(s), the following resolution as a
Special Resolution:
“RESOLVED THAT pursuant to the provisions of Sections 198, 269, 309 and 310 read with
Schedule XIII of the Companies Act, 1956 and other applicable provisions, if any of the said Act,
including any statutory modification(s) or re-enactment or any notification which the Central
Government may issue from time to time thereof and such other approvals as may be required in
this behalf, the approval of members be and is hereby accorded for the re-appointment of Mrs.
G.Padmaja Reddy as Managing Director of the Company with effect from 19th April 2008 to 18th
April 2013 on the following remuneration:
S.No. Particulars Amount (Rs.)
1. Gross Remuneration 72,00,000 p.a.
Bonus: As per the rules of the Company
Other benefits:
Mrs. Padmaja Reddy G. shall also be entitled to the following benefits:
1. Earned leave : As per the rules of the Company.
2. Company's Contribution to provident fund as per the rules of the Company.
3. Gratuity: As per the rules of the Company.
4. Encashment of leave: As per the rules of the Company.
5. Company car and telephone: Use of the Company's car and telephone at residence for official
purposes, as per the rules of the Company.
The aggregate remuneration inclusive of salary and other benefits payable to Mrs. Padmaja Reddy
Gangireddy, shall always be subject to the overall ceilings laid down in Sections 198 and 309 and
other applicable provisions of the Companies Act, 1956.
For Spandana Sphoorty Financial Limited
Date : 02-07-2008 Sd/-
Place: Hyderabad. Malleswari.G
Company Secretary
Notes:
1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend and vote instead of himself and a proxy need not be a member.
2. The meeting has been called in terms of section 171 of the Companies Act, 1956.
3. The relevant explanatory statement pursuant to the provisions of section 173(2) of the Companies Act, 1956 is annexed hereto.
4. Members are requested to affix their signature at the space provided on the Attendance Slip annexed to the Proxy Form and hand over the slip at the entrance to the place of the Meeting.
5. The Shares of the Company are eligible for Dematerialization. On Circular No: NSDLPI/2008/1396 dated 1st July 2008 the ISIN: INE572J01011 was activated. Any shareholder interested to Dematerialize their shares they can approach the nearest Depository Participant.
6. The registered office of the Company was Changed from 7-1-19/5, Jyothi Bhopal Apartments, Opp: Country Club Road, Begumpet, Hyderabad - 500 016 to Plot No: 79, Care Crystal, Vinayaknagar Colony, Gachibowli, Hyderabad 500 032.
7. Members are requested to communicate their change of address, addressing to Company Secretary, Plot No: 79, Care Crystal, Vinayaknagar Colony, opp: Indiranagar Bus stop, Gachibowli, Hyderabad 500 032.
Spandana Annual Report 2007-08 43
Extract from Clause V (a) at present
The Authorised Share Capital of the
Company is Rs.50,00,00,000 (Rupees Fifty
crore only) divided into 1,00,00,000 (One
crore only) Equity Shares of Rs.10 (Rupees
Ten only) each and 4,00,00,000 (Four crore
o n l y ) C o m p u l s o r i l y C o nv e r t i b l e
Preference Shares of Rs.10(Rupees Ten
only) each with power to increase or
reduce the share capital of the Company
and to divide the shares in the capital for
the time being into several classes and to
attach thereto respectively preferential,
cumulative convertible preference,
guaranteed, qualified or special rights,
privileges or conditions as may be
determined by or in accordance with the
Articles of Association of the Company
and to vary, modify, amalgamate or
abrogate such rights, privileges or
conditions in such manner as may for the
time being be provided by the Articles of
Association.
With the proposed amendment
The Authorised Share Capital of the
Company is Rs.50,00,00,000 (Rupees Fifty
crore only) divided into 1,64,83,000 (One
crore sixty four lacs eighty three thousand
only) Equity Shares of Rs.10/- (Rupees Ten
only) each and 3,35,17,000(Three crore
Thirty Five Lac Seventeen Thousand only)
Compulsorily Convertible Preference
Shares of Rs.10/- (Rupees Ten only) each
with power to increase or reduce the
share capital of the Company and to
divide the shares in the capital for the time
being into several classes and to attach
thereto respectively preferential ,
cumulative convertible preference,
guaranteed, qualified or special rights,
privileges or conditions as may be
determined by or in accordance with the
Articles of Association of the Company
and to vary, modify, amalgamate or
abrogate such rights, privileges or
conditions in such manner as may for the
time being be provided by the Articles of
Association.
The relevant Article 3.1 as at present and with the proposed amendment is given below for ready reference of the Members:
“3.1 The Authorised Share Capital of the
Company is Rs.50,00,00,000 (rupees Fifty
crore only) divided into 1,00,00,000 (One
crore only) Equity Shares of Rs.10 (Rupees
Ten only) each and 4,00,00,000 (Four crore
o n l y ) C o m p u l s o r i l y C o n v e r t i b l e
Preference Shares of Rs.10(Rupees Ten
only) each with powers to increase or
reduce the same in accordance with the
provisions of the Companies Act, 1956.
3.1 The Authorised Share Capital of the
Company is Rs.50,00,00,000 (Rupees Fifty
crore only) divided into 1,64,83,000 (One
crore Sixty Four Lac Eighty Three
Thousand only) Equity Shares of Rs.10
(Rupees Ten only) each and 3,35,17,000
(Three crore Thirty Five Lacs Seventeen
Thousand only)Compulsorily Convertible
Preference Shares of Rs.10 (Rupees Ten
only) each with powers to increase or
reduce the same in accordance with the
provisions of the Companies Act, 1956.
Present Article Proposed Article
Explanatory Statement under Section 173(2) of the Companies Act, 1956
Item 6
Mr. Rahul Gupta, was appointed as an Additional Director of the Company pursuant to Section
260 of the Companies Act 1956 w.e.f 29th January, 2008 and holds office upto the date of this
Annual General Meeting . The Company has received a notice along with requisite fee from a
member under Section 257 of the Companies Act, 1956, proposing his candidature as a Director of
the Company. Brief profile of Mr.Rahul Gupta is as follows:-
He is a chief operating officer and chief financial officer of Citibank Global Consumer Group,
Singapore. He has three decades of experience in several banking sectors at different positions
globally. He did his masters in Business Administration at University of South California, Los
Angeles, USA and Bachelor of Engineering in electronics at Birla Institute Technology & Science.
The Board recommends the Resolution for approval of members.
None of the other Directors other than Sri.Rahul Gupta is are concerned or interested in the
proposed Resolution.
Item 7
Due to increase of volume of operations in the accounts and financial areas, the Board of Directors
decided to appoint M. Venkata Narendra Prasad as Whole Time Director of the Company with the
said remuneration package with effect from 28th July 2008. Sri M. Venkata Narendra Prasad has
the experience of 7 years in the areas of Accounts, Finance and MIS.
The Board recommends the above resolution for the approval of the members as an an ordinary
resolution.
None of the Directors of the company other than Mr. M. Venkata Narendra Prasad are interested or
concerned in the resolution.
Item No.'s 8 & 9
At present, the authorised capital of the Company is Rs. 50 crores as set out in Clause V of the
Memorandum of Association of the Company divided in to 1 crore equity shares of Rs. 10/- each
and four crores compulsorily convertible preference Shares of Rs. 10/- each aggregating fifty
crores. Now, the Company is planning to convert the compulsorily convertible preference Shares
into equity shares.
Keeping in view of the above, it is proposed to change the authorized capital clause as follows:
The relevant extracts from Clause V at present vis-a-vis the proposed amendment are given below
for ready reference of the Members:
Spandana Annual Report 2007-08 45
Extract from Clause V (a) at present
The Authorised Share Capital of the
Company is Rs.50,00,00,000 (Rupees Fifty
crore only) divided into 1,00,00,000 (One
crore only) Equity Shares of Rs.10 (Rupees
Ten only) each and 4,00,00,000 (Four crore
o n l y ) C o m p u l s o r i l y C o nv e r t i b l e
Preference Shares of Rs.10(Rupees Ten
only) each with power to increase or
reduce the share capital of the Company
and to divide the shares in the capital for
the time being into several classes and to
attach thereto respectively preferential,
cumulative convertible preference,
guaranteed, qualified or special rights,
privileges or conditions as may be
determined by or in accordance with the
Articles of Association of the Company
and to vary, modify, amalgamate or
abrogate such rights, privileges or
conditions in such manner as may for the
time being be provided by the Articles of
Association.
With the proposed amendment
The Authorised Share Capital of the
Company is Rs.50,00,00,000 (Rupees Fifty
crore only) divided into 1,64,83,000 (One
crore sixty four lacs eighty three thousand
only) Equity Shares of Rs.10/- (Rupees Ten
only) each and 3,35,17,000(Three crore
Thirty Five Lac Seventeen Thousand only)
Compulsorily Convertible Preference
Shares of Rs.10/- (Rupees Ten only) each
with power to increase or reduce the
share capital of the Company and to
divide the shares in the capital for the time
being into several classes and to attach
thereto respectively preferential ,
cumulative convertible preference,
guaranteed, qualified or special rights,
privileges or conditions as may be
determined by or in accordance with the
Articles of Association of the Company
and to vary, modify, amalgamate or
abrogate such rights, privileges or
conditions in such manner as may for the
time being be provided by the Articles of
Association.
The relevant Article 3.1 as at present and with the proposed amendment is given below for ready reference of the Members:
“3.1 The Authorised Share Capital of the
Company is Rs.50,00,00,000 (rupees Fifty
crore only) divided into 1,00,00,000 (One
crore only) Equity Shares of Rs.10 (Rupees
Ten only) each and 4,00,00,000 (Four crore
o n l y ) C o m p u l s o r i l y C o n v e r t i b l e
Preference Shares of Rs.10(Rupees Ten
only) each with powers to increase or
reduce the same in accordance with the
provisions of the Companies Act, 1956.
3.1 The Authorised Share Capital of the
Company is Rs.50,00,00,000 (Rupees Fifty
crore only) divided into 1,64,83,000 (One
crore Sixty Four Lac Eighty Three
Thousand only) Equity Shares of Rs.10
(Rupees Ten only) each and 3,35,17,000
(Three crore Thirty Five Lacs Seventeen
Thousand only)Compulsorily Convertible
Preference Shares of Rs.10 (Rupees Ten
only) each with powers to increase or
reduce the same in accordance with the
provisions of the Companies Act, 1956.
Present Article Proposed Article
Explanatory Statement under Section 173(2) of the Companies Act, 1956
Item 6
Mr. Rahul Gupta, was appointed as an Additional Director of the Company pursuant to Section
260 of the Companies Act 1956 w.e.f 29th January, 2008 and holds office upto the date of this
Annual General Meeting . The Company has received a notice along with requisite fee from a
member under Section 257 of the Companies Act, 1956, proposing his candidature as a Director of
the Company. Brief profile of Mr.Rahul Gupta is as follows:-
He is a chief operating officer and chief financial officer of Citibank Global Consumer Group,
Singapore. He has three decades of experience in several banking sectors at different positions
globally. He did his masters in Business Administration at University of South California, Los
Angeles, USA and Bachelor of Engineering in electronics at Birla Institute Technology & Science.
The Board recommends the Resolution for approval of members.
None of the other Directors other than Sri.Rahul Gupta is are concerned or interested in the
proposed Resolution.
Item 7
Due to increase of volume of operations in the accounts and financial areas, the Board of Directors
decided to appoint M. Venkata Narendra Prasad as Whole Time Director of the Company with the
said remuneration package with effect from 28th July 2008. Sri M. Venkata Narendra Prasad has
the experience of 7 years in the areas of Accounts, Finance and MIS.
The Board recommends the above resolution for the approval of the members as an an ordinary
resolution.
None of the Directors of the company other than Mr. M. Venkata Narendra Prasad are interested or
concerned in the resolution.
Item No.'s 8 & 9
At present, the authorised capital of the Company is Rs. 50 crores as set out in Clause V of the
Memorandum of Association of the Company divided in to 1 crore equity shares of Rs. 10/- each
and four crores compulsorily convertible preference Shares of Rs. 10/- each aggregating fifty
crores. Now, the Company is planning to convert the compulsorily convertible preference Shares
into equity shares.
Keeping in view of the above, it is proposed to change the authorized capital clause as follows:
The relevant extracts from Clause V at present vis-a-vis the proposed amendment are given below
for ready reference of the Members:
Spandana Annual Report 2007-08 45
The Board recommends the above resolutions for the approval of the members as a Special Resolutions.
None of the Directors of the company are interested or concerned in the resolutions.
Item No.'s 10:
In terms of the provisions of section 293(1)(a) of the Companies Act, 1956, except with the consent of the Company in general meeting, Company can not create charge against the book debts of the Company.
The Board recommends the above resolution for the approval of the members as an ordinary resolution.
None of the other Directors are concerned or interested in the proposed Resolution.
Item No.'s 11:
The Company needs the services of Mrs. Padmaja Reddy, to take the company at higher levels & a respected organization in the industry. The present term of five years to act as Managing Director of the Company will be expired on 18th April 2008. Keeping in view of her past contributions & future growth of the company Board has recommended for reappointment of her as a Managing Director of the Company for a period of 5 years with effect from 18th April 2008 to 17th April 2013 with the above said remuneration.
The Board recommends the above resolutions for the approval of the members as a Special Resolutions.
None of the Directors of the company other than Mrs. Padmaja Reddy interested or concerned in the resolution.
By Order of the Board For Spandana Sphoorty Financial Limited
Date : 02.07.2008 Sd/-Place: Hyderabad. Malleswari.G
Company Secretary
DIRECTORS' REPORT
To
The members of
Spandana Sphoorty Financial Limited.
Your Directors have great pleasure in presenting their Fifth Annual Report together with the audited staccounts for the financial year ended 31 March 2008.
FINANCIAL RESULTS
stThe financial results of the Company for the year ended 31 March 2008 are as given below:
st stParticulars 31 March 2008 31 March 2007
Income from Operations 113,38,13,613 46,94,40,563
Other Income 14,06,82,884 2,65,40,691
Profit before Tax & Depreciation 46,88,44,271 4,89,08,999
Depreciation 91,96,969 63,33,598
Profit before tax 45,96,47,302 4,25,75,401
Provision for Tax 18,90,07,555 1,64,19,393
Profit after Tax 27,06,39,747 2,61,56,008
OPERATIONS
During the year under review your company disbursed an amount of Rs.11,92,30,68,375/- (Inclusive of
disbursements under managed portfolio). The Company achieved a profit before tax
Rs.45,96,47,302/- as against Rs.4,25,75,401/- and profit after tax Rs.27,06,39,747/- as against
Rs.2,61,56,008/- during the previous year .
DIVIDENDS
As was the case in the previous year, your directors decided not to declare dividend and to utilize the surplus
reserves to meet the huge fund requirement of the Company.
SUBSIDIARY COMPANIES
By virtue of the provisions of Section 4 of the Companies Act, 1956, our Company is treated as the
Holding Company for M/s. Spandana Sphoorty Marketing Services Private Limited, M/s M.G.Brothers
Finance Limited and M/s. Spandana Sphoorty Chit Funds Private Limited in which our company holds
5,03,000 Equity Shares of face value of Rs. 10/- each ; 631449 Equity shares of face value of Rs.10/- each
and 80,000 Equity shares of Rs. 10/- each respectively.
Spandana Annual Report 2007-08 47
The Board recommends the above resolutions for the approval of the members as a Special Resolutions.
None of the Directors of the company are interested or concerned in the resolutions.
Item No.'s 10:
In terms of the provisions of section 293(1)(a) of the Companies Act, 1956, except with the consent of the Company in general meeting, Company can not create charge against the book debts of the Company.
The Board recommends the above resolution for the approval of the members as an ordinary resolution.
None of the other Directors are concerned or interested in the proposed Resolution.
Item No.'s 11:
The Company needs the services of Mrs. Padmaja Reddy, to take the company at higher levels & a respected organization in the industry. The present term of five years to act as Managing Director of the Company will be expired on 18th April 2008. Keeping in view of her past contributions & future growth of the company Board has recommended for reappointment of her as a Managing Director of the Company for a period of 5 years with effect from 18th April 2008 to 17th April 2013 with the above said remuneration.
The Board recommends the above resolutions for the approval of the members as a Special Resolutions.
None of the Directors of the company other than Mrs. Padmaja Reddy interested or concerned in the resolution.
By Order of the Board For Spandana Sphoorty Financial Limited
Date : 02.07.2008 Sd/-Place: Hyderabad. Malleswari.G
Company Secretary
DIRECTORS' REPORT
To
The members of
Spandana Sphoorty Financial Limited.
Your Directors have great pleasure in presenting their Fifth Annual Report together with the audited staccounts for the financial year ended 31 March 2008.
FINANCIAL RESULTS
stThe financial results of the Company for the year ended 31 March 2008 are as given below:
st stParticulars 31 March 2008 31 March 2007
Income from Operations 113,38,13,613 46,94,40,563
Other Income 14,06,82,884 2,65,40,691
Profit before Tax & Depreciation 46,88,44,271 4,89,08,999
Depreciation 91,96,969 63,33,598
Profit before tax 45,96,47,302 4,25,75,401
Provision for Tax 18,90,07,555 1,64,19,393
Profit after Tax 27,06,39,747 2,61,56,008
OPERATIONS
During the year under review your company disbursed an amount of Rs.11,92,30,68,375/- (Inclusive of
disbursements under managed portfolio). The Company achieved a profit before tax
Rs.45,96,47,302/- as against Rs.4,25,75,401/- and profit after tax Rs.27,06,39,747/- as against
Rs.2,61,56,008/- during the previous year .
DIVIDENDS
As was the case in the previous year, your directors decided not to declare dividend and to utilize the surplus
reserves to meet the huge fund requirement of the Company.
SUBSIDIARY COMPANIES
By virtue of the provisions of Section 4 of the Companies Act, 1956, our Company is treated as the
Holding Company for M/s. Spandana Sphoorty Marketing Services Private Limited, M/s M.G.Brothers
Finance Limited and M/s. Spandana Sphoorty Chit Funds Private Limited in which our company holds
5,03,000 Equity Shares of face value of Rs. 10/- each ; 631449 Equity shares of face value of Rs.10/- each
and 80,000 Equity shares of Rs. 10/- each respectively.
Spandana Annual Report 2007-08 47
PORTFOLIO BUYOUT BY ICICI BANK
The Company has entered into Assignment agreement with scheduled banks in respect of certain
loan contracts, whereby underlying pool of Assets are transferred to these banks for a lump sum
consideration. During the year, the company has assigned loan portfolio having book value of INR
864.3 million to ICICI Bank. The Company has received a total consideration of INR 932.0 million arising
out of such sale of loans through direct assignment. The difference between the consideration
received and the book value of the loan portfolio assigned amounting to INR 67.7 millions has been
accounted for as a gain in the profit and loss account in the current year. Though we have FLDG
Commitment on future losses, the premium was accounted as a gain in the current year. We would like
to update on the current status of the portfolio in terms of how it is behaving to give a better sense of
future risk on the Company pertaining to this portfolio.
1. All loans sold are regular in payment.
2. One third of the Portfolio sold were collected and transferred.
3. The Company provided 1% provision on the total portfolio sold though the FLDG commitment is
only 10%.
CHANGES IN SHARE CAPITAL
i) During the year Authorised share capital of the Company increased from Rs. 10 Crores divided into
one crore equity shares of Rs. 10 each to Rs. 50 crores divided into One crore Equity Shares of
Rs.10/- each and four crores compulsorily convertible preference shares of Rs. 10/- each.
ii) In accordance with the resolution passed by the shareholders at the Extraordinary General thMeeting held on 26 June, 2007, the board has allotted 12,08,051 Equity shares of Rs. 115.86/- per
share and 33,516,041 compulsorily convertible preferential Shares of Rs.10/ to the Investors.
iii) The above allotment of shares resulted in an increase in the paid up equity capital of the Company
from Rs. 8,63,10,000/- to Rs. 9,83,90,510 /-
iv) With the approval of shareholders the Company is planning to convert 64,83,000 Convertible
Preference Authorised Capital to Equity Authorised Share Capital in the forth coming Annual
General Meeting. Hence your Directors recommended for your approval.
FINANCE
Your company has been regular in discharging its liability to ING Vysya Bank, Guntur, Indian Overseas
Bank, Vijayawada and Hyderabad, ICICI Bank, Mumbai, HSBC, Hyderabad, SIDBI, Hyderabad, HDFC
Bank, Hyderabad, Yes Bank, Hyderabad, IDBI, Hyderabad, BNP Paribas, Hyderabad, Punjab&Sind Bank,
Hyderabad, The Bank of Rajasthan Limited, Hyderabad, Standard Charted Bank, Hyderabad, Karnataka
Bank, Hyderabad, Axis Bank, Hyderabad, FWWB and Manavayya Holdings & Investments Pvt. Limited.
Your Company continued to enjoy good relationship with them during the year under review.
PUBLIC DEPOSITS
The Company has not accepted any deposits from the public, directors or its employees during the
year under review. The Board of Directors though circulation passed the resolution for non
acceptance of Public Deposits during the financial 2008-09 and submitted the same to the Statutory
Auditor as per the requirements of the Reserve Bank of India.
DIRECTORS
As per Section255 & 256 of the Companies Act, Mr.M.V.Narendra Prasad, Mr. Y.S.N.Murty and
Dr.G.Venkateswara Reddy retire by rotation in the ensuing Annual General Meeting. All of them,
being eligible, for re-appointment.
Mr. Rahul Gupta has been appointed as Additional-Non Executive Independent Director by the board thof Directors of the Company in their meeting held on 29 January 2008. According to the provisions of
Section 260 of the Companies Act 1956, he holds office only upto the date ensuing Annual General
Meeting. The company has received the notice in writing from one of the Members of the company
proposing his appointment U/s 257. Hence your directors recommended the matter for your
approval.
AUDIT COMMITTEE
ndAs per 252A of the Companies Act 1956, the Audit Committee was re-constituted on 2 November
2007 with the following members:
1. Mrs. Padmaja Reddy Gangireddy
2. Dr. Rajiv Lall
3. Mr.Harinder Sawhney
4. Mr. Y.S.N. Murty
The Committee met two times during the year on 25.06.2007 and 08.10.2007 and reviewed the
accounts of the Company and internal Controls, in compliance with the requirements of the
Companies Act, 1956.
PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN
EXCHANGE EARNINGS AND OUTGO
a) Conservation of Energy
Our operations are not energy-intensive. However, significant measures are taken to reduce
energy consumption by using energy efficient computers.
As energy costs comprise a very small part of the total expenses, the financial impact of these
measures is not material.
b) Research and Development (R&D)
Research and development of new products and methodologies continue to be of importance to
us. This allows us to enhance quality of service and customer satisfaction through continuous
innovation.
c) Technology absorption, adaptation and innovation
We at Spandana believe that technology should aid in improving efficiencies and at the same time
should not disrupt the existing operational model with the efficiencies and the cost advantages
Spandana Annual Report 2007-08 49
PORTFOLIO BUYOUT BY ICICI BANK
The Company has entered into Assignment agreement with scheduled banks in respect of certain
loan contracts, whereby underlying pool of Assets are transferred to these banks for a lump sum
consideration. During the year, the company has assigned loan portfolio having book value of INR
864.3 million to ICICI Bank. The Company has received a total consideration of INR 932.0 million arising
out of such sale of loans through direct assignment. The difference between the consideration
received and the book value of the loan portfolio assigned amounting to INR 67.7 millions has been
accounted for as a gain in the profit and loss account in the current year. Though we have FLDG
Commitment on future losses, the premium was accounted as a gain in the current year. We would like
to update on the current status of the portfolio in terms of how it is behaving to give a better sense of
future risk on the Company pertaining to this portfolio.
1. All loans sold are regular in payment.
2. One third of the Portfolio sold were collected and transferred.
3. The Company provided 1% provision on the total portfolio sold though the FLDG commitment is
only 10%.
CHANGES IN SHARE CAPITAL
i) During the year Authorised share capital of the Company increased from Rs. 10 Crores divided into
one crore equity shares of Rs. 10 each to Rs. 50 crores divided into One crore Equity Shares of
Rs.10/- each and four crores compulsorily convertible preference shares of Rs. 10/- each.
ii) In accordance with the resolution passed by the shareholders at the Extraordinary General thMeeting held on 26 June, 2007, the board has allotted 12,08,051 Equity shares of Rs. 115.86/- per
share and 33,516,041 compulsorily convertible preferential Shares of Rs.10/ to the Investors.
iii) The above allotment of shares resulted in an increase in the paid up equity capital of the Company
from Rs. 8,63,10,000/- to Rs. 9,83,90,510 /-
iv) With the approval of shareholders the Company is planning to convert 64,83,000 Convertible
Preference Authorised Capital to Equity Authorised Share Capital in the forth coming Annual
General Meeting. Hence your Directors recommended for your approval.
FINANCE
Your company has been regular in discharging its liability to ING Vysya Bank, Guntur, Indian Overseas
Bank, Vijayawada and Hyderabad, ICICI Bank, Mumbai, HSBC, Hyderabad, SIDBI, Hyderabad, HDFC
Bank, Hyderabad, Yes Bank, Hyderabad, IDBI, Hyderabad, BNP Paribas, Hyderabad, Punjab&Sind Bank,
Hyderabad, The Bank of Rajasthan Limited, Hyderabad, Standard Charted Bank, Hyderabad, Karnataka
Bank, Hyderabad, Axis Bank, Hyderabad, FWWB and Manavayya Holdings & Investments Pvt. Limited.
Your Company continued to enjoy good relationship with them during the year under review.
PUBLIC DEPOSITS
The Company has not accepted any deposits from the public, directors or its employees during the
year under review. The Board of Directors though circulation passed the resolution for non
acceptance of Public Deposits during the financial 2008-09 and submitted the same to the Statutory
Auditor as per the requirements of the Reserve Bank of India.
DIRECTORS
As per Section255 & 256 of the Companies Act, Mr.M.V.Narendra Prasad, Mr. Y.S.N.Murty and
Dr.G.Venkateswara Reddy retire by rotation in the ensuing Annual General Meeting. All of them,
being eligible, for re-appointment.
Mr. Rahul Gupta has been appointed as Additional-Non Executive Independent Director by the board thof Directors of the Company in their meeting held on 29 January 2008. According to the provisions of
Section 260 of the Companies Act 1956, he holds office only upto the date ensuing Annual General
Meeting. The company has received the notice in writing from one of the Members of the company
proposing his appointment U/s 257. Hence your directors recommended the matter for your
approval.
AUDIT COMMITTEE
ndAs per 252A of the Companies Act 1956, the Audit Committee was re-constituted on 2 November
2007 with the following members:
1. Mrs. Padmaja Reddy Gangireddy
2. Dr. Rajiv Lall
3. Mr.Harinder Sawhney
4. Mr. Y.S.N. Murty
The Committee met two times during the year on 25.06.2007 and 08.10.2007 and reviewed the
accounts of the Company and internal Controls, in compliance with the requirements of the
Companies Act, 1956.
PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN
EXCHANGE EARNINGS AND OUTGO
a) Conservation of Energy
Our operations are not energy-intensive. However, significant measures are taken to reduce
energy consumption by using energy efficient computers.
As energy costs comprise a very small part of the total expenses, the financial impact of these
measures is not material.
b) Research and Development (R&D)
Research and development of new products and methodologies continue to be of importance to
us. This allows us to enhance quality of service and customer satisfaction through continuous
innovation.
c) Technology absorption, adaptation and innovation
We at Spandana believe that technology should aid in improving efficiencies and at the same time
should not disrupt the existing operational model with the efficiencies and the cost advantages
Spandana Annual Report 2007-08 49
that have given Spandana its market leadership status. The current weekly branches have a
computerized MIS which has made data storage and data retrieval very speedy at the branch level.
Keeping in view the unique operational model that we have for our Individual Lending product,
we have developed an in-house software for data management associated with this product. We
are also exploring various options available for the microfinance sector to handle the MIS
requirements in line with our current scale of operations and future plans for expansion.
d) Foreign exchange earnings and outgo
During the year, there was no foreign exchange earning and no outgo.
REPORTING TO RBI
Spandana has been filing all the necessary reports to RBI on time and has been submitting the reports
on monthly basis.
DIRECTORS' RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 217(2AA) OF THE
COMPANIES ACT, 1956:
Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to
Directors' Responsibility Statement, it is hereby confirmed that:
a. In the preparation of the accounts for the financial year ended 31st March, 2008, the applicable
accounting standards have been followed along with proper explanation relating to material
departures, wherever applicable;
b. The Directors have selected such accounting policies and applied them consistently and made
judgments and estimates that were 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 the year under review;
c. The Directors have taken proper and sufficient care for the maintenance of adequate accounting
records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets
of the Company and for preventing and detecting fraud and other irregularities;
d. The Directors have prepared the accounts for the Financial Year ended 31st March, 2008 on a
'going concern' basis.
e. The financial statements have been audited by Joint Statutory Auditors, M/s. B.S.R & Company &
M/s K.V.R. Subba Rao, Chartered Accountants, the Independent Auditors.
AUDITORS
The Companys' Statutory Auditors shall retire at the conclusion of this Annual General Meeting and
are eligible for re-appointment. The certificates from the auditors have been received to the effect that
their re-appointment, if made, would be within the limits prescribed under Section 224 (1B) of the
Companies Act, 1956.
AUDITORS' REPORT
The remarks as contained in the Auditor's Report, read with notes forming part of Accounts are Self
Explanatory.
PARTICULARS OF EMPLOYEES
During the year under review, no employee of the Company was in receipt of remuneration requiring
disclosure under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of
Employees) Rules, 1975.
EMPLOYEE RELATIONS
Your Company continues to have cordial and harmonious relation ship with the employees.
GROUP GARTUITY
Your Company has created a Group Gratuity Fund an amount of Rs. 45,88,907/- and the same was
invested with M/s Birla Sun life Insurance Company Limited.
GRATITUDE AND ACKNOWLEDGEMENT
The directors would like to place on record their appreciation for the contribution made by the
employees to the significant growth of the Company. The trust reposed in your company by its
esteemed customers helped stabilized growth during the year under review. Your Directors also
express their gratitude fro the co-operation extended by the Bankers of the Company &
governmental Agencies like Reserve Bank of India, Ministry of Corporate Affairs etc. during the year
under review and it looks forward for such continuing support to enhance its goal.
For and on behalf of the Board
(Spandana Sphoorty Financial Limited)
Date : 02-07-2008 Sd/- Sd/-
Place: Hyderabad Padmaja Reddy G. M.V. Narendra Prasad
Managing Director Director
Spandana Annual Report 2007-08 51
that have given Spandana its market leadership status. The current weekly branches have a
computerized MIS which has made data storage and data retrieval very speedy at the branch level.
Keeping in view the unique operational model that we have for our Individual Lending product,
we have developed an in-house software for data management associated with this product. We
are also exploring various options available for the microfinance sector to handle the MIS
requirements in line with our current scale of operations and future plans for expansion.
d) Foreign exchange earnings and outgo
During the year, there was no foreign exchange earning and no outgo.
REPORTING TO RBI
Spandana has been filing all the necessary reports to RBI on time and has been submitting the reports
on monthly basis.
DIRECTORS' RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 217(2AA) OF THE
COMPANIES ACT, 1956:
Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to
Directors' Responsibility Statement, it is hereby confirmed that:
a. In the preparation of the accounts for the financial year ended 31st March, 2008, the applicable
accounting standards have been followed along with proper explanation relating to material
departures, wherever applicable;
b. The Directors have selected such accounting policies and applied them consistently and made
judgments and estimates that were 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 the year under review;
c. The Directors have taken proper and sufficient care for the maintenance of adequate accounting
records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets
of the Company and for preventing and detecting fraud and other irregularities;
d. The Directors have prepared the accounts for the Financial Year ended 31st March, 2008 on a
'going concern' basis.
e. The financial statements have been audited by Joint Statutory Auditors, M/s. B.S.R & Company &
M/s K.V.R. Subba Rao, Chartered Accountants, the Independent Auditors.
AUDITORS
The Companys' Statutory Auditors shall retire at the conclusion of this Annual General Meeting and
are eligible for re-appointment. The certificates from the auditors have been received to the effect that
their re-appointment, if made, would be within the limits prescribed under Section 224 (1B) of the
Companies Act, 1956.
AUDITORS' REPORT
The remarks as contained in the Auditor's Report, read with notes forming part of Accounts are Self
Explanatory.
PARTICULARS OF EMPLOYEES
During the year under review, no employee of the Company was in receipt of remuneration requiring
disclosure under Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of
Employees) Rules, 1975.
EMPLOYEE RELATIONS
Your Company continues to have cordial and harmonious relation ship with the employees.
GROUP GARTUITY
Your Company has created a Group Gratuity Fund an amount of Rs. 45,88,907/- and the same was
invested with M/s Birla Sun life Insurance Company Limited.
GRATITUDE AND ACKNOWLEDGEMENT
The directors would like to place on record their appreciation for the contribution made by the
employees to the significant growth of the Company. The trust reposed in your company by its
esteemed customers helped stabilized growth during the year under review. Your Directors also
express their gratitude fro the co-operation extended by the Bankers of the Company &
governmental Agencies like Reserve Bank of India, Ministry of Corporate Affairs etc. during the year
under review and it looks forward for such continuing support to enhance its goal.
For and on behalf of the Board
(Spandana Sphoorty Financial Limited)
Date : 02-07-2008 Sd/- Sd/-
Place: Hyderabad Padmaja Reddy G. M.V. Narendra Prasad
Managing Director Director
Spandana Annual Report 2007-08 51
Spandana Annual Report 2007-08 53
AUDITORS' REPORT TO THE MEMBERS OF SPANDANA SPHOORTY FINANCIAL LIMITED
(formerly Spandana Sphoorty Innovative Financial Services Limited)
1 We have audited the attached balance sheet of Spandana Sphoorty Financial Limited (formerly Spandana Sphoorty Innovative Financial Services Limited) (“the Company”) as at 31 March 2008, the profit and loss account and the cash flow statement for the year ended on that date, annexed thereto. 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 (“the Order”), as amended, issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure I a statement on the matters specified in paragraphs 4 and 5 of the said Order.
4 Further to our comments in the Annexure I referred to in paragraph 3 above, we report that:
(a) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;
(c) the balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;
(d) in our opinion, the balance sheet, profit and loss account 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;
(e) on the basis of written representations received from the directors, as on 31 March 2008, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31 March 2008 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;
(f ) 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:
(i) in the case of the balance sheet, of the state of affairs of the Company as at 31 March 2008;
(ii) in the case of the profit and loss account, of the profit for the year ended on that date; and
(iii) in the case of cash flow statement, of the cash flows for the year ended on that date.
for B S R & Company
Chartered Accountants
Sd/-
Zubin Shekary
Partner
Membership No: 48814
Place : Hyderabad
Date : 02-07-2008
Spandana Annual Report 2007-08 53
AUDITORS' REPORT TO THE MEMBERS OF SPANDANA SPHOORTY FINANCIAL LIMITED
(formerly Spandana Sphoorty Innovative Financial Services Limited)
1 We have audited the attached balance sheet of Spandana Sphoorty Financial Limited (formerly Spandana Sphoorty Innovative Financial Services Limited) (“the Company”) as at 31 March 2008, the profit and loss account and the cash flow statement for the year ended on that date, annexed thereto. 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 (“the Order”), as amended, issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure I a statement on the matters specified in paragraphs 4 and 5 of the said Order.
4 Further to our comments in the Annexure I referred to in paragraph 3 above, we report that:
(a) we have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b) in our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;
(c) the balance sheet, profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account;
(d) in our opinion, the balance sheet, profit and loss account 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;
(e) on the basis of written representations received from the directors, as on 31 March 2008, and taken on record by the Board of Directors, we report that none of the Directors is disqualified as on 31 March 2008 from being appointed as a Director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956;
(f ) 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:
(i) in the case of the balance sheet, of the state of affairs of the Company as at 31 March 2008;
(ii) in the case of the profit and loss account, of the profit for the year ended on that date; and
(iii) in the case of cash flow statement, of the cash flows for the year ended on that date.
for B S R & Company
Chartered Accountants
Sd/-
Zubin Shekary
Partner
Membership No: 48814
Place : Hyderabad
Date : 02-07-2008
Spandana Annual Report 2007-08 55
14. According to the information and explanations given to us and on the basis of our examination of the
records of the Company, the Company has been generally regular in depositing amounts
deducted/accrued in the books of account in respect of undisputed statutory dues including Provident
Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth tax, Service tax, Custom duty, Excise duty
and other material statutory dues with the appropriate authorities during the year.
Further, since the Central Government has till date not prescribed the amount of cess payable under
section 441A of the Companies Act, 1956, we are not in a position to comment upon the regularity or
otherwise of the Company in depositing the same.
According to the information and explanations given to us, no undisputed amounts payable in respect of
Provident Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth tax, Service tax, Customs duty,
Excise duty, Cess and other material statutory dues were in arrears as at 31 March 2008 for a period of more
than six months from the date they became payable.
As explained to us, the Company did not have any dues on account of Investor Education and Protection
Fund, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise duty and Cess which have not been
deposited with the appropriate authorities on account of any dispute.
15. The Company does not have any accumulated losses at the end of the financial year and has not incurred
cash losses in the financial year and in the immediately preceding financial year.
16. In our opinion and according to the information and explanations given to us, the Company has not
defaulted in repayment of dues to its bankers or to any financial institutions. The Company did not have
any outstanding debentures during the year.
17. The Company has not granted any loans and advances on the basis of security by way of pledge of shares,
debentures and other securities.
18. In our opinion, and according to the information and explanations given to us, the Company is not a chit
fund or a nidhi/ mutual benefit fund/ society.
for B S R & Company
Chartered Accountants
Sd/-
Zubin Shekary
Partner
Membership No: 48814
Place: Hyderabad
Date: 02-07-2008
ANNEXURE I TO THE AUDITORS' REPORT
Annexure referred to in paragraph 3 of our report of even date to the members of Spandana Sphoorty Financial
Limited (“the Company”) (formerly Spandana Sphoorty Innovative Financial Limited):
1. The Company has maintained proper records showing full particulars, including quantitative details and
situation of fixed assets.
2. The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are
verified every year. In our opinion, the periodicity of physical verification is reasonable having regard to the
size of the Company and the nature of its assets. In accordance with this programme, fixed assets were
verified during the year and no material discrepancies were noted on such verification.
3. Fixed assets disposed during the year were not substantial, and therefore, do not affect the going concern
assumption.
4. The Company is a Non Banking Finance Company ('NBFC'), engaged in the business of proving loans.
Accordingly, it does not hold any physical inventories. Thus, paragraph 4(ii) of the Order is not applicable.
5. The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered
in the register maintained under section 301 of the Companies Act, 1956.
6. The Company has taken loans from companies and other parties covered in the register maintained under
section 301 of the Companies Act, 1956. The maximum amount outstanding during the year was Rs
432,616,965 and the year-end balance of such loans was Rs 200,000,000.
7. In our opinion, the rate of interest and other terms and conditions on which loans have been taken from
companies, firms or other parties listed in the register maintained under section 301 of the Companies Act,
1956 are not, prima facie, prejudicial to the interest of the company.
8. In the case of loans taken from companies and other parties listed in the register maintained under section
301, the company has been regular in repaying the principal amounts as stipulated and in the payment of
interest.
9. In our opinion and according to the information and explanations given to us, there is an adequate internal
control system commensurate with the size of the Company and the nature of its business with regard to the
purchase of fixed assets and with regard to the sale of services. The activities of the Company do not involve
purchase of inventory and the sale of goods. We have not observed any major weakness in the internal
control system during the course of our audit.
10. In our opinion and according to the information and explanations given to us, the particulars of contracts or
arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register
required to be maintained under that section. In our opinion and according to the information and
explanations given to us, the transactions made in pursuance of contracts and arrangements entered in the
register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five
lakhs with any party during the year have been made at prices which are reasonable having regard to the
prevailing market prices at the relevant time.
11. The Company has not accepted any deposits from the public.
12. In our opinion, the Company has an internal audit system commensurate with the size and nature of its
business.
13. The Central Government has not prescribed the maintenance of cost records under clause (d) of sub-
section (1) of section 209 of the Companies Act, 1956 for any of the services rendered by the Company.
Spandana Annual Report 2007-08 55
14. According to the information and explanations given to us and on the basis of our examination of the
records of the Company, the Company has been generally regular in depositing amounts
deducted/accrued in the books of account in respect of undisputed statutory dues including Provident
Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth tax, Service tax, Custom duty, Excise duty
and other material statutory dues with the appropriate authorities during the year.
Further, since the Central Government has till date not prescribed the amount of cess payable under
section 441A of the Companies Act, 1956, we are not in a position to comment upon the regularity or
otherwise of the Company in depositing the same.
According to the information and explanations given to us, no undisputed amounts payable in respect of
Provident Fund, Employees' State Insurance, Income-tax, Sales-tax, Wealth tax, Service tax, Customs duty,
Excise duty, Cess and other material statutory dues were in arrears as at 31 March 2008 for a period of more
than six months from the date they became payable.
As explained to us, the Company did not have any dues on account of Investor Education and Protection
Fund, Income tax, Sales tax, Wealth tax, Service tax, Customs duty, Excise duty and Cess which have not been
deposited with the appropriate authorities on account of any dispute.
15. The Company does not have any accumulated losses at the end of the financial year and has not incurred
cash losses in the financial year and in the immediately preceding financial year.
16. In our opinion and according to the information and explanations given to us, the Company has not
defaulted in repayment of dues to its bankers or to any financial institutions. The Company did not have
any outstanding debentures during the year.
17. The Company has not granted any loans and advances on the basis of security by way of pledge of shares,
debentures and other securities.
18. In our opinion, and according to the information and explanations given to us, the Company is not a chit
fund or a nidhi/ mutual benefit fund/ society.
for B S R & Company
Chartered Accountants
Sd/-
Zubin Shekary
Partner
Membership No: 48814
Place: Hyderabad
Date: 02-07-2008
ANNEXURE I TO THE AUDITORS' REPORT
Annexure referred to in paragraph 3 of our report of even date to the members of Spandana Sphoorty Financial
Limited (“the Company”) (formerly Spandana Sphoorty Innovative Financial Limited):
1. The Company has maintained proper records showing full particulars, including quantitative details and
situation of fixed assets.
2. The Company has a regular programme of physical verification of its fixed assets by which all fixed assets are
verified every year. In our opinion, the periodicity of physical verification is reasonable having regard to the
size of the Company and the nature of its assets. In accordance with this programme, fixed assets were
verified during the year and no material discrepancies were noted on such verification.
3. Fixed assets disposed during the year were not substantial, and therefore, do not affect the going concern
assumption.
4. The Company is a Non Banking Finance Company ('NBFC'), engaged in the business of proving loans.
Accordingly, it does not hold any physical inventories. Thus, paragraph 4(ii) of the Order is not applicable.
5. The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered
in the register maintained under section 301 of the Companies Act, 1956.
6. The Company has taken loans from companies and other parties covered in the register maintained under
section 301 of the Companies Act, 1956. The maximum amount outstanding during the year was Rs
432,616,965 and the year-end balance of such loans was Rs 200,000,000.
7. In our opinion, the rate of interest and other terms and conditions on which loans have been taken from
companies, firms or other parties listed in the register maintained under section 301 of the Companies Act,
1956 are not, prima facie, prejudicial to the interest of the company.
8. In the case of loans taken from companies and other parties listed in the register maintained under section
301, the company has been regular in repaying the principal amounts as stipulated and in the payment of
interest.
9. In our opinion and according to the information and explanations given to us, there is an adequate internal
control system commensurate with the size of the Company and the nature of its business with regard to the
purchase of fixed assets and with regard to the sale of services. The activities of the Company do not involve
purchase of inventory and the sale of goods. We have not observed any major weakness in the internal
control system during the course of our audit.
10. In our opinion and according to the information and explanations given to us, the particulars of contracts or
arrangements referred to in section 301 of the Companies Act, 1956 have been entered in the register
required to be maintained under that section. In our opinion and according to the information and
explanations given to us, the transactions made in pursuance of contracts and arrangements entered in the
register maintained under section 301 of the Companies Act, 1956 and exceeding the value of rupees five
lakhs with any party during the year have been made at prices which are reasonable having regard to the
prevailing market prices at the relevant time.
11. The Company has not accepted any deposits from the public.
12. In our opinion, the Company has an internal audit system commensurate with the size and nature of its
business.
13. The Central Government has not prescribed the maintenance of cost records under clause (d) of sub-
section (1) of section 209 of the Companies Act, 1956 for any of the services rendered by the Company.
Spandana Annual Report 2007-08 57
ANNEXURE II TO THE AUDITORS' REPORT
To the members of
SPANDANA SPHOORTY FINANCIAL LIMITED
(formerly Spandana Sphoorty Innovative Financial Services Limited)
We have audited the attached balance sheet of Spandana Sphoorty Financial Limited (formerly
Spandana Sphoorty Innovative Financial Services Limited) (the Comp as at 31 March 2008 and profit
and loss account for the year ended on that date annexed thereto.
Further to our audit report of even date issued under section 224 the Companies Act, 1956, as required
by the Non Banking Finance Companies Auditors' report (Reserve Bank) Directions, 1998 based on the
information and explanations given to us and based on the records produced, we state below a
statement of matters specified in paragraph 3 of the said Directions.
1 The Company has obtained a certificate of registration from Reserve Bank of India dated
11 January 2008 as a Non Banking Finance Company without accepting public deposit. The
registration number is N-09.00414.
2 The Board of Directors has passed a resolution in the meeting held on 23 April 2007 for not
acceptance of public deposits and the Company has not accepted any public deposits during the
year ended 31 March 2008.
3 The Company has complied with prudential norms relating to income recognition, accounting
standards, asset classification and provisioning for bad and doubtful debts as applicable.
for B S R & CompanyChartered Accountants
Sd/-
Zubin Shekary
Partner
Membership No: 48814
Place: Hyderabad
Date : 02-07-2008
SOURCES OF FUNDS Schedule 31 March 2008 31 March 2007
Shareholders' funds
Share capital 1 433,550,920 86,310,000
Reserves and surplus 2 450,365,028 64,713,766
883,915,948 151,023,766
Loan funds
Secured loans 3 4,725,953,373 2,751,301,019
Unsecured loans (Subordinated debt) 200,000,000 194,500,000
Deferred tax liability, net 2,811,177 2,244,139
5,812,680,498 3,099,068,924
APPLICATION OF FUNDS
Fixed assets 4
Gross block 54,754,957 33,347,995
Less: Accumulated depreciation 17,831,108 8,921,731
Net block 36,923,849 24,426,264
Capital Work in Progress 1,021,033 “
37,944,882 24,426,264
Investments 5 14,245,685 6,333,000
Current assets, loans and advances
Cash and bank balances 6 1,012,615,766 448,016,094
Loans and advances 7 4,882,683,751 2,698,322,198
Other current assets 8 77,257,822 28,941,259
5,972,557,339 3,175,279,552
Current liabilities and provisions
Current liabilities 9 44,868,948 92,957,155
Provisions 10 167,298,461 14,307,889
212,167,409 107,265,045
Net current assets 5,760,389,930 3,068,014,507
Miscellaneous expenditure 11 100,001 295,153
(to the extent not written off ) 5,812,680,498 3,099,068,924
Significant accounting policies 18
Notes to accounts 19
The Schedules referred to above form an integral part of the Balance Sheet
As per our report attachedfor BSR & Company For K.V.R Subba Rao & Co for Spandana Sphoorty Financial LimitedChartered Accountants Chartered Accountants (formerly Spandana Sphoorty
Innovative Financial Services Limited)
Sd/- Sd/- Sd/- Sd/-Zubin Shekary K.V.R Subba Rao Managing Director Director PartnerMembership No. 48814
Hyderabad Sd/-02, July 2008 Company Secretary
Spandana Sphoorty Financial Limited (formerly Spandana Sphoorty Innovative Financial Services Limited)
Balance Sheet as at 31 March 2008 (All amounts in Indian rupees, except share data)
Spandana Annual Report 2007-08 57
ANNEXURE II TO THE AUDITORS' REPORT
To the members of
SPANDANA SPHOORTY FINANCIAL LIMITED
(formerly Spandana Sphoorty Innovative Financial Services Limited)
We have audited the attached balance sheet of Spandana Sphoorty Financial Limited (formerly
Spandana Sphoorty Innovative Financial Services Limited) (the Comp as at 31 March 2008 and profit
and loss account for the year ended on that date annexed thereto.
Further to our audit report of even date issued under section 224 the Companies Act, 1956, as required
by the Non Banking Finance Companies Auditors' report (Reserve Bank) Directions, 1998 based on the
information and explanations given to us and based on the records produced, we state below a
statement of matters specified in paragraph 3 of the said Directions.
1 The Company has obtained a certificate of registration from Reserve Bank of India dated
11 January 2008 as a Non Banking Finance Company without accepting public deposit. The
registration number is N-09.00414.
2 The Board of Directors has passed a resolution in the meeting held on 23 April 2007 for not
acceptance of public deposits and the Company has not accepted any public deposits during the
year ended 31 March 2008.
3 The Company has complied with prudential norms relating to income recognition, accounting
standards, asset classification and provisioning for bad and doubtful debts as applicable.
for B S R & CompanyChartered Accountants
Sd/-
Zubin Shekary
Partner
Membership No: 48814
Place: Hyderabad
Date : 02-07-2008
SOURCES OF FUNDS Schedule 31 March 2008 31 March 2007
Shareholders' funds
Share capital 1 433,550,920 86,310,000
Reserves and surplus 2 450,365,028 64,713,766
883,915,948 151,023,766
Loan funds
Secured loans 3 4,725,953,373 2,751,301,019
Unsecured loans (Subordinated debt) 200,000,000 194,500,000
Deferred tax liability, net 2,811,177 2,244,139
5,812,680,498 3,099,068,924
APPLICATION OF FUNDS
Fixed assets 4
Gross block 54,754,957 33,347,995
Less: Accumulated depreciation 17,831,108 8,921,731
Net block 36,923,849 24,426,264
Capital Work in Progress 1,021,033 “
37,944,882 24,426,264
Investments 5 14,245,685 6,333,000
Current assets, loans and advances
Cash and bank balances 6 1,012,615,766 448,016,094
Loans and advances 7 4,882,683,751 2,698,322,198
Other current assets 8 77,257,822 28,941,259
5,972,557,339 3,175,279,552
Current liabilities and provisions
Current liabilities 9 44,868,948 92,957,155
Provisions 10 167,298,461 14,307,889
212,167,409 107,265,045
Net current assets 5,760,389,930 3,068,014,507
Miscellaneous expenditure 11 100,001 295,153
(to the extent not written off ) 5,812,680,498 3,099,068,924
Significant accounting policies 18
Notes to accounts 19
The Schedules referred to above form an integral part of the Balance Sheet
As per our report attachedfor BSR & Company For K.V.R Subba Rao & Co for Spandana Sphoorty Financial LimitedChartered Accountants Chartered Accountants (formerly Spandana Sphoorty
Innovative Financial Services Limited)
Sd/- Sd/- Sd/- Sd/-Zubin Shekary K.V.R Subba Rao Managing Director Director PartnerMembership No. 48814
Hyderabad Sd/-02, July 2008 Company Secretary
Spandana Sphoorty Financial Limited (formerly Spandana Sphoorty Innovative Financial Services Limited)
Balance Sheet as at 31 March 2008 (All amounts in Indian rupees, except share data)
Spandana Annual Report 2007-08 59
Cash flows from operating activities 31 March 2008 31 March 2007
Profit before tax 459,647,302 42,575,401
Adjustments:
Depreciation 9,196,969 6,333,598
Provisions and Write Offs 74,863,567 88,727,617
Interest and Finance Charges 416,527,325 259,740,361
Interest income (23,397,049) (5,058,032)
Profit on sale of assets (143,485) (25,473)
Preliminary expenditure written-off 195,152 195,152
Operating cash flows before working capital changes and other assets 936,889,781 392,488,624
(Increase) / decrease in current assets (37,312,720) 74,791,971
Increase in loans and advances (2,189,481,100) (1,636,737,843)
(Decrease)/Increase in current liabilities and provisions (50,722,043) (107,224,732)
Cash generated from operations (1,340,626,082) (1,276,681,980)
Income taxes paid, net (108,987,095) (14,175,254)
Net cash provided by operating activities (1,449,613,177) (1,290,857,234)
Cash flows from investing activities
Purchase of fixed assets (23,213,402) (15,125,098)
Proceeds from sale of fixed assets 641,299 335,000
Purchase of investments (7,912,685) -
Interest received 10,937,274 4,742,180
Income from mutual funds 1,348,100 315,852
Net cash provided by / (used in) investing activities (18,199,414) (9,732,066)
Cash flows from financing activities
Proceeds from issuance of share capital (net of share issue expenses) 463,588,445 -
Government grant received - 7,000,000
Proceeds/(repayment) of unsecured loans 5,500,000 -
Proceeds from long-term borrowings 1,974,652,353 1,687,788,740
Dividends paid (including dividend tax) 0 984,150
Interest paid -411328535 -259740362
Net cash provided by / (used in) financing activities 2,032,412,263 1,434,064,228
Net increase in cash and cash equivalents 564,599,672 133,474,928
Cash and cash equivalents at the beginning of the year (Note 1) 448,016,094 314,541,166
Cash and cash equivalents at the end of the year 1,012,615,766 448,016,094
Spandana Sphoorty Financial Limited(formerly Spandana Sphoorty Innovative Financial Services Limited)
Cash flow statement for the year ended 31 March 2008(All amounts in Indian rupees, except share data)
Schedule 31 March 2008 31 March 2007
Income
Income from operations 12 1,133,813,613 469,440,563
Other income 13 140,682,883 26,540,691
1,274,496,496 495,981,254
Expenditure
Financial expenses 14 416,527,325 148,001,612
Personnel expenses 15 232,969,484 143,224,705
Operating and other expenses 16 81,096,698 66,923,170
Depreciation 9,196,969 6,333,598
Provisions and write offs 17 74,863,567 88,727,617
Preliminary expenses written-off 195,152 195,152
814,849,194 453,405,853
Profit before tax 459,647,302 42,575,401
Provision for tax 189,007,555 16,419,393
Current tax 187,531,050 13,873,405
Deferred tax expense/(benefit) 1,254,981 2,244,139
Fringe benefit tax 221,524 301,849
Profit after tax 270,639,748 26,156,008
Balance in Profit and Loss Account brought forward -
-
Amount available for appropriation 270,639,748 26,156,008
Appropriations
Transfer to Statutory reserve 54,127,950 5,741,981
Provision for Dividends - (863,100)
Provision for Dividend Tax - (121,049)
Balance carried to Balance Sheet 216,511,798 21,398,176
Earnings per share
Basic and diluted - Par value Rs.10 per share 28.68 2.58
Significant accounting policies
Notes to accountsThe Schedules referred to above form an integral part of the Profit and Loss Account
As per our report attachedfor BSR & Company For K.V.R Subba Rao & Co for Spandana Sphoorty Financial LimitedChartered Accountants Chartered Accountants (formerly Spandana Sphoorty
Innovative Financial Services Limited)
Sd/- Sd/- Sd/- Sd/-Zubin Shekary K.V.R Subba Rao Managing Director Director PartnerMembership No.: 48814
Hyderabad Sd/-02, July 2008 Company Secretary
Spandana Sphoorty Financial Limited (formerly Spandana Sphoorty Innovative Financial Services Limited)
Profit and Loss Account for the year ended 31 March 2008 (All amounts in Indian rupees, except share data)
Spandana Annual Report 2007-08 59
Cash flows from operating activities 31 March 2008 31 March 2007
Profit before tax 459,647,302 42,575,401
Adjustments:
Depreciation 9,196,969 6,333,598
Provisions and Write Offs 74,863,567 88,727,617
Interest and Finance Charges 416,527,325 259,740,361
Interest income (23,397,049) (5,058,032)
Profit on sale of assets (143,485) (25,473)
Preliminary expenditure written-off 195,152 195,152
Operating cash flows before working capital changes and other assets 936,889,781 392,488,624
(Increase) / decrease in current assets (37,312,720) 74,791,971
Increase in loans and advances (2,189,481,100) (1,636,737,843)
(Decrease)/Increase in current liabilities and provisions (50,722,043) (107,224,732)
Cash generated from operations (1,340,626,082) (1,276,681,980)
Income taxes paid, net (108,987,095) (14,175,254)
Net cash provided by operating activities (1,449,613,177) (1,290,857,234)
Cash flows from investing activities
Purchase of fixed assets (23,213,402) (15,125,098)
Proceeds from sale of fixed assets 641,299 335,000
Purchase of investments (7,912,685) -
Interest received 10,937,274 4,742,180
Income from mutual funds 1,348,100 315,852
Net cash provided by / (used in) investing activities (18,199,414) (9,732,066)
Cash flows from financing activities
Proceeds from issuance of share capital (net of share issue expenses) 463,588,445 -
Government grant received - 7,000,000
Proceeds/(repayment) of unsecured loans 5,500,000 -
Proceeds from long-term borrowings 1,974,652,353 1,687,788,740
Dividends paid (including dividend tax) 0 984,150
Interest paid -411328535 -259740362
Net cash provided by / (used in) financing activities 2,032,412,263 1,434,064,228
Net increase in cash and cash equivalents 564,599,672 133,474,928
Cash and cash equivalents at the beginning of the year (Note 1) 448,016,094 314,541,166
Cash and cash equivalents at the end of the year 1,012,615,766 448,016,094
Spandana Sphoorty Financial Limited(formerly Spandana Sphoorty Innovative Financial Services Limited)
Cash flow statement for the year ended 31 March 2008(All amounts in Indian rupees, except share data)
Schedule 31 March 2008 31 March 2007
Income
Income from operations 12 1,133,813,613 469,440,563
Other income 13 140,682,883 26,540,691
1,274,496,496 495,981,254
Expenditure
Financial expenses 14 416,527,325 148,001,612
Personnel expenses 15 232,969,484 143,224,705
Operating and other expenses 16 81,096,698 66,923,170
Depreciation 9,196,969 6,333,598
Provisions and write offs 17 74,863,567 88,727,617
Preliminary expenses written-off 195,152 195,152
814,849,194 453,405,853
Profit before tax 459,647,302 42,575,401
Provision for tax 189,007,555 16,419,393
Current tax 187,531,050 13,873,405
Deferred tax expense/(benefit) 1,254,981 2,244,139
Fringe benefit tax 221,524 301,849
Profit after tax 270,639,748 26,156,008
Balance in Profit and Loss Account brought forward -
-
Amount available for appropriation 270,639,748 26,156,008
Appropriations
Transfer to Statutory reserve 54,127,950 5,741,981
Provision for Dividends - (863,100)
Provision for Dividend Tax - (121,049)
Balance carried to Balance Sheet 216,511,798 21,398,176
Earnings per share
Basic and diluted - Par value Rs.10 per share 28.68 2.58
Significant accounting policies
Notes to accountsThe Schedules referred to above form an integral part of the Profit and Loss Account
As per our report attachedfor BSR & Company For K.V.R Subba Rao & Co for Spandana Sphoorty Financial LimitedChartered Accountants Chartered Accountants (formerly Spandana Sphoorty
Innovative Financial Services Limited)
Sd/- Sd/- Sd/- Sd/-Zubin Shekary K.V.R Subba Rao Managing Director Director PartnerMembership No.: 48814
Hyderabad Sd/-02, July 2008 Company Secretary
Spandana Sphoorty Financial Limited (formerly Spandana Sphoorty Innovative Financial Services Limited)
Profit and Loss Account for the year ended 31 March 2008 (All amounts in Indian rupees, except share data)
Spandana Annual Report 2007-08 61
Notes:
1. Cash and cash equivalents comprise: 31 March 2008 31 March 2007
Cash on hand 49,588,479 33,684,393
Balances in
Current accounts 205,377,996 178,531,744
Deposit accounts 757,649,291 235,799,957
1,012,615,766 448,016,094
As per our report attached
for BSR & Company For K.V.R Subba Rao & Co for Spandana Sphoorty Financial LimitedChartered Accountants Chartered Accountants (formerly Spandana Sphoorty
Innovative Financial Services Limited)
Sd/- Sd/- Sd/-
Zubin Shekary Managing Director Director
Partner
Membership No.: 48814
Hyderabad Sd/-
02, July 2008 Company Secretary
Spandana Sphoorty Financial Limited(formerly Spandana Sphoorty Innovative Financial Services Limited)
(All amounts in Indian rupees, except share data)
Schedules to the Accounts
Schedule 1
Share capital 31 March 2008 31 March 2007
Authorised
10,000,000 Equity Shares of Rs. 10/- each 100,000,000 100,000,000
40,000,000 Preference Shares of Rs. 10/- each 400,000,000 -
Previous Year - 10,000,000 Equity Shares of Rs. 10/- each
Issued, subscribed and paid-up
9,839,051 Equity shares (Previous years 8,631,000)
of Rs. 10- each fully paid up (includes 1,208,051
Equity shares of Rs. 10/- issued during
the current year 2007-08) 98,390,510 8,631,000
33,516,041 Compulsorily Convertible Preference Shares
Rs. 10- each fully paid up 335,160,410 -
433,550,920 86,310,000
Schedule 2
Reserves and surplus 31 March 2008 31 March 2007
General reserve
At the commencement of the year 24,616,667 3,218,491
Less: Gratuity Provision (Transition) 1,336,011
Add: Transfer from Profit and Loss Account - 21,398,176
23,280,656 24,616,667
Securities Premium Reserve
Share Premium (Issue of Compulsorily
Convertiable Preferance Shares) 127,884,279 -
Less: Share issue expenses 11,536,754
116,347,525 -
Capital reserve
Grant received from SIDBI 7,000,000 7,000,000
Statutory reserve
At the commencement of the year 33,097,099 27,355,118
Add: Transfer from Profit and Loss Account 54,127,950 5,741,981
87,225,049 33,097,099
Balance in Profit and Loss Account 216,511,798 -
450,365,028 64,713,766
Spandana Annual Report 2007-08 61
Notes:
1. Cash and cash equivalents comprise: 31 March 2008 31 March 2007
Cash on hand 49,588,479 33,684,393
Balances in
Current accounts 205,377,996 178,531,744
Deposit accounts 757,649,291 235,799,957
1,012,615,766 448,016,094
As per our report attached
for BSR & Company For K.V.R Subba Rao & Co for Spandana Sphoorty Financial LimitedChartered Accountants Chartered Accountants (formerly Spandana Sphoorty
Innovative Financial Services Limited)
Sd/- Sd/- Sd/-
Zubin Shekary Managing Director Director
Partner
Membership No.: 48814
Hyderabad Sd/-
02, July 2008 Company Secretary
Spandana Sphoorty Financial Limited(formerly Spandana Sphoorty Innovative Financial Services Limited)
(All amounts in Indian rupees, except share data)
Schedules to the Accounts
Schedule 1
Share capital 31 March 2008 31 March 2007
Authorised
10,000,000 Equity Shares of Rs. 10/- each 100,000,000 100,000,000
40,000,000 Preference Shares of Rs. 10/- each 400,000,000 -
Previous Year - 10,000,000 Equity Shares of Rs. 10/- each
Issued, subscribed and paid-up
9,839,051 Equity shares (Previous years 8,631,000)
of Rs. 10- each fully paid up (includes 1,208,051
Equity shares of Rs. 10/- issued during
the current year 2007-08) 98,390,510 8,631,000
33,516,041 Compulsorily Convertible Preference Shares
Rs. 10- each fully paid up 335,160,410 -
433,550,920 86,310,000
Schedule 2
Reserves and surplus 31 March 2008 31 March 2007
General reserve
At the commencement of the year 24,616,667 3,218,491
Less: Gratuity Provision (Transition) 1,336,011
Add: Transfer from Profit and Loss Account - 21,398,176
23,280,656 24,616,667
Securities Premium Reserve
Share Premium (Issue of Compulsorily
Convertiable Preferance Shares) 127,884,279 -
Less: Share issue expenses 11,536,754
116,347,525 -
Capital reserve
Grant received from SIDBI 7,000,000 7,000,000
Statutory reserve
At the commencement of the year 33,097,099 27,355,118
Add: Transfer from Profit and Loss Account 54,127,950 5,741,981
87,225,049 33,097,099
Balance in Profit and Loss Account 216,511,798 -
450,365,028 64,713,766
Spandana Annual Report 2007-08 63
Schedule 3
Secured Loans 31 March 2008 31 March 2007
Term Loans
From Banks (Secured by Book Debts and Cash Collateral )
ING Vysya Bank 783,674,892 716,458,256
ICICI Bank 600,000,000 -
Indian Overseas Bank 569,051,883 682,154,008
Punjab and Sind Bank 486,110,000 -
IDBI Bank 480,000,000 200,000,000
HDFC Bank 334,160,119 292,500,000
YES Bank 225,000,000 50,000,000
AXIS Bank 200,000,000 -
Bank of Rajasthan 140,000,000 -
Karnataka Bank 96,814,042 -
Standard Chartered Bank 40,000,000 -
BNP Paribas 37,500,000 -
HSBC Bank - 35,000,000
3,992,310,936 1,976,112,264
From others (Secured by Book Debts)
Small Industries Development Bank of India (SIDBI) 286,472,400 703,383,200
Maanaveeya Holdings and Investments Pvt. Ltd. 280,000,000 -
Friends of 'WWB, India 118,888,879 71,805,555
685,361,279 775,188,755
Other Loans
HDFC Bank, Cash Credit 48,281,158 -
4,725,953,373 2,751,301,019
Schedule 4 "See page 66"
Schedule 5
Investments in Subsidiaries (Unquoted) 31 March 2008 31 March 2007
631,449 Equity shares (FV Rs.10)
in M G Brothers Finance Limited 7,912,685 -
503,000 Equity shares (FV Rs.10) (Previous years 503,000)
in Spandana Sphoorty Marketing Services Private Limited 5,533,000 5,533,000
80,000 Equity shares (FV Rs.10) (Previous years 80,000)
in Spandana Sphoorty Chit Funds Private Limited 800,000 800,000
14,245,685 6,333,000
Schedule 6
Cash and bank balances 31 March 2008 31 March 2007
Cash on hand 49,588,479 33,684,393
Balances with Scheduled banks
Current accounts 205,377,996 178,531,744
Deposit accounts * 757,649,291 235,799,957
*lien marked against term loans from banks
and in the form of cash colleteral for assigned loans
1,012,615,766 448,016,094
Schedule 7
Loans and advances 31 March 2008 31 March 2007
Opening Loan outstanding 3,916,014,766 2,891,963,111
Add: Loans disbursed during the Year 11,923,068,375 6,558,118,000
15,839,083,141 9,450,081,111
Less: Loans recovered during the year 8,603,865,431 5,344,467,365
Portfolio transferred (50,843,560) 59,830,060
Portfolio written off 5,119,547 129,768,920
8,558,141,418 5,534,066,345
Loans outstanding at the end of the year 7,280,941,722 3,916,014,766
Less: Managed portfolio 2,092,536,100 1,060,488,902
Loans and advances outstanding 5,220,816,063 2,855,525,864
Less: Additioanl Loan Recovery 338,132,312 157,203,666
4,882,683,751 2,698,322,198
Schedule 8
Other Current assets
Interest accrued but not due on loans 26,111,472 6,373,254
Interest accrued on Term Deposits 16,611,774 5,500,099
Income Tax Refund receivable 5,997,410 3,741,815
Rent deposits 9,091,331 3,704,958
Staff Loans 5,969,317 5,340,072
Tax Deducted at Source 3,345,553 970,801
Advance given to staff for expenses 550,512 407,194
Amount pending with court 320,000 320,000
Commission receivable from Western Union 80,889 32,926
Remittances receivable from Western Union 1,165,758 507,682
Fringe Benefit tax (Net) 58,912 166,746
Others 7,954,893 1,875,713
Total 77,257,822 28,941,259
Schedule 9
Current liabilities 31 March 2008 31 March 2007
Interest accrued but not due on borrowings 10,909,431 5,710,641
Amount transferrable to Bajaj Allianz 9,199,627 198,395
Tax Deducted at Source
Outstanding Expenses 23,019,956 18,567,965
Add Audit Fees
Other current liabilities 1,739,934 91,697
Security Deposits from borrowers - 60,989,195
Interest payable on security deposits - 7,399,262
44,868,948 92,957,155
Spandana Annual Report 2007-08 63
Schedule 3
Secured Loans 31 March 2008 31 March 2007
Term Loans
From Banks (Secured by Book Debts and Cash Collateral )
ING Vysya Bank 783,674,892 716,458,256
ICICI Bank 600,000,000 -
Indian Overseas Bank 569,051,883 682,154,008
Punjab and Sind Bank 486,110,000 -
IDBI Bank 480,000,000 200,000,000
HDFC Bank 334,160,119 292,500,000
YES Bank 225,000,000 50,000,000
AXIS Bank 200,000,000 -
Bank of Rajasthan 140,000,000 -
Karnataka Bank 96,814,042 -
Standard Chartered Bank 40,000,000 -
BNP Paribas 37,500,000 -
HSBC Bank - 35,000,000
3,992,310,936 1,976,112,264
From others (Secured by Book Debts)
Small Industries Development Bank of India (SIDBI) 286,472,400 703,383,200
Maanaveeya Holdings and Investments Pvt. Ltd. 280,000,000 -
Friends of 'WWB, India 118,888,879 71,805,555
685,361,279 775,188,755
Other Loans
HDFC Bank, Cash Credit 48,281,158 -
4,725,953,373 2,751,301,019
Schedule 4 "See page 66"
Schedule 5
Investments in Subsidiaries (Unquoted) 31 March 2008 31 March 2007
631,449 Equity shares (FV Rs.10)
in M G Brothers Finance Limited 7,912,685 -
503,000 Equity shares (FV Rs.10) (Previous years 503,000)
in Spandana Sphoorty Marketing Services Private Limited 5,533,000 5,533,000
80,000 Equity shares (FV Rs.10) (Previous years 80,000)
in Spandana Sphoorty Chit Funds Private Limited 800,000 800,000
14,245,685 6,333,000
Schedule 6
Cash and bank balances 31 March 2008 31 March 2007
Cash on hand 49,588,479 33,684,393
Balances with Scheduled banks
Current accounts 205,377,996 178,531,744
Deposit accounts * 757,649,291 235,799,957
*lien marked against term loans from banks
and in the form of cash colleteral for assigned loans
1,012,615,766 448,016,094
Schedule 7
Loans and advances 31 March 2008 31 March 2007
Opening Loan outstanding 3,916,014,766 2,891,963,111
Add: Loans disbursed during the Year 11,923,068,375 6,558,118,000
15,839,083,141 9,450,081,111
Less: Loans recovered during the year 8,603,865,431 5,344,467,365
Portfolio transferred (50,843,560) 59,830,060
Portfolio written off 5,119,547 129,768,920
8,558,141,418 5,534,066,345
Loans outstanding at the end of the year 7,280,941,722 3,916,014,766
Less: Managed portfolio 2,092,536,100 1,060,488,902
Loans and advances outstanding 5,220,816,063 2,855,525,864
Less: Additioanl Loan Recovery 338,132,312 157,203,666
4,882,683,751 2,698,322,198
Schedule 8
Other Current assets
Interest accrued but not due on loans 26,111,472 6,373,254
Interest accrued on Term Deposits 16,611,774 5,500,099
Income Tax Refund receivable 5,997,410 3,741,815
Rent deposits 9,091,331 3,704,958
Staff Loans 5,969,317 5,340,072
Tax Deducted at Source 3,345,553 970,801
Advance given to staff for expenses 550,512 407,194
Amount pending with court 320,000 320,000
Commission receivable from Western Union 80,889 32,926
Remittances receivable from Western Union 1,165,758 507,682
Fringe Benefit tax (Net) 58,912 166,746
Others 7,954,893 1,875,713
Total 77,257,822 28,941,259
Schedule 9
Current liabilities 31 March 2008 31 March 2007
Interest accrued but not due on borrowings 10,909,431 5,710,641
Amount transferrable to Bajaj Allianz 9,199,627 198,395
Tax Deducted at Source
Outstanding Expenses 23,019,956 18,567,965
Add Audit Fees
Other current liabilities 1,739,934 91,697
Security Deposits from borrowers - 60,989,195
Interest payable on security deposits - 7,399,262
44,868,948 92,957,155
Spandana Annual Report 2007-08 65
Schedule 10
Provisions 31 March 2008 31 March 2007
Provision for taxation [net of advance tax Rs. 95,000,000 ] 92,531,050 13,873,405
Provision on Standard Assets 70,178,504 434,484
Provision for gratuity 4,588,907 -
167,298,461 14,307,889
Schedule 11
Miscellaneous expenditure 31 March 2008 31 March 2007
(to the extent not written-off or adjusted)
Opening Balance 295,153 490,305
Additions during the year - -
Less:Amortised during the year 195,152 195,152
100,001 295,153
Schedule 12
Income from operations 31 March 2008 31 March 2007
Interest income from portfolio loans 1,083,797,693 444,594,143
Group registration fees 50,015,920 24,846,420
1,133,813,613 469,440,563
Schedule 13
Other income 31 March 2008 31 March 2007
Interest on fixed deposits 17,039,215 4,742,180
[Tax deducted at source Rs. 3,210,350
(Previous year Rs. 962,254)]
Recovery from loans written off 40,724,694 20,406,693
Insurance facilitation charges 7,054,316 37,431
Commission on remittances 449,145 152,950
Income from asset assignment 67,646,604 -
Profit on sale of vehicles 143,485 25,473
Interest accrued on security deposits 5,009,733 -
Income from mutual fund investments 1,348,100 315,852
Miscellaneous income 1,267,592 860,112
140,682,883 26,540,691
Schedule 14
Financial Expenses 31 March 2008 31 March 2007
Interest
on term loans from banks 299,896,030 42,165,529
on term loans from financial institutions 77,030,893 65,910,311
on other loans 17,087,224 15,182,020
Processing fee and other charges 22,513,178 24,743,751
416,527,325 148,001,612
Schedule 15
Personnel expenses 31 March 2008 31 March 2007
Salaries, wages and bonus 210,635,752 128,170,067
Contribution to provident and other funds 8,346,615 6,823,255
Leave encashment 220,680 229,795
Gratuity 2,564,954 -
Staff welfare 11,201,483 8,001,588
232,969,484 143,224,705
Schedule 16
Operating and other expenses 31 March 2008 31 March 2007
Death Relief and Rehabilitation Assistance 24,614,674 24,217,286
Bank Charges 8,285,992 6,489,443
Office Rent and Electricity 19,990,824 12,344,584
Printing & Stationery 9,745,022 6,135,297
Franking charges - 5,530,631
Certification
Administration and other expenses 8,042,072 2,804,375
Postage & Telephone 2,922,739 2,139,755
Staff Recruitment and Training 2,820,674 1,977,219
Travelling Expenses 1,790,986 1,250,339
Rates & Taxes 534,644 322,495
Computers and Network maintenance 305,812 267,970
Professional charges 597,440 1,992,078
Sitting fees to Independent Directors 30,000 30,000
Others 264,129 585,179
Audit Fees 1,151,690 836,520
Certification
81,096,698 66,923,170
Schedule 17
Provisions and write offs 31 March 2008 31 March 2007
Standard Assets provision 69,744,020 7,910
Bad Debts written off 5,119,547 88,719,707
Total 74,863,567 88,727,617
Spandana Annual Report 2007-08 65
Schedule 10
Provisions 31 March 2008 31 March 2007
Provision for taxation [net of advance tax Rs. 95,000,000 ] 92,531,050 13,873,405
Provision on Standard Assets 70,178,504 434,484
Provision for gratuity 4,588,907 -
167,298,461 14,307,889
Schedule 11
Miscellaneous expenditure 31 March 2008 31 March 2007
(to the extent not written-off or adjusted)
Opening Balance 295,153 490,305
Additions during the year - -
Less:Amortised during the year 195,152 195,152
100,001 295,153
Schedule 12
Income from operations 31 March 2008 31 March 2007
Interest income from portfolio loans 1,083,797,693 444,594,143
Group registration fees 50,015,920 24,846,420
1,133,813,613 469,440,563
Schedule 13
Other income 31 March 2008 31 March 2007
Interest on fixed deposits 17,039,215 4,742,180
[Tax deducted at source Rs. 3,210,350
(Previous year Rs. 962,254)]
Recovery from loans written off 40,724,694 20,406,693
Insurance facilitation charges 7,054,316 37,431
Commission on remittances 449,145 152,950
Income from asset assignment 67,646,604 -
Profit on sale of vehicles 143,485 25,473
Interest accrued on security deposits 5,009,733 -
Income from mutual fund investments 1,348,100 315,852
Miscellaneous income 1,267,592 860,112
140,682,883 26,540,691
Schedule 14
Financial Expenses 31 March 2008 31 March 2007
Interest
on term loans from banks 299,896,030 42,165,529
on term loans from financial institutions 77,030,893 65,910,311
on other loans 17,087,224 15,182,020
Processing fee and other charges 22,513,178 24,743,751
416,527,325 148,001,612
Schedule 15
Personnel expenses 31 March 2008 31 March 2007
Salaries, wages and bonus 210,635,752 128,170,067
Contribution to provident and other funds 8,346,615 6,823,255
Leave encashment 220,680 229,795
Gratuity 2,564,954 -
Staff welfare 11,201,483 8,001,588
232,969,484 143,224,705
Schedule 16
Operating and other expenses 31 March 2008 31 March 2007
Death Relief and Rehabilitation Assistance 24,614,674 24,217,286
Bank Charges 8,285,992 6,489,443
Office Rent and Electricity 19,990,824 12,344,584
Printing & Stationery 9,745,022 6,135,297
Franking charges - 5,530,631
Certification
Administration and other expenses 8,042,072 2,804,375
Postage & Telephone 2,922,739 2,139,755
Staff Recruitment and Training 2,820,674 1,977,219
Travelling Expenses 1,790,986 1,250,339
Rates & Taxes 534,644 322,495
Computers and Network maintenance 305,812 267,970
Professional charges 597,440 1,992,078
Sitting fees to Independent Directors 30,000 30,000
Others 264,129 585,179
Audit Fees 1,151,690 836,520
Certification
81,096,698 66,923,170
Schedule 17
Provisions and write offs 31 March 2008 31 March 2007
Standard Assets provision 69,744,020 7,910
Bad Debts written off 5,119,547 88,719,707
Total 74,863,567 88,727,617
Spandana Annual Report 2007-08 67
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Spandana Sphoorty Financial Limited
(formerly Spandana Sphoorty Innovative Financial Services Limited)
Schedules to the Accounts (continued)
Background
Spandana Sphoorty Financial Limited (formerly Spandana Sphoorty Innovative Financial Services Limited) (“SSFL” or “the Company”) was incorporated on 10 March 2003 as a limited Company. The Company is engaged in the business of micro finance lending activities, following group lending methodology and providing small value unsecured group loans to the extent of Rs 15,000 to poor people and lower income group in urban and rural areas. The tenure of these loans is generally spread over fifty weeks; other services offered to the members of the Company include facilitating remittances and insurance. The Company also provides individual loans, small business loans, diary loans and tractor loans. The Company also acts as agent to manage group loans given on behalf of the Banks.
Schedule 18: Significant accounting policies
1. Basis of preparation of financial statements
The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting in accordance with the Generally Accepted Accounting Principles (GAAP) in India and comply with the mandatory Accounting Standards ('AS') issued by the Institute of Chartered Accountants of India ('ICAI'), the relevant provisions of the Companies Act, 1956 ('the Act') and the relevant guidelines of Reserve Bank of India ('RBI') to the extent applicable to a non banking finance company. The financial statements are presented in Indian Rupees rounded off to the nearest rupee.
2. Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
3. Revenue Recognition
Interest income on loan portfolio (including interest on managed portfolio) is recognized in the profit and loss account on accrual basis using effective interest method except in the case of non-performing assets (“NPA's”) where it is recognized, upon realization, as per the prudential norms of RBI.
Group membership fee that are non-refundable in nature is recognized on upfront basis.
Interest on term deposits has been accrued on the time proportion basis, using the underlying interest rate.
Dividend income is accounted when the right to receive the dividend is established.
4. Assignment of certain Loan portfolio
During the year Company has entered into Assignment agreement with scheduled banks in respect of certain loan contracts, whereby underlying pool of Assets are transferred to these banks for a lump sum consideration. During the year, the company has assigned loan portfolio having book value of INR 864.3 million to Scheduled Bank. The Company has received a total consideration of INR 932.0 million arising out of such sale of loans through direct assignment. The difference between the consideration received and the book value of the loan portfolio assigned amounting to INR 67.7 millions has been accounted as a gain in the profit and loss account in the current year, as all the right to benefits specified in the contract have been unconditionally and irrevocably transferred to the Banks without any recourse obligation.
5. Classification of loan portfolio and provisioning policy
All loan exposures are classified as per RBI guidelines, into performing and non-performing assets (“NPAs”). Further, NPAs are classified into sub-standard, doubtful and loss assets in accordance with the extant Non-Banking Financial (Non-Deposit Accepting and Holding) Companies prudential Norms (Reserve Bank) Direction, 2007. The provisioning rates and classification criteria for NPAs, which are not lower than the rates prescribed in RBI guidelines, are given below:
Spandana Annual Report 2007-08 67
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(formerly Spandana Sphoorty Innovative Financial Services Limited)
Schedules to the Accounts (continued)
Background
Spandana Sphoorty Financial Limited (formerly Spandana Sphoorty Innovative Financial Services Limited) (“SSFL” or “the Company”) was incorporated on 10 March 2003 as a limited Company. The Company is engaged in the business of micro finance lending activities, following group lending methodology and providing small value unsecured group loans to the extent of Rs 15,000 to poor people and lower income group in urban and rural areas. The tenure of these loans is generally spread over fifty weeks; other services offered to the members of the Company include facilitating remittances and insurance. The Company also provides individual loans, small business loans, diary loans and tractor loans. The Company also acts as agent to manage group loans given on behalf of the Banks.
Schedule 18: Significant accounting policies
1. Basis of preparation of financial statements
The financial statements have been prepared and presented under the historical cost convention on the accrual basis of accounting in accordance with the Generally Accepted Accounting Principles (GAAP) in India and comply with the mandatory Accounting Standards ('AS') issued by the Institute of Chartered Accountants of India ('ICAI'), the relevant provisions of the Companies Act, 1956 ('the Act') and the relevant guidelines of Reserve Bank of India ('RBI') to the extent applicable to a non banking finance company. The financial statements are presented in Indian Rupees rounded off to the nearest rupee.
2. Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities on the date of the financial statements. Actual results could differ from those estimates. Any revision to accounting estimates is recognized prospectively in current and future periods.
3. Revenue Recognition
Interest income on loan portfolio (including interest on managed portfolio) is recognized in the profit and loss account on accrual basis using effective interest method except in the case of non-performing assets (“NPA's”) where it is recognized, upon realization, as per the prudential norms of RBI.
Group membership fee that are non-refundable in nature is recognized on upfront basis.
Interest on term deposits has been accrued on the time proportion basis, using the underlying interest rate.
Dividend income is accounted when the right to receive the dividend is established.
4. Assignment of certain Loan portfolio
During the year Company has entered into Assignment agreement with scheduled banks in respect of certain loan contracts, whereby underlying pool of Assets are transferred to these banks for a lump sum consideration. During the year, the company has assigned loan portfolio having book value of INR 864.3 million to Scheduled Bank. The Company has received a total consideration of INR 932.0 million arising out of such sale of loans through direct assignment. The difference between the consideration received and the book value of the loan portfolio assigned amounting to INR 67.7 millions has been accounted as a gain in the profit and loss account in the current year, as all the right to benefits specified in the contract have been unconditionally and irrevocably transferred to the Banks without any recourse obligation.
5. Classification of loan portfolio and provisioning policy
All loan exposures are classified as per RBI guidelines, into performing and non-performing assets (“NPAs”). Further, NPAs are classified into sub-standard, doubtful and loss assets in accordance with the extant Non-Banking Financial (Non-Deposit Accepting and Holding) Companies prudential Norms (Reserve Bank) Direction, 2007. The provisioning rates and classification criteria for NPAs, which are not lower than the rates prescribed in RBI guidelines, are given below:
Deferred tax
Deferred tax charge or benefit reflects the tax effects of timing differences between accounting income and taxable income for the year. The deferred tax charge or benefit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantially enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognized only if there is a virtual certainty of realization of such assets. Deferred tax assets are reviewed at each balance sheet date and written-down or written-up to reflect the amount that is reasonably/virtually certain to be realised.
Fringe benefit tax
Consequent to the introduction of Fringe Benefit Tax (“FBT”) effective 1 April 2005, the Company provides for and discloses the FBT in accordance with the provisions of Section 115 WC of the Income Tax Act, 1961 and guidance note on FBT issued by the ICAI.
10. Earnings per share
The basic and diluted earnings per share ('EPS') is computed by dividing the net profit after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
11. Provisions and contingent liabilities
The Company creates a provision when there is a present obligation as a result of an obligating event that probably requires an outflow of resources and a reliable estimate can be made of the amount for the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation that the likelihood of outflow of resource is remote, no provision or disclosure is made.
12. Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that any assets forming part of its cash generating units may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to 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 reassessed recoverable amount subject to a maximum of depreciated historical cost.
Schedule 19: Notes to the accounts
1. During the year, Company has changed its method of accounting interest income from a flat interest rate method to an effective interest rate based on the internal rate of return as the Company believes that the change results in a more appropriate presentation of the underlying terms of the arrangement with the borrowers. The change in method of accounting has been effected to bring the financial statements in compliance with the requirement of Accounting Standard 9 “Revenue Recognition”. On account of such change the current year interest income has increased by Rs. 32,410,441.
Spandana Annual Report 2007-08 69
Past Classification General Individual Small Tractor Agri- Dairy Due days Loan Loan Business Loan Family Loan
Loan Loan
1 to 30 Standard 1% 1% 50% 1% 1% 1%
31 to 60 Sub standard 50% 1% 100% 1% 25% 50%
61 to 90 Sub standard 50% 25% 100% 20% 50% 50%
91 to 120 Sub standard 100% 50% 100% 40% 100% 100%
> 120 Doubtful 100% 100% 100% 100% 100% 100%
In addition to the specific provision on NPAs, the Company maintains general provision of 1% on outstanding balance of standard assets. The Company has not rescheduled/ restructured any loans during the year.
6. Fixed assets and depreciation
Fixed assets are carried at cost of acquisition less accumulated depreciation. The cost of fixed assets comprises the purchase price, taxes, duties, freight (net of rebates and discounts) and any other directly attributable costs of bringing the assets to their working condition for their intended use. Borrowing costs directly attributable to acquisition of those fixed assets which necessarily take a substantial period of time to get ready for their intended use are capitalized.
Advances paid towards the acquisition of fixed assets outstanding at each balance sheet date and the cost of fixed assets acquired but not ready for their intended use before such date are disclosed as capital work-in-progress.
Depreciation on fixed assets is provided using the written down method as per the rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956. Depreciation is calculated on a pro-rata basis from / upto the month the assets are purchased / sold.
7. Investments
Investments that are readily realizable and intended to be held to the period of not more than a year are classified as current investments. Current investments are carried at lower of cost and fair value determined on individual investment basis. All other investments are classified as long term investments. Long term investments are carried at cost. Provision is recognized for any diminution in the value of investments, other than temporary.
8. Employee benefits
Contributions to gratuity fund (a defined benefit plan), determined by independent actuary at the balance sheet date are charged to profit and loss account.
Contributions payable to the recognized provident fund which is defined contribution schemes, is charged to the profit and loss account. All actuarial gains and losses arising during the year are recognized in the profit and loss account.
The service rules of the Company do not provide for the carry forward of the accumulated leave balance.
9. Income Tax
Income tax expense comprises current tax, deferred tax and fringe benefit tax.
Current tax
The current charge for income taxes is calculated in accordance with the relevant tax regulations applicable to the Company.
Deferred tax
Deferred tax charge or benefit reflects the tax effects of timing differences between accounting income and taxable income for the year. The deferred tax charge or benefit and the corresponding deferred tax liabilities or assets are recognized using the tax rates that have been enacted or substantially enacted by the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future; however, where there is unabsorbed depreciation or carry forward of losses, deferred tax assets are recognized only if there is a virtual certainty of realization of such assets. Deferred tax assets are reviewed at each balance sheet date and written-down or written-up to reflect the amount that is reasonably/virtually certain to be realised.
Fringe benefit tax
Consequent to the introduction of Fringe Benefit Tax (“FBT”) effective 1 April 2005, the Company provides for and discloses the FBT in accordance with the provisions of Section 115 WC of the Income Tax Act, 1961 and guidance note on FBT issued by the ICAI.
10. Earnings per share
The basic and diluted earnings per share ('EPS') is computed by dividing the net profit after tax for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the year.
11. Provisions and contingent liabilities
The Company creates a provision when there is a present obligation as a result of an obligating event that probably requires an outflow of resources and a reliable estimate can be made of the amount for the obligation. A disclosure for a contingent liability is made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation that the likelihood of outflow of resource is remote, no provision or disclosure is made.
12. Impairment of assets
The Company assesses at each balance sheet date whether there is any indication that any assets forming part of its cash generating units may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset or the recoverable amount of the cash generating unit to 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 reassessed recoverable amount subject to a maximum of depreciated historical cost.
Schedule 19: Notes to the accounts
1. During the year, Company has changed its method of accounting interest income from a flat interest rate method to an effective interest rate based on the internal rate of return as the Company believes that the change results in a more appropriate presentation of the underlying terms of the arrangement with the borrowers. The change in method of accounting has been effected to bring the financial statements in compliance with the requirement of Accounting Standard 9 “Revenue Recognition”. On account of such change the current year interest income has increased by Rs. 32,410,441.
Spandana Annual Report 2007-08 69
Past Classification General Individual Small Tractor Agri- Dairy Due days Loan Loan Business Loan Family Loan
Loan Loan
1 to 30 Standard 1% 1% 50% 1% 1% 1%
31 to 60 Sub standard 50% 1% 100% 1% 25% 50%
61 to 90 Sub standard 50% 25% 100% 20% 50% 50%
91 to 120 Sub standard 100% 50% 100% 40% 100% 100%
> 120 Doubtful 100% 100% 100% 100% 100% 100%
In addition to the specific provision on NPAs, the Company maintains general provision of 1% on outstanding balance of standard assets. The Company has not rescheduled/ restructured any loans during the year.
6. Fixed assets and depreciation
Fixed assets are carried at cost of acquisition less accumulated depreciation. The cost of fixed assets comprises the purchase price, taxes, duties, freight (net of rebates and discounts) and any other directly attributable costs of bringing the assets to their working condition for their intended use. Borrowing costs directly attributable to acquisition of those fixed assets which necessarily take a substantial period of time to get ready for their intended use are capitalized.
Advances paid towards the acquisition of fixed assets outstanding at each balance sheet date and the cost of fixed assets acquired but not ready for their intended use before such date are disclosed as capital work-in-progress.
Depreciation on fixed assets is provided using the written down method as per the rates of depreciation prescribed in Schedule XIV to the Companies Act, 1956. Depreciation is calculated on a pro-rata basis from / upto the month the assets are purchased / sold.
7. Investments
Investments that are readily realizable and intended to be held to the period of not more than a year are classified as current investments. Current investments are carried at lower of cost and fair value determined on individual investment basis. All other investments are classified as long term investments. Long term investments are carried at cost. Provision is recognized for any diminution in the value of investments, other than temporary.
8. Employee benefits
Contributions to gratuity fund (a defined benefit plan), determined by independent actuary at the balance sheet date are charged to profit and loss account.
Contributions payable to the recognized provident fund which is defined contribution schemes, is charged to the profit and loss account. All actuarial gains and losses arising during the year are recognized in the profit and loss account.
The service rules of the Company do not provide for the carry forward of the accumulated leave balance.
9. Income Tax
Income tax expense comprises current tax, deferred tax and fringe benefit tax.
Current tax
The current charge for income taxes is calculated in accordance with the relevant tax regulations applicable to the Company.
5. Segmental Reporting
The company operates in a single reportable segment i.e. lending to members, which have similar risk and returns for the purpose of AS-17 on 'segmental reporting' issued by ICAI. The Company does not have any reportable geographical segment.
6. Managerial remuneration :(Amount in Rs)
Particulars 31 March 2008 31 March 2007
Salary and allowances 3,291,893 3,656,809
Contribution to provident and other funds 18,720 18,720
Total 3,310,513 3,675,529
7. Legal and professional charges include auditors' remuneration as given below:
(Amount in Rs)
Particulars For the year ended For the year ended 31 March 2008 31 March 2007
Audit fees 926,970 674,160
Tax audit fees 224,720 112,360
Reimbursement of expenses - 50,000
Spandana Annual Report 2007-08 71
1. Provisions on Non Performing Assets (NPAs):
(Amount in Rs)
3. Contingent liability not provided for:
Guarantees given on managed and assigned portfolio
Sl. No. Name of the Banks Sanctioned Portfolio FLDG (%) Contingent Links Outstanding Liability
1 ICICI Bank (Managed Portfolio) 2,000,000,000 323,612,260, 6 - 8% 20,112,273
2 ICICI Bank 931,952,064 864,305,460 10% 93,195,207
3 HDFC Bank 700,001,240 404,816,720 10% 77,000,136
4 Centurion Bank of Punjab 500,000,000 399,801,660 8% 40,000,000
5 Development Credit Bank 100,000,000 100,000,000 10% 10,000,000
Total 4,231,953,304 2,092,536,100 240,307,616
Other contingent liabilities not acknowledged as debt by the Company is Rs 83,620,910.
4. Deferred Tax Liability and Provision for Income Taxes:(Amount in Rs)
For the year ended 31 March 2008 31 March 2007
Current tax 184,287,240 13,873,405
Deferred tax Asset -
Gratuity 687,942
Deferred tax Liability
Depreciation 3,499,119 2,244,139
Deferred tax Net 2,811,177 2,244,139
Fringe benefit tax 221,524 301,849
Asset classification Loan Portfolio Provision made Written off Balance Active Loans (in numbers)
Standard Portfolio 5,219,998,179 69,744,020 - 5,219,998,179 1,254,882
Sub Standard Portfolio 5,937,431 5,119,547 5,119,547 817,884 3,288
Doubtful Portfolio - - - -
Loss Asset - - - -
Total 5,225,935,610 74,812,371 5,119,547 5,220,816,062 1,258,170
5. Segmental Reporting
The company operates in a single reportable segment i.e. lending to members, which have similar risk and returns for the purpose of AS-17 on 'segmental reporting' issued by ICAI. The Company does not have any reportable geographical segment.
6. Managerial remuneration :(Amount in Rs)
Particulars 31 March 2008 31 March 2007
Salary and allowances 3,291,893 3,656,809
Contribution to provident and other funds 18,720 18,720
Total 3,310,513 3,675,529
7. Legal and professional charges include auditors' remuneration as given below:
(Amount in Rs)
Particulars For the year ended For the year ended 31 March 2008 31 March 2007
Audit fees 926,970 674,160
Tax audit fees 224,720 112,360
Reimbursement of expenses - 50,000
Spandana Annual Report 2007-08 71
1. Provisions on Non Performing Assets (NPAs):
(Amount in Rs)
3. Contingent liability not provided for:
Guarantees given on managed and assigned portfolio
Sl. No. Name of the Banks Sanctioned Portfolio FLDG (%) Contingent Links Outstanding Liability
1 ICICI Bank (Managed Portfolio) 2,000,000,000 323,612,260, 6 - 8% 20,112,273
2 ICICI Bank 931,952,064 864,305,460 10% 93,195,207
3 HDFC Bank 700,001,240 404,816,720 10% 77,000,136
4 Centurion Bank of Punjab 500,000,000 399,801,660 8% 40,000,000
5 Development Credit Bank 100,000,000 100,000,000 10% 10,000,000
Total 4,231,953,304 2,092,536,100 240,307,616
Other contingent liabilities not acknowledged as debt by the Company is Rs 83,620,910.
4. Deferred Tax Liability and Provision for Income Taxes:(Amount in Rs)
For the year ended 31 March 2008 31 March 2007
Current tax 184,287,240 13,873,405
Deferred tax Asset -
Gratuity 687,942
Deferred tax Liability
Depreciation 3,499,119 2,244,139
Deferred tax Net 2,811,177 2,244,139
Fringe benefit tax 221,524 301,849
Asset classification Loan Portfolio Provision made Written off Balance Active Loans (in numbers)
Standard Portfolio 5,219,998,179 69,744,020 - 5,219,998,179 1,254,882
Sub Standard Portfolio 5,937,431 5,119,547 5,119,547 817,884 3,288
Doubtful Portfolio - - - -
Loss Asset - - - -
Total 5,225,935,610 74,812,371 5,119,547 5,220,816,062 1,258,170
B) Other related parties with whom transactions have taken place during the year
Sl. Name of the Relation- Nature of 2007 - 08 2006 - 07No. transacting ship transactions
party Volume of Amount Volume of Amount transactions payable / transactions payable /
during (receivable) during (receivable) the year as at the year as at
31 March 2008 31 March 2008 1. MV Narendra Director Personal Loan 49,975 Nil 69,000 49,975
Prasad
9. Earnings Per Share (EPS)(Amount in Rs)
Particulars 31 March 2008 31 March 2007
EarningsProfit after tax 270,639,748 22,283,988
Shares Weighted average number of 9,435,264 8,631,000equity shares outstanding during the year
Basic EPS of par value of Rs.10 28.68 2.58
The Company has during the year issued 33,516,041 Compulsorily convertible preference shares which are convertible at a conversion price to be mutually agreed between the parties. Since the conversion price of these shares has not been fixed so far, the dilutive effect of the preference shares and its effect on the earnings per share is not determined.
10. Break up of loan portfolio
Loans and advances 31 March 2008 31 March 2007
Opening Loan outstanding 3,916,014,766 2,891,963,111
Add: Loans disbursed during the Year 11,923,068,375 6,558,118,000 15,839,083,141 9,450,081,111
Less: Loans recovered during the year 8,571,454,990 5,344,467,365
Portfolio transferred (50,843,560) 59,830,060
Portfolio written off 5,119,547 129,768,920 8,525,730,977 5,534,066,345
Loans outstanding at the end of the year 7,313,352,164 3,916,014,766
Less: Assigned portfolio 2,092,536,100 1,060,488,902
Balance 5,220,816,064 2,855,525,864
Spandana Annual Report 2007-08 73
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rm
3,0
76
,19
5 (
Dr)
Nil
13
5,4
01
,98
7 (
Dr)
Nil
Mu
tual
loan
3,0
76
,19
5 (
Cr)
NIl
13
5,4
01
,98
7 (
Cr)
Nil
Be
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fit
Tru
stS
ub
ord
inat
ed
loan
50
,00
0,0
00
(C
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0,0
00
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Inte
rest
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loan
s2
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9,4
83
35
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42
3S
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iary
Sh
ort
te
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an5
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5,0
00
(D
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0,9
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(Dr)
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Mar
keti
ng
5
,52
5,0
00
(C
r)3
,33
0,9
05
(C
r)S
erv
ice
sP
riva
te L
imit
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Inte
rest
on
loan
s1
45
,79
16
09
05
4
Sp
and
ana
Su
bsi
dia
ryS
ho
rt t
erm
loan
1,8
00
,00
0 (
Dr)
Nil
60
4,3
92
(Dr)
Nil
Sp
ho
ort
hy
1,8
00
,00
0 (
Cr)
60
4,3
92
(Cr)
Ch
it F
un
dP
riva
te L
imit
ed
Inte
rest
on
loan
s4
2,5
30
55
60
5
Sp
and
ana
Inve
sto
rS
ho
rt t
erm
loan
9,1
50
,00
0 (
Dr)
Nil
6,6
19
,88
2(D
r)N
ilE
mp
loye
e9
,15
0,0
00
(C
r)6
,61
9,8
82
(Cr)
We
lfar
e T
rust
Inte
rest
on
loan
s2
58
,48
36
1,9
48
6
M G
Bro
the
rs
Su
bsi
dia
ryS
ho
rt t
erm
loan
5,9
90
,00
0 (
Dr)
Nil
Nil
Nil
Fin
ance
Lim
ite
d5
,99
0,0
00
(C
r)
Inte
rest
on
loan
s2
53
,57
8
B) Other related parties with whom transactions have taken place during the year
Sl. Name of the Relation- Nature of 2007 - 08 2006 - 07No. transacting ship transactions
party Volume of Amount Volume of Amount transactions payable / transactions payable /
during (receivable) during (receivable) the year as at the year as at
31 March 2008 31 March 2008 1. MV Narendra Director Personal Loan 49,975 Nil 69,000 49,975
Prasad
9. Earnings Per Share (EPS)(Amount in Rs)
Particulars 31 March 2008 31 March 2007
EarningsProfit after tax 270,639,748 22,283,988
Shares Weighted average number of 9,435,264 8,631,000equity shares outstanding during the year
Basic EPS of par value of Rs.10 28.68 2.58
The Company has during the year issued 33,516,041 Compulsorily convertible preference shares which are convertible at a conversion price to be mutually agreed between the parties. Since the conversion price of these shares has not been fixed so far, the dilutive effect of the preference shares and its effect on the earnings per share is not determined.
10. Break up of loan portfolio
Loans and advances 31 March 2008 31 March 2007
Opening Loan outstanding 3,916,014,766 2,891,963,111
Add: Loans disbursed during the Year 11,923,068,375 6,558,118,000 15,839,083,141 9,450,081,111
Less: Loans recovered during the year 8,571,454,990 5,344,467,365
Portfolio transferred (50,843,560) 59,830,060
Portfolio written off 5,119,547 129,768,920 8,525,730,977 5,534,066,345
Loans outstanding at the end of the year 7,313,352,164 3,916,014,766
Less: Assigned portfolio 2,092,536,100 1,060,488,902
Balance 5,220,816,064 2,855,525,864
Spandana Annual Report 2007-08 73
8.
Re
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(C
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16
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loan
1,8
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60
4,3
92
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Sp
ho
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1,8
00
,00
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Cr)
60
4,3
92
(Cr)
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Inte
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on
loan
s2
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36
1,9
48
6
M G
Bro
the
rs
Su
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ho
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loan
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Fin
ance
Lim
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0,0
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Inte
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loan
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,57
8
Change in the fair value of plan assets
Particulars For the year ended 31 March 2008
Balance at April 1, 2007 -
Expected return on plan assets -
Actuarial gains -
Employer contributions -
Benefits paid -
Balance at March 31, 2008 Nil
Amount recognized in Balance Sheet
Particulars For the year ended 31 March 2008
Present value of funded obligations 4,588,907
Fair value on plan assets -
Net liability/(asset) 4,588,907
Amounts in the balance sheet For the year ended 31 March 2008
Provisions 4,588,907
Net liability/(asset) 4,588,907
Expense recognized in statement of profit and loss account
Particulars For the year ended 31 March 2008
Current service cost 2,564,954
Interest on defined benefit obligation 161,916
Expected return on plan assets -
Net actuarial loss/(gain) recognized in the year (161,916)
Amount included in “Personnel expense” 2,564,954
Asset Information
Category of Assets As at 31 March 2008
Insurer managed funds Nil
Total Nil
Summary of Actuarial Assumptions
Particulars For the year ended 31 March 2008
Discount Rate 8%
Expected return on plan assets 8%
Salary escalation rate 5% p.a.
Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.
Expected rate of return on plan assets: This is based on the expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.
Salary escalation rate: The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors.
Spandana Annual Report 2007-08 75
11. Security Deposits and Additional loan recovery:
Security Deposits:
stDuring the year the Company has repaid the entire balance of Security Deposit outstanding as on 31 March
2007. The details of repayment/ adjustment of Security Deposit are given below:
For the year ended 31 March 2008 31 March 2007
Opening balance 60,989,195 202,230,238
Add: Collected during the year 25,009,313
Less: Repaid during the year 60,989,195 166,250,356
Closing balance - 60,989,195
Additional Loan Recovery (ALR):
The Company has accepted advance loan repayments over and above the installment due from borrowers and
the same is accounted for. In case of instances where the borrower fails to pay or falls short of loan installment,
the same is adjusted against the installment.
For the year ended 31 March 2008 31 March 2007
Opening balance 157,203,666 52,385,216
Add: Collected during the year 763,713,642 344,284,092
Less: Repaid/ Adjusted during the year 582,784,997 239,465,642
Closing balance 338,132,312 157,203,666
12. Employee Benefit Plans
Effective 1 April 2007, the Company adopted revised Accounting Standard on Employee Benefits. Pursuant to
the adoption, the transitional obligations of the Company amounts to Rs. 1,336,011 net of deferred tax Rs.
687,942. As required by the standard, the obligation has been recorded with the transfer of Rs. 1,336,011 to
revenue reserves.
The following table set out the status of the gratuity plan as required under AS 15 (Revised)
Reconciliation of opening and closing balances of the present value of the defined benefit
Obligation
Change in Defined Benefit Obligation
Particulars For the year ended 31 March 2008
Balance at April 1, 2007 2,023,953
Service cost 2,564,954
Interest cost 161,916
Actuarial loss/(Gain) (161,916)
Benefits paid -
Balance at March 31, 2008 4,588,907
Change in the fair value of plan assets
Particulars For the year ended 31 March 2008
Balance at April 1, 2007 -
Expected return on plan assets -
Actuarial gains -
Employer contributions -
Benefits paid -
Balance at March 31, 2008 Nil
Amount recognized in Balance Sheet
Particulars For the year ended 31 March 2008
Present value of funded obligations 4,588,907
Fair value on plan assets -
Net liability/(asset) 4,588,907
Amounts in the balance sheet For the year ended 31 March 2008
Provisions 4,588,907
Net liability/(asset) 4,588,907
Expense recognized in statement of profit and loss account
Particulars For the year ended 31 March 2008
Current service cost 2,564,954
Interest on defined benefit obligation 161,916
Expected return on plan assets -
Net actuarial loss/(gain) recognized in the year (161,916)
Amount included in “Personnel expense” 2,564,954
Asset Information
Category of Assets As at 31 March 2008
Insurer managed funds Nil
Total Nil
Summary of Actuarial Assumptions
Particulars For the year ended 31 March 2008
Discount Rate 8%
Expected return on plan assets 8%
Salary escalation rate 5% p.a.
Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.
Expected rate of return on plan assets: This is based on the expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations.
Salary escalation rate: The estimates of future salary increases considered takes into account the inflation, seniority, promotion and other relevant factors.
Spandana Annual Report 2007-08 75
11. Security Deposits and Additional loan recovery:
Security Deposits:
stDuring the year the Company has repaid the entire balance of Security Deposit outstanding as on 31 March
2007. The details of repayment/ adjustment of Security Deposit are given below:
For the year ended 31 March 2008 31 March 2007
Opening balance 60,989,195 202,230,238
Add: Collected during the year 25,009,313
Less: Repaid during the year 60,989,195 166,250,356
Closing balance - 60,989,195
Additional Loan Recovery (ALR):
The Company has accepted advance loan repayments over and above the installment due from borrowers and
the same is accounted for. In case of instances where the borrower fails to pay or falls short of loan installment,
the same is adjusted against the installment.
For the year ended 31 March 2008 31 March 2007
Opening balance 157,203,666 52,385,216
Add: Collected during the year 763,713,642 344,284,092
Less: Repaid/ Adjusted during the year 582,784,997 239,465,642
Closing balance 338,132,312 157,203,666
12. Employee Benefit Plans
Effective 1 April 2007, the Company adopted revised Accounting Standard on Employee Benefits. Pursuant to
the adoption, the transitional obligations of the Company amounts to Rs. 1,336,011 net of deferred tax Rs.
687,942. As required by the standard, the obligation has been recorded with the transfer of Rs. 1,336,011 to
revenue reserves.
The following table set out the status of the gratuity plan as required under AS 15 (Revised)
Reconciliation of opening and closing balances of the present value of the defined benefit
Obligation
Change in Defined Benefit Obligation
Particulars For the year ended 31 March 2008
Balance at April 1, 2007 2,023,953
Service cost 2,564,954
Interest cost 161,916
Actuarial loss/(Gain) (161,916)
Benefits paid -
Balance at March 31, 2008 4,588,907
Schedule to the Balance Sheet of Spandana Sphoorty Financial Limited(formerly Spandana Shoorty Innovative Financial Services Limited)
as required in terms of Paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding)
Companies Prudential Norms (Reserve Bank) Directions, 2007
(Rs. In lakhs)LIABILITIES SIDE:
(1) Loans and advances availed by the NBFCs inclusive of Amount Amount interest accrued thereon but not paid: Outstanding Overdue
(a) Debentures : Secured - - Unsecured - -
(other than falling within meaning of public depostis*)
(b) Deferred credits - -
(c) Term Loans 47,260 -
(d) Inter-corporate loans and borrowing - -
(e) Commercial Paer - -
(f ) Public Deposits*
(g) Otber Loans (Subordinated Loan) 2,000 -
*Please see Note 1 below
(2) Break-up of (1)(f ) above (Outstanding public deposits inclusive of interest accrued thereon but not paid):
(a) In the form of unsecured debentures - -
b) In the form of partly secured debentures i.e. debentures - - where there is a shortfall in the value of security
(c) Other public deposits - -
ASSESTS SIDE : Amount Outstanding
3. Break-up of Loans and Advances including bills receivables [other than those included in (4) below] :
(a) Secured
(b) Unsecured
4. Break-up of leased assets and stock on hire and hypothecation loans counting towards EL/HP activites
(i) Lease assets including lease rentals under sundry debtors :(a) Financial lease(b) Operating lease
(ii) Stock on hire including hire charges under sundry debtors:(a) Assests on hire(b) Repossessed assets
(iii) Hypothecation loans counting towards EL/HP activities(a) Loans where assets have been repossessed(b) Loans other than (a) above
Spandana Annual Report 2007-08 77
13. Unsecured loan (Subordinated debt):
The company has raised subordinated debt during the year, the breakup of which is as follows:
Name of the entity Date Rate Loan Amount Maturity
Spandana Rural & Urban 31-08-2007 8.25% 150,000,000 31-08-2013Development Organisation
Spandana Mutual Benefit Trust 31-08-2007 8.25% 50,000,000 31-08-2013
Total 200,000,000
14. Capital Adequacy Ratio:
2008-2007
i) Capital Adequacy Ratio (CRAR) 22.69%
ii) CRAR Tier I Capital (%) 17.46%
iii) CRAR Tier II Capital (%) 5.23%
15. Investments during the year
Name of the Scheme Purchase Units Purchase Value Sold Units Sale Proceeds
Reliance Liquidity Fund 62,970,207 663,445,000 63,010,431 664,460,661
ING Liquid Fund 8,289,969 83,000,000 8,289,969 83,332,437
16. Social Responsibilities
The Company is in the business of offering financial services to low income households in rural and urban areas. The Company also offers training to the groups to generate income for their livelihood and to ensure a better life.
17. Amounts payable to Micro , Small and Medium enterprises
The management has initiated the process of identifying enterprises which have provided goods and services to the Company and which qualify under the definition of micro and small enterprises, as defined under Micro, Small and Medium Enterprises Development Act, 2006. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2008 has been made in the financial statements based on information received and available with the Company. Further in the view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier under the said Act.
18. Previous year's figures have been regrouped / reclassified, where necessary, to conform to current year's classification.
As per our report attachedfor BSR & Company For K.V.R Subba Rao & Co for Spandana Sphoorty Financial LimitedChartered Accountants Chartered Accountants (formerly Spandana Sphoorty
Innovative Financial Services Limited)
Sd/- Sd/- Sd/- Sd/-Zubin Shekary K.V.R Subba Rao Managing Director Director PartnerMembership No. 48814
Schedule to the Balance Sheet of Spandana Sphoorty Financial Limited(formerly Spandana Shoorty Innovative Financial Services Limited)
as required in terms of Paragraph 13 of Non-Banking Financial (Non-Deposit Accepting or Holding)
Companies Prudential Norms (Reserve Bank) Directions, 2007
(Rs. In lakhs)LIABILITIES SIDE:
(1) Loans and advances availed by the NBFCs inclusive of Amount Amount interest accrued thereon but not paid: Outstanding Overdue
(a) Debentures : Secured - - Unsecured - -
(other than falling within meaning of public depostis*)
(b) Deferred credits - -
(c) Term Loans 47,260 -
(d) Inter-corporate loans and borrowing - -
(e) Commercial Paer - -
(f ) Public Deposits*
(g) Otber Loans (Subordinated Loan) 2,000 -
*Please see Note 1 below
(2) Break-up of (1)(f ) above (Outstanding public deposits inclusive of interest accrued thereon but not paid):
(a) In the form of unsecured debentures - -
b) In the form of partly secured debentures i.e. debentures - - where there is a shortfall in the value of security
(c) Other public deposits - -
ASSESTS SIDE : Amount Outstanding
3. Break-up of Loans and Advances including bills receivables [other than those included in (4) below] :
(a) Secured
(b) Unsecured
4. Break-up of leased assets and stock on hire and hypothecation loans counting towards EL/HP activites
(i) Lease assets including lease rentals under sundry debtors :(a) Financial lease(b) Operating lease
(ii) Stock on hire including hire charges under sundry debtors:(a) Assests on hire(b) Repossessed assets
(iii) Hypothecation loans counting towards EL/HP activities(a) Loans where assets have been repossessed(b) Loans other than (a) above
Spandana Annual Report 2007-08 77
13. Unsecured loan (Subordinated debt):
The company has raised subordinated debt during the year, the breakup of which is as follows:
Name of the entity Date Rate Loan Amount Maturity
Spandana Rural & Urban 31-08-2007 8.25% 150,000,000 31-08-2013Development Organisation
Spandana Mutual Benefit Trust 31-08-2007 8.25% 50,000,000 31-08-2013
Total 200,000,000
14. Capital Adequacy Ratio:
2008-2007
i) Capital Adequacy Ratio (CRAR) 22.69%
ii) CRAR Tier I Capital (%) 17.46%
iii) CRAR Tier II Capital (%) 5.23%
15. Investments during the year
Name of the Scheme Purchase Units Purchase Value Sold Units Sale Proceeds
Reliance Liquidity Fund 62,970,207 663,445,000 63,010,431 664,460,661
ING Liquid Fund 8,289,969 83,000,000 8,289,969 83,332,437
16. Social Responsibilities
The Company is in the business of offering financial services to low income households in rural and urban areas. The Company also offers training to the groups to generate income for their livelihood and to ensure a better life.
17. Amounts payable to Micro , Small and Medium enterprises
The management has initiated the process of identifying enterprises which have provided goods and services to the Company and which qualify under the definition of micro and small enterprises, as defined under Micro, Small and Medium Enterprises Development Act, 2006. Accordingly, the disclosure in respect of the amounts payable to such enterprises as at 31 March 2008 has been made in the financial statements based on information received and available with the Company. Further in the view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of the Act is not expected to be material. The Company has not received any claim for interest from any supplier under the said Act.
18. Previous year's figures have been regrouped / reclassified, where necessary, to conform to current year's classification.
As per our report attachedfor BSR & Company For K.V.R Subba Rao & Co for Spandana Sphoorty Financial LimitedChartered Accountants Chartered Accountants (formerly Spandana Sphoorty
Innovative Financial Services Limited)
Sd/- Sd/- Sd/- Sd/-Zubin Shekary K.V.R Subba Rao Managing Director Director PartnerMembership No. 48814
5. Break-up of Investments :
Current Investments
1. Quoted :
(i) Shares : (a) Equity
(b) Preference
(ii) Debentures and Bonds
(iii) Units of mutual funds
(iv) Government Securities - -
(v) Others (please specify) - -
2. Unquoted :
(i) Shares : (a) Equity 142 -
(b) Preference - -
(ii) Debentures and bonds - -
(iii) Units of mutual funds - -
(iv) Government Securities - -
(v) Others (please specify) - -
Long Term investments
1. Quoted :
(i) Shares : (a) Equity
(b) Preference
(ii) Debentures and Bonds - -
(iii) Units of mutual funds - -
(iv) Government Securities - -
(v) Others (please specify) - -
2. Unquoted : - -
i) Shares : (a) Equity - -
(b) Preference - -
(ii) Debentures and bonds - -
(iii) Units of mutual funds - -
(iv) Government Securities - -
v) Others (please specify) - -
(6) Borrower group-wise classification of all leased assets,
stock-on -hire and loans and advances :
Please see Note 2 below
Category Amount net of provisions
Secured Unsecured Total
1. Related Parties**
(a) Subsidiaries - - -
(b) Companies in the same guoup - - -
(c) Other related parties - - -
2. Other than related parties - - -
Total - - -
(7) 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/ Book Value Break-up or (Net of
fair value or NAV Provisions)1. Related Parties**
(a) Subsidiaries 142 121
(b) Companies in the same guoup - -
(c) Other related parties - -
2. Other than related parties - -
Total
**As per Accounting Standard of ICAI (Please see Note 3)
(8) Other information
Particulars Amount
(i) Gross Non-Performing Assests
(a) Related parties - -
(b) Other than related parties - -
(ii) Net Non-Performing Assests
(a) Related parties - -
(b) Other than related parties - -
(iii) Assests acquired in satisfaction of debt - -
Notes :
1. As defined in pararaph 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 the Non-Banking Financial Companies
Prudential Norms (Reserve Bank) Directions, 1998.
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.
Spandana Annual Report 2007-08 79
5. Break-up of Investments :
Current Investments
1. Quoted :
(i) Shares : (a) Equity
(b) Preference
(ii) Debentures and Bonds
(iii) Units of mutual funds
(iv) Government Securities - -
(v) Others (please specify) - -
2. Unquoted :
(i) Shares : (a) Equity 142 -
(b) Preference - -
(ii) Debentures and bonds - -
(iii) Units of mutual funds - -
(iv) Government Securities - -
(v) Others (please specify) - -
Long Term investments
1. Quoted :
(i) Shares : (a) Equity
(b) Preference
(ii) Debentures and Bonds - -
(iii) Units of mutual funds - -
(iv) Government Securities - -
(v) Others (please specify) - -
2. Unquoted : - -
i) Shares : (a) Equity - -
(b) Preference - -
(ii) Debentures and bonds - -
(iii) Units of mutual funds - -
(iv) Government Securities - -
v) Others (please specify) - -
(6) Borrower group-wise classification of all leased assets,
stock-on -hire and loans and advances :
Please see Note 2 below
Category Amount net of provisions
Secured Unsecured Total
1. Related Parties**
(a) Subsidiaries - - -
(b) Companies in the same guoup - - -
(c) Other related parties - - -
2. Other than related parties - - -
Total - - -
(7) 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/ Book Value Break-up or (Net of
fair value or NAV Provisions)1. Related Parties**
(a) Subsidiaries 142 121
(b) Companies in the same guoup - -
(c) Other related parties - -
2. Other than related parties - -
Total
**As per Accounting Standard of ICAI (Please see Note 3)
(8) Other information
Particulars Amount
(i) Gross Non-Performing Assests
(a) Related parties - -
(b) Other than related parties - -
(ii) Net Non-Performing Assests
(a) Related parties - -
(b) Other than related parties - -
(iii) Assests acquired in satisfaction of debt - -
Notes :
1. As defined in pararaph 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 the Non-Banking Financial Companies
Prudential Norms (Reserve Bank) Directions, 1998.
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.
Spandana Annual Report 2007-08 79
Spandana Annual Report 2007-08 81
BOARD PROFILE
PROFILES
Mrs. Padmaja Reddy Gangireddy, Managing Director
Mrs. Padmaja Reddy is a graduate in Communication & Journalism and Post Graduate in Business
Administration. She has over a decade of work experience in microfinance and development sector. She is the
Founding Managing Director of Spandana Sphoorty Financial Limited. She has pursued several courses,
including a microfinance course at Naropa University, U.S.A, Credit and Micro Enterprise Development Training
from Durham University Business School, U.K and Market Research for Micro Finance in Uganda. She has built
one of India's leading microfinance organizations, famed for its efficiency, size and productivity, and has been
instrumental in establishing benchmarks for the industry.
Mr. M.V. Narendra Prasad, Whole Time Director
Mr. Narendra Prasad M.V. is a Graduate in Commerce and has gained a deep insight into the microfinance sector
through hands on experience at Spandana. He is the Chief Financial Officer and Director of the Company.
Dr. Rajiv B. Lall, Director
Dr. Lall has over two decades of experience with Warburg Pincus, Morgan Stanley, the World Bank and Asian
Development Bank. He is Managing Director and Chief Executive Officer of Infrastructure Development Finance
Corporation. He did his Ph.D in Economics from Columbia University, and his areas of expertise include Private
Equity /Venture Capital, International Capital Markets, trade & industrial policy issues and project finance.
SPANDANA SPHOORTY FINANCIAL LIMITED(Formerly Spandana Sphoorty Innovative Financial Services Limited)
ADDITIONAL INFORMATION UNDER PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956
Balance Sheet abstract and General Business Profile
I. Registration Details Registration No 0 1 - 4 0 6 4 8 State Code 0 1
II. Capital raised during the year (Amount in Rs. Thousands)
Public Issued Rights Issue
NIL NIL
Bonus Issue Private Placement
NIL 3 4 7 2 4 0
III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousand)
Total Liabilities Total Assets
5 8 1 2 6 8 0 5 8 1 2 6 8 0
Sources of Funds
Paid-up Capital Reserves and Surplus
4 3 3 5 5 0 4 5 0 3 6 5
Secured Loans Unsecured Loans
4 7 2 5 9 5 3 2 0 0 0 0 0
Application of Funds
Net Fixed Assets Investments
3 7 9 4 4 1 4 2 4 5
Net Current Assets Misc. Expenditure
5 7 6 0 3 8 9 1 0 0
Accumulated Losses
N I L
IV. Performance of Company (Amount in Rs. Thousands)
Turnover Total Expenditure
1 2 7 4 4 9 6 8 1 4 8 4 9
+ - Profit/Loss before Tax + - Profit/Loss after tax
+ 4 5 9 6 4 7 + 2 7 0 6 3 9
Earning per Share in Rs. Dividend rate %
2 8 0 0
V. Generic Names of Three Principal Products/Services of Company (as per monetary terms)Item Code No. N A(ITC Code)
Spandana Annual Report 2007-08 81
BOARD PROFILE
PROFILES
Mrs. Padmaja Reddy Gangireddy, Managing Director
Mrs. Padmaja Reddy is a graduate in Communication & Journalism and Post Graduate in Business
Administration. She has over a decade of work experience in microfinance and development sector. She is the
Founding Managing Director of Spandana Sphoorty Financial Limited. She has pursued several courses,
including a microfinance course at Naropa University, U.S.A, Credit and Micro Enterprise Development Training
from Durham University Business School, U.K and Market Research for Micro Finance in Uganda. She has built
one of India's leading microfinance organizations, famed for its efficiency, size and productivity, and has been
instrumental in establishing benchmarks for the industry.
Mr. M.V. Narendra Prasad, Whole Time Director
Mr. Narendra Prasad M.V. is a Graduate in Commerce and has gained a deep insight into the microfinance sector
through hands on experience at Spandana. He is the Chief Financial Officer and Director of the Company.
Dr. Rajiv B. Lall, Director
Dr. Lall has over two decades of experience with Warburg Pincus, Morgan Stanley, the World Bank and Asian
Development Bank. He is Managing Director and Chief Executive Officer of Infrastructure Development Finance
Corporation. He did his Ph.D in Economics from Columbia University, and his areas of expertise include Private
Equity /Venture Capital, International Capital Markets, trade & industrial policy issues and project finance.
SPANDANA SPHOORTY FINANCIAL LIMITED(Formerly Spandana Sphoorty Innovative Financial Services Limited)
ADDITIONAL INFORMATION UNDER PART IV OF SCHEDULE VI TO THE COMPANIES ACT, 1956
Balance Sheet abstract and General Business Profile
I. Registration Details Registration No 0 1 - 4 0 6 4 8 State Code 0 1
II. Capital raised during the year (Amount in Rs. Thousands)
Public Issued Rights Issue
NIL NIL
Bonus Issue Private Placement
NIL 3 4 7 2 4 0
III. Position of Mobilisation and Deployment of Funds (Amount in Rs. Thousand)
Total Liabilities Total Assets
5 8 1 2 6 8 0 5 8 1 2 6 8 0
Sources of Funds
Paid-up Capital Reserves and Surplus
4 3 3 5 5 0 4 5 0 3 6 5
Secured Loans Unsecured Loans
4 7 2 5 9 5 3 2 0 0 0 0 0
Application of Funds
Net Fixed Assets Investments
3 7 9 4 4 1 4 2 4 5
Net Current Assets Misc. Expenditure
5 7 6 0 3 8 9 1 0 0
Accumulated Losses
N I L
IV. Performance of Company (Amount in Rs. Thousands)
Turnover Total Expenditure
1 2 7 4 4 9 6 8 1 4 8 4 9
+ - Profit/Loss before Tax + - Profit/Loss after tax
+ 4 5 9 6 4 7 + 2 7 0 6 3 9
Earning per Share in Rs. Dividend rate %
2 8 0 0
V. Generic Names of Three Principal Products/Services of Company (as per monetary terms)Item Code No. N A(ITC Code)
COMMITTEES
Mr. Dilip Kothari, Director
He is the founder and Managing Director of JM India Private Equity Fund and he has over 23 years of experience
in the global financial services industry, having spent 10 years in the USA and over 12 years in Asia. Prior to JM
Financial, Mr. Kothari was Managing Director Olympus Capital Holdings one of Asia's leading private equity
firms. In the past he has held positions as Head of Consumer Banking, Singapore, HSBC, and Head of Credit Policy
and Risk Management, Citibank, Asia. He started his career with Citibank, where he had held various senior
management positions in the consumer banking division, based in the USA. Mr. Kothari has a Master Degree in
Finance from the Kansas State University, USA.
Mr. Harinder Sawhney, Director
He is the Director of JM Financial Investment Managers Limited. He is Post Graduate in Business Administration,
with two decades experience in investment banking globally.
Mr. Krishna Prasad T., Director
He is Deputy General Manager of ICICI Bank Limited. He is a Post Graduate in Business Administration and has
over 14 years of banking experience.
Mr. Raman Madhavan Nair, Director
His career began with the RBI, after which worked for IDBI and has served SIDBI for the last 2 decades. Through
working with these three national level institutions, Mr. Nair gained valuable experience in the appraisal of large
industrial and service sector projects, as well as developing an expertise in Development Banking . His stint with
SIDBI during the last one and a half decades has provided him with an understanding of the needs and potential
of the under-developed regions of the country, and more so of the SSI sector in general, by virtue of his postings
in the North-Eastern, Eastern and Northern regions. Mr. Nair has a variety of experience handling large, medium
and small scale service sector projects. His present mission is to build the capacity of the MF institutions to
upscale their MF activities to Micro Enterprises, thus creating not only income generating avenues for the poor
but also rural employment and overall rural economic growth.
Mr. Rahul Gupta, Independent Director
He is a chief operating officer and chief financial officer of Citibank – Global Consumer Group, Singapore. He has
three decades of Banking experience in a number of positions globally. He did his Masters in Business
Administration at University of South California, Los Angeles, USA and Bachelor of Engineering in electronics at
Birla Institute Technology & Science.
Dr. Venkateswara Reddy G., Independent Director
He is a Professor in Cardiology, as has specialized in Cardiology. He has been associated with the Company since
its inception.
Mr. Y.S.N.Murty, Independent Director
He is a Fellow Member of Institute of Chartered Accountants of India. He is a practicing Chartered Accountant
and has a keen acumen for internal audit and statutory audits in various sectors particularly in financial services
sector.
Committee Name Members
Executive Committee Mrs. Padmaja Reddy Gangireddy
Mr. M.V. Narendra Prasad
Dr. Venkateswara Reddy G.
Remuneration Committee Mrs. Padmaja Reddy Gangireddy
Mr. M.V. Narendra Prasad
Mr. Harinder Sawhney
Mr. Krishna Prasad T.
Nomination committee Mrs. Padmaja Reddy Gangireddy
Mr. Dilip Kothari
Dr. Rajiv B. Lall
Asset Liability Management Committee Mrs. Padmaja Reddy Gangireddy
Dr. Rajiv B. Lall
Mr. Harinder Sawhney
Mr. M.V. Narendra Prasad
Mr. Karthik Kolluri
Risk Management Committee Mrs. Padmaja Reddy Gangireddy
Dr. Rajiv B. Lall
Mr. Dilip Kothari
Mr. Krishna Prasad T.
Audit Committee Mrs. Padmaja Reddy Gangireddy
Dr. Rajiv B. Lall
Mr. Harinder Sawhney
Mr. Y.S.N.Murty
Spandana Annual Report 2007-08 83
COMMITTEES
Mr. Dilip Kothari, Director
He is the founder and Managing Director of JM India Private Equity Fund and he has over 23 years of experience
in the global financial services industry, having spent 10 years in the USA and over 12 years in Asia. Prior to JM
Financial, Mr. Kothari was Managing Director Olympus Capital Holdings one of Asia's leading private equity
firms. In the past he has held positions as Head of Consumer Banking, Singapore, HSBC, and Head of Credit Policy
and Risk Management, Citibank, Asia. He started his career with Citibank, where he had held various senior
management positions in the consumer banking division, based in the USA. Mr. Kothari has a Master Degree in
Finance from the Kansas State University, USA.
Mr. Harinder Sawhney, Director
He is the Director of JM Financial Investment Managers Limited. He is Post Graduate in Business Administration,
with two decades experience in investment banking globally.
Mr. Krishna Prasad T., Director
He is Deputy General Manager of ICICI Bank Limited. He is a Post Graduate in Business Administration and has
over 14 years of banking experience.
Mr. Raman Madhavan Nair, Director
His career began with the RBI, after which worked for IDBI and has served SIDBI for the last 2 decades. Through
working with these three national level institutions, Mr. Nair gained valuable experience in the appraisal of large
industrial and service sector projects, as well as developing an expertise in Development Banking . His stint with
SIDBI during the last one and a half decades has provided him with an understanding of the needs and potential
of the under-developed regions of the country, and more so of the SSI sector in general, by virtue of his postings
in the North-Eastern, Eastern and Northern regions. Mr. Nair has a variety of experience handling large, medium
and small scale service sector projects. His present mission is to build the capacity of the MF institutions to
upscale their MF activities to Micro Enterprises, thus creating not only income generating avenues for the poor
but also rural employment and overall rural economic growth.
Mr. Rahul Gupta, Independent Director
He is a chief operating officer and chief financial officer of Citibank – Global Consumer Group, Singapore. He has
three decades of Banking experience in a number of positions globally. He did his Masters in Business
Administration at University of South California, Los Angeles, USA and Bachelor of Engineering in electronics at
Birla Institute Technology & Science.
Dr. Venkateswara Reddy G., Independent Director
He is a Professor in Cardiology, as has specialized in Cardiology. He has been associated with the Company since
its inception.
Mr. Y.S.N.Murty, Independent Director
He is a Fellow Member of Institute of Chartered Accountants of India. He is a practicing Chartered Accountant
and has a keen acumen for internal audit and statutory audits in various sectors particularly in financial services
sector.
Committee Name Members
Executive Committee Mrs. Padmaja Reddy Gangireddy
Mr. M.V. Narendra Prasad
Dr. Venkateswara Reddy G.
Remuneration Committee Mrs. Padmaja Reddy Gangireddy
Mr. M.V. Narendra Prasad
Mr. Harinder Sawhney
Mr. Krishna Prasad T.
Nomination committee Mrs. Padmaja Reddy Gangireddy
Mr. Dilip Kothari
Dr. Rajiv B. Lall
Asset Liability Management Committee Mrs. Padmaja Reddy Gangireddy
Dr. Rajiv B. Lall
Mr. Harinder Sawhney
Mr. M.V. Narendra Prasad
Mr. Karthik Kolluri
Risk Management Committee Mrs. Padmaja Reddy Gangireddy
Dr. Rajiv B. Lall
Mr. Dilip Kothari
Mr. Krishna Prasad T.
Audit Committee Mrs. Padmaja Reddy Gangireddy
Dr. Rajiv B. Lall
Mr. Harinder Sawhney
Mr. Y.S.N.Murty
Spandana Annual Report 2007-08 83
Spanda a p oo ty n c al td.n S h r Fi an i L
, C Cry tal, Ne ach wli us Stop, ayak ach wli, Hyd rabad - 00 32Plot No.79 are s ar G ibo B Vin Nagar, G ibo e 5 0 .
Te +91 0- 438 66 . Mail: in mation span anain i cl: -4 4 48 e- for @ d d a. om
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