a corporate communications initiative, esaf microfinanceemfil.org/ar2013.pdf · state bank of...

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VisionA society with equal opportunities for complete access to sustainable financial services that promotes livelihood and economic development.

MissionTo be a leading financial institution providing customer centric products through high quality service by using innovative technology to the underserved households in India.

New Population

Including new groups that traditional microfinance has largely ignored, such as persons with disabilities.

New Products

Apart from traditional Income Generation Loans, this initiative covers all forms of credit, insurance, pension and payments. Micro Enterprise Loans-MEL, individual loans, housing loans etc.

New Platforms

Using digital technologies to connect with people more frequently from multiple locations.

New Policies

Are framed to promote integrated services through ESAF's group entities and other outside agencies.

Photo: A student at ESAF Child Care Centre, Dumka, Jharkhand

N 2020

TABLE OF CONTENTS

FROM THE FOUNDER’S DESK 06

THE ‘LITTLE’ BIG INITIATIVE 09

LOYAL CUSTOMERS, KEY TO SUCCESS 11

NOTICE AND AGENDA 15

DIRECTORS’ REPORT 19

REPORT ON CORPORATE GOVERNANCE 25

MANAGEMENT DISCUSSION AND ANALYSIS 30

STORIES OF TRANSFORMATION 36

INDEPENDENT AUDITORS’ REPORT 38

FINANCIAL STATEMENTS 42

NOTES FORMING PART OF FINANCIAL STATEMENTS 46

ESAF MICROFINANCEAnnual Report 2013

5

CORPORATE INFORMATION

Board of Directors : Mr. K. PAUL THOMAS (Founder and Managing director) : Mr. GEORGE THOMAS (director - operations) : Mr. VIKRAMAN AMPALAKKAT : Mr. CHERIAN THOMAS : Dr. IDICHERIA NINAN : Mr. RAJAN SAMUEL : Ms. RANJANI K.C. : Mr. N.A.J.V.S. SUNDARA RAO : Mr. R. PRABHA : Ms. LATHA MANI

Chief Mentor : Mr. RAPHAEL PARAMBIAdvisors ● Social Transformation : Mr. JACOB SAMUEL ● Strategy & Risk : Mr. A. AKBAR (ForMer gM, Federal Bank) ● Finance & Systems : Mr. C.P. SIMON (ForMer agM, sBi) Chairperson, Grievance Redressal Forum : Ms. MEREENA PAUL Company Secretary & Compliance Officer : Mr. PADMAKUMAR K.

Management Team ● Chief Financial Officer : Mr. JOBY C.O. ● Dy. General Manager : Mr. PHILIP JOHN ● Chief Technology Officer : Mr. LEO SAMUEL ● Dy. General Manager : Mr. SIBU K.A. ● General Manager : Mr. CHRISTUDAS K.V. ● General Manager : Mr. GEORGE K. JOHN ● General Manager : Mr. ROY K. ALEX

Auditors : M/S A. JOHN MORIS & CO., CHARTERED ACCOUNTANTS, CHENNAI.Our Lenders

Registered Office : #5 / A, Fifth Floor, No. 8 & 9, Gangadeeswara Koil Street,

Purasawalkam, Chennai - 600 084

Corporate Office : Hepzibah Complex, Mannuthy P.O., Thrissur , Kerala - 680 651

Time and Date of Meeting : 12 Noon, 27th September, 2013

PSU BANKS● Andhra Bank● Canara Bank● Central Bank of India● Corporation Bank● Dena Bank● IDBI Bank● Indian Bank● Indian Overseas Bank● Oriental Bank of Commerce

● Punjab National Bank● State Bank of Hyderabad● State Bank of India● State Bank of Patiala● State Bank of Travancore● Union Bank of India● Vijaya Bank

PRIVATE BANKS● Axis Bank

● DCB Bank● Dhanlaxmi Bank● ICICI Bank● ING Vysya Bank● Ratnakar Bank● South Indian Bank

FOREIGN BANKS● BNP Paribas● Rabo Bank

NBFC / OTHERS● Ananya Finance ● Dia Vikas Capital ● FWWB● Maanaveeya Development and Finance● MAS Financial Services Ltd● MV Microfin (Micro Ventures)● Reliance Capital


6 7


Under the circumstances, ESAF Microfinance has consistently focused on building customer-centric approach and shareholder value as its primary objectives. In order to serve our customers more effectively we have developed a sustainable long term value proposition by capitalizing on new business opportunities. This is well supported by investing in technology, human capital and by establishing robust systems and processes.

Despite overwhelming odds, we managed to close the year crossing the half a million customer mark, increasing our gross loan book from ` 1,380.52 million to ` 4,290.82 million and with a Profit After Tax of ` 54.50 million. Your Company has been able to disburse ̀ 6,176.25 mn against ̀ 4,555.94 mn in the last financial year. The total Revenue grew to ` 806.93 million from ` 652.53 million in the previous year. The Revenue increased by 23.67% and the Profit After Tax increased by 31.42% over the previous year.

In the last financial year, Your Company concluded six securitization transactions involving assets to the tune of ` 1423.27 mn. The entire pool of securities were qualified for the weaker section advances as per RBI’s priority sector guidelines and the pool covered loans disbursed in Kerala, Tamil Nadu, Maharashtra, Madhya Pradesh and Chhattisgarh. Also CARE, the international rating agency assigned ‘CARE BBB-’ rating to the banking facilities of ESAF Microfinance & Investments Pvt. Ltd, after assessing internal controls and loan portfolio management systems.

Also through SHG Federations, clients could opt for accident insurance schemes, whereas through ESAF Microfinance they could avail services of SBI Life Insurance. The Organization has covered over 3,300 lives through SBI life insurance and almost 2 lac lives through accident insurance schemes, in the last financial year. Remittances services were also offered, where clients could easily walk in and carry back money transferred

Dear Stakeholders,

I take great pleasure in welcoming you to the 17th Annual General Meeting of the Company. Before analyzing Your Company’s performance in the last financial year, I would like to discuss the evolving economic environment that favored microfinance and the value propositions

that ESAF Microfinance focused on to effectively serve our customers.

The unbridled forces of change witnessed in the Indian economy over the last decade had transformed the operating environment across the entire spectrum of businesses. This coincided with rapid developments in technology and created both opportunities and challenges for businesses worldwide. The opportunities to innovate in product offerings and improve upon operational efficiencies. The challenges of keeping pace with changes and gaining first-mover advantages. These two developments catalyzed significant shifts in the structure of the Indian economy, which were reflected in the increased share of the services sector in the economy. The microfinance sector also thrived in the opportunities opened, although it had its share of setbacks in the latter stages of the last decade. However, the evolving environment has allowed the MFIs to innovate and build meaningful partnerships that benefit the target customers.

FROM THE FOUNDER’S DESK from distant places. For implementing the money transfer scheme, ESAF has entered into alliances with reputed players like Western Union Money Transfer and Xpress Money.

Your Company achieved the much desired number one position among the Aggregators of the Government of India’s prestigious social security program - Swavalamban Yojana National Pension Scheme (NPS) by enrolling 1,59,439 new members and renewing the membership of 19,378 members enrolled in the previous year. In effect, ESAF facilitated almost `180 mn of Government funds to reach our members, which was an outstanding achievement, in tune with our vision of empowering the poor. Under the Sanchar Sakthi Project implemented with the support of Department of Tele Communications, your Company has identified interested clients who wanted to expand markets through mobile based services.

In Central India, your Company continues to partner with the international development organization Water.org to implement the water and sanitation projects.

With the help of EDA Rural Systems, ESAF Microfinance conducted beta testing of Universal Standards of Social Performance. The testing was conducted in two phases and accordingly the gaps were identified and action plans were chalked out to streamline Social Performance Management (SPM) within ESAF Microfinance. Also I had the privilege of participating in the Global Social Performance Task Force Meeting held in Jordan and European Microfinance Week held in Luxemburg, which gave the Company adequate visibility at the International level and helped in building bondages with experienced microfinance practitioners and social investors.

Our commitment to corporate governance has only been reinforced, as new business models have been evolved, enabling

us to preserve high ethical standards while maintaining growth and profitability. The future holds many opportunities for ESAF Microfinance. We continue our ceaseless efforts for innovation, not merely by leveraging on opportunities but by creating them and by being a driver of changes and development. Our efforts will be guided by the principles of customer centricity and shareholder value, which I hope would help us to achieve ethical and sustainable value creation.

We remain strongly committed to our core values and will continue to expand our activities with increased vigor and zeal.

The ability of our staff to respond to changes quickly and effectively with exemplary commitment and dynamism was the key factor for the continuous success of ESAF Microfinance. I would like to thank the employees who are the pillars of strength in all our endeavors.

Our achievements thus far would not have been possible but for the support and goodwill of a wide range of Stakeholders including our Board of Directors, Bankers, Investors and Sangam Members (Customers). I would like to thank them, and look forward to their continued support and encouragement as we move forward to meet new opportunities and challenges that await us. Above all, I would also like to thank God the almighty with whose blessings the Organization has grown to the magnitude that we witness now.

Thanking you and wishing you all the best,

K. Paul Thomas Founder and Managing Director


9

THE ‘LITTLE’ BIG INITIATIVE ESAF, a Non Governmental Organization, was formed in 1992 with the purpose of serving the deprived, suffering from the travails of the prevailing economic and social evils like unemployment and poverty. The vision of the Society was steered by the principle of sustainable holistic transformation of the poor and the marginalized. By remaining true to its vision, the initiative was launched in a small rented house named ‘Little’.

In 1995, the Micro Enterprises Development (MED) initiative of ESAF was launched, which resulted in the formation of ESAF Microfinance and Investments Pvt. Ltd., in 2008. The shift in focus to microfinance was inevitable as the Founder and the Managing Director of ESAF Microfinance, K. Paul Thomas was clear in his understanding of the importance of financial component in holistic development of the poor. Nobel Laureate Prof. Muhammad Yunus, who pioneered the success of Grameen Bank in Bangladesh, also inspired the founder.

The house named ‘Little’, where the little big initiative started

Prof. Meenakshi Thampan, MLA disbursing the first loan at Methala, Kodungalloor

Since the launch of the MED initiative, ESAF has made giant strides in the sector, ushering in an era of job creation and poverty reduction through microfinance in a viable, sustainable and effective manner.

Based in Thrissur, Kerala, ESAF Microfinance is one of the

premier microfinance institutions in India today. Through a network of 148 branches the Company is now empowering 5.25 lac families across five states in India.

K. Paul Thomas with Prof. Muhammad Yunus

Loan disbursement at Chavakkad, Thrissur

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ESAF LEADS AMONG CORPORATEAGENTS OF SBI LIFE INSURANCE

ESAF introduced SBI Life Insurance to our customers in 2011, which proved to be a great source of support to them. In an unfortunate event of natural or accidental death of a customer, the insurance amount will help the nominee to lead a hassle free life.

In the financial year 2012-13, ESAF managed to collect a premium amount of ̀ 5.85 mn against 3342 policies. The total revenue generated was ̀ 1.76 mn.

Last year, ESAF was ranked first among all the corporate agents of SBI Life across the country in terms of number of policies collected. Now plans are afoot at the SBI Life’s end to consider all the branches of ESAF Microfinance as approved renewal collection centers. Also SBI Life has approved 25 employees of ESAF as ‘authorized’ to bring business.

K. Paul Thomas inaugurating a branch dedicated to ESAF-SBI Life partnership, at Thrissur

C r e a t i n g O p p o r t u n i t i e s

LOYAL CUSTOMERS, KEY TO SUCCESS ESAF Microfinance is a pioneering microfinance institution based in Kerala, having women employees constituting 90% of the field staff. The Organization serves the deprived sections of the society located in the rural and most remote areas in the country. Set up in 1995, ESAF Microfinance has its headquarters in Thrissur, with regional offices in Chennai and Maharashtra. Out of the total 148 branches, 20% of the branches are located in backward districts. According to a study conducted by the R&D team of ESAF Microfinance, almost 25% of the clients remain with us for five years or more, which clearly shows that loyal customer base is the key to our success.

Presently, around 80% of our clients hail from rural areas and 97% of them are women. Among them, 29% belong to religious minorities and 3% are physically challenged.

ESAF Microfinance is one of the few NBFC-MFIs in India, where the client representatives are part of the Management and are effectively influencing important decisions taken by the Organization. Community ownership, more percentage of female field staff, integrated approach etc. are some of the unique features, which distinguish the Organization as a socially focused entity.

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Customer growth graph of ESAF Microfinance

The Company has now rolled out multiple products to cater to the diversified demands of its clients, over and above the non-financial services that are offered. Majority of the clientele is comprised of people at the bottom of the pyramid who have no access to formal banking system or are deprived of the benefits of formal banking system. Our business model combines the unique methodology of selecting and servicing customers at the front end with technology, processes & disciplines of

modern retail banking at the back end. We have had an excellent growth and consolidation phase in the past few years. As on 31st March 2013 we have a customer outreach of 5,24,104 clients spread over 33 Districts in five States with a cumulative disbursement of ` 21,268.53 million.

FINANCIAL PRODUCTS Income Generation LoanA popular loan product offered to micro entrepreneurs who look for building assets or infusing working capital. Loan Amount – `12,000 – `30,000 interest rate – 26% per annum on diminishing balance

General LoanLoan given for meeting emergencies.Loan Amount – Up to ̀ 8,000, interest rate – 26% per annum on diminishing balance.

Nirmal LoanLoan meant for the poor who wish to construct toilet facilities.Loan Amount – `12,000, interest rate – 26% per annum on diminishing balance.

A benificiary of ESAF Nirmal loan

Jeeva Dhara Loan

ESAF has partnership with Water.org for providing clean drinking water facilities to our members. This loan is given to members who wish to take water connections, buy storage tanks/pump sets or dig wells. Loan Amount – `12,000, interest rate – 26% per annum on diminishing balance.

Surya Jyothi LoanESAF has tied up with MicroEnergy Credits, USA for promoting clean energy products like solar lamps , energy efficient cooking stoves and water purifiers. When the clean energy lending portfolio reaches critical mass, MicroEnergy Credits buys the carbon emission reductions, and sells them at the carbon markets. They fund its own services through these proceeds,


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and then pass the majority of the carbon proceeds on to the Microfinance Institution to scale up the clean energy lending program. Loan Amount – ̀ 1300 – ̀ 9300, interest rate – 26% per annum on diminishing balance.

Dairy LoanLoan for purchasing milch animals and promoting milk vendors, who play a critical role in the milk supply chain, aggregating milk supply from small and marginal farmers.Loan Amount – `30,000, interest rate – 26% per annum on diminishing balance

Insurance ESAF introduced SBI life insurance to our customers in 2011, which proved to be a great source of support to them. In an unfortunate event of natural or accidental death of a customer, the insurance amount will help the nominee to lead a hassle free life.

Apart from Life Insurance, ESAF SHG Federation gives financial support to nominees of our members on the occurrence of normal and accidental deaths. From 2011, Federation partnered with United India Assurance Company to offer Group Insurance policies to our clients and their spouses, mainly through two schemes. Last year, we have disbursed mitigation allowances of ` 6.02 mn to 1038 members and direct death funds of ` 4.38 mn to 257 members. Accident death claims of ` 1.70 mn were disbursed to nominees of 68 members.

NON FINANCIAL SERVICES

ESAF Microfinance always gives emphasis on providing credit plus services and has developed a range of microfinance plus services keeping in mind the needs of the beneficiaries.

Business Development Services

We provide Business Development Services to the clients by organizing skill training programs and creating marketing avenues to sell their products beyond their local settings. We also help them in getting linked to the schemes of the Government, meant for supporting micro and small scale entrepreneurs.

Social Security Programs

With the objective of providing the clients with safety nets, especially during their old age, ESAF Microfinance has enrolled nearly 2,00,000 poor families across India into the National

Pension Scheme patronized by the Central Government. Through ESAF SHG Federation, clients can opt for accident insurance schemes whereas through ESAF Microfinance they can avail SBI Life Insurance policies. The Organization has covered over 3,300 lives through SBI Life Insurance and over 2 lac lives through accident schemes, in the last financial year.

Remittances Services

Remittances services are provided by partnering with Western Union and Xpress Money. These services help the clients to simply walk in to the branches and collect the money transferred from distant places, in a matter of less than five minutes.

Natural Resource Management Program

Under this program, awareness classes are organized for the clients on the issues of climate change and carbon emission. They are given education on how to reduce carbon emissions by adopting clean energy products. Organizing awareness programs on environment protection and conservation along with distribution of seeds and saplings, construction of bio-gas plants for waste disposal etc. are also part of the program.

Health Education

For the members, ESAF provides health education programmes and affordable health services by partnering with local Hospitals. Health education programmes are being conducted with the support of Micro Credit Summit Campaign and Freedom from Hunger.

Leadership and Skill Development Training

ESAF organizes leadership and skill development training programs to benefit our members. In a survey conducted last year among 1500 clients, it was revealed that almost 76% had contested in local elections at some point of time since becoming ESAF members, 64% had become sangam leaders once and 97% enjoyed a say in financial decisions at home.

Mobile Handsets

ESAF provides loans to its members for purchasing value-for-money mobile handsets manufactured by Finnish mobile handset maker Nokia. The aim is to empower the women members and assist them in expanding their livelihood activities.

States Kerala Tamil Nadu Maharashtra Chhattisgarh Madhya Pradesh Total

Districts 11 7 7 6 2 33

Branches 90 23 20 10 5 148

Members 350,225 71,681 70,719 22,904 8,575 524104

Borrowers 246417 54000 58314 19061 6458 384250

Total Portfolio in Million 2975.24 555.35 546.93 155.86 57.45 4290.82

Staff 970 185 194 56 24 1429

Loan Officers 562 109 110 38 16 835

Snapshot Profile as on 31st March 2013

THE GROWTH CHARTS

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Borrowers’ growth graph Incremental borrowings - growth chart (in million `)

Revenue growth chart (in million `) Geographical spread


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NOTICE AND AGENDANOTICE is hereby given that the 17th ANNUAL GENERAL MEETING of the members of ESAF MICROFINANCE AND INVESTMENTS PVT. LTD will be held on 27th September, 2013 at 12.00 Noon at Trident, 1/24 G.S.T Road, Chennai -600 027, to transact the following businesses:

ORDINARY BUSINESS1. To receive, consider and adopt the Audited Balance Sheet and Profit & Loss Account for the year ended 31st March, 2013 together with the reports of the Board of Directors and Auditors thereon.

2. To re-appoint Mr. A.Vikraman, Director who retires by rotation and being eligible offers himself for re-appointment.

3. To appoint M/s Deloitte Haskins & Sells, Chartered Accountants, Chennai, as the Statutory Auditors of the Company 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. In this connection 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 224 and other applicable provisions, if any of the Companies Act, 1956, M/s. Deloitte Haskins & Sells, Chennai, Chartered Accountants Registered with the Institute of Chartered Accountants of India vide Firm Registration Number 008072S be and are hereby appointed as Statutory Auditors of the company to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting of the Company.

FURTHER RESOLVED that the Board of Directors of the company be and are hereby authorised to fix the remuneration and out-of-pocket expenses (including service tax at the applicable rate) of M/s. Deloitte Haskins & Sells, Chennai, Chartered Accountants, in consultation with them based on the recommendations of the Audit Committee.

SPECIAL BUSINESS

4. Appointment of Smt. Latha Mani E.V. as Director

To Consider and, if thought fit, to pass, with or with out modification(s), the following resolution as an Ordinary Resolution

“RESOLVED THAT Smt. Latha Mani E.V., appointed as an Additional Director of the Company on 18th March, 2013 under section 260 of Companies Act 1956 and who holds the office till the date of the 17th Annual General Meeting, having expressed

her willingness to continue as the Director be and is here by appointed as a Director of the Company in accordance with the applicable provisions of the Companies Act 1956.”

5. Alteration of Articles by substitution of Article 18.12 relating to - Chairman and Vice Chairman

To Consider and, if thought fit, to pass, with or without modification(s), the following resolution as Special Resolution

“RESOLVED that pursuant to Section 31 and any other applicable provisions if any, of the Companies Act, 1956, Articles of Association of the Company be and is hereby altered by substituting the article 18.12 in the following manner”

ExISTING ARTICLE

18.12 Chairman and Vice Chairman

18.12.a The Chairman and the Vice Chairman of the Board of Directors of the Company shall be appointed from among the Promoter/representatives of the Promoter so long as the Promoter/s holds equity or other financial interests in the Company.

18.12.a.i At every meeting of the Board, the Directors present in the meeting shall appoint the Chairman of that meeting, subject to clause 18.12.a of the Articles.

18.12.a.ii The appointment of Vice Chairman shall be at the discretion of the Board subject to clause 18.12.a of the Articles.

18.12.a.iii The Chairman and Vice Chairman of just preceding Board Meeting shall also act as Chairman and Vice Chairman for the General Body Meetings.

18.12.a.iv In the event of an equality of votes the Chairman or in his place the Vice Chairman shall have a casting vote either in the Board Meetings or General Body Meetings on any issue, which is put to vote.

18.12.b If at any meeting of the Board, the category of Directors mentioned in clause 18.12.a of the article is not present within fifteen minutes from the time appointed for holding the meeting, the remaining Directors may elect any one of the other Directors as the case may be, who shall preside as Chairman of the meeting. Subject to the above, the Directors present may, from time to time, elect one from among their numbers to act as the Chairman for that meeting. However, the restrictions on certain questions at the Board meeting, to be decided, as

In a first of its kind initiative launched by an MFI in India, ESAF Microfinance released a report on Social Return on Investment (SROI) of its Income Generating Loan (IGL) Product in Kerala. The project, started in October 2011, was facilitated by Opportunity International, Australia, a major stakeholder in the Company. The primary objective of this analysis was to understand the degree of impact ESAF Microfinance was able to create on various stakeholders involved.

A list of stakeholders, covering clients and their family, SHG federation, loan officers and management, were identified, from which clients’ perspectives during different loan cycles were analyzed. The result showed that an investment of Rs. 4,900 Mn, including equity investment and interest paid by clients, could potentially create `15,610.3 Mn of present value, resulting in an indicative SROI ratio of 1:3.19. That is, for the equivalent of every `1 invested in ESAF Microfinance, `3.19 is returned in social value. This literally gave a thumping boost to the underlying social aspirations of the Organization. The report concluded that the Organization is well positioned to continue implementing an SPM strategy given its strong commitment to social mission and its competitive edge over other MFIs on the topic.

INVESTMENT OF IN ESAF MICROFINANCEGIVES IN SOCIAL VALUE

`1`3.19

A diagram showing client journey with ESAF

At any loan cycle, negative outcomes can be resulted due toincreased over indebtedness/financial stress.


16 17


provided in clause 18.13 of these Articles, should be followed.

The above portion be substituted as follows

18.12.a. Chairman of the Board shall be a Director appointed by the Board from among the Promoters/representatives of the Promoters so long as the Promoters hold equities or other financial interests in the Company.

18.12.a.i. The Chairman so appointed will be the regular Chairman, who presides the Board and General Meetings of the Company and will continue as such till another Chairman is appointed by the Board.

18.12.a.ii The appointment of Vice Chairman shall be at the discretion of the Board. In the absence of Chairman, Vice Chairman will act as the Chairman.

18.12.a.iii In the event of an equality of votes the Chairman or in his place the Vice Chairman shall have a casting vote either in the Board Meetings or General Body Meetings on any issue, which is put to vote.

18.12.b If Chairman or in his absence Vice Chairman is not present within 15 minutes after the time appointed for the holding of the Meetings (Board/General Meeting) or is unwilling to act, the Directors present shall elect one among them as the Chairman of the meeting. Provided the Chairman so elected will not be deemed as appointed for the purpose of clause 18.12.a.i. By order of the Board,

For ESAF MICROFINANCE ANDINVESTMENTS PVT. LTD.,

-Sd/-

PLACE : Thrissur PADMAKUMAR K. DATE : 24-06-2013 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/HERSELF AND THE PROXY NEED NOT BE A MEMBER OF THE COMPANY.

The members are requested to send their proxy form to the Registered Office of the Company not less than 48 hours before the commencement of the meeting.

2. The explanatory statement setting out the material facts pursuant to section 173(2) of the Companies Act, 1956, relating to item nos 4 & 5 is annexed here to.

3. Copies of all documents referred to in the notice and explanatory statement annexed thereto are available for inspection at the Registered Office of the Company between 10.00 AM and 1.00 PM on all working days till the date of the meeting.

Explanatory Statement U/S 173(2) of the Companies Act, 1956

As required under section 173 of the Companies Act, 1956, the following explanatory statements convey the material facts relating to the business.

Item No. 4

4. Appointment of Smt. Latha Mani E.V. as Director

Smt. Latha Mani E.V. was appointed as Additional Director of the Company in the Board Meeting held on 18th March, 2013. She is an elected Trustee of ESAF SHG Federation-Thrissur, a major shareholder of the Company and was appointed based on the nomination of the Trust.

The Company hopes to utilize her experience at the field level, as a sangam member and leader, for matters relating to field operations. Being a representative her period of office will be determined by the Trust she represents.

As an Additional Director her tenure will automatically expire on the day of the Annual General Meeting of the Company. Based on the notice received by the Company from the SHG Federation, that proposed the appointment, the Board recommends the appointment of Smt. Latha Mani as a Director, whose period of office will continue till recalled by the SHG Federation she represents.

A brief profile of the Director is available for inspection at the Registered Office of the Company between 10 AM to 1.00 PM on all working days till the date of the meeting. The appointment of the above person as Director of the Company is recommended.

None of the Directors other than the Director seeking appointment is interested in the resolution.

The Board recommends the resolution to be passed as ordinary resolution (simple majority) - Minimum Statutory requirement for passing the above resolution.

Item No. 5

5. Alteration of Articles by substitution of Article 18.12 relating to Chairman and Vice Chairman

The Board Meeting held on 15/12/2012 decided to appoint a regular Chairman to preside the Board Meetings and General Meetings of the Company. In this regard the Articles of Association of the Company has to be amended accordingly

as it contemplates appointment of Chairman in every Board Meeting.

In view of this, it has been decided to alter the sub clauses 18.12 relating to the appointment of Chairman and Vice Chairman of the Meeting of Board of Directors of the Company by substituting the new clause as given in the resolution.

In accordance with the provisions of Section 31 of the Companies Act, 1956, amendment of clauses of Articles of Association of the Company requires approval of shareholders by way of Special Resolution (ie.3/4th Majority). Hence the Board recommends the special resolution for the approval of the members.

All the Directors are deemed to be interested in this resolution.

By order of the Board,For ESAF MICROFINANCE AND

INVESTMENTS PVT. LTD.,Sd/-

PLACE : Thrissur PADMAKUMAR K. DATE : 24-06-2013 Company Secretary


18 19


DIRECTORS’ REPORT Your Directors have pleasure in placing before you the 17th

Annual Report of the Company together with the audited Balance Sheet and Profit & Loss Account for the year ended 31st March 2013.

Inadequacy of regulatory framework has continued to be a limiting factor in 2012-13, even though moulding a sectoral framework has occupied invaluable time of the RBI in the previous year. The Government support through the budget 2012-13, in the form of encouraging Qualified Foreign Investors (QFIs), SIDBI venture fund for MSMEs and enlarging of Womens’ SHG Development Fund from ` 200 to ` 300 crore signified the increasing importance of the sector in maintaining a balanced economic growth. Likewise relief provided by the RBI such as allowing the qualifying assets requirement to be for assets originated from 1st Jan, 2012; easing of the lending norms so as to cover loans for purposes such as house repairs, education, etc., lifting of the interest rate cap, and the substantial regulatory forbearance in the context of the Andhra portfolios, has been greatly welcomed by the industry. But still NBFC- MFIs are concerned over matters like revised Margin Cap for MFIs with Loan Portfolio in excess of ` 100 Crores, loan amount linked tenure and restriction on membership of only one JLG/SHG.

Many MFIs redesigned their funding strategies and started relying more on securitization deals and also debt instruments like Non-Convertible Debentures. To ensure adequate returns to their stakeholders, some big MFIs have resorted to diversification and promotion of ancillary products to retain its revenue generation capabilities.

Performance Highlights

The total balance sheet size of the Company reached ` 5,080 million from ` 2,797 million registered in the previous year, clocking a very impressive growth rate of 81.63%.

Total Revenue generated was ` 806.93 million compared to ` 652.53 million in the previous year, registering a growth rate of 23.67%.

Profit After Tax rose to ` 54.50 million compared to ` 41.47 million in the previous year, registering an impressive growth of 31.42%.

Net worth of the Company increased to ` 625.60 million against ` 571.10 million registered in the previous year, showing a growth of 9.54%

NPAs as a percentage of Gross Loan portfolio comes to 0.62% compared to the last year’s figure of 0.96%.

Earnings per share has risen to ` 1.09 from last year’s ` 0.86 on an Equity share having nominal value of ` 10/-.

Capital Adequacy Ratio Stood at a healthy 19.37% as against the RBI requirement of 15% for systemically important NBFCs.

Financial Results (in million `)

Parameters 2012-13 2011-12

Total Revenue 806.93 652.53

Total Expenses 687.15 556.61

Profit Before Depreciation, Extraordinary Items and Taxation

119.78 95.92

Less

Depreciation 25.96 24.64

Extraordinary Items 12.00 9.20

Taxation 27.32 20.61

Profit After Tax 54.50 41.47

In the increasingly rosy scenario, in 2012-13, the Company registered a reasonable growth rate of 52% in portfolio and 23.67% in revenue, thanks to its strong foothold in areas where it could make the difference. In the Financial Year 2012-13, the Company earned total revenue of ` 806.93 million compared to the previous Financial Year figure of ` 652.53 million. The Profit After tax has increased to ` 54.50 million as against the previous year’s ` 41.47 million, which would certainly add on the confidence of all the stakeholders.

We support lives,thanks to your support...PSU BANKS

PRIVATE BANKS

FOREIGN BANKS

NBFC/OTHERS


20 21


1. Borrowings

Details of Fresh Funding

Particulars 2012-13 2011-12

Fund Received ` (Million) % ` (Million) %

Term Loan/ Cash Credit 3520.00 69.13 1310.00 64.16

Portfolio Assignment 1339.50 26.30 663.00 32.47

Total Fund Raised from Banks/FIs 4859.50 95.43 1973.00 96.63

Fund Raised from Federations 204.00 4.01 65.50 3.21

NCD Raised 29.00 0.56 3.20 0.16

Total 5092.50 100.00 2041.07 100.00

69%

26%

4% 1%Banks/FIs

Portfolio Assignment

Fund Raised fromFederations

NCD Raised

Funding PatternThere has been a substantial increase of 150% in debt funding received by the Company in the FY 2012-13 as against the year 2011-12. The Company initiated the securitization transactions by way of Pass Through Certificates and was successful in concluding six such transactions aggregating to ` 1340 million.

It is a notable aspect that almost 44% of the total funding comes from PSUs and 37% from Private Sector Banks. This shows the credibility the Organization enjoys among the traditional as well as new generation Banks.

Break-up of funding sources

Funding Source ` (Million) %

PSU Banks 2225.00 43.70%

Private Banks 1877.00 36.86%

NBFC 607.00 11.92%

SHG Federation 234.50 4.61%

Foreign Banks 120.00 2.35%

NCD 29.00 0.56%

Grand Total 5092.50 100%

73.50

49.4043.00 41.40

37.00

26.00 25.00 24.50 21.40

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

IDBIBank

RatnakarBank

RelianceCapitalLimited

ICICIBank

StateBank of

India

SouthIndianBank

StateBank ofPatiala

DCBBank

AxisBank

89

52 50

37

25 25 23 23 20 17 17

0102030405060708090

100

Top lenders in the year

The above chart shows the top ten lenders during the FY 2012-13. The Organization successfully won 10 new Banking relationships during the period, out of which transactions with nine banks were completely concluded by now.

6.609.90 12.90

41.50

54.50

0

10

20

30

40

50

60

2008-09 2009-10 2010-11 2011-12 2012-13

Top 10 lenders as on 31st March 2013

12.79%

22.58% 23.18%20.45%

19.37%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2008-09 2009-10 2010-11 2011-12 2012-13

CRAR

The Company is able to maintain a healthy Capital Risk Adequacy Ratio (CRAR) throughout the year. During the year end, the CRAR of the Company stood at 19.37% against a statutory minimum requirement of 15%.

A pie chart showing the funding pattern

2. Share Capital

There was no change in Share Capital of the Company during the year under review.

3. Reserves

During the year the Company transferred to Statutory Reserve an amount of ` 10.90 mn taking the outstanding of the same to ` 25.13 mn and the Revenue Reserves as on March 31, 2013 stood at ` 100.47 mn.

PAT

Capital Adequacy Ratio

4. RBI Regulations

The Company being a systemically important non-deposit taking Non Banking Financial Company (NBFC) is regulated by Reserve Bank of India. As per Non-Banking Finance Companies RBI Directions, 1998, the Directors’ hereby report that the Company did not accept any public deposits during the year and did not have any public deposits outstanding at the end of the year.

Applications for NBFC-MFI

The Reserve Bank of India has introduced a new category of NBFC viz; Non Banking Financial Company-Micro Finance Institution (NBFC-MFI) vide circular no. RBI/2011-12/290 DNBS.CC.PD.No. 250/03.10.01/2011-12 dated December 02, 2011. All the NBFCs operating in the microfinance sector are required to obtain license from the RBI as NBFC-MFIs. Your company being in compliance with the conditions has applied for the same.

5. Operations

The Gross Loan Portfoilo of the Company as on 31st March 2013 stood at an all time high of ` 4290.82 million. The loan disbursements during the year stood to the tune of ` 6176.25 million.

Loan Disbursements (2012-13)

(In million `)

(In million `)

1295.402397.40

4120.80 4555.906176.25

0

2000

4000

6000

8000

2008-09 2009-10 2010-11 2011-12 2012-13

(In million `)


22 23


Programme titled “Microfinance for Decent Work”.

This year, Your Company had the privilege of participating in the Annual Meeting of Social Performance Task Force held at Panama from 4th to 8th June 2013, in which almost 300 representatives from across the globe attended. The meeting called for a global commitment for protection of clients by ensuring that the standards of social performance are part of the strategic decisions of the MFIs.

10. RATINGS, AWARDS AND RECOGNITIONS

Last year, ESAF Microfinance has been chosen by the World Bank Group for executing its India Development Marketplace initiative, a project that aims at scaling up innovative business models in Madhya Pradesh, Chhattisgarh and Jharkhand. Under the initiative, the Company will receive capacity building support and business mentoring services over the next 18 months from the WB Group. ESAF was one of the twenty organizations chosen out of 200 applicants for the grant.

Mr. K. Paul Thomas, Managing Director, ESAF Microfinance has been elected to the Board of MFIN (Micro Finance Institutions Network), at their Annual General Meeting held at Hyderabad on June 29, 2013. MFIN has been promoting the key objectives of microfinance in India and as the Self-Regulatory Organization for the Industry, has been trying to establish guidelines for responsible lending and client protection.

Pension Fund Regulatory and Development Authority of India, which is an autonomous Institution under the Government of India has appointed our Company as an Aggregator for the National Pension System Lite Swavalamban Scheme, which is meant to support individuals coming under the poverty line.

Ministry of Overseas India Affairs, Govt of India has appointed ESAF Microfinance as service provider under their Mahatma Gandhi Pravasisuraksha Yojana for overseas India workers.

Our Company is registered with the Credit Bureaus M/s Highmark and Equifax as a step towards preventing multiple borrowing and thereby avoiding over indebtedness.

11. DIRECTORS

During the year, Smt. Latha Mani was appointed as Additional Director of the Company at the Board Meeting held on 18th March 2013.

Smt. Sreedevi Venugopal resigned from the Board in the Board meeting held on 15th December, 2012. Board places on record

its deep appreciation to Smt. Sreedevi Venugopal for effectively representing the sangam members in the Board and for her contribution as a Board Member.

Shri. Vikraman Ampalakkat, Director retiring at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment.

12. AUDITORS AND AUDITORS’ REPORT

M/s. A. JOHN MORIS & CO., Statutory Auditors of the Company for the year 2012-13 retiring at the conclusion of the ensuing Annual General Meeting, intimated that they do not wish to seek re-appointment due to certain administrative reasons, intimation to this effect had been received by the Company. Accordingly the Board Meeting held on 24th June 2013 decided to recommend the appointment of M/s Deloitte Haskins & Sells, Chartered Accountants, Chennai, as Statutory Auditors of the Company for the year 2013-14, they had confirmed that, if appointed it will be within the statutory limits prescribed under section 224 (IB) of the Companies Act, 1956.

The notes to the Accounts forming part of the financial statements are self explanatory and need no further clarifications or explanations.

The report of the Auditors to the share holders is attached herewith. There are no qualifications or adverse remarks in the Auditors’ Report which require any clarification/explanation.

13. DIVIDEND

Your Directors have not recommended any dividend during the year as the Board is of the view that the Company should retain capital in order to maintain a healthy capital adequacy ratio and to support future growth opportunities.

14. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN ExCHANGE EARNINGS AND OUTGO

The particulars as required under section 217 (1) (e) of the Companies Act, 1956 read with the Companies (Disclosure of particulars in respect of Board of Directors) Rules, 1988, are mentioned in Annexure ‘A’ included in this report.

15. PARTICULARS OF EMPLOYEES

During the year, there were no employees who were in receipt of remuneration as per the provisions of Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975.

16. DIRECTORS’ RESPONSIBILITY STATEMENT

In Pursuant to the provisions of section 217(2AA) of the Companies Act, 1956, your Directors wish to state that:

(i) In the preparation of the Annual Accounts for the year, all applicable accounting standards have been followed and that there are no material departures.

(ii) Your Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the period.

(iii) The Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

(iv) The Directors have prepared the Annual Financial Statements on a “Going Concern” basis.

17. ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation for the excellent support received from the Customers, Employees and Statutory Authorities. The Directors also wish to place on record their appreciation of the sustained work of the employees of the Company.

By order of the Board,For ESAF MICROFINANCE AND

INVESTMENTS PVT. LTD.,

Sd/- Sd/-

(K. Paul Thomas) (George Thomas)Managing Director Director Operations

PLACE : ThrissurDATE : 24-06-2013

6. ERNST & YOUNG RECOMMENDATIONS

As per the recommendations made by the global consulting firm Ernst & Young, whom the Company had assigned to study on its Organizational Structure, the Company decided to move on to a Regional structure. Accordingly, the Company has constituted 10 Regions covering 32 areas across the country.

7. CORPORATE GOVERNANCE

Your Company has been practicing the principle of good Corporate Governance, which is a continuous and ongoing process. Clause 49 of the standard listing agreement and the Corporate Governance report under this clause are not applicable to the Company. Notwithstanding this, a report on Corporate Governance practices followed by your Company is attached and forms part of the Directors’ Report.

8. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis report, highlighting the important aspects of the business is attached and forms part of this report.

9. SOCIAL PERFORMANCE AND CORPORATE SOCIAL RESPONSIBILITY (CSR)

Apart from the normal microfinance activities, your Company emphasizes on holistic development of the society as a whole. Behind every product we endorse, from water purifiers to green stoves, lies the vision of contributing to the development of the poor in all possible ways.

A full fledged Social Performance Management Unit, which has won accolades at various national and international forums, operates at Your Company to monitor the SPM initiatives. The emphasis being given to SPM initiatives qualified the Company to partner with International Labour Organization (ILO), a specialized agency of the UN, to implement the Action Research

0500

100015002000250030003500400045005000

2008-09 2009-10 2010-11 2011-12 2012-13

Gross

ManagedPortfolio

762.

1829

9.26

1561

.23

318

.52

2095

.75

153.

22

2910

.30

598.

78

4290

.82

1101

.25

Portfolio (In million `)


24 25


A.Earnings Amt (in `.) Amt(in USD) Date Account No. Transaction bank

International Labour Office, 4 Route des Morillons, CH-1211, Geneva 22, Switzerland.

16,55,704 29,961 25/05/2012 59.73.488South Indian Bank, Ollukkara, Thrissur

B. OutgoPaid to,

Grameen Foundation, 1101, 15th St. NW, 3rd FIO, Washington DC 6,52,413.96 11,644.93 19/06/2012 0275789445

Citi Bank NA, 50, C.P. Ramaswamy Road, Alwarpet, Chennai

ANNExURE A Information pursuant to section 217 (1) (e) of the Companies Act, 1956 read with Rule 2 of the Companies (Disclosure of particulars in the respect of Board of Directors) Rules, 1988,

CONSERVATION OF ENERGY

Our operations are not energy intensive. However, significant measures will be taken to reduce energy consumption by using energy efficient computers.

TECHNOLOGY ABSORPTION

During the year under review, there is no expenditure on Technology Absorption and on Research and Development.

FOREIGN ExCHANGE

The details of Foreign Exchange earnings and outgo are shown below.

REPORT ON CORPORATE GOVERNANCE – BOARD PROFILEREPORT ON CORPORATE GOVERNANCE

ESAF Microfinance has given adequate thrust to Corporate Governance practices built on the principles of ethics, fair practices and transparency in all its dealings with various stakeholders such as Customers, Employees, Investors, Government and the Society at large. Also the Corporate Governance system is in tune with the RBI guidelines, which envisages adherence to transparency, accountability, responsibility and fairness. Sound corporate governance at Your Company is the result of external marketplace commitment and legislation plus a healthy Board culture, which directs the policies and philosophies of the Organization. The Company manages its business and conducts its affairs with the objective of enhancing shareholder value, which also ensures the financial viability of the business.

A. Philosophy on Corporate Governance

At ESAF Microfinance, Corporate Governance is not viewed as a set of binding obligations, but considered as a framework to be followed in true letter and spirit. The Board ensures good Corporate Governance in terms of sound business policies and practices, adherence to compliances, and protection of interests of all the stakeholders. The Board often revisits the existing procedures and policies on Corporate Governance and makes adequate changes to further strengthen the governance practices. The Board ensures the success and continuity of the

Company’s business through on-going monitoring of activities. In other words, Your Company sees Corporate Governance beyond financial numbers.

B. Internal Guiding Principles on Corporate Governance

Your Company’s Corporate Governance initiatives are based on the following key principles and are in compliance with the Companies Act, Guidelines issued by the RBI and other applicable statutes.

● Management must have the executive freedom to drive the enterprise forward without undue restraints

● The freedom of the Management should be exercised with in a frame work of effective accountability.

● The framework should cover areas including Organizational Structure, Planning Methodology, Management Standards and Policies, Monitoring, Reporting Processes and Statutory Compliances.

C. Board of Directors

As on March 31, 2013, the Board consisted of 10 Directors including the Managing Director and a Whole Time Director. During the year. Smt. Lathamani was appointed as an Additional Director on 18th March, 2013. Smt. Sreedevi Venugopal retired on 15th Dec 2012. Out of the total of 10 Directors, eight Directors are Non-executive Directors of which three Directors are Independent Directors. All important strategic policy matters are deliberated at the Board Meetings, where the role of Independent Directors plays the key.

a. Composition of BoardSl. No Name Date of Birth DIN Category Date of Appointment

1. Mr. K. Paul Thomas 21.05.1963 00199925 MD 10.10.2005

2. Mr. George Thomas 01.06.1963 01334307 WTD 02.09.2006

3. Mr. Vikraman Ampalakkat 08.08.1947 01978341 NEID 30.09.2008

4. Mr. Cherian Thomas 30.08.1962 00707735 NEID 30.09.2008

5. Dr. Idicheria Ninan 12.05.1956 02361501 NED 30.09.2008

6. Mr. Rajan Samuel 07.03.1961 02586490 NEID 07.10.2008

7. Ms. Ranjani K.C. 09.05.1958 01735539 NED 20.06.2009

8. Ms. Latha Mani 27.01.1967 06490309 NED 18.03.2013

9. Mr. Sundararao N.A.J.V.S. 06.03.1950 00492524 NED 31.03.2010

10. Mr. Ravindranathan Prabha 25.10.1948 01828812 NED 28.02.2011

MD - Managing Director NEID - Non-Executive Independent Director WTD - Whole Time Director NED - Non-Executive Director


26 27


BOARD PROFILE

K. Paul Thomas-The Founder and Managing Director of ESAF Microfinance, has been a Management professional for over 28 years, out of which more than 20 years are in the microfinance sector. He is on the Boards of apex microfinance bodies like MFIN and Sa-Dhan apart from being on the Boards of the sister concerns of ESAF like ESAF Swasraya Producers Company Ltd., ESAF Health Care Services (P) Ltd, ESAF Homes & Infrastructure (P) Ltd, ESAF Retail (P) Ltd, Takyon Systems Solutions (P) Ltd. and Nirman Bharathi. He is the Chairman of Kerala Association of Microfinance Institutions.

George Thomas- Director Operations, has over 13 Years of service in the Government sector and 9 years of experience in Microfinance. He is on the Boards of ESAF Swasraya Producers Company Ltd, ESAF Health Care Services (P) Ltd, ESAF Homes & Infrastructure (P) Ltd, ESAF Retail (P) Ltd, and ESAF Staff Welfare Trust. He holds a Masters Degree (Env. & Eco.).

Vikraman Ampalakkat - Independent Director has four decades of professional experience, of which 17 years in SIDBI, with 10 years exposure in microfinance and has retired as CGM. He is also on the Board of Muthoot Fincorp Ltd. and Samasta Microfinance Limited.

Cherian Thomas - Independent Director, is currently the Chief Executive Officer (CEO) of IDFC Foundation. He has over 27 years of professional experience in the banking, finance and infrastructure sectors. He is a Director on the Boards of Infrastructure Development Corporation (Karnataka) Limited, Uttarakhand Infrastructure Development Company Limited, Delhi Integrated Multi-Modal Transit System Limited, Buddha Smriti Udhyaan Development Company Limited, J. C. Advisory Services Private Limited and Shikhar Microfinance Private Limited. He holds degrees in Mechanical Engineering and Finance.

Idicheria Ninan-Non-Executive Director, a renowned professor holding a doctrate in Theology from Coventry University, UK. He has over 30 years of experience in Academics and Administration in various institutions including nine years of exposure in Microfinance. He is a Professor at SAIACS, was Principal of IPCKTS, and Research Guide in University of Mysore and a Board Member-ESAF Society.

Rajan Samuel - Independent Director - now serves as Regional Housing Finance Manager, Asia-Pacific with Habitat for Humanity International. Mr. Samuel has been involved in finance and community development for more than 27 years in 25 countries with Opportunity International, World Bank, Khula Finance, DFID, World Vision, Danida, etc. He is a CGAP certified Trainer. Mr. Samuel holds a Master’s degree in Commerce and Business Administration - has presented his Ph.D. thesis on microfinance and transiting economics at Azerbaijan State Economic University. He is based in Manila, the Philippines.

K. C. Ranjani - Non-Executive Director, is the Managing Director of Dia Vikas, a subsidiary of Opportunity International Australia, and its nominee. She has over 20 years of experience as a Financial Service and Development Specialist with SIDBI, as a Senior Microfinance Specialist with MicroSave and with Opportunity International Australia, on whose sponsorship set up Dia VIkas in 2007, and heading since then. She holds a Post Graduate Degree in Bank Management.

Sundararao N.A.J.V.S. - Non-Executive Director – is the Managing Director of Maanaveeya Development & Finance Private Limited, a subsidiary of Oiko Credit Netherlands, and its nominee. He serves as the Regional Manager of Oiko Credit. He is a Cost Accountant and Company Secretary and holds MBA in Financial Management from BITS and has over four decades of exposure in both public and private sectors.

R. Prabha- Non-Executive Director – nominee of all ESAF SHG Federations. He is a seasoned banker with over four decades of experience in all facets of banking and retired as General Manager, Canara Bank. He is on the Board of Grameen Financial Services Ltd., GenaracinEolica Pvt. Ltd. and an Advisor to Sa-Dhan. He was the Chairman of South Grameen Malabar Bank and holds a post graduate degree in Agriculture

Latha Mani-Additional Director - a nominee of ESAF SHG Federation has field level experience in organizing and leading sangams. She is an elected Board member of ESAF SHG Federation.


28 29


C. Board Meetings

Five Board meetings were held during the financial year ended on March 31th 2013. These meetings were held on 13th June, 2012, 27th September 2012, 15th December, 2012, 29th January, 2013 and 18th March 2013. The maximum gap between two Board meetings was 85 days.

D. Directors’ Attendance RecordSl. No Name Board meetings during Financial year 2012 - 13 Whether present at the

previous AGMHeld Attended

1. Mr. K. Paul Thomas 5 5 Yes

2. Mr. George Thomas 5 5 Yes

3. Dr. Idicheria Ninan 5 1 Yes

4. Mr. Vikraman Ampalakkat 5 4 No

5. Mr. Cherian Thomas 5 3 Yes

6. Mr. Rajan Samuel 5 1 No

7. Ms. Latha Mani* 1 1 No

8. Ms. Ranjani K.C. 5 5 Yes

9. Mr. Sundararao N.A.J.V.S. 5 2 Yes

10. Ms. Sreedevi Venugopal^ 3 3 Yes

11 Mr. Ravindranathan Prabha 5 5 Yes

*Appointed as Additional Director with effect from 18/3/2013. ^ceased to be a Director with effect from 15/12/2012.

BOARD COMMITTEES

The Company has three Board Committees Viz. Audit Committee, Human Resources and Nomination Committee and Executive Committee. Minutes of the meetings of the Committees are approved by the Chairman of the respective Committees and are noted and confirmed by the Board in its subsequent meeting.

1. Audit Committeea. Constitution of Audit Committee

The Audit Committee was constituted on 07.10.2008. The Committee comprises of the following Directors as Members.

Sl No. Name Designation

1. Mr. Vikraman Ampalakkat Chairman

2. Mr. George Thomas Member

3. Dr. Idicheria Ninan Member

The composition of the Audit Committee meets the requirement of section 292A of the Companies Act, 1956 and Clause 11 of Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007. At the Board Meeting held on 13-06-2012, the terms of reference of Audit Committee was revised to include the additional functions of monitoring, supervising and overseeing the systems and reviewing the functions of Risk Management Committee and ALCO Committee.

b. Meeting and Attendance

During the financial year under review four meetings of the Audit Committee were held on 13/6/2012, 27/9/2012, 15/12/2012 and 28/1/2013. The attendance details of Audit Committee members are as under.

Sl No. Name

Number of meeting during the Financial year 2012 - 13

Held Attended

1. Mr. Vikraman Ampalakkat 4 4

2. Mr. George Thomas 4 4

3. Dr. Idicheria Ninan 4 1

2. Human Resource and Nomination Committeea. Constitution of Human Resources and Nomination Committee

The Human Resources and Nomination Committee was constituted on 13.02.2009 (initially named as Human Resource and Remuneration Committee and renamed as Human Resources and Nomination Committee at the Board Meeting held on 13-06-2012) with the following Directors as members.


1. Mr. Vikraman Ampalakkat Chairman

2. Mr. K. Paul Thomas Member

3. Mr. Cherian Thomas Member

4. Mr. Rajan Samuel Member


b. Attendance during the year

The Committee shall meet at least twice annually or more frequently as circumstances dictate. Any member of the Committee may call meetings, if finds necessary.

During the financial year two meetings were conducted ie, on 15/12/2012 and 29/1/2013. The attendance details of the Remuneration Committee members are as under.

Sl No. NameNumber of meetings during the Financial Year 2012 - 13

Held Attended

1. Mr. Vikraman Ampalakkat 2 2

2. Mr. K. Paul Thomas 2 2

3. Mr. Cherian Thomas 2 2

4. Mr. Rajan Samuel 2 0


3. Executive Committeea. Constitution of Executive Committee

The Executive Committee was constituted on 13.02.2009, consisting of the following Directors as members.


1. Mr. K. Paul Thomas Chairman


b. Attendance during the year

Thirty Three Meetings were held during the financial year ended on March 31st 2013. These meetings were held on 26/4/2012, 28/5/2012, 27/6/2012, 3/7/2012, 13/7/2012, 19/7/2012, 9/8/2012, 22/8/2012, 5/9/2012, 13/9/2012, 26/9/2012, 9/10/2012, 17/10/2012, 29/10/2012, 5/11/2012, 19/11/2012, 20/11/2012, 3/12/2012, 27/12/2012, 10/1/2013, 28/1/2013, 29/1/2013, 1/2/2013, 15/2/2013, 16/2/2013, 26/2/2013, 5/3/2013, 7/3/2013, 12/3/2013, 15/3/2013, 22/3/2013, 25/3/2013 and 27/3/2013. The attendance details of Executive Committee members are as under.

Sl No. Name

Number of meeting during the Financial year 2012 - 13

Held Attended

1. Mr. K. Paul Thomas 33 33


Mr. A Vikraman, has resigned from the Committee with effect from 27th September 2012

Mr. Padmakumar K., Company Secretary and Compliance Officer, acts as Secretary to the Audit Committe, Human Resources & Nomination Committee and Executive Committee.

GENERAL SHARE HOLDER INFORMATION

a. Date time and venue of 17th AGM

The 17th AGM of the Company will be held on 27th September 2013, at 12 Noon at Trident, 1/24 G.S.T Road, Chennai -600 027

b. Financial Calendar

The financial Calendar of the Company is from 1st April to 31st March.


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MANAGEMENT DISCUSSION AND ANALYSIS Amidst new guidelines and lack of clarity in regulatory policies, ESAF Microfinance managed a steady growth rate for the year ended March 2013. During the year, We crossed the half a million customer mark, increasing our loan book by 52% to `4290.82 million and with a modest profit of `54.5 million. Optimizing operational efficiency was the key focus area for the year, with an objective to sustain controlled growth and profitability.

In the first half of the year, liquidity was a challenge as the sector witnessed a downward spiral as far as funding from banks was concerned. Migration to the technology platform selected was another challenge. A protracted delay from the vendor’s end in customizing the requirements prompted the Organization to move from Infra Soft to BR.Net. The Margin cap of 10% was another challenge to sustain the viability of the business. However, the Organization took it as an opportunity to take leverage on its extensive network by launching a bouquet of customer-centric ancillary products.

Operational Performance

During the year, the operations of the Company, spread over 33 districts in five states, (Kerala, Tamil Nadu, Maharashtra, Chhattisgarh and Madhya Pradesh) are organized under three zones – Kerala, Tamil Nadu and Central India zones. About 67% of the Company’s business took place in Kerala, 20% in Central India and 13% in Tamil Nadu.

A Snapshot Profile as on 31st March 2013

Parameters Kerala Tamil Nadu Maharashtra Chattisgarh Madhya Pradesh Total

Districts 11 7 7 6 2 33

Branches 90 23 20 10 5 148

Sangam 20066 3941 3314 1215 494 29030

Members 350,225 71,681 70,719 22,904 8,575 524104

Borrowers 246417 54000 58314 19061 6458 384250

Loan Officers 562 109 110 38 16 835

Staff 970 185 194 56 24 1429

Loan Disbursement FY 12-13 (mn) 4163.05 788.81 870.98 264.38 89.04 6176.26

Loan Disbursement Till Date (mn) 15122.79 3068.81 1993.65 840.62 242.66 21268.53

Total Outstanding (mn) 2975.24 555.35 546.93 155.86 57.45 4290.82

The year 2012-13 proved to be an eventful year for the Company, as reflected in 36% growth in disbursement and 52% growth in portfolio over the previous year.

ESAF Microfinance has 148 branches as on March 31, 2013. New locations for the branches are strategically identified by conducting need assessment studies. Among the total of 5,24,104 members in 29,030 sangams, 3,84,250 are borrowers with a total outstanding of ` 4,290.82 mn. The loan disbursement during the FY 2012-2013 stands at ` 6176.25 mn. The total number of employees is 1429, where women enjoy a higher gender ratio.

Growth and Expansion

Region 2011-12 2012-13Additions/Deductions

Kerala 86 90 4

Tamil Nadu 25 23 -2

Central India 36 35 -1

Total 147 148 1

During the year the Company opened five new branches in Kerala and one branch in Tamil Nadu (but merged one branch in Kerala, three branches in Tamil Nadu and one branch in Central Zone as part of reducing operational cost and increasing productivity). The region wise details of branches are shown in the table given above.

Particulars 2011-12 2012-13 Additions Growth

Loan Disbursed (in mn `) 4555.93 6176.26 1620.33 36%

Loan Outstanding (in mn `) 2910.30 4290.82 1380.52 47%

The loan disbursement grew by 36% and reached ̀ 6176.26 mn in the financial year 12-‘13 against a disbursement of ̀ 4555.93 mn in the financial year 11-‘12. The portfolio increased by 47% in the financial year 12-‘13 to ` 4290.82 mn from ` 2910.30 mn. The number of loan accounts registered an increase of 20%.

Productivity

Particulars 2011-12 2012-13Additions/Deductions

Average Borrower/ Branch in Nos 2352 2596 244

Average Borrower / Loan Officer 404 460 56

Average Portfolio/ Loan Officer in mn 3.29 5.14 1.85

During the year, average borrower per branch increased by 10%, average borrower per Loan Officer increased by 14% and average portfolio per Loan Officer increased by 56%.

Performance – Zone wise

Kerala Zone

Particulars 2011-12 2012-13 Change Growth

Districts 11 11 0 0.00%

Branches 86 90 4 4.65%

Borrowers 228698 246417 17719 7.75%

Portfolio in mn ` 2139.27 2975.24 835.97 39.07%

Kerala, the home ground of the Company, has shown a growth of 39.07% by increasing its total outstanding from ̀ 2139.27 mn to ` 2975.24 mn during 2012-13. The Borrower base increased to 2,46,417 in Mar 13.

Tamil Nadu Zone


Districts 7 7 0 0.00%

Branches 25 23 -2 -8.00%

Borrowers 54338 54000 -338 -0.62%

Portfolio (in mn `) 358.62 555.35 196.73 54.86%

In Tamil Nadu, Portfolio increased to ` 555.35 million in Mar 13 from 358.62 million in Mar 12, the borrowers decreased to 54,000 in Mar 13 from 54338 in Mar 12.

Central India Zone


Districts 15 15 0 0.00%

Branches 36 35 -1 -2.78%

Borrowers 62780 83833 21053 33.53%

Portfolio in mn ` 412.41 760.23 347.83 84.34%

In Central India, comprised of Maharastra, Chhattisgarh and Madhya Pradesh the portfolio increased to ` 760.23 million in Mar ‘13 from ̀ 412.41 million in Mar ‘12. The borrower base has increased to 83, 833 from 62,780.

Financial Highlights

Particulars 2009-10 2010-11 2011-12 2012-13

Incremental Borrowing ` mn

849.05 232.64 330.18 2126.3

Total Revenue ` mn 297.84 537.29 652.53 806.93

Profit After Tax ` mn 9.94 12.89 41.47 54.50

Total Assets ` mn 1848.87 2315.04 2796.92 5080.11

Jay


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Operational highlights – March 2013 – Growth Highlights

Parameters Kerala Tamil Nadu Maharashtra Chattisgarh Madhya Pradesh Total

Districts 11 7 7 6 2 33

Branches 90 23 20 10 5 148

Members 350,225 71,681 70,719 22,904 8,575 524104

Borrowers 246417 54000 58314 19061 6458 384250

Total Portfolio (mn) 2975.24 555.35 546.93 155.86 57.45 4290.82

Loan officers 562 109 110 38 16 835

Staff 970 185 194 56 24 1429

Parameters March 2013 March 2012 March 2011

State 5 5 7

Branches 148 147 150

Districts 33 33 35

Members 524104 457193 434425

Sangams 29030 26912 26021

Borrowers 384250 345816 322590

No. of Loan Disbursed During FY 440856 353,435 379,180

Amount Disbursed During FY(in Mn) 6176.25 4555.94 4120.79

Cumulative Loan Disbursed (in Mn) 21268.53 15092.28 10536.34

No. of Staff 1429 1462 1591

No. of Loan officers 835 858 1001

Total Loan Outstanding (in Mn) 4290.82 2822.83 2095.75

BUSINESS PLAN

As per March 2013 figures, Indian MFIs serve 95 million low income borrower accounts. Even though Microfinance is a significant sub-sector of the financial system, the figure represents only 13.6% of the total 60% population that is financially excluded. By 2015, almost 45 million urban households are expected to be in the less than ` 2 lac income category, for which financial inclusion will be relevant.

In this light, the Vision of the Company is framed in compliance with the RBI guidelines applicable to NBFC MFIs. Vision 2020 is

formulated by restructuring four ‘P’s of marketing as Population, Products, Platforms and Policies.

New Population

Including new groups that traditional microfinance has largely ignored, such as persons with disabilities.

Geographic focusIncludes backward districts in the states of Madhya Pradesh, Bihar, Uttar Pradesh, Jharkhand, Karnataka and North East India.

New Products

Apart from traditional Income Generation Loans, this initiative covers all forms of credit, insurance, pension and payments. Micro Enterprise Loans-MEL, individual loans, housing loans etc.

New Platforms

Using digital technologies to connect with people more frequently from multiple locations.

New Policies

Are framed to promote integrated services through ESAF’s associates and other outside agencies.

By 2015 ESAF plans to reach `10,000 mn Loan portfolio with 1 million borrowers in 200 branches and by 2020 the aim is to reach `50,000 mn. Loan portfolio with 2.5 million borrowers in 500 branches.

HUMAN RESOURCES MANAGEMENT

As a socially oriented financial services company, quality of HR assumes significance and the Company gives paramount importance to this segment to manage the operations professionally.

A. Head Count – The total employee count of Your Company as on 31st March 2013, was 1429. Among the zones, Kerala has the highest manpower with 1030 employees followed by Central India with 274 and Tamil Nadu with 125 employees. Majority of the manpower is assigned for branch / field operations. Out of the 1429 employees, 884 are females and 545 are males.

B. Employee Tenure – with the objective to develop committed employees your Company encourages long term relationships with them.

C. Recruitment - The Company has a fair and transparent non discriminate recruitment policy. The positions are normally advertised through leading newspapers/ weeklies / local TV channels/ job sites like Naukri. We also give opportunities to the members of our sangams to get the right candidates. During the year, 403 employees were recruited for different posts.

D. Training and Development – Your Company believes in ‘placing the right person in the right place’ and training plays a significant role towards this. The Company has developed structured training and development programs covering topics

like vision and mission, professional and soft skill development and customer orientation. A total of 72 training programs were conducted for the entire staff. Efforts are made to ensure that training programs for the field staff are conducted in vernacular languages so that staff from different states perceives it properly.

RISK MANAGEMENT

An Integrated Risk Management Department (IRMD) headed by a Senior Banker along with associating staff is functioning at the HO to identify, measure, monitor and mitigate risks to the extent possible in the areas of credit, market and operations. The Company has embedded Risk Management in the business process and ensures the implementation of healthy risk management practices in its operational processes and procedures.

Reserve Bank Guidelines Monitoring Cell (RBGMC)

A Reserve Bank Guidelines Monitoring Cell is established under IRMD to monitor the implementation of RBI Guidelines.

INTERNAL AUDIT AND CONTROL

The Company has a well established Internal Audit Department, which supports and helps the Management in identifying risks and in exercising adequate control over all the activities at the Branch level. The Internal Audit Department is headed by an experienced Senior Official retired from State Bank of India. The Department conducts detailed surprise audits at the Branches once in 6 months and Head Office departments once in a year. In addition to this, the Department also conducts spot audits at selected Branches at irregular intervals. Plans are on the anvil to increase the frequency of audit to once in 4 months. The rating system introduced during the latter half of 2011 has stabilized fully and further refinements are envisaged in the system. The Internal Audit Department submits quarterly reports to the Audit Committee of the Board on the important audit observations made at the Branches. The audit observations have helped the Management to streamline the Branches and increase the efficiency, wherever required. Most of the procedural irregularities are rectified during the audit period itself and follow up is made for prompt rectifications of the remaining irregularities and deviations.

GRIEVANCE REDRESSAL MECHANISM

Your Company has implemented a Grievance Redressal Mechanism for customers and staff members. In line with


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the Supreme Court Judgment, a system for prevention of and dealing with sexual harassment of women employees is also implemented in the Company. The grievances, complaints and deficiency in services are addressed at various tiers of management. A grievance redressal forum is functioning under the HR department. Dedicated telephone and mobile numbers are made operational for registering complaints/suggestions. The Grievance Redressal Mechanism is headed by a Senior Management functionary of the Head Office.

NEW BUSINESS INITIATIVES

Your Company in line with the emerging opportunities has started associating with other business initiatives to ensure that our client base of 5.25 lac gets the privilege of our new initiatives. The Company now takes pole position to utilize its rural branch network, knowledge on rural households and client loyalty built over the years through customer oriented services like implementation of Central Government’s National Pension Scheme, facilitating marketing of energy efficient water purifiers like Pure It (brand of Hindustan Unilever) and facilitating money transfer services by entering into strategic alliances with Western Union and Xpress Money. Your Company’s delivery channel encompasses a committed workforce of more than 1500, spread across 148 branches in the country and is connected through a cutting-edge technology platform.

TECHNOLOGY INITIATIVES

ESAF has made rapid strides in technological initiatives in the last few years. A 17 member technology team, well versed in cutting edge IT solutions, is in place to take care of the software / infrastructure needs.

We have entered into strategic partnerships with leading IT companies to ensure that state of the art systems and processes are in place.

Data Security Alliance With IBM

In order to ensure seamless flow of business continuity, ESAF has given significant focus on data security. ESAF’s data center is hosted and managed by the multinational technology and consulting corporation IBM in one of its Tier-3 data centers. The Disaster Recovery environment connected to the Data Center guarantees 24/7 connectivity and uptime to ensure smooth business operations, in case of unplanned exigencies. The processes and policies built around the infrastructure ensure privacy and protection for the data.

Bankers Realm.NET the Core Banking Platform

BR.NET is a comprehensive Micro Finance Banking solution developed by Craft Silicon; a Kenya based IT Company with more than a decade of domain expertise. The customized solution offered by BR. NET is a new age platform that can be adapted to the changing business requirements.

Centralized Processing Unit

In order to improve efficiency, ESAF has decided to shift from a branch based system to a centralized processing system. Apart from improved data quality, the idea is intended to allow branch officials to focus more on their primary responsibilities.

Other Supporting Applications

a. The NPS application to track the NPS Lite application logistics

b. The strategic partnership with Micro Energy Credits. This initiative is meant to provide technical support for maintaining database on carbon credits acquired.

SOCIAL PERFORMANCE MANAGEMENT

Client-centric activities were the corner stone based on which Social Performance Management efforts for the year were focused. As a result the Organization made sure that products and services designed were in line with the social values upheld by the Organization. For all the activities ESAF Microfinance embarked upon, SPM dealt with understanding its relevance to the poor customers. The social targets were clearly defined and detailed out to better reach the marginalized sections in the unreached areas.

ESAF Microfinance also beta tested the globally accepted Universal Standards of Social Performance within the strategic operations to understand its relevance.

Training Staff on SPM

Separate SPM modules were developed and included in the induction training programs designed for the Credit Officers, Branch Managers and Area Managers. Topics like Progress out of Poverty Index (PPI), Client protection, Transparency etc. were covered in the sessions.

Studies Conducted

R&D department of ESAF Microfinance has undertaken some path breaking studies that helped the management to take

decisions from the perspective of the clients. Some important studies conducted were –

a. Client satisfaction survey

Client Satisfaction survey was primarily conducted with the purpose of understanding the satisfaction as well as the dissatisfaction levels of the clients in terms of parameters like loan amount, tenure, repayment schedule etc. Altogether 910 clients participated in the Focus Group Discussions conducted across 25 branches. Majority of the clients were satisfied with the loan tenure and the size of the loans but felt that specific loan products for housing and education would be a welcome move.

b. Client preference for repayment schedules

A study on client preference on repayment schedules was conducted among 100 clients from all the three zones. 50 clients participated in the survey conducted in Kerala and 25 each participated in surveys conducted in Tamil Nadu & Central Zone. 87% of the clients were satisfied with the present mode of weekly repayment, which could be attributed to the daily and weekly income of the respondents.

c. Need assessment of micro enterprises loan

A need assessment survey towards understanding the requirement of micro enterprise loans was conducted among 85 entrepreneurial clients. The respondents were mainly into livelihood development activities like garment making, running grocery shops, and handicrafts retail. Most of them were into the business for more than five years and were in need of ` 1-2 lac for expansion, which could be repaid in 3-4 years. Moreover, 75% of customers were willing to take secured loans by providing adequate collaterals.

d. Study on product / service acceptability among cluster leaders

The study conducted by ESAF among 154 cluster leaders from Kerala Zone revealed that majority of the respondents were highly satisfied with the Company’s services. Satisfaction level of the respondents was gauged against six parameters comprised of timely disbursement of loans, loan delivery methods from branches, savings custom through SHG Federation, attitude of the branch staff, training provided by SHG Federation and accurate information dissemination among members on programs and policy changes. The study also captured the respondents’ opinions on their transformation

after joining ESAF. It was found that many of the cluster leaders gathered skill and know-how, which remained untapped and 65% of them wished to impart skills they acquired to other sangam members as well. Also 24% of the cluster leaders were interested to market the products and services of ESAF for additional income.

e. Drop out study

A drop out study was conducted among 100 clients on a random basis at 10 different branches in Kerala. The study revealed that non-availability of higher loan amount, not being able to attend sangam meetings regularly, shifting of the house to another location, peer pressure within sangam to repay on time etc. were some of the chief reasons for drop outs.

f. State wise client profile

A state wise client profile of 1500 members was analyzed to specifically look into their socio-economic status and to understand their access to various basic facilities such as water connections, toilets etc. The study also revealed that almost 25% of sangam members have remained with ESAF for five years or more.

Internship Programs

Internship programs are offered to students undergoing their post graduation in business management, economics, rural management and commerce. Students from national and international universities were encouraged to attend the programs with an aim to nurture aspiring talents into the field of microfinance. Four students from Calicut University, one student each from Cochin, Bangalore, and Anna universities and one student each from Solvay Brussels School of Economics and Management and College of Engineering Trivandrum participated in the program.

SPI Audit

In SPI Audit conducted during the year, ESAF Microfinance scored more than 70% in all the four dimensions - targeting and outreach to the poor, adaptation of products and services, benefits to the clients and social responsibility. In social responsibility front, ESAF scored 80%, a significant improvement from 65% registered in June 2010, thanks to the client involved management and client-centric approaches of the Organization.


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STORIES OF TRANSFORMATONEnjoying the sweetness of ‘pappadam’...

It’s been five years since Usha Pampavan enrolled as a member of ESAF Microfinance. The 43 year old lady has been engaging in the business of making pappadams for the past 25 years. She lives a happy life at Chembuthra, Thrissur with her husband, who works as a mason. Even after 27 years of married life a divine blessing in the form of an offspring still eludes the couple. But nothing can stop the enthusiasm of Usha in honestly discharging her duties and she is thankful to ESAF Microfinance for the timely support she gets to expand her business.

Now she is able to make a stable income of ` 4000 / month and can afford her husband’s off-days due to lack of demand in the market or ill health. Her distribution network now covers both wholesalers and retailers. Usha says that the four loans taken from ESAF have significantly improved her standard of living. Using the money, she bought raw materials to increase her production volume. This helps her to keep churning out the product in accordance with the market demand. She then happily concluded by pointing her finger towards the refrigerator she bought recently.

A refirigerator Usha bought recently shows her improved standard of living

Fanciful life, fierce determination…

Rajamani from Sengalipalayam has been with ESAF for almost five years. She decided to join ESAF, when she realized that relying on the inconsistent income of her husband would not help her aim of leading a quality life. Being a daily wage earner, her husband had his limitations in finding a regular job. Rajamani could understand it better as she too was depending on small works that could earn her ` 25 – ` 50 / day. Soon after joining ESAF, she took a loan of ̀ 8,000 to set up a fancy store of her own at her native place. The decision proved to be a hit as hers was the only fancy store in the area. Started with bangles and fancy

chains she later added one more Stock Keeping Unit (SKU) in the form of fancy kids wear.

No wonder, she managed to escalate her revenues from sales to ` 15,000 / month. She now foresees her future with a positive frame of mind, thanks to the value added services of ESAF like pension and insurance. Her close relatives give her adequate support in her initiative. She thanked ESAF Microfinance, as the loans helped her to run her business successfully and made it possible for her to construct a house of her own. Also she could send her daughter to get quality education from a premium English medium school. She also thanked the branch staff and added that never once she experienced a delay in getting loans from them. Rajamani now dreams big of building a small shopping complex in her village and looks for the support of ESAF to give her daughter the maximum level of education possible. She now wants to see more people from her community to join the success bandwagon and has already recommended ESAF to her neighborhoods.

Rajamani at her shop

Steely resolve…

Archana is a business woman running a utensils shop in Nagpur. Few years back, she decided to join ESAF as she was finding it difficult to bring up her two children, with the limited income of her husband. The success stories of ESAF members in Nagpur also prompted her to start a venture of her own.

From the beginning, she was clear in her mind that she would take a different route than the popular business of edible oils,

which needed more space and preparations. Like a smart B school student she conducted a market study and found that steel utensils were in great demand in the area, which was yet to have a steel retail outlet. She started sourcing steel utensils from wholesale market and selling it from her house.

In 2011, she started the business with a loan of ` 10,000 from ESAF. Now she owns an inventory worth ` 80,000. Her business has helped her to send her children, studying in 8th and 5th standards, to earn quality education and has given enough disposable income to meet their needs. Now she wants to own a space of her own to run the shop and free her room at home.

Archana at her steel utensils shop

Stitching dreams step by step At the age of 26, when most women prefer to relax on the shoulders of their better halves, fate had left Radhamani without any such shoulders to rest. As a widow she adorned multiple roles to get things moving for her and her son, including the role of a house maid at her home town Thotipalayam, Thudiyalur. Radhamani was adept in tailoring but couldn’t find sufficient orders to rely on it as a primary income source. Meanwhile, she joined ESAF Microfinance as a sangam member and not surprisingly, utilized her first loan of ` 8,000 to buy a new tailoring machine. Through her

sangam network she found it easy to get stitching orders and the small loan never gave her sleepless nights over repayment.

Gradually she shifted her work base from home to a rented house and officially launched her tailoring shop. Using her 4th loan cycle, she expanded her tailoring shop to a ready made garments shop. She started taking readymade garments from Erode and selling it at her shop. Her daily income now increased ten folds from ` 100/ day to ` 1,000/day. The life insurance and pension schemes provided by ESAF encouraged her to cultivate her savings habit. No wonder, her standard of living improved and now she owned a house with concrete roof in five cents and didn’t need to compromise on her favourite dishes. Moreover, she was happy that she could give reasonably good education to her son. Now she focuses on improving her revenues and has plans to open another shop in Coimbatore, which will help her to attain the twin aim of profit maximization and new job opportunities for the poor. She is grateful to ESAF for the hassle free loans provided at the right time.

Radhamani at her textile shop


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INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF ESAF MICROFINANCE AND INVESTMENTS PRIVATE LIMITED

Report on the Financial Statements

1. We have audited the accompanying financial statements of ESAF MICROFINANCE AND INVESTMENTS PRIVATE LIMITED (“the Company”), which comprise the Balance Sheet as at 31st March, 2013, the Statement of Profit and Loss and the Cash Flow Statement for the said year and a summary of the significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

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

Auditors’ Responsibility

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

4. An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether

due to fraud or error. In making those risk assessments, the auditor considers the internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.

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

Opinion

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

i. in the case of the Balance Sheet, of the state of affairs of the Company as at 31stMarch, 2013,

ii. in the case of the Statement of Profit and Loss, of the profit of the Company for the year ended on that date, and

iii. in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.

Report on Other Legal and Regulatory Requirements

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

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

i. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.

ii. In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.

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

iv. In our opinion, the Balance Sheet, Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards referred to in• sub-section (3C) of section 211 of the Act.

v. On the basis of the written representations received from the directors as on 31st March, 2013 taken on record by the Board of Directors, none of the directors is disqualified as on

31st March, 2013 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Act.

For A. JOHN MORIS& CO. CHARTERED ACCOUNTANTS,

FRN. 007220S

SD/-

PLACE : CHENNAI (G. KUMAR)DATE : JUNE 24, 2013 PARTNER,

M.No: 023082


40 41


ANNExURE TO THE AUDITORS’ REPORT

Referred to in paragraph 3 of our Report of Even Date

I. 1. The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

2. As explained to us, fixed assets, according to the practice of the Company, are physically verified by the management at reasonable intervals, in a phased verification programme, which, in our opinion, is reasonable looking to the size of the company and the nature of its business.

3. The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern of the Company.

II. 1. Being a Non-Banking Finance Company, the matters in connection with verification, reporting and all other related matters on inventory are not applicable.

III. 1. The Company has granted loans aggregating to Rs. 10,09,880/-/- to four parties listed in the register maintained under section 301 of the Companies Act, 1956 during the year. At the year-end, the outstanding balances of such loans amounting to Rs.NIL from the above parties and the maximum amount involved during the year was Rs.6,83,066/-.

2. The rate of interest and other terms and conditions of such loans are, in our opinion, pirma facie not prejudicial to the interest of the Company.

3. The receipts of principal amount and interest have been regular I as per the stipulations.

4. According to the information and explanations given to us, there is no overdue more than Rs. 1 Lakh of principal and interest.

IV. The Company has not taken any loans secured or unsecured from companies, firms or other parties listed in the register maintained under section 301 of the Companies Act, 1956. Therefore, reporting under sub clauses of clauses 4 does not arise.

V. In our opinion, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of fixed assets and for the sale of

services. Further, on the basis of our examination of the books and records of the company, carried out in accordance with the auditing standards generally accepted in India, we have not observed any continuing failure to correct major weaknesses in the aforesaid internal control system.

VI. 1. To the best of our knowledge and belief and according to the information and explanations given to us, we are of the opinion that the particulars of contracts or arrangements referred to in Section 301 of the Act that need to be entered in the register maintained under that Section have been so entered.

2. In our opinion, according to the information and explanations give to us, the transactions made in pursuance of such contracts or arrangements entered in the register maintained under Section 301 of the Act and exceeding the value of rupees five lakhs in respect of any party during the year, prima facie, have been made at prices which are reasonable having regard to the nature of the service and the prevailing market prices at the relevant time.

VII. In our opinion, according to the information and explanations given to us, the Company has not accepted any deposits from the public within the purview of section 58A of the Companies Act, 1956 and the company has complied with the directives issued by Reserve Bank of India with regard to acceptance of deposits.

VIII. In our opinion, the company has an internal audit system, the scope and coverage of which is fairly adequate, commensurate with the size and nature of the business of the Company.

Ix. According to the information and explanations given to us, the maintenance of cost records has not been prescribed by the Central Government under section 209(1)(d) of the Companies Act, 1956, for any of the activities of the company.

x. 1. According to the information and explanations given to us, the Company is regular in depositing undisputed statutory dues including Provident Fund, Investors Education and Protection Fund, Employees’ State Insurance, Income Tax, Service Tax and other material statutory dues applicable to it with the appropriate authorities during the year.

2. According to the information and explanations given to us, there are no undisputed amounts payable in respect of Provident Fund, Investors Education and Protection Fund, Employees State Insurance, Income-tax, Sales-Tax, Wealth Tax,

Custom Duty, Excise Duty & Cess as at the year end, for a period more than six months from the date they became payable.

xI. According to the information and explanation given to us, there are no dues of disputed Income Tax, Service Tax and Cess that have not been deposited with the appropriate authorities.

xII. The Company does not have accumulated losses at the end of the financial year and has not incurred cash loss during the financial year and the immediately preceding financial year.

xIII. According to the information and explanations given to us the company has not defaulted in repayment of dues to Financial Institutions, Banks and Non-banking Financial Companies.

xIV. Based on our examination of documents and records maintained by the Company, we are of the opinion that the Company has not granted any loans and advances on the basis of security by way of pledge of shares, debentures and other securities.

xV.. The Company does not carry on the business of Chit funds, Nidhi, mutual benefit fund and society. Hence, the provisions of clause 4 (xiii) of the Order are not applicable to the Company.

xVI. In our opinion and according to the information and explanations given to us, the company is not a dealer or trader in shares, securities, debentures and other investments.

xVII. In our opinion and according to information and explanation given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from the financial institutions are not, prima facie prejudicial to the interests of the Company.

xVIII. To the best of our knowledge and belief and according to the information and explanations given to us, in our opinion, term loans availed by the Company were, prima facie, applied by the Company during the year for the purposes for which the loans were obtained.

xIx. Based on the information and explanations given to us and on an overall examination of financial statements of the Company, in our opinion, short term funds have not been utilised for long term purposes.

xx. According to the information and explanations given to us no preferential allotment of shares has been made by the company to companies, firm or other parties listed in the register maintained under section 301 of the company Act, 1956.

xxI. 1. According to the information and explanations given to us, during the period covered by our audit report, . the Company has issued 28,640 secured non-convertible debentures of Rs.1,000 which amounting to Rs.2,86,40,000/- and outstanding balance of Rs.3,27,20,000/for which the Company has filed the requisite forms with the Registrar of Companies.

2. According to the information and explanations given to us, the company has created securities in respect of secured debenture issued.

xxII.The Company has not raised money by public issues in the recent past and hence, we have no comments to offer in respect of clause 4(xx) for the Companies (Auditor’s Report) Order, 2003.

xxIII.As per information and explanations given to us, the company has reported frauds during the year by customers as well as staff to the tune of Rs.l,59,775/- and Rs. 2,59,505/- respectively.

xxIV.The company has complied with the prudential norms on the income recognition and provisioning against standard/sub-standard/doubtful/loss assets, as per the provisions of NonBanking Financial (Non Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2007.

xxV.Based on representations by management and our visit to borrowers and branches of the Company, we are of the opinion that the Company has adequate procedures for appraisal of credit proposals/requests, assessment of credit needs and repayment capacity of the borrowers.

For A. JOHN MORIS& CO. CHARTERED ACCOUNTANTS,

FRN. 007220S

SD/-

PLACE : CHENNAI (G. KUMAR)DATE : JUNE 24, 2013 PARTNER,

M.No: 023082

ParticularsAs at

31.03.2013`

As at31.03.2012

`

Note No.

M/s. ESAF MICROFINANCE AND INVESTMENTS PRIVATE LIMITED,(Formerly Pinnai Finance & Investments (P) Ltd.)

#5A, 5th FLOOR, No. 8 & 9, GANGADEESWARA KOIL STREET, PURASAWALKAM, CHENNAI-600 084.

BALANCE SHEET AS ON 31st MARCH, 2013

Particulars

SCH

A EQUITY AND LIABILITIES1 Shareholders’ Funds Share capital 3 500,000,000 500,000,000 Reserves and surplus 4 125,596,142 71,099,566 625,596,142 571,099,566 2 Non-current liabilities Long-term borrowings 5 2,044,575,002 934,957,604 Deferred tax liabilities 6 0 1,677,279 Long-term provisions 7 14,154,446 5,680,200 2,058,729,448 942,315,083 3 Current liabilities Short-term borrowings 8 135,260,438 148,543,731 Other current liabilities 9 2,189,463,617 1,056,790,718 Short-term provisions 10 71,069,104 78,166,695 2,395,793,159 1,283,501,144 TOTAL 5,080,118,749 2,796,915,793

B ASSETS1 Non-current assets Fixed assets Tangible assets 11 106,371,631 102,522,031 Intangible assets 11 0 19,991,070 106,371,631 122,513,101 Non-current investments 12 47,050,287 1,000,000 Deferred Tax Asset 6 622,505 0 Long-term loans and advances 14 1,647,126,483 642,327,655 1,694,799,275 643,327,655 2 Current assets Current investments 13 0 100,000 Trade receivables 15 1,715,226,909 1,662,693,540 Cash and cash equivalents 16 1,489,015,682 315,478,657 Short-term loans and advances 17 39,757,487 28,312,429 Other current assets 18 34,947,765 24,490,411 3,278,947,843 2,031,075,037 TOTAL 5,080,118,749 2,796,915,793 See accompanying notes forming part of 25the financial statements In terms of our report attached.For A. JOHN MORIS & CO., Chartered Accountants, FRN. 007220S For and on behalf of the Board of Directors (G. Kumar) K. PAUL THOMAS GEORGE THOMASPartner Managing Director Director Membership No. 023082

Place : Thrissur JOBY. C.O PADMAKUMAR.K Date : June 24, 2013 Chief Financial Officer Company Secretary



BALANCE SHEET AS ON 31st MARCH, 2013

Particulars

SCH

A EQUITY AND LIABILITIES1 Shareholders’ Funds Share capital 3 500,000,000 500,000,000 Reserves and surplus 4 125,596,142 71,099,566 625,596,142 571,099,566 2 Non-current liabilities Long-term borrowings 5 2,044,575,002 934,957,604 Deferred tax liabilities 6 0 1,677,279 Long-term provisions 7 14,154,446 5,680,200 2,058,729,448 942,315,083 3 Current liabilities Short-term borrowings 8 135,260,438 148,543,731 Other current liabilities 9 2,189,463,617 1,056,790,718 Short-term provisions 10 71,069,104 78,166,695 2,395,793,159 1,283,501,144 TOTAL 5,080,118,749 2,796,915,793

B ASSETS1 Non-current assets Fixed assets Tangible assets 11 106,371,631 102,522,031 Intangible assets 11 0 19,991,070 106,371,631 122,513,101 Non-current investments 12 47,050,287 1,000,000 Deferred Tax Asset 6 622,505 0 Long-term loans and advances 14 1,647,126,483 642,327,655 1,694,799,275 643,327,655 2 Current assets Current investments 13 0 100,000 Trade receivables 15 1,715,226,909 1,662,693,540 Cash and cash equivalents 16 1,489,015,682 315,478,657 Short-term loans and advances 17 39,757,487 28,312,429 Other current assets 18 34,947,765 24,490,411 3,278,947,843 2,031,075,037 TOTAL 5,080,118,749 2,796,915,793 See accompanying notes forming part of 25the financial statements In terms of our report attached.For A. JOHN MORIS & CO., Chartered Accountants, FRN. 007220S For and on behalf of the Board of Directors (G. Kumar) K. PAUL THOMAS GEORGE THOMASPartner Managing Director Director Membership No. 023082




STATEMENT OF PROFIT AND LOSS - NORMAL AS AT 31ST MARCH, 2013

Particulars

SCH

CONTINUING OPERATIONS 1 Revenue from operations 19 760,441,182 635,560,986 2 Other income 20 46,491,893 16,972,277 3 Total revenue (1+2) 806,933,075 652,533,263 4 Expenses (a) Finance costs 21 361,778,359 254,519,820 (b) Employee benefits expenses 22 240,404,017 207,834,840 (c) Administrative and other Expenses 23 78,791,460 74 ,930,207 (d) Depreciation and amortisation 11 25,962,432 24,646,687 (e) Provisions/ Write offs 24 6,174,873 19,328,084 Total expenses 713,111,141 581,259,638 5 Profit before exceptional and extraordinary items&tax 93,821,934 71,273,6256 Exceptional items 0 0 7 Profit before extraordinary items and tax 93,821,934 71,273,625 8 Extraordinary items 25.18 12,000,680 9,200,600 9 Profit before tax 81,821,254 62,073,025 10 Tax expense (a) Current tax expense for current year 29,624,463 21,958,357 (b) (Less): MAT credit 0 0 (c) Current tax expense relating to prior years 0 0 (d) Net current tax expense 29,624,463 21,958,357 (e) Deferred tax (2,299,784) (1,351,651) 27,324,679 20,606,706 11 Profit / (Loss) from continuing operations (9 +10) 54,496,575 41,466,319 12 Earnings per share (Face value of `10/- each): (a) Basic 25.17 (i) Continuing operations 1.09 0.86 (ii) Total operations 1.09 0.86 (b) Diluted 25.17 (i) Continuing operations 1.06 0.85 (ii) Total operations 1.06 0.85 See accompanying notes forming part of the 25 financial statements.

In terms of our report attached.For A. JOHN MORIS & CO., Chartered Accountants, FRN. 007220S For and on behalf of the Board of Directors (G. Kumar) K. PAUL THOMAS GEORGE THOMASPartner Managing Director Director Membership No. 023082


As at31.03.2012

`

As at31.03.2012

`

Particulars ParticularsAs at

31.03.2013`

As at31.03.2013

`

Note No. Note No.

SD/-SD/- SD/-SD/-

SD/-SD/- SD/-SD/- SD/-SD/-


44 45



#5A, 5th FLOOR, No. 8 & 9,GANGADEESWARA KOIL STREET, PURASWALKAM, CHENNAI-600 084.

CASH FLOW STATEMENT FOR THE YEAR ENDED 31st MARCH, 2013

A Cash Flow from Operating Activities:- Profit Before Tax 93,821,934 71,273,625 Adjustments for:- Depreciation and amortisation expenses 25,962,432 24,646,687 Dividend from Mutual funds (130,536) (1,290,989) Provision for Standard receivables under Microfinance activities 534,492 8,056,254 Provision for Sub-Standard receivables under Microfinance activities 264,350 9,569,558 Finance Costs 361,778,359 254,519,820 Interest Income on Deposits with Banks (20,664,280) (9,967,872) (Profit) / Loss on Sale of Fixed Assets 11,181 20,840 Operating Profit before Working Capital Changes 461,577,931 356,827,923 Changes in Working Capital:- (Increase)/ Decrease in Microfinance activities (Long-term and Short Term) (899,796,388) (281,524,840) (Increase)/ Decrease in Deposits & Advances (Long-term) (179,438,221) (38,080,229) Increase/(Decrease) in Current Liabilities 86,355,588 55,775,498 Cash Generated from Operations (531,301,089) 92,998,352 Direct Taxes Paid (26,654,349) (14,891,042) Finance Costs paid (348,081,704) (250,727,233) Cash Flow before Extraordinary Items (906,037,142) (172,619,923) Cash flow from Extraordinary items (10,400,668) (9,200,600) Net Cash from Operating activities (A) (916,437,810) (181,820,523)

B Cash Flow from Investing Activities:- Purchase of Fixed Assets (10,122,143) (40,468,081) Sale of Fixed Assets 290,000 130,000 Investments (Net) (45,950,287) (100,000) Interest Income on Deposits with Banks 20,664,280 9,967,872 Dividend from Mutual funds 130,536 1,290,989

Net Cash from Investing activities (B) (34,987,614) (29,179,220)

ParticularsFor the year ended

31 March, 2013`

For the year ended 31 March, 2012

`

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH, 2012

C Cash Flow from Financing Activities:- Issue of Equity Shares - 16,980,000 Borrowings from Banks & Others taken 7,523,904,673.22 3,487,403,886.03 Borrowings from Banks & Others Repaid (5,426,817,224) (3,150,264,407) Proceeds from issue of debentures 28,640,000.00 3,360,000.00 Repayment of Debentures (765,000) (100,000) Net Cash from Financing activities (C) 2,124,962,449 357,379,479 Net Increase (Decrease) in cash & Cash Equivalents 1,173,537,025 146,379,736 Cash & Cash Equivalents at the beginning of year 315,478,657 169,098,921

Cash & Cash Equivalents at the end of year 1,489,015,682 315,478,657

Notes:- 1. The cash flow statement has been prepared under the "Indirect method" as set out in Accounting Standard - 3, " Cash flow statement".2. Cash and cash equivalents at the year end includes Rs. 65,19,75,242/- in the form of Fixed unencumbered Deposits with Banks.

In terms of our report attached.

For A. JOHN MORIS & CO., Chartered Accountants, FRN. 007220S For and on behalf of the Board of Directors (G. Kumar) K. PAUL THOMAS GEORGE THOMASPartner Managing Director Director Membership No. 023082


ParticularsFor the year ended

31 March, 2013`

For the year ended 31 March, 2012

`

SD/-

SD/-SD/-

SD/-

SD/-


46 47


NOTE PARTICULARS

1 CORPORATE INFORMATION:-

1.1

ESAF MICROFINANCE & INVESTMENTS (P)LTD is engaged in micro finance activities with the ultimate objective of benefiting the underpriveleged, mostly women who are organized in the form of Joint Liability Groups. The Company is registered with the Chennai Registrar of Companies as a private limited Company on 27th September 1996 vide Registration No. U65933TN1996PTC036650. The Company is holding a valid Certificate of Registration issued by the Reserve Bank of India as a Non Banking Financial Company - Non Deposit taking vide certificate No. B-07-00652 dated 22nd August, 2007, and is into the process of getting changed its registration into an NBFC - MFI as per the RBI guidelines relating to NBFCs engaged in Microfinance.The Company is having its Registered Office at Chennai, with one Corporate office at Thrissur, three Zonal Offices and 150 Branches as on the reporting date.

1.2The operations of the Company are mostly concentrated in the States of Kerala, Tamilnadu, Maharashtra, Chattisgarh and Madhyapradesh.

1.3

The main loan Products of the Company includes Income Generation Loan (IGL), General Loan (GL), House Construction Loan (HCL), House Repair Loans (HRL), Jeevandhara Loan (JL), Nirmal Loan (NL) and Vyapar Vikas Yojana Loan (VVY). The Company is an aggregator for NPS (Lite) Scheme administered by the Pension Fund Regulatory and Development Authority of India. It is also acting as a Corporate Agent of SBI Life Insurance Company Ltd and is a sub agent for Money transfer services run by both Western Union and xpress Money. The Company is partnering with Hindusthan Unilever Ltd in making available waterfpurifiers in deserving geographies.

2 SIGNIFICANT ACCOUNTING POLICIES:-

2.1 Basis of accounting and preparation of financial statements

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements have been prepared on accrual basis under the historical cost convention. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

2.2 Use of estimates

The preparation of the financial statements is in conformity with Indian GAAP and requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialised.


#5A, 5th FLOOR, No. 8 & 9,GANGADEESWARA KOIL STREET, PURASAWALKAM, CHENNAI-600 084.

NOTES FORMING PART OF FINANCIAL STATEMENTS AS ON 31st MARCH 2013

2.3 Inventories

The Company is engaged in Microfinance activities and does not have any inventories as on the reporting date.

2.4 Cash and cash equivalents (for purposes of Cash Flow Statement)

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

2.5 Cash flow statement

Cash flows are reported using the indirect method as prescribed by Accounting Standard - 3, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

2.6 Depreciation and amortisation

1. Depreciation has been provided on the straight-line method as per the rates prescribed in Schedule XIV to the Companies Act, 1956 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under:

2. Assets costing less than ` 500 each are fully depreciated in the year of capitalisation.

3. The estimated useful life of the intangible assets and the amortisation period are reviewed at the end of each financial year and the amortisation method is revised to reflect the changed pattern.

2.7 Receivables under Microfinancing Activity:-

Receivables under Microfinancing activity include Income Generation Loans and General Loans. Loans are classified into ‘Performing and Non-Performing’ assets in terms of the Non Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998 issued by the Reserve Bank of India as amended from time to time.

2.8 Revenue recognition:-

Interest Income from Microfinance Activities

Interest on Microfinance Loans are recognised on accrual basis. Based on the RBI Circular RPCD.CO. Plan BC. 66/ 04.09.01/ 2010-11 dated May 3, 2011, the Company is charging on Microfinance loans, interest at the rate of 26% per annum which is calculated on reducing balance basis. The above change was effected from 1st of June 2011, prior to which the company was charging interest at the rate of 13% per annum calculated on flat basis. Income on Non performing assets are recognised only when realised and no interest which has remained overdue for more than six months at the end of the accounting period is treated as income.

Income from Securitisation Transaction

In accordance with the RBI guidelines for securitisation of standard assets, the Company accounts for any loss arising from assignment/ securitisation immediately at the time of sale and the profit/ premium arising from securitisation is amortised over the life of the underlying portfolio loans/ securities.


48 49


Income from services

Processing fees at the rate of 1% is charged on the Microfinance loans disbursed as permitted by RBI and the same is recognised as and when collected at the time of loan disbursement.

Dividend Income

Dividend income is recognised only on actual receipt or when the company has a reason to believe that a right is established for its receipt in the period under consideration.

Grant Income

Grants received by the Company are utilised according to the terms of the Grant and in the case of Revenue Grants the same is set off against expenses incurred.

Interest on Fixed Deposits

Interest income on deposits with banks is recognised on a time proportion accrual basis taking into account the amount outstanding and the rate applicable.

Commission Income/ Plaftform Fee

The Company recognises commission income/ Platform fee from Pension Fund Regulatory and Development Authority of India, SBI Life, Western Union and Xpress Money on due basis as per the terms agreed to between the agencies concerned.

2.9 Other income

Miscellaneous incomes are accounted on receipt basis.

2.10 Tangible fixed assets

Fixed assets, except Land are carried at cost less accumulated depreciation and impairment losses, if any. The cost of fixed assets includes interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use and other incidental expenses incurred up to that date. Subsequent expenditure relating to fixed assets is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.

Fixed assets retired from active use and held for sale are stated at the lower of their net book value and net realisable value and are disclosed separately in the Balance Sheet.

2.11 Intangible assets

Intangible assets are carried at cost less accumulated amortisation and impairment losses, if any. The cost of an intangible asset comprises its purchase price and other taxes and any directly attributable expenditure on making the asset ready for its intended use and net of any trade discounts and rebates. Subsequent expenditure on an intangible asset after its purchase / completion is recognised as an expense when incurred unless it is probable that such expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standards of performance and such expenditure can be measured and attributed to the asset reliably, in which case such expenditure is added to the cost of the asset.

2.12 Foreign currency transactions and translations

Transactions in foreign currencies entered into by the Company are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.

2.13 Investments

Long-term investments (excluding investment properties), are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost and fair value. Cost of investments include acquisition charges such as brokerage, fees and duties.

Investment properties are carried individually at cost less accumulated depreciation and impairment, if any. Investment properties are capitalised and depreciated (where applicable) in accordance with the policy stated for Tangible Fixed Assets.

2.14 Employee benefits

Employee benefits include provident fund, gratuity fund, compensated absences, long service awards and Employees State insurance/Medical Insurance.

Defined contribution plans

The Company’s contribution to provident fund are considered as defined contribution plans and are charged as an expense as they fall due based on the amount of contribution required to be made.

Defined benefit plans

For defined benefit plans in the form of gratuity fund , the cost of providing benefits is determined using the Projected Unit Credit method, with actuarial valuations being carried out at each Balance Sheet date. The Company has formed a Gratuity Trust termed “ ESAF Employees Gratuity Fund Trust” and the funds are managed by SBI Life and Kotak Insurance. Actuarial gains and losses are recognised in the Statement of Profit and Loss in the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the schemes.

Short-term employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service. These benefits include Staff incentive and compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service.

Long-term employee benefits

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related service are recognised as a liability on adhoc basis. Long Service Awards are recognised only at the time of arisal.

2.15 Borrowing costs

Borrowing costs include interest, Processing charges and amortisation of ancillary costs incurred to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan.


50 51


2.16 Segment reporting

This is not applicable to the Company being not into different segments of operations, either geographicaly or operationaly.

2.17 Leases/ Rentals

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss on a straight-line basis.

2.18 Earnings per share

Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares. Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.

2.19 Taxes on income

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the provisions of the Income Tax Act, 1961. It is determined as the amount of tax payable in respect of the taxable income for the year under consideration.

Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantially enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences of other items only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each Balance Sheet date for their realisability.

2.20 Provisions and contingencies

A provision is recognised when the Company has a present obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. Contingent liabilities are disclosed in the Notes.

2.21 Insurance claims

Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that there is no uncertainty in receiving the claims.

2.22 Service tax input credit

The Company is a registered Service provider and the Service tax input credit is accounted for in the books in the period in which the underlying service received is accounted and when there is no uncertainty in availing / utilising the credits.


52 53



#5A, 5th FLOOR, No. 8 & 9, GANGADEESWARA KOIL STREET, PURASWALKAM, CHENNAI-600 084.

NOTES FORMING PART OF FINANCIAL STATEMENTS AS ON 31st MARCH, 2013

NOTE 3 SHARE CAPITAL:-

(a) Authorised Equity shares of Rs. 10 each with voting rights 70,000,000 700,000,000 50,000,000 500,000,000 Preference shares of Rs. 100 each 500,000 50,000,000 500,000 50,000,000 (b) Issued Equity shares of Rs. 10 each with voting rights 50,000,000 500,000,000 50,000,000 500,000,000 Preference shares of Rs.100 each - - - - (c) Subscribed and fully paid up Equity shares of Rs. 10 each with voting rights 50,000,000 500,000,000 50,000,000 500,000,000 Preference shares of Rs.100 each - - - - Total 50,000,000 500,000,000 50,000,000 500,000,000

(i) Reconciliation of the number of shares and amount outstanding at the beginning and at the end of the reporting period:

Opening Balance 50,000,000 500,000,000 48,302,000 483,020,000 Fresh Issue - - - - Option Shares - - 198,000 1,980,000 Employee Benefit Shares - - 1,500,000 15,000,000 Conversion - - - Buy back - - - - Other changes (give details) - - - -

Closing Balance 50,000,000 500,000,000 50,000,000 500,000,000

As at 31 March 2013Particulars

As at 31 March 2012

Number ofShares

Number ofShares ``


As at 31 March 2012

Number ofShares

Number ofShares ``

(ii) Details of shares held by each shareholder holding more than 5% shares:

ESAF SHG Federation, Thrissur 20,955,400 41.91% 20,955,400 41.91%ESAF SHG Federation, Coimbatore 5,500,000 11.00% 5,500,000 11.00%Prachodhan SHG Federation, Raipur 4,719,000 9.44% 4,500,000 9.00%ESAF Staff Welfare Trust 3,154,900 6.31% 3,154,900 6.31%Dia Vikas Capital (P) Ltd 11,429,000 22.86% 11,429,000 22.86%Manaveeya Holdings & Investments (P) Ltd. 3,000,000 6.00% 3,000,000 6.00%

(iii) The Company haven`t issued any preference shares during the reporting period and there are no arrears of dividends as on 31st March 2013.(iv) The Company is not a holding company or ultimate holding company for the time being and haven’t got any subsidiaries or associates as on the reporting date.(v) For the financial year 2012-13, 8,18,210 shares were reserved for issuance as Option shares to the promoter (Refer Note 25.17).(vi) The Company during the year allotted Nil equity shares towards any Employees Stock Option Plans.(vii) The Company haven’t brought back any of its shares during 5 years immediately preceding the reporting date.(viii) There are no calls unpaid on the reporting date.(ix) None of the shares of the Company stands forfeited as on the reporting date(x) As on the report date, the company has issued only one class of equity shares with voting rights which is one vote per share


As at 31 March 2012

Number ofShares

Number ofShares ``

NOTE 4 RESERVES AND SURPLUS:-

(a) Other reserves (Statutory reserve) Opening balance 14,229,485 5,936,221 Add: Additions/ Transfers during the year 10,899,315 8,293,264 Less: Utilisations / transfers during the year 0 0 Closing balance 25,128,800 14,229,485 (b) Surplus / (Deficit) in Statement of Profit and Loss Opening balance 56,870,082 23,697,026 Add: Profit for the year 54,496,575 41,466,319 Less: Transferred to: Other reserves (Statutory Reserve) * 10,899,315 8,293,264

Closing balance 100,467,342 56,870,081 Total 125,596,142 71,099,566

*Statutory Reserve: As per Section 45-IC of the Reserve Bank of India Act, 1934, the Company is required create a reserve fund at the rate of 20% of the Profit after Tax. Accordingly, the Company has transferred an amount of Rs.1,08,99,315/- (Previous year Rs.82,93,264/-), out of profit after tax for the year ended 31.03.2013 to the statutory reserve.

As at 31 March 2013


` `


54 55





NOTE 5 LONG-TERM BORROWINGS :-

(a) Non Convertible Debentures Secured 14,701,000 3,695,000 Unsecured - - 14,701,000 3,695,000(b) Term loans From banks Secured 1,861,069,246 870,085,233 Unsecured - - 1,861,069,246 870,085,233 From other parties Secured 65,366,460 19,166,671 Unsecured 1,757,192 29,061,397 67,123,652 48,228,068(c) Loans and advances from related parties @ (Refer Note 25.9) Secured - - Unsecured 100,000,000 11,280,440 100,000,000 11,280,440(d) Other loans and advances (Vehicle Loan) Secured 1,681,104 1,668,863 Unsecured - - 1,681,104 1,668,863 Total 2,044,575,002 934,957,604

As at 31 March 2013


` `

6970 Non Convertible Debentures at13.25% redeemable during April to December 2013 6,970,000 6,970,000

Total - Bonds / debentures 32,720,000 18,019,000 14,701,000

(iv) Details of terms of repayment for the other long-term borrowings and security provided in respect of the secured other long-term borrowings as at 31st March 2012:

Term loans from banks: Axis Bank Book Debts - 18 mts. 50,000,000.00 - 40,000,000.00 10,000,000.00 Canara Bank Book Debts - 32 mts. 13,471,265.00 - 13,471,265.00 - Central Bank of India Book Debts - 36 mts. 189,659,592.00 - 75,000,000.00 114,659,592.00 Corporation Bank Book Debts - 36 mts. 19,189,076.00 - 18,180,000.00 1,009,076.00 ICICI Bank Book Debts - 24 mts. 37,500,000.00 - 37,500,000.00 - IDBI Bank Book Debts - 60 mts. 279,167,800.00 - 133,931,800.00 145,236,000.00 Indian Bank Book Debts - 35 mts. 54,551,972.00 - 25,775,972.00 28,776,000.00 Oriental Bank of Commerce Book Debts - 59 mts. 29,960,829.00 - 9,999,996.00 19,960,833.00 Punjab National Bank Book Debts - 65 mts. 224,997,260.00 - 60,927,800.00 164,069,460.00 State Bank of Hyderabad Book Debts - 36 mts. 16,437,440.00 - 13,336,000.00 3,101,440.00 State Bank of India Book Debts - 36 mts. 282,320,146.00 - 126,666,676.00 155,653,470.00 State Bank of Travancore Book Debts - 35 mts. 127,336,326.00 - 63,736,326.00 63,600,000.00 South Indian Bank Book Debts - 42 mts. 193,808,000.00 - 76,372,000.00 117,436,000.00 Union Bank of India Book Debts - 59 mts. 47,833,354.00 - 19,999,992.00 27,833,362.00 Vijaya Bank Book Debts - 64 mts. 31,250,000.00 - 12,500,000.00 18,750,000.00

HDFC Bank Vehicle Loan Fixed Asset - 60 mts. 247,345.32 - 89,468.22 157,877.10 ICICI Bank Vehicle Loan Fixed Assets - 60 mts. 652,359.80 - 134,613.00 517,746.80 PNB Vehicle Loan Fixed Assets - 84 mts. 1,100,000.00 - 106,761.00 993,239.00

Total - Term loans from banks 1,599,482,765.12 - 727,728,669.22 871,754,095.90 Secured Term loans from other parties: Manaveeya Holdings & Investments (P) Ltd. Book Debts - 36 mts. 31,200,000.00 - 31,200,000.00 - MV Microfin (P) Ltd. Book Debts - 24 mts. 75,000,000.00 - 60,000,000.00 15,000,000.00 Ananya Finance (P) Ltd. Book Debts - 18 mts. 14,166,667.00 - 9,999,996.00 4,166,671.00

Sub Total 120,366,667.00 - 101,199,996.00 19,166,671.00

50 Non Convertible Debentures at 12.50%redeemable in the year 2016 50,000 50,000

275 Non Convertible Debentures at 12.81% redeemable in the year 2015 275,000 275,000



1490 Non Convertible Debentures, at 13.00% redeemable in the year 2015 1,490,000 1,490,000

1510 Non Convertible Debentures at12.50% redeemable in the year 2015 1,510,000 1,510,000

2268 Non Convertible Debentures at 13.75% redeemable in the year 2014 2,268,000 2,268,000 3499 Non Convertible Debentures at13.25% redeemable in the year 2014 3,499,000 3,499,000 1185 Non Convertible Debentures at13.00 % redeemable in the year 2014 1,185,000 555,000 630,000

370 Non Convertible Debentures at 12.50% redeemable in the year 2014 370,000 145,000 225,000


300 Non Convertible Debentures at 11.50% redeemable in the year 2014 300,000 300,000 4182 Non Convertible Debentures at 13.75% redeemable duringApril to December 2013 4,182,000 4,182,000

555 Non Convertible Debentures, 13.00% redeemable on 25-03-2014 555,000.00 - 555,000.00




470 Non Convertible Debentures, 13.25% redeemable on 30-03-2013 470,000.00 470,000.00 -


Total - Bonds / debentures 4,845,000.00 - 1,150,000.00 3,695,000.00

(ii) The Company haven’t yet reissued any Debentures which were issued till the reporting date.

(iii) Details of bonds / debentures issued by the Company for the year ended 31st March 2013:

9022 Non convertibleDebentures at 13.5% redeemable in the year 2018 9,022,000 9,022,000

230 Non convertible Debentures at 13.5% redeemable in the year 2017 230,000 230,000 10 Non Convertible Debentures at 13.31% redeemable in the year 2016 10,000 10,000

200 Non Convertible Debentures at13.00% redeemable in the year 2016 200,000 200,000


Unsecured Term loans from other parties:

Dia Vikas Capital (P) Ltd. Clean facility - 24 mts. - 51,000,000.00 29,571,424.00 21,428,576.00 ESAF SHG Federation, Thrissur Clean facility - 24 mts. - 103,453,261.00 86,210,000.00 17,243,261.00 ESAF Staff Welfare Trust Clean facility - 12 mts. - 3,500,000.00 3,500,000.00 - ESAF Society Clean facility - 12 mts. - 11,280,439.78 11,280,439.78 - Prachodhan SHG Federation, Raipur Clean facility - 24 mts. - 10,000,000.00 8,330,000.00 1,670,000.00 FWWB, Ahmedabad Clean facility - 24 mts. - 416,674.00 416,674.00 -

Sub Total - 179,650,374.78 139,308,537.78 40,341,837.00

(v) Details of terms of repayment for the other long-term borrowings and security provided in respect of the secured other long-term borrowings as at 31st March 2013:

Term loans from banks: AAndhra Bank Cash Collateral -10%, 50,000,000 12,500,000 37,500,000 Book Debts - 100% 51 months Axis Bank Cash Collateral -10%, 122,000,000 79,142,856 42,857,144 Book Debts - 100% 24 months Canara Bank Cash Collateral -10%, 94,285,714 33,600,000 60,685,714 Book Debts - 100% 35 months Central Bank of India Cash Collateral -10%, 171,964,215 91,666,656 80,297,559 Book Debts - 110% 36 months Corporation Bank Book Debts - 105% 81,009,186 27,675,850 53,333,336 36 months

Dena Bank Cash Collateral -10%, 137,500,002 50,004,000 87,496,002 Book Debts - 110% 36 months

Development Credit Bank Cash Collateral -10%, 106,666,667 81,666,660 25,000,007 Book Debts - 110% 19 months

Dhanlaxmi Bank Book Debts - 110% 50,000,000 27,092,000 22,908,000 27 months

ICICI Bank Cash Collateral - 5% 87,500,000 37,500,000 50,000,000 Book Debts - 110% 24 months

IDBI Bank Cash Collateral - 5% 545,236,000 249,407,000 295,829,000 Book Debts - 100% 60 months

Indian Bank Cash Collateral - 5% 44,580,658 26,681,776 17,898,882 Book Debts - 100% 35 months

ING Vysya Cash Collateral - 8% 196,000,000 99,991,326 96,008,674 Book Debts - 108% 24 months

Indian Overseas Bank Cash Collateral - 10% 100,000,000 27,780,000 72,220,000 Book Debts - 120% 36 months

Oriental Bank of Commerce Cash Collateral - 10% 19,930,619 9,999,996 9,930,623 Book Debts - 110% 60 months

Punjab National Bank Cash Collateral - 10% 169,996,205 60,000,000 109,996,205 Book Debts - 100% 66 months

Rabo Bank Book Debts - 100% 50,000,000 25,000,000 25,000,000 24 months

Ratnakar Bank Cash Collateral - 5% 250,000,000 125,000,000 125,000,000 Book Debts - 104% 24 months

State Bank of India Book Debts - 100% 420,258,921 220,258,921 200,000,000 34 months

State Bank of Patiala Cash Collateral - 5% Book Debts - 105% 250,000,000 107,100,000 142,900,000 24 months

State Bank of Travancore Book Debts - 100% 138,611,000 59,127,270 79,483,730 36 months

South Indian Bank Book Debts - 110% 367,436,000 154,795,000 212,641,000 36 months

Union Bank of India Cash Collateral - 10% 27,833,362 19,999,992 7,833,370 Book Debts - 110% 60 months

Vijaya Bank Cash Collateral - 10% 18,750,000 12,500,000 6,250,000 Book Debts - 100% 64 months




NOTE 5 (A) LONG-TERM BORROWINGS - OTHER DETAILS:

Notes:(i) Details of bonds / debentures issued by the Company for the year ended 31st March 2012:

85 Non ConvertibleDebentures, 13.5% redeemable on 30-09-2017 85,000.00 - - 85,000.00

10 Non Convertible ebentures, 13.5%redeemable on 15-09-2017 10,000.00 - 10,000.00 100 Non Convertible Debentures, 12.5% redeemable on 16-03-2015 100,000.00 - 100,000.00


1385 Non Convertible Debentures, 12.5% redeemable on 05-01-2015 1,385,000.00 - 1,385,000.00



390 Non Convertible Debentures, 13.00% redeemable on 27-04-2014 390,000.00 - 390,000.00 180 Non Convertible Debentures, 13.00% redeemable on 27-04-2014 180,000.00 - 180,000.00

HDFC Bank Vehicle Loan Fixed Asset - 60 mts. 644,972 197,181 447,791 ICICI Bank Vehicle Loan Fixed Assets - 60 mts. 517,754 149,813 367,941 PNB Vehicle Loan Fixed Assets - 84 mts. 985,674 120,301 865,373

Total - Term loans from banks 3,501,706,949 - 1,638,956,599 1,862,750,350

Secured Term loans from other parties: Manaveeya Development Book Debts - 105% 41,666,000 16,666,664 24,999,336 & Finance (P) Ltd. 36 mts. MV Microfin (P) Ltd. Cash Collateral - 3% 40,000,000 40,000,000 Book Debts - 100% 14 months Ananya Finance (P) Ltd. PDCs and Book Debts 4,166,671 4,166,671 18 mts. Mas Financial Services Ltd. Book Debts - 105% 19,977,528 15,999,996 3,977,532 PDCs - FLDG - 15% 12 mts. Reliance Capital Cash Collateral - 10% 142,544,447 106,154,855 36,389,592 Book Debts - 100% PDCs - 14 months

Sub Total 248,354,646 - 182,988,186 65,366,460

Unsecured Term loansfrom other parties: Dia Vikas Capital (P) Ltd. Clean facility - 66 mts 50,000,000 50,000,000 60 months moratorium Subordinated Debt

ESAF SHG Federation, Clean facility - 66 mts 50,000,000 50,000,000Thrissur Subordinated Debt

ESAF SHG Federation, Clean facility - 14 mts 114,805,726 114,805,726 - Thrissur

Prachodhan SHG Federation Clean facility - 14 mts. 40,000,000 40,000,000 -Raipur FWWB, Ahmedabad Clean facility with 4,599,310 2,997,010 1,602,300 PDCs - 24 mts.

Kashi Vishwanatha Clean facility - 24 mts. 403,918 249,026 154,892 Vidya Samasthe

Total - Term loans from - 259,808,954 158,051,762 101,757,192 other parties

(vi) Details of long-term borrowings guaranteed by some of the directors or others:

Term loans from banks Andhra Bank 50,000,000 - Canara Bank 94,285,714 13,471,265 Central Bank of India 171,964,215 189,659,592 Dena Bank 137,500,002 - Development Credit Bank 106,666,667 - IDBI Bank 545,236,000 279,167,800 Indian Bank 44,580,658 54,551,972 ING Vysya Bank 196,000,000 - Indian Overseas Bank 100,000,000 - Manaveeya Developments & Finance (P) Ltd. 41,666,000 - Oriental Bank of Commerce 19,930,619 29,960,829 Punjab National Bank 169,996,205 224,997,260 Reliance Capital 142,544,447 - State Bank of Hyderabad - 16,437,440 State Bank of India 420,258,921 282,320,146 State Bank of Travancore 138,611,000 127,336,326 South Indian Bank 367,436,000 193,808,000 Union Bank of India 27,833,362 47,833,354 Vijaya Bank 18,750,000 31,250,000

Total 2,793,259,810 1,490,793,984

S(vii) The Company has not defaulted in the repayment of loans and interest in any of the Loans outstanding.

As at 31 March 2013

Secured SecuredUnsecured Unsecured


Particulars

Terms and Conditions*

` ` ` `

The redemption of the principal amount of the

Non convertible De-bentures, payment of all

interest remuneration and remuneration of

the Debenture trustees and all monies, fees and costs stipulated in the hypothecation are fully

secured against the book debts receivable of the

Company


56 57








Sub Total 120,366,667.00 - 101,199,996.00 19,166,671.00


























Sub Total - 179,650,374.78 139,308,537.78 40,341,837.00




































Sub Total 248,354,646 - 182,988,186 65,366,460









Total 2,793,259,810 1,490,793,984


As at 31 March 2013


As at 31 March 2012Particulars Terms and

Conditions*` ` ` `

The redemption of the principal amount of the

Non convertible De-bentures, payment of all

interest remuneration and remuneration of

the Debenture trustees and all monies, fees and costs stipulated in the hypothecation are fully

secured against the book debts receivable of the

Company







Sub Total 120,366,667.00 - 101,199,996.00 19,166,671.00


























Sub Total - 179,650,374.78 139,308,537.78 40,341,837.00




































Sub Total 248,354,646 - 182,988,186 65,366,460









Total 2,793,259,810 1,490,793,984



58 59








Sub Total 120,366,667.00 - 101,199,996.00 19,166,671.00


























Sub Total - 179,650,374.78 139,308,537.78 40,341,837.00




































Sub Total 248,354,646 - 182,988,186 65,366,460









Total 2,793,259,810 1,490,793,984


As at 31 March 2013


As at 31 March 2012Particulars Terms of repayment

and security*` ` ` `







Sub Total 120,366,667.00 - 101,199,996.00 19,166,671.00






















































Sub Total 248,354,646 - 182,988,186 65,366,460









Total 2,793,259,810 1,490,793,984




Sub Total - 179,650,374.78 139,308,537.78 40,341,837.00






As at 31 March 2013




As at 31 March 2013





60 61








Sub Total 120,366,667.00 - 101,199,996.00 19,166,671.00


























Sub Total - 179,650,374.78 139,308,537.78 40,341,837.00




































Sub Total 248,354,646 - 182,988,186 65,366,460









Total 2,793,259,810 1,490,793,984








Sub Total 120,366,667.00 - 101,199,996.00 19,166,671.00


























Sub Total - 179,650,374.78 139,308,537.78 40,341,837.00



































Secured Term loans from other parties: Maanaveeya Development Book Debts - 105% 41,666,000 16,666,664 24,999,336 & Finance (P) Ltd. 36 mts. MV Microfin (P) Ltd. Cash Collateral - 3% 40,000,000 40,000,000 Book Debts - 100% 14 months Ananya Finance (P) Ltd. PDCs and Book Debts 4,166,671 4,166,671 18 mts. Mas Financial Services Ltd. Book Debts - 105% 19,977,528 15,999,996 3,977,532 PDCs - FLDG - 15% 12 mts. Reliance Capital Cash Collateral - 10% 142,544,447 106,154,855 36,389,592 Book Debts - 100% PDCs - 14 months

Sub Total 248,354,646 - 182,988,186 65,366,460









Total 2,793,259,810 1,490,793,984


As at 31 March 2013




As at 31 March 2013





62 63








Sub Total 120,366,667.00 - 101,199,996.00 19,166,671.00


























Sub Total - 179,650,374.78 139,308,537.78 40,341,837.00




































Sub Total 248,354,646 - 182,988,186 65,366,460









Total 2,793,259,810 1,490,793,984


As at 31 March 2013


` `




NOTE 6 DEFERRED TAX LIABILITY:-

Deferred tax (liability) / asset Tax effect of items constituting deferred tax liability On difference between book balance and tax balance of fixed assets (622,505) 1,677,279 Tax effect of items constituting deferred tax liability (622,505) 1,677,279

Net deferred tax (liability) / asset (622,505) 1,677,279

The Company has recognised deferred tax asset on unabsorbed depreciation to the extent of the corresponding deferred tax liability on the difference between the book balance and the written down value of fixed assets under Income Tax.

NOTE 7 LONG-TERM PROVISIONS:-

(b) Provision - Others: (i) Provision for Microfinance Loans (Standard Assets) 14,154,446 5,680,200 14,154,446 5,680,200

Total 14,154,446 5,680,200

As at 31 March 2013


` `

As at 31 March 2013


` `


64 65


Hypothecation of Book Debts, Personal

Guarantee of Directors




NOTE 8 SHORT-TERM BORROWINGS:-

(a) Loans repayable on demand From banks Secured 135,260,438 148,543,731 Total 135,260,438 148,543,731

Notes: (i) Details of security for the secured short-term borrowings:

Loans repayable on demand from banks: State Bank of Hyderabad 30,782,370 60,388,277State Bank of India 98,918,716 78,122,359South Indian Bank 5,559,352 10,033,095

Total - from banks 135,260,438 148,543,731

(ii) Details of short-term borrowings guaranteed by some of the directors or others:

Loans repayable on demand from banks 135,260,438 148,543,731

(iii) The Company has not defaulted in any of the above repayment obligations.

As at 31 March 2013


` `

As at 31 March 2013

As at 31 March 2012Particulars Nature of

Security ` `

As at 31 March 2013


` `




NOTE 9 OTHER CURRENT LIABILITIES:-

(a) Current maturities of Non Convertible Debentures (Ref. Note Below (a)) 18,019,000 1,150,000(b) Current maturities of Long Term Debt from Banks (Ref. Note Below (b)) 1,638,489,303 727,397,827(c) Current maturities of Long Term Debt - Others (Ref. Note Below (c)) 341,507,244 240,839,376(d) Interest accrued and due on borrowings 24,959,828 13,985,577(e) Processing Fee Payable 1,890,800 -(f) Unpaid dividends - -(g) Application money received for allotment of NCDs and due for refund 286,000 -(h) NCD Application Money due for allotment 3,001,000 -(i) Other payables (i) Statutory remittances (Contributions to PF and ESIC, Withholding Taxes etc.) Contribution to EPF 2,725,766 1,447,235 Contribution to ESI 663,264 653,496 Contribution to KEWF 37,240 35,440 Professional Tax 16,528 - TDS Payable 4,902,764 2,619,574 Service Tax Payable 268,683 - (ii) Others Staff Vehicle Fund 91,440 91,940 Unrealised Gain on Loan Transfer transactions 72,487,053 5,690,298 Expenses Payable 5,233,808 4,037,825 Leave Travel Allowance Payable 658,650 1,025,724 Staff Incentive Payable 3,948,020 14,682,383 Trusteeship Fee Payable 896,604 65,000 Auditors Remuneration Payable 990,382 404,323 NPS Lite Swavalamban 68,390,240 42,664,700 Total 2,189,463,617 1,056,790,718

As at 31 March 2013


` `


66 67


CURRENT MATURITIES OF LOANS/ TERM DEBTS (a) Non Convertible Debentures Secured 18,019,000 1,150,000 Unsecured - -

SUB TOTAL 18,019,000 1,150,000

(b) Term loans From banks Secured 1,638,489,303 727,397,827 Unsecured - - SUB TOTAL 1,638,489,303 727,397,827

(c) From other parties Secured 182,988,186 101,199,996 Unsecured 43,246,036 128,028,098

SUB TOTAL 226,234,222 229,228,094

(d) Loans and advances from related parties (Refer Note 25.9) Secured - - Unsecured 114,805,726 11,280,440

SUB TOTAL 114,805,726 11,280,440

(e) Other loans and advances (Vehicle Loan) Secured 467,296 330,842 Unsecured - -

SUB TOTAL 467,296 330,842

Total 1,998,015,547 969,387,203

As at 31 March 2013


` `




NOTE 10 SHORT-TERM PROVISIONS:-

(a) Provision for employee benefits: (i) Provision for bonus 4,327,607 4,413,842 (ii) Provision for compensated absences 9,179,186 10,485,264 (iii) Provision for gratuity (net) 3,661,829 6,261,829

17,168,622 21,160,935 (b) Provision - Others: (i) Provision for Direct taxes [(Net of Advance Tax paid during the year Rs. 1,50,00,000) - Previous Year - Rs.1,10,00,000] Income Tax 14,346,085 11,375,971 (ii) Provision for Royalty Commitments 10,800,612 9,200,600 (iii) Provision for Microfinance receivables General (Standard) 28,489,435 23,144,412 (iv) Provision for Microfinance receivables Sub Standard & Doubtfull 264,350 13,284,777 53,900,482 57,005,760

Total 71,069,104 78,166,695

As at 31 March 2013


` `


68 69


M/S. ESAF MICROFINANCE AND INVESTMENTS PRIVATE LIMITED(Formerly Pinnai Finance & Investments (P) Ltd.)

#5A, 5th FLOOR, No. 8 & 9 GANGADEESWARA KOIL STREET, PURASAWALKAM, CHENNAI - 600 084.

NOTES FORMING PART OF FINANCIAL STATEMENTS AS ON 31ST MARCH 2013

NOTE 11 FIxED ASSETS :-

GROSS BLOCK ACCUMULATED DEPRECIATION AND IMPAIRMENT NET BLOCK

Particulars Balance as atApril 1, 2012

Additions Disposals/Transfers

Balance as at March 31, 2013

Rate Balance as atApril 1, 2012

Depreciation expense during the year

Depreciation on disposals



Balance as atApril 1, 2012

A. Tangible Assets

Land 39053632 10000 39063632 0.00 0 0 0 39063632 39053632

Building 12389489 0 12389489 1.63 41189 586544 627733 11761756 12348300

Furniture & Elec. Fittings 23463928 2345690 25809618 6.33 3504620 1349536 4854156 20955462 19959308

Office Equipments 3414960 242260 3657220 4.75 397350 150780 548130 3109090 3017610

Vehicle 7411796 879141 496119 7794818 9.50 1536438 558839 194938 1900339 5894479 5875358

Computer & Accessories 21540467 5580481 27120948 16.21 6089133 2976628 9065761 18055187 15451334

Plant & Machinery 7601286 1064571 8665857 4.75 784796 349036 1133832 7532025 6816490

B. Intangible Assets

Intellectual Property Rights 55530750 0 55530750 20.00 44424600 11106150 55530750 11106150

Market creation costs 44424600 0 44424600 20.00 35539680 8884920 44424600 8884920

Total 214830907 10122143 496119 224456931 92317806 25962432 194938 118085300 106371631 122513101

Previous year 174598040 40468081 235214 214830907 67755493 24646687 84374 92317806 122513101 106842547


70 71





NOTE 12 NON CURRENT INVESTMENTS :-

Trade Investments at Cost Investment in Equity Shares:- Investment in Equity Shares ofM/s Alpha Microfinance Consultants (P) Ltd. 500,000 500,000 Investment in Equity Shares of M/s ESAF Healthcare Services (P) Ltd. 500,000 500,000 (5,000 Shares of Rs.100/- each fully paid up - Previous Year 5,000 Shares) Investment in other Instruments:- 2741 Pass Through Certificates of Cedar MFI Trust 4 27,155,087 - 15 Pass Through Certificates of Cedar MFI Trust 5 7,598,400 - 18 Pass Through Certificates of Cedar MFI Trust 6 11,296,800 -

Total 47,050,287 1,000,000

NOTE 13 CURRENT INVESTMENTS :-

Mutual Fund Investments Current year - Nil and Prior period - 4511.943 Units of HDFC Cash Management Fund - Savings Plan - Growth - 100,000

Total - 100,000

As at 31 March 2013


` `

As at 31 March 2013


` `




NOTE 14 LONG-TERM LOANS AND ADVANCES :-

(a) Loans and advances to related parties (Refer Note 25.9) Unsecured, considered good 1,643,403 2,629,022 (b) Security deposits Unsecured, considered good 116,072,339 80,806,680 Receivables from SPVs for assets derecognised 109,716,444 -

(c) Loans and advances to employees Unsecured, considered good 1,847,101 2,259,299 (d) Microfinance Loans:- Unsecured, considered good:- Income Generation Loan (Non Current) 1,415,444,561 556,632,654

Other Loans 2,402,635 -

Sub Total 1,417,847,196 556,632,654 Total 1,647,126,483 642,327,655

* Security Deposits with Banks and Financial institutions against Loans and securitisation transactions are shown separately according Wto their maturity buckets.

As at 31 March 2013


` `


72 73





NOTE 15 TRADE RECEIVABLES:-

a) Trade Receivables from Microfinance Activity:- Unsecured, Considered Good Income Generation Loans (Current) 1,422,642,100 1,558,602,190 Other Loans 273,955,058 99,413,122 Sub Total 1,696,597,158 1,658,015,312 b) Other Trade receivables outstanding on Services rendered:- Receivable from Pension Fund Regulatory and Development Authority 17,968,383 4,628,400 Receivable on Insurance Agency and Moneytransfer services 661,368 49,828 Sub Total 18,629,751 4,678,228 Total 1,715,226,909 1,662,693,540

Note:-1.The Company is an aggregator for the National Pension System Swavalamban Scheme of the Pension Fund Regulatory and Development Authority and is a Corporate Agent for SBI Life Insurance. 2. Microfinance Assets derecognised on account of Securitisation of receivables to various banks comes to Rs. 110,12,53,755.81. (For the previous year it comes to Rs. 59,87,79,864.76)

NOTE 16 CASH AND CASH EQUIVALENTS :-

(a) Cash on hand 609,053 855,658(b) Balances with banks:- (i) In current accounts 520,592,921 178,716,099 (ii) In deposit accounts (Refer Note (i) below) 651,975,242 4,384,459 (iii) In deposit accounts (Refer Note (ii) below) 315,838,466 131,522,441 Total 1,489,015,682 315,478,657

Notes:- (i) Balances with banks include unencumbered Fixed deposits amounting to Rs.65,19,75,242/- (ii) Short Term security Deposits with Banks and Financial institutions against Loans and securitisation transactions are shown separately according to their maturity buckets.

As at 31 March 2013


` `

As at 31 March 2013


` `




NOTE 17 SHORT-TERM LOANS AND ADVANCES:-

(a) Capital Advances (Advance for Land & Building) (Refer Note 25.9) Unsecured, considered good 19,930,000 19,930,000(b) Loans and advances to employees Unsecured, considered good 6,289,228 4,518,597(c) Loans and advances to related parties (Refer Note 25.9) Unsecured, considered good 3,166,497 -(d) Prepaid expenses - Unsecured, considered good 4,591,523 2,255,582

Sub Total 33,977,248 26,704,179(e) Balances with Government authorities Unsecured, considered good (i) Service Tax credit receivable 188,292 48,142 (ii) TDS Receivables 5,414,297 1,382,458 (iii) Income Tax Refund claim AY 2009-10 177,650 177,650 Sub Total 5,780,239 1,608,250 Total 39,757,487 28,312,429

NOTE 18 OTHER CURRENT ASSETS:-

(a) Accruals (i) Interest accrued on Financing activity 13,233,235 3,365,979(b) Others (i) Insurance claims 134,039 329,077 (ii) Others Rent Deposit 17,768,870 15,625,530 Telephone Deposit 310,453 306,753 Staff Advance 3,460,088 4,821,992 Other Deposits 41,080 41,080 Total 34,947,765 24,490,411

As at 31 March 2013


` `

As at 31 March 2013


` `


74 75





NOTE 19 INCOME FROM OPERATIONS:-

Interest on Loans 661,397,774 584,456,864Processing Fees on Loans 61,152,753 36,457,182Gain on Securitisation/Loan transfer (Net) 37,890,655 14,646,940 Total 760,441,182 635,560,986 Note:- As per the ICAI guidance note, Operating income would include revenue arising from the Company's operating activities - principal or ancillary revenue generating activities, but which is not revenue from sale of products and rendering of services.

NOTE 20 OTHER INCOME:-

Interest income on Fixed Deposits 20,664,280 9,967,872Dividend income: from current investments - Mutual funds 130,536 1,290,989

Other non-operating income: Income from PFRDA as Aggregator 22,665,950 4,628,400Microinsurance Administration Revenue - 1,011,803Insurance Agency Income 1,767,270 63,452Income from Money Transfer 131,102 -Facilitation & Platform Charges 863,853 -Foreign Exchange Gain 258,241 -Miscellaneous Income 21,842 30,601Profit/(Loss) on Sale of Assets (Net) (11,181) (20,840) Total 46,491,893 16,972,277

As at 31 March 2013


` `

As at 31 March 2013


` `




NOTE 21 FINANCE COSTS:-

Interest expense on Borrowings 328,888,401 240,170,755Interest on payments of taxes 33,381 101,582Processing Fee on Borrowings 29,897,085 13,646,396Rating Charges 1,989,376 536,087Debenture Trustee fees 970,116 65,000

Total 361,778,359 254,519,820

NOTE 22 EMPLOYEE BENEFIT EXPENSES:-

Salaries and wages 171,235,892 137,832,233

Contributions to provident fund and others:- EPF Employers Contribution 13,180,745 7,655,633ESI Employers Contribution 6,524,467 4,064,364KEWF Employers Contribution 225,160 68,600Gratuity 33,646 6,627,939Bonus 4,374,127 4,413,842EPF Administration Expenses 1,167,191 679,743Staff Insurance 425,047 1,269,278ESI & EPF Arrear Expenses 3,080,730 1,457,591Employee Benefit Expenses - 16,980,000Staff welfare expenses 40,157,012 26,785,617

Total 240,404,017 207,834,840

As at 31 March 2013


` `

As at 31 March 2013


` `


76 77





NOTE 23 ADMINISTRATION AND OTHER EXPENSES:-

Water and Electricity Charges 2,965,559 2,173,074Rent including Lease Rentals 15,374,897 13,440,137Repairs and Maintenance - Buildings 838,638 807,258Repairs and Maintenance - Computer Hardware 140,718 280,404Insurance 818,140 596,860Rates and Taxes 125,617 89,791Telephone and Internet Expenses 5,137,115 3,814,194Travelling and Conveyance 23,413,769 33,547,680Printing and Stationery 5,073,466 4,536,631Business Promotion 476,545 772,480Legal and Professional 468,548 401,210Payments to Auditors (Refer Note (i) below) 1,389,435 1,431,375Office Maintenance 1,639,272 1,246,437Counterfeit Currency 2,800 2,500Consultation Fee 6,396,601 2,235,420Postage & Courier Charges 702,031 391,424ROC Expense 1,045,600 22,660Bank Charges 720,123 618,472Hospitality 449,690 376,563Website Creation Charges/ Server Space Rent 1,684,418 107,671Books & Periodicals 267,162 227,312General Body Meeting Expenses 43,183 242,737Board Meeting Expenses 186,152 206,801Directors Sitting fees 250,000 240,000Vehicle Maintenance 2,354,469 2,299,587Software Implementation Expenses 182,727 204,126Service Tax input Unclaimable 2,357,137 998,820Transportation 370,252 194,902Anniversaries and Celebrations 1,859,909 1,755,389Meeting Expense 807,631 824,062Membership and Subscription 776,936 844,230Credit Information Services 472,920 - Total 78,791,460 74,930,207

As at 31 March 2013


` `

Notes:- (i) Payments to the auditors comprises (net of service tax input credit): As auditors - statutory audit 800,000 800,000For taxation & Representation matters 200,000 200,000For Certification services 300,000 300,000Reimbursement of expenses 89,435 131,375

Total 1,389,435 1,431,375

NOTE 24. BAD DEBTS AND PROVISIONS ON MICROFINANCE ACTIVITY:-

Provision for Microfinance Loans:- Provision for Standard Assets 534,491 8,056,254Provision for Substandard and Doubtful Assets 264,350 9,569,558Loans Written Off 5,376,032 1,702,272 Total 6,174,873 19,328,084

As at 31 March 2013


` `

As at 31 March 2013


` `


78 79


NOTE PARTICULARS

As at 31 March2013

`

Income Tax Claims Pending Pertaining to the period

B: Outgo:- Paid to Grameen Foundation, 1101, 15th St. NW, 3rd FIO, Washington DC 652,414 11,645 19-06-2012 0275789445 (Nature - Guarantee Fee payment)

II. The year-end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below:

As at 31 March, 2013 As at 31 March, 2012

Receivable in Foreign currency Receivable in Foreign currency INR US Dollars INR US Dollars - - 13,97,463 26,312

The above receivables as on 31 March 2012 are from International Labour Office, Geneva towards Shramjyothi Project.

25.4 Asset Classification and Provisioning:-

1. The Company is not having any loan portfolio created or outstanding in the state of Andhra Pradesh. In the reporting period, the Company has followed the norms stated in the Non-Banking Financial (Non Deposit Accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007. But taking into account the imminent implementation of the asset provisioning norms prescribed for the Non AP portfolio of NBFC MFIs, with effect from 01-04-2013 onwards as per the Circular No. DNBS (PD) CC.No.300/03.10.038/2012-13 dated 03-08-2012, the Company has ensured that it is having atleast 1% of the total portfolio outstanding as provisions in its books which is in line with the rates prescibed in the Circular No. DNBS.CC.PD.No.250/03.10.01/2011-12 dated 02-12-2011. 2. Apart from the Staff loans and Staff Vehicle loans, the company is not providing any kind of loans to its employees. On the Staff loans and Staff vehicle loans, the company is charging a rate of interest at 18% diminishing and the maximum duration of the loan is 18 months. The Company as a policy has not created any provisions on Staff loans. Also in the case of Staff vehicle loans outstanding to Rs. 10,00,525/- as on the report date, the vehicles are hypothecated in the name of the Company. 3. Provision calculations are made on Gross Portfolio which includes the portfolio under securitisation or which is assigned to Banks or financial institutions. The Loss assets written off during the year comes to Rs. 53,76,032/-Provisioning Norms:-

Standard Assets 0.25

Sub Standard Assets 6 Months - 24 Months 10.00

Doubtful Assets Overdue more than 24 months 100

Loss Assets As estimated 100




NOTE 25 ADDITIONAL INFORMATION TO THE FINANCIAL STATEMENTS:-

25.1 Contingent liabilities and commitments (to the extent not provided for) (i) Contingent liabilities (a) Claims against the Company not acknowledged as debt (give details) (i) Income Tax:-

- On 08-02-2012, the Company has received a show cause notice from the Income Tax Officer, Company Ward – II(1), Chennai, relating to the following unpaid Income Tax demands. Against this, the Company has gone for Appeal and it is pending to be settled.

Section Assessment Year Regular u/s 143(1) 2009-10 2,22,315

Regular u/s 143(3) 2009-10 28,402

Regular u/s 115WE (3) 2009-10 21,237

Regular u/s 115WE 2009-10 64,702

(ii) Service Tax:- The Company is in receipt of a Notice to Show Cause No. F. No. Va/27/2011-12/BZU - KRU, O.R. No. 61/2011/BZU KRU, SCN No. 86/2012-13 dated 28th March 2013 from the Additional Director General, Directorate General of Central Excise Intelligence, Bangalore Zonal Unit. A demand is raised under section 73(1) of the Finance Act, 1994 amounting to Rs. 1,50,77,020/-. The Company in the process of responding and has engaged a reputed service tax counsel for the same.(iii) Corporate Guarantee to Related parties:- A) As part of its new initiatives, the Company has business arrangements with M/s Hindustan Unilever for distribution of their range of waterpurifiers to the clients using the channel of M/s ESAF Retail. As part of this arrangement M/s Hindustan Unilever is providing products on credit to the clients of the Company, the install-ments of repayments which are collected and paid back to HUL through their channel partner M/s ESAF Retail (P) Ltd. For enabling the same, the Company stands as a guarantor for the transactions between M/s ESAF Retail (P) Ltd and M/s Hindustan Unilever Ltd for the amounts due from M/s ESAF Retail (P) Ltd to Hindustan Unilever Ltd towards the credit sales of the above mentioned products and has also guaranteed to ensure that M/s ESAF Retail (P) Ltd makes all payments to M/s Hindustan Unilever Ltd on due dates and will make good short falls, if any, in case of defaults by M/s Esaf Retail (P) Ltd. As on the reporting date the amount involved comes to Rs. 21,38,398. 48/-. B) The Company out of its funds has issued a Corporate guarantee to M/s Manaveeya Development and Finance (P) Ltd, Hyderabad limited to a maximum liability amount of .Rs. 2 Crores towards the repayment of

25.8 Segment Reporting The Company is only involved in the business segment of Microfinance lending and the only geographical segment is the Republic of India. Accounting Segment Reporting requirements as per Accounting Standard 17 are not applicable.

25.9 Related Party Disclosures A. List of related parties are given below:-

Dia Vikas Capital Private Limited Enterprise having significant influence SHG Federation, Thrissur Enterprise having significant influence Key Management Personnel K.Paul Thomas Managing Director Key Management Personnel George Thomas Director Relative of Key Management Personnel Mareena Paul Spouse of Mr.K.Paul Thomas Relative of Key Management Personnel George Thomas Relative of Key Management Personnel Mercy Mathew Sister of Mr.K.Paul Thomas Relative of Key Management Personnel Beena George Sister of Mr.K.Paul Thomas Relative of Key Management Personnel George.K.John Brother in law of Mr. K. Paul Thomas Relative of Key Management Personnel Jimmy Mathew Brother in law of Mr. K. Paul Thomas

Entities in which the Key Management personnel can exercise control or having substantial interest:-

1 ESAF Retail (P) Ltd K.Paul Thomas, Director

2 ESAF Swasraya Producers Company Ltd. K.Paul Thomas, Director

3 ESAF Healthcare Services (P) Ltd K.Paul Thomas, Director

4 ESAF Society K.Paul Thomas, Secretary

B. Transactions with the above parties during the reporting period:- (Amount in Rs.)

Unsecured Loan from M/s. Dia Vikas Capital Private Limited 50,000,000

Unsecured Loan from M/s.SHG Federation, Thrissur 164,805,726 Remuneration to Mr. K.Paul Thomas 5,123,846

Dues from Mr.K.Paul Thomas 3,559,321

Remuneration of Mrs. Mareena Paul 794,500

Dues from Mrs. Mareena Paul 1,006,659

(III) Asset Liability Management Maturity Pattern of major assets and liabilities as on 31st March 2012 (in Rs. Crores)

Upto 1 month 41.36 13.31

Over 1 month to 2 months 41.90 12.61

Over 2 months to 3 months 35.11 17.11


Over 6 months to 1 year 103.40 106.72

Over 1 year to 3 year 141.54 197.32

Over 3 years to 5 years 0.00 14.09

Over 5 years 0.00 0.00

Total 430.01 417.72

The ALM information is as per the report and figures compiled by the Management.

25.6 Debt Equity Ratio (DER)

Debt : (A) Loans from Banks / Institutions 4,009,870,549

Cash Credits from Banks 135,260,438

Non convertible Debentures 32,720,000 4,177,850,987 4,177,850,987

Equity : (B) Equity share capital 500,000,000

Reserves & Surplus 125,596,142 625,596,142

Less : Intangible Assets (Net) NIL 625,596,142

Debt Equity Ratio (A/B) 6.68

25.7 Assignment of Portfolio to Banks and Financial Institutions:-A. Assignment of Portfolio to Banks and Financial Institutions:-In the year under consideration the Company has entered into assigment transactions with Banks and Financial institutions and the details are as under:-

Term Loan amounting to Rs. 7.5 Crores issued to ESAF Society by M/s Manaveeya Development and Finance (P) Ltd.

(ii) Commitments #

Tangible assets: - The Company has intimated its intention to withdraw from the agreement with M/s Infrasoft Tech India Limited, Mumbai towards implementation of the Core Banking Solution termed Omni Enterprise considering various performance parameters and has decided to opt for a more scalable and technical advanced software. The actual amount expended by the company towards this is not exceeding Rs. 20,00,000. However the Company is in the lookout for options for recovering the loss incurred.

25.2 Disclosures required under Section 22 of the Micro, Small and Medium Enterprises Development Act, 2006

(i) Principal amount remaining unpaid to any supplier as at the end of the accounting year - - (ii) Interest due thereon remaining unpaid to any supplier as at the end of the accounting year - - (iii) The amount of interest paid along with the amounts of the payment made to the supplier beyond the appointed day - - (iv) The amount of interest due and payable for the year - - (v) The amount of interest accrued and remaining unpaid at the end of the accounting year - - (vi) The amount of further interest due and payable even in the succeeding year, until such date when the interest dues as above are actually paid - -

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

25.3 Disclosures on foreign currency exposures:- I. Earnings and outgo in Foreign Currency:

A: Earnings:- Received from Amount (in Rs.) Amount (in USD) Date Ac. No. Bank

IInternational Labour Office, 4 Route des Morillons, CH-1211, Geneva 22,1,655,704 29,961 25-05-2012 59.73.488 Switzerland.

(Nature - Grant Receivable for Shramjyothi Project of ILO)

PROVISION SPLIT UP FOR THE YEAR 2012-13

Standard Assets:-

Current Advances 2,848,943,495 7,122,359 28,489,435

Non Current Advances 1,415,444,561 3,538,611 14,154,446

Sub Standard Assets (Current - 6 months to 24 months) 24,924,867 2,492,487 249,249

Doubtful Assets (More than 24 months) 1,510,071 1,510,071 15,101

Additional provision as providedby the Management - 28,244,702 -

Total 4,290,822,994 42,908,230 42,908,230

25.5 Disclosure pursuant to RBI Notification DNBS. 200/CGM (PK) - 2008 dt. 01-08-2008 (i) Capital to Risk Assets Ratio (CRAR) (All amounts in `)

As a prudent practice Company is maintaining a CRAR/CAR of 18.44% which is more than the RBI requirement of 15% for NBFCs having asset size of more than 100 Crore (Systemically Important NBFC). The workings are as detailed below:-

Tier- I Capital 571,795,982 515,164,304

Tier - II Capital 100,228,796 (28,738,039)

Total Capital 672,024,778 486,426,265

Total Risk weighted Assets 3,469,438,781 2,379,079,278

Tier - I Capital as a percentage of total risk weighted Assets (%) 16.48% 21.65%

Tier - II Capital as a percentage of total risk weighted Assets (%) 2.89% -1.21%

Capital to Risk Assets Ratio (CRAR) 19.37% 20.45%

(ii) Exposure to Real Estate sector (Direct & Indirect) The Company does not have any direct or indirect exposure to real estate sector as on 31st March 2012 and 2013.

Number of Loan accounts assigned during the year - 66,985

Book value of Loan assets assigned during the year - 590,040,059

Sale Consideration for the assignment received during the year - 622,878,934

Total gain on account of assignements to be amortised over the life of receivables - 6,306,530

Gain recognised in the Profit & Loss account during the year 14,646,940

Quantum of credit enhancements provided during the year - 66,966,513

B. Securitisation Transactions Disclosure pursuant to Reserve Bank of India guidelines on securitisation Transactions RBI/ 2012-13/170 DNBS.PD. No. 301/3.10.01/2012-13 dated 21 August 2012.

1 No of Special purpose vehicles (SPVs) sponsored by the NBFC for securitisation transactions (Nos.) 6 - 2 Total amount of securitised assets as per the books of the SPVs sponsored by the NBFC 1,423,276,416 -

3 Total amount of exposures retained by the NBFC to comply with Minimum Retention Ratio (MRR) as on the date of Balance Sheet a) Off balance sheet exposures First loss - - Others - - b) On balance sheet exposures First loss 107,600,319 - Others (Investment in Pass Through certificates) 46,050,287 -

4 Amount of exposures to securitisation transactions other than MRR a) Off balance sheet exposures i) Exposure to own securitisations First loss - - Others - - b) On balance sheet exposures i) Exposure to own securitisations First loss - - Others (Receivables from SPV`s for assets Derecognised) 37,229,391 - ii) Exposure to third party securitisations First loss - - Others - -

Remuneration of Mrs. Mercy Mathew 152,360

Remuneration of Mrs. Beena George 241,800

Dues from Mrs. Beena George 33,328

Remuneration of Mr. George.K.John 880,500

Dues from Mr. George.K.John 204,000

Remuneration of Mr. Jimmy Mathew 169,300

Dues from Mr. Jimmy Mathew 6,592

Payable Outstanding Balances:-

Royalty payable - ESAF Society 10,800,612

Apart from the above the Corporate guarantees provided to entities coming under the related party list are disclosed in Note 25 1(iii).

25.10 Details of rental arrangements:-

The Company has taken on rent Branch premises for periods ranging from 11 months to 5 years. The rental arrangements are cancellable after giving one months notice and the agreements provides for an annual increase of 5% on an yearly basis. For the reporting year the rental expenses comes to Rs. 1,53,74,897 (Previous year 1,34,40,137).

25.11 The Company has not capitalised any borrowings as per the provisions of Accounting Standard - 16 and hence no disclosures are applicable. 25.12 There are no discontinuing operations for the company and therefore the disclosures under Accounting Standard 24 are not applicable. 25.13 Employee Benefit Plans

a) Defined contribution Plans:-

Employees Provident Fund The Company makes Provident Fund contributions for eligible employees. For the year under consideration the company has made a EPF contribution of Rs. 1,31,80,745 (Previous Year - 76,55,633).

Employees State InsuranceThe Company has brought eligible employees under the purview of Employee State Insurance Scheme. For the year under consideration it has made an ESI contribution of Rs.65,24,467 (Previous Year - 40,64,364.61).

b) Defined Benefit Plans:-

Staff Insurance SchemeEmployees outside the purview of ESI are covered under the Group medical insurance policy of M/s Oriental Insurance Company. For the year under consideration, the company has made a premium payment of Rs. 7,60,386.57 (Previous year Rs. 12,69,278).

Contribution to Gratuity Fund Reconciliation of Defined Benefit Obligation (DBO) (in Rs. 000)

Present Value of DBO at start of the year 8,075

Current Service Cost 3,517

Interest Cost 646

Benefits Paid (347)

Actuarial Loss/(Gain) 5,418

Present Value of DBO at end of the year 17,309

Reconciliation of Fair Value of Plan Assets (in Rs. 000)

Fair Value of plan assets at start of the year 4,571

Contributions by employer 2,500

Benefits paid (347)

Expected return on plan assets 368

Actuarial Loss/(Gain) 99

Fair Value of plan assets at end of the year 7,191

Actual return on plan assets 467

Expected employer contribution for the coming period 2,500

Expense recognised in the Profit and Loss Account (in Rs. 000)


Interest cost 646

Expected return on plan assets (368)


Employer expense 9,114

Net Liability/Asset recognised in the Balance Sheet


Fair Value of plan assets 7,191

Net Liability/(Asset) 10,118

Less: Unrecognised past service cost -

Liability/(Asset) recognised in the Balance Sheet 10,118

Of which, short term Provision -

Percentage Breakdown of Total Plan Assets

Insurer managed funds 100%

Actuarial Assumptions

Salary Growth rate 5% p.a

Discount Rate 7.9% p.a

Withdrawal/Attrition rate 3% p.a

Expected return on plan assets 8% p.a

Mortality rate IALM 2006-08(Ult.)

Expected average remaining working lives of employees 17 years

Experience Adjustments

Defined benefit obligation 17,314

Fair value of plan assets 7,191

Surplus/(Deficit) (10,118)

Experience adjustment on plan liabilities: (Gain)/Loss 5,206

Experience adjustment on plan assets: Gain/(Loss) 99

The amount of actuarially calculated value of employees benefits arising from the employers obligation to the employee at the time of employee`s separation from the services of the company. The defined benefit obligation is arrived at after consid-ering the relevant assumptions like future salary growth rate, withdrawal rate, mortality, morbidity and discount rate.

25.14 Employee Share Based payments:- In the reporting period the Company have not issued any shares relating to any Employees Stock option plans. In the year 2011-12, based on the approval by the Board of Directors to issue Employee Benefit Shares, the company has issued 15,00,000 shares of the face value of Rs. 10 each to ESAF Staff Welfare Trust formed for the benefit of employees.

Options outstanding at the beginning of the year - - Options exercised during the year - - Options outstaning at the end of the year - -

No option shares were issued during the reporting period. In the prior period, Option shares numbering 1,98,000 amounting to Rs.19,80,000 were allotted to the Promoter of the company (Refer Note 25.19)

25.15 Adhering to the guidelines relating to the Revised Schedule VI, previous year's figures have been regrouped / reclassified wherever necessary to correspond with the current year's classification / disclosure.

South IndianBank

Ollukkara, Thrissur

ParticularsAs at 31 March

2013`

As at 31 March2012

`


















INCOME TAX CLAIMS PENDING


Regular u/s 143(3) 2009-10 28,402

Regular u/s 115WE (3) 2009-10 21,237

Regular u/s 115WE 2009-10 64,702

(ii) Service Tax:- The Company is in receipt of a Notice to Show Cause No. F. No. Va/27/2011-12/BZU - KRU, O.R. No. 61/2011/BZU KRU, SCN No. 86/2012-13 dated 28th March 2013 from the Additional Director General, Directorate General of Central Excise Intelligence, Bangalore Zonal Unit. A demand is raised under section 73(1) of the Finance Act, 1994 amounting to Rs. 1,50,77,020/-. The Company in the process of responding and has engaged a reputed service tax counsel for the same.(iii) Corporate Guarantee to Related parties:- A) As part of its new initiatives, the company has business arrangements with M/s Hindustan Unilever for distribution of their range of waterpurifiers to the clients using the channel of M/s ESAF Retail. As part of this arrangement M/s Hindustan Unilever is providing products on credit to the clients of the company, the install-ments of repayments which are collected and paid back to HUL through their channel partner M/s ESAF Retail (P) Ltd. For enabling the same, the Company stands as a guarantor for the transactions between M/s ESAF Retail (P) Ltd and M/s Hindustan Unilever Ltd for the amounts due from M/s Esaf Retail (P) Ltd to Hindustan Unilever Ltd towards the credit sales of the above mentioned products and has also guaranteed to ensure that M/s ESAF Retail (P) Ltd makes all payments to M/s Hindustan Unilever Ltd on due dates and will make good short falls, if any, in case of defaults by M/s Esaf Retail (P) Ltd. As on the reporting date the amount involved comes to Rs. 21,38,398. 48/-. B) The Company out of its funds has issued a Corporate guarantee to M/s Manaveeya Development and Finance (P) Ltd, Hyderabad limited to a maximum liability amount of .Rs. 2 Crores towards the repayment of
















Upto 1 month 41.36 13.31








Total 430.01 417.72












(ii) Commitments # (a) Estimated amount of contracts remaining to be executed on capital account and not provided for:-

Tangible assets: - The Company has intimated its intention to withdraw from the agreement with M/s Infrasoft Tech India Limited, Mumbai towards implementation of the Core Banking Solution termed Omni Enterprise considering various performance parameters and has decided to opt for a more scalable and technical advanced software. The actual amount expended by the Company towards this is not exceeding Rs. 20,00,000. However the Company is on the lookout for options for recovering the loss incurred.









Standard Assets:-






Total 4,290,822,994 42,908,230 42,908,230



Tier- I Capital 571,795,982 515,164,304

Tier - II Capital 100,228,796 (28,738,039)

Total Capital 672,024,778 486,426,265





































Interest Cost 646

Benefits Paid (347)






Benefits paid (347)








Interest cost 646
































80 81


Asset Classification Period of OverdueProvision as per RBI

Prudential Norms 2007

Citi Bank NA50, C.P.

RamaswamyRoad,

AlwarpetChennai







1. The Company is not having any loan portfolio created or outstanding in the state of Andhra Pradesh. In the reporting period, the Company has followed the norms stated in the Non-Banking Financial (Non Deposit Accepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007. But taking into account the imminent implementation of the asset provisioning norms prescribed for the Non AP portfolio of NBFC MFIs, with effect from 01-04-2013 onwards as per the Circular No. DNBS (PD) CC.No.300/03.10.038/2012-13 dated 03-08-2012, the Company has ensured that it is having atleast 1% of the total portfolio outstanding as provisions in its books which is in line with the rates prescibed in the Circular No. DNBS.CC.PD.No.250/03.10.01/2011-12 dated 02-12-2011. 2. Apart from the Staff loans and Staff Vehicle loans, the Company is not providing any kind of loans to its employees. On the Staff loans and Staff vehicle loans, the Company is charging a rate of interest at 18% diminishing and the maximum duration of the loan is 18 months. The Company as a policy has not created any provisions on Staff loans. Also in the case of Staff vehicle loans outstanding to Rs. 10,00,525/- as on the report date, the vehicles are hypothecated in the name of the Company. 3. Provision calculations are made on Gross Portfolio which includes the portfolio under Securitisation or which is assigned to Banks or Financial Institutions. The Loss assets written off during the year comes to Rs. 53,76,032/-Provisioning Norms:-













Regular u/s 143(3) 2009-10 28,402

Regular u/s 115WE (3) 2009-10 21,237

Regular u/s 115WE 2009-10 64,702

















Upto 1 month 41.36 13.31








Total 430.01 417.72












(ii) Commitments #










Standard Assets:-






Total 4,290,822,994 42,908,230 42,908,230



Tier- I Capital 571,795,982 515,164,304

Tier - II Capital 100,228,796 (28,738,039)

Total Capital 672,024,778 486,426,265





































Interest Cost 646

Benefits Paid (347)






Benefits paid (347)








Interest cost 646































Asset Classification

Particulars 31.03.2013 31.03.2012

Gross Amount in Rs.Provision as per RBI

Prudential Norms, 2007Provision as per New

RBI Guidelines




















Regular u/s 143(3) 2009-10 28,402

Regular u/s 115WE (3) 2009-10 21,237

Regular u/s 115WE 2009-10 64,702

















Upto 1 month 41.36 13.31








Total 430.01 417.72












(ii) Commitments #










Standard Assets:-






Total 4,290,822,994 42,908,230 42,908,230



Tier- I Capital 571,795,982 515,164,304

Tier - II Capital 100,228,796 (28,738,039)

Total Capital 672,024,778 486,426,265





































Interest Cost 646

Benefits Paid (347)






Benefits paid (347)








Interest cost 646
































82 83


Particulars

Particulars Figures (`) Sub Totals Totals

Assets Liabilities

Advances Borrowings




















Regular u/s 143(3) 2009-10 28,402

Regular u/s 115WE (3) 2009-10 21,237

Regular u/s 115WE 2009-10 64,702

















Upto 1 month 41.36 13.31








Total 430.01 417.72





Non Convertible Debentures 32,720,000 4,177,850,987 4,177,850,987





25.7 Assignment/ Securitisation TransactionsA. Assignment of Portfolio to Banks and Financial Institutions:-In the year under consideration the Company has entered into assigment transactions with Banks and Financial institutions and the details are as under:-


(ii) Commitments #










Standard Assets:-






Total 4,290,822,994 42,908,230 42,908,230



Tier- I Capital 571,795,982 515,164,304

Tier - II Capital 100,228,796 (28,738,039)

Total Capital 672,024,778 486,426,265





































Interest Cost 646

Benefits Paid (347)






Benefits paid (347)








Interest cost 646
































2013`




















Regular u/s 143(3) 2009-10 28,402

Regular u/s 115WE (3) 2009-10 21,237

Regular u/s 115WE 2009-10 64,702

















Upto 1 month 41.36 13.31








Total 430.01 417.72












(ii) Commitments #










Standard Assets:-






Total 4,290,822,994 42,908,230 42,908,230



Tier- I Capital 571,795,982 515,164,304

Tier - II Capital 100,228,796 (28,738,039)

Total Capital 672,024,778 486,426,265








Sale consideration for the assignment received during the year - 622,878,934






3 Total amount of exposures retained by the NBFC to comply with Minimum Retention Ratio (MRR) as on the date of Balance Sheet a) Off balance sheet exposures First loss - - Others - - b) On balance sheet exposures First loss 107,600,319 - Others (Investment in Pass Through Certificates) 46,050,287 -

4 Amount of exposures to securitisation transactions other than MRR a) Off balance sheet exposures i) Exposure to own securitisations First loss - - Others - - b) On balance sheet exposures i) Exposure to own securitisations First loss - - Others (Receivables from SPV`s for assets derecognised) 37,229,391 - ii) Exposure to third party securitisations First loss - - Others - -



















As at 31 March2012

`


2013`

As at 31 March2012

`




Interest Cost 646

Benefits Paid (347)






Benefits paid (347)








Interest cost 646
































84 85





















Regular u/s 143(3) 2009-10 28,402

Regular u/s 115WE (3) 2009-10 21,237

Regular u/s 115WE 2009-10 64,702


25.8 Segment Reporting:- The Company is only involved in the business segment of Microfinance lending and the only geographical segment is the Republic of India. Accounting Segment Reporting requirements as per Accounting Standard 17 are not applicable.

25.9 Related Party Disclosures:- A. List of related parties are given below:-














Upto 1 month 41.36 13.31








Total 430.01 417.72












(ii) Commitments #










Standard Assets:-






Total 4,290,822,994 42,908,230 42,908,230



Tier- I Capital 571,795,982 515,164,304

Tier - II Capital 100,228,796 (28,738,039)

Total Capital 672,024,778 486,426,265


































Name of the EntitySl. No.

Status of Key Management Personnel




Interest Cost 646

Benefits Paid (347)






Benefits paid (347)








Interest cost 646


















































Regular u/s 143(3) 2009-10 28,402

Regular u/s 115WE (3) 2009-10 21,237

Regular u/s 115WE 2009-10 64,702

















Upto 1 month 41.36 13.31








Total 430.01 417.72












(ii) Commitments #










Standard Assets:-






Total 4,290,822,994 42,908,230 42,908,230



Tier- I Capital 571,795,982 515,164,304

Tier - II Capital 100,228,796 (28,738,039)

Total Capital 672,024,778 486,426,265






























Employees Provident Fund The Company makes Provident Fund contributions for eligible employees. For the year under consideration the Company has made a EPF contribution of Rs. 1,31,80,745 (Previous Year - 76,55,633).



Staff Insurance SchemeEmployees outside the purview of ESI are covered under the Group medical insurance policy of M/s Oriental Insurance Company. For the year under consideration, the Company has made a premium payment of Rs. 7,60,386.57 (Previous year Rs. 12,69,278).




Interest Cost 646

Benefits Paid (347)






Benefits paid (347)








Interest cost 646
































86 87


Particulars 31 March 2013




















Regular u/s 143(3) 2009-10 28,402

Regular u/s 115WE (3) 2009-10 21,237

Regular u/s 115WE 2009-10 64,702

















Upto 1 month 41.36 13.31








Total 430.01 417.72












(ii) Commitments #










Standard Assets:-






Total 4,290,822,994 42,908,230 42,908,230



Tier- I Capital 571,795,982 515,164,304

Tier - II Capital 100,228,796 (28,738,039)

Total Capital 672,024,778 486,426,265





































Interest Cost 646

Benefits Paid (347)






Benefits paid (347)








Interest cost 646




















































Regular u/s 143(3) 2009-10 28,402

Regular u/s 115WE (3) 2009-10 21,237

Regular u/s 115WE 2009-10 64,702

















Upto 1 month 41.36 13.31








Total 430.01 417.72












(ii) Commitments #










Standard Assets:-






Total 4,290,822,994 42,908,230 42,908,230



Tier- I Capital 571,795,982 515,164,304

Tier - II Capital 100,228,796 (28,738,039)

Total Capital 672,024,778 486,426,265





































Interest Cost 646

Benefits Paid (347)






Benefits paid (347)








Interest cost 646




































88 89





















Regular u/s 143(3) 2009-10 28,402

Regular u/s 115WE (3) 2009-10 21,237

Regular u/s 115WE 2009-10 64,702

















Upto 1 month 41.36 13.31








Total 430.01 417.72












(ii) Commitments #










Standard Assets:-






Total 4,290,822,994 42,908,230 42,908,230



Tier- I Capital 571,795,982 515,164,304

Tier - II Capital 100,228,796 (28,738,039)

Total Capital 672,024,778 486,426,265





































Interest Cost 646

Benefits Paid (347)






Benefits paid (347)








Interest cost 646





























No option shares were issued during the reporting period. In the prior period, Option shares numbering 1,98,000 amounting to Rs.19,80,000 were allotted to the Promoter of the Company (Refer Note 25.19)


Amount in `Number of SharesParticulars

25.16 Particulars: Disclosure of frauds reported during the year vide DNBS PD.CC.NO. 256/03.10.042/2011-12 dated March 02,2012 Fraud Cases Reported during the previous year 2011-12

(A) Person involved Staff Client 186 1447403 0 0 0 0 186 1447403

0 0

0

Total 195 1820270 3 911104 2 1262760 200 3994134

(B) Type of fraud Misappropriation and criminal 9 372867 3 911104 2 1262760 51 2546731breach of trust

0

Fraudulent encash/manipulation of books of accounts 0

0

Unauthorised credit facility 186 1447403 0 0 0 0 186 1447403extended

0

Cheating and forgery Total 195 1820270 3 911104 2 1262760 237 3994134

ParticularsLess than Rs. 1 Lakh

No. Value in Rs. No. Value in Rs. No. Value in Rs. No. Value in Rs.

Rs. 1 Lakh to Rs. 5 Lakhs Rs. 5-25 Lakhs Total


90 91


Fraud Cases reported during the financial year 2012-13

(A) Person involved Staff 1 159,775 1 159,775 Client 32 259,505 32 259,505

0 0

0

Total 32 259,505 1 159,775 33 419,280

(B) Type of fraud Misappropriation and criminal 1 159,775 1 159,775breach of trust

0

Fraudulent encash/manipulation of books of accounts 0

0

Unauthorised credit facility 32 259,505 32 259,505extended

0

Cheating and forgery Total 32 259,505 1 159,775 33 419,280

The data compiled is based on the information made available by the Company on the cases pending as on the reporting date and it includes decreed cases where recoveries are effected to the possible extent and no additional provision is required as it is considered as the existing provision of Rs.25 Lacs is being considered adequate keeping in the view that the recoveries which can be effected in the ensuing years.

ParticularsLess than Rs. 1 Lakh

No. Value in Rs. No. Value in Rs. No. Value in Rs. No. Value in Rs.

Rs. 1 Lakh to Rs. 5 Lakhs Rs. 5-25 Lakhs Total

Note 25 Disclosures under Accounting Standards continued

25.17 Earnings per share Basic Continuing Operations & Total Operations

Net Profit attributable to equity Shareholders (Amount Rs.) (A1) 54,496,575 41,466,319 Net Profit attributable to equity Shareholders and all dilutive potential equity shareholders (Amount Rs.) (A2) 54,496,575 41,466,319 Weighted Average Equity Shares outstanding during the year.(Nos.) (B1) 50,000,000 48,353,173 Basic earnings per share Rs. (A1/B1) 1.09 0.86 Option Shares Eligible (C1) 1,260,740 442,530 Weighted Average Equity Shares outstanding for Diluted Earnings per Share.(Nos.) (D1= B1+C1)) 51,260,740 48,795,703 Diluted earnings per share Rs. (A2/D1) 1.06 0.85 Nominal Value per share Rs. 10.00 10.00

The diluted earnings per share has been computed by dividing the Net Profit After Tax available for Equity Shareholders by the weighted average number of equity shares, after giving dilutive effect of the outstanding Warrants and Stock Options for the respective periods.

Option Shares eligibility of the Promoters:- The Board meeting dated 21-03-2012, decided to issue 3,000,000 (Three million) equity shares in the form of Option Shares to Mr. K. Paul Thomas, who is the promoter of the Company. This option shares shall be issued without any consideration, subject to the condition that the amount of shares issued in a particular year will not exceed an amount equal to the lesser of either: (1) 1,000,000 (One million) equity shares amounting to Rs. 10,000,000 (Rupees one Crore only); or (2) equity shares corresponding to an amount equal to 10% of the net profit before tax for that particular year. Based on those criteria 8,18,210 nos of equity shares are due for issue for the financial year 2012-13 as option shares.

The Company has not issued any Preference shares during the reporting period.

The Company doesn`t have any discontinued operations

25.18 Royalty Payment

As on March 31,2008 through a Business Transfer Agreement the Company had taken over all the assets and liabilities of Microfinance business, hitherto carried on under the name and style of Micro Enterprise Development Department by ESAF Society. The entire business was taken over lock stock and barrel. The liabilities were agreed to be settled through a back to back agreement to enable ESAF to settle the same with lenders either on its due dates or on the dates which the demand is made, till the time the liabilities are duly settled. It is also agreed that, subject to the possibility of generating adequate profits, the Company will pay an annual royalty of Rs.40 per customer, for all the customers taken over and being acquired by the Company in the next 5 years. Based on the subsequent understanding the Company had with the Society, the Royalty due dates were rescheduled in order to start from the year 2011-12, though the calculation was based on the number of custom-ers for five years starting from 2008-09 which is shown below in the table. Accordingly the Company have already paid out Rs. 92,00,600 corresponding to the financial year 2008-09 and in the reporting period has provided for Rs. 1,20,00,680 which corresponds to the royalty payment for the year 2009-10.

Royalty Calculation Sheet:-

Royalty per member agreed (in Rs.) 40.00

2008-09 (2011-12) 230015 9,200,600 2009-10 (2012-13) 300017 12,000,680 2010-11 (2013-14) 434425 17,377,000 2011-12 (2014-15) 457193 18,287,720 2012-13 (2015-16) 524104 20,964,160 Total 77,830,160

W


2013`

As at 31 March2012

`


92 93


Note 25 Disclosures under Accounting Standards continued

25.17 Earnings per share Basic Continuing operations & Total Operations

Net Profit attributable to equity Shareholders (Amount Rs.) (A1) 54,496,575 41,466,319 Net Profit attributable to equity Shareholders and all dilutive potential equity shareholders (Amount Rs.) (A2) 54,496,575 41,466,319 Weighted Average Equity Shares outstanding during the year.(Nos.) (B1) 50,000,000 48,353,173 Basic earnings per share Rs. (A1/B1) 1.09 0.86 Option Shares Eligible (C1) 1,260,740 442,530 Weighted Average Equity Shares outstanding for Diluted Earnings per Share.(Nos.) (D1= B1+C1)) 51,260,740 48,795,703 Diluted earnings per share Rs. (A2/D1) 1.06 0.85 Nominal Value per share Rs. 10.00 10.00

The diluted earnings per share has been computed by dividing the Net Profit After Tax available for Equity Shareholders by the weighted average number of equity shares, after giving dilutive effect of the outstanding Warrants and Stock Options for the respective periods.

Option Shares eligibility of the Promoters:- The Board meeting dated 21-03-2012, decided to issue 3,000,000 (Three million) equity shares in the form of Option Shares to Mr. K. Paul Thomas, who is the promoter of the Company. This option shares shall be issued without any consideration, subject to the condition that the amount of shares issued in a particular year will not exceed an amount equal to the lesser of either: (1) 1,000,000 (One million) equity shares amounting to Rs. 10,000,000 (Rupees one Crore only); or (2) equity shares corresponding to an amount equal to 10% of the net profit before tax for that particular year. Based on those criteria 8,18,210 nos of equity shares are due for issue for the financial year 2012-13 as option shares.

The Company has not issued any Preference shares during the reporting period.

The Company doesn`t have any discontinued operations

25.18 Royalty Payment

As on March 31,2008 through a Business Transfer Agreement the Company had taken over all the assets and liabilities of Micro finance business, hitherto carried on under the name and style of Micro Enterprise Development Department by ESAF Society. The entire business was taken over lock stock and barrel. The liabilities were agreed to be settled through a back to back agreement to enable ESAF to settle the same with lenders either on its due dates or on the dates which the demand is made, till the time the liabilities are duly settled. It is also agreed that, subject to the possibility of generating adequate profits, the company will pay an annual royalty of Rs.40 per customer, for all the customers taken over and being acquired by the company in the next 5 years. Based on the subsequent understanding the Company had with the Society, the Royalty due dates were rescheduled in order to start from the year 2011-12, though the calculation was based on the number of custom-ers for five years starting from 2008-09 which is shown below in the table. Accordingly the Company have already paid out Rs. 92,00,600 corresponding to the financial year 2008-09 and in the reporting period has provided for Rs. 1,20,00,680 which corresponds to the royalty payment for the year 2009-10.

Royalty Calculation Sheet:-

Royalty per member agreed (in Rs.) 40.00

2008-09 (2011-12) 230015 9,200,600 2009-10 (2012-13) 300017 12,000,680 2010-11 (2013-14) 434425 17,377,000 2011-12 (2014-15) 457193 18,287,720 2012-13 (2015-16) 524104 20,964,160 Total 77,830,160


2013`

As at 31 March2012

`

6 Investor group-wise classification of all investments (current and long term) in shares and securities (both quoted and unquoted) Please see note 3 below Category Market value /Break Book Value up or fair value or NAV (Net of Provisions)

1. Related Parties **

(a) Subsidiaries - - (b) Companies in the same group 5.00 5.00

(c) Other related parties 2. Other than related parties - -

Total 5.00 5.00

** As per Accounting Standard of ICAI (Please see Note 3) 7 Other information

Particulars Amount

(i) Gross Non-Performing Assets (a) Related parties (b) Other than related parties 264

(ii) Net Non-Performing Assets (a) Related parties (b) Other than related parties 224

(iii) Assets acquired in satisfaction of debt -

25.19 Disclosure Pursuant to Reserve Bank of India Notification DNBS.193DG(VL) - 2007 Dated 22nd February 2007:Schedule to the Balance Sheet of a non-deposit taking non-banking financial company (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 :

Loans and advances availed by the Non Banking 1 Finanical Company inclusive of interest accrued Amount Amount thereon but not paid: outstanding overdue

(a) Debentures : Secured 327 - : Unsecured - - (other than falling within the meaning of public deposits*) (b) Deferred Credits - - (c) Term Loans 40099 - (d) Inter-corporate loans and borrowings - - (e) Commercial Paper - - (f) Other Loans (specify nature) - - * Please see Note 1 below

Assets side :

Amount outstanding

2 Break-up of Loans and Advances including bills receivables (Other than those included in (4) below)

(a) Secured - (b) Unsecured 31,255

3 Break up of Leased Assets and stock on hire and other assets counting towards AFC activities

(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) Assets on hire - (b) Repossessed Assets -

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

Particulars

4 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 - (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 10.00 (b) Preference - (ii) Debentures and Bonds - (iii) Units of mutual funds - (iv) Government Securities - (v) Others (pass through Certificates) 461

2. Unquoted : (i) Shares : (a) Equity 10.00 (b) Preference - (ii) Debentures and Bonds - (iii) Units of mutual funds - (iv) Government Securities - (v) Others (please specify) -

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

Category

Amount net of provisions

Secured Unsecured Total

1. Related Parties ** (a) Subsidiaries - - -

(b) Companies in the same group - - -

(c) Other related parties - 48 - 2. Other than related parties - 31,207 31,207

Total


94 95






Total 5.00 5.00


Particulars Amount





(Rs. in lakhs)

Liabilities side :

Loans and advances availed by the nonbanking 1 finanical company inclusive of interest accrued Amount Amount thereon but not paid: outstanding overdue

(a) Debentures : Secured 327 - : Unsecured - - (other than falling within the meaning of public deposits*) (b) Deferred Credits - - (c) Term Loans 40099 - (d) Inter-corporate loans and borrowing - - (e) Commercial Paper - - (f) Other Loans (specify nature) - - * Please see Note 1 below

Assets side :

Amount outstanding







4 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 - (b) Preference - (ii) Debentures and Bonds - (iii) Units of Mutual Funds - (iv) Government Securities - (v) Others (please specify) -


1. Quoted : (i) Shares : (a) Equity 10.00 (b) Preference - (ii) Debentures and Bonds - (iii) Units of Mutual Funds - (iv) Government Securities - (v) Others (Pass through Certificates) 461



Category






Total





Total 5.00 5.00


Particulars Amount





(Rs. in lakhs)

Liabilities side :

Loans and advances availed by the nonbanking 1 finanical company inclusive of interest accrued Amount Amount thereon but not paid: outstanding overdue

(a) Debentures : Secured 327 - : Unsecured - - (other than falling within the meaning of public deposits*) (b) Deferred Credits - - (c) Term Loans 40099 - (d) Inter-corporate loans and borrowing - - (e) Commercial Paper - - (f) Other Loans (specify nature) - - * Please see Note 1 below

Assets side :

Amount outstanding







4 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 - (b) Preference - (ii) Debentures and Bonds - (iii) Units of mutual funds - (iv) Government Securities - (v) Others (please specify) -


1. Quoted : (i) Shares : (a) Equity 10.00 (b) Preference - (ii) Debentures and Bonds - (iii) Units of mutual funds - (iv) Government Securities - (v) Others (pass through Certificates) 461



Category






Total

PROxY FORM

I/We ……………………………..of……………………………………………………………………………………...being a member/member(s) of ESAF

Microfinance and Investments Private Limited hereby appoint ……………………….of ……………………………………………………………….

or failing him………………………..as my/our proxy to attend and vote for me/us on my/our behalf at the Annual General

Meeting of the Company on Thursday the 27th day of September, 2013 at 12.00 Noon or at any adjournment thereof.

Registered Folio No:

Signed this................…………………...........….............................................day of.................................................................………………2012

Signature of Member………………....................................................................

Notes: 1. This form in order to be effective should be duly stamped, completed and must be deposited at the registered

office of the Company, not less than 48 hours before the meeting.

For office use only

Date of receipt of proxy form: .....................................................................................................................................................................

Whether the form is complete in all respect: .........................................................................................................................................

Mode of receipt: ............................................................................................................................................................................................

Signature, Name and Designation of the Officer received the form:

Affix `1.00

RevenueStamp

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