EARNINGS UPDATE Q4FY16

1

SKS Microfinance LimitedBSE: 533228 ● NSE: SKSMICRO

Corporate Identity No. L65999MH2003PLC250504

www.sksindia.com

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

MAY 2016

CONTENTS

2

Particulars Slide No.

Executive Summary 3

Investment Hypothesis 5

Company Overview 8

Clarity on Major Uncertainties Post AP MFI Crisis 13

Future Strategy 18

Q4FY16 Performance Highlights 24

Review of Financials 31

Financial Architecture 42

Risk Management 46

Capital Structure 48

Annexures 51

3

EXECUTIVE SUMMARY

3

4

158

278

423

714

FY-13 FY-14 FY-15 FY-16

2,016 2,837

4,171

7,677

Mar-13 Mar-14 Mar-15 Mar-16

Overview AUM Growth (Non-AP portfolio) Growing Net Interest Income

Attractive Financial Metrics Balanced Geographical mix Diversified Shareholding

Marginal cost of borrowing# 9.2%

Cost to income 48.3%

Return on Equity 25.1%

Return on Asset* 4.2%

EXECUTIVE SUMMARY

• Second largest microfinance company

in India with gross loan portfolio of INR

7,677 Cr., 56 Lakhs members in Non-

AP states and 1,324 branches

• Lowest lending rate (19.75%) among

MFIs

• Company’s non-AP Portfolio grew by

84% (YoY) and 24% (QoQ) to INR

7,677 Crs. as of March 31, 2016

• PAT of INR 303 Cr. for FY16.

Note: Shareholding As of March 31, 2016

Net worth (INR Cr.) 1,383

Capital Adequacy 23.1%

Cash & Cash equivalent

(INR Cr.)

1,660

Gross NPA 0.1%

Note: Portfolio As of March 31, 2016

Strong Balance sheet and liquidity

Efficiency and Profitability

INR Cr. INR Cr.

*Interest income on Portfolio loans + Excess interest

spread on securitization/Income from Assignment + Loan

processing fees + BC Fee – Financial Cost

Note: FY16

Non-AP = excluding states of AP and Telangana

# includes on and off b/s borrowings (excluding processing fees) for

Q4FY16

*includes securitized, assigned and managed loans

Figures rounded off to the nearest digit across the presentation

Odisha18%

Karnataka14%

Maharashtra

12%Bihar11%

West Bengal10%

Uttar Pradesh

9%

Kerala6%

Madhya Pradesh

5%

Rajasthan5%

Jharkhand4%

Others6%

2.5%

2.7%

2.8%

3.0%

3.3%

3.4%

3.6%

4.1%

4.2%

4.4%

Baron Capital…

Kismet Microfinance

Indus Capital Partners

Tree Line

Vinod Khosla

IDFC Mutual Fund

Max Life Insurance…

Sandstone

Amansa Capital PTE…

Morgan Stanley SG PTE

Top 10 Shareholders

5

INVESTMENT HYPOTHESIS

5

6

INVESTMENT HYPOTHESIS

There is a huge demand/ supply gap for microfinance

SKS is the lowest cost MFI lender across the globe

Diversified earnings stream with cross-sell / Non-Loan revenue contributing 9% to PAT

Pan-India presence with no unbalanced geographic sectoral exposure

Strong solvency (Capital Adequacy of 23.1%) and sufficient liquidity

RBI’s comprehensive regulatory framework mitigates political and regulatory risks

RBI and MoF acknowledge microfinance as a key component of financial inclusion

Entry barriers and supervisory standards are significantly enhanced thwarting future competition

No credible alternative for microfinance emerges even after 5.5 years of AP MFI Act

PSL requirement of banks to enhance funding availability and value of the franchise

Steady state RoA of 4% still the highest among financial services play

7

Segment -1

70 mn households in India

with some assets (INR

90/day PPP)

Segment -2 (BPL)

80 mn households in India

with no assets (INR 55/day

PPP)

THERE IS A HUGE UNMET DEMAND FOR MICROFINANCE

Assumptions

• Target households: 150 mn

•Basis: World Bank poverty statistics, India

• Avg. credit requirement: Rs 20,000 per household

•Basis: EDA Rural Systems, World Bank, Access to Finance

• Adjustment for service difficulties: 20%

•Basis: adjustment made to reflect inaccessible poor in rural areas (~7%) and half of

underserved urban poor (0.5 x 26% = 13%)

Source: World Bank; Sa-Dhan Bharat Microfinance reports

38,558 59,860

24,017

27,582

2014 2015

MFIs SHG

Micro-Credit Demand In India

covered in part by

moneylenders and

informal sources,

but largely untapped

*Disbursement in INR Crs.

Demand

Rs. 2,40,000 Crs.

* *

Rs.87,442 crs

Rs.62,575 crs

8

COMPANY OVERVIEW

8

9

Survey a village Recruit members

Deliver doorstep service Provide training

SKS USES GRAMEEN MODEL TO PROVIDE UNSECURED CREDIT AT THE

DOORSTEP OF LOW INCOME RURAL WOMEN

Put loan

officers pic

1,484

2,875

3,503

FY 12 FY 13 FY 14

Drawdowns

AP exposure of Rs. 1,360

crore written off/ provided

for

Q3FY11 Q4FY14 Var.

Branches 2,403 1,255 -48%

Other Opex (INR crore)

51 21 -60%

Headcount 25,735 8,932 -65%

Personnel Cost (INR crore)

89 43 -52%

3,526

1,185

2,837

Q3FY11 Q3FY12 Q4FY14

Non–AP Gross Loan Portfolio

(13.6) (3.0)

70

FY12 FY13 FY14

Return To Profitability

Bn Bn

INR crore

BUILDING BLOCKS OF TURNAROUND POST AP MFI CRISIS

Balance Sheet Cleansed Supply-side Shock Managed Credit Growth Resumed

Cost Structure Optimization

10

2000 2014 -152012Yrs

14%

8%1,229

Oct’10 June’12 Dec’15

28.300

14.600

Non-AP Portfolio Outstanding

3,945

SKS

Others

INR Crs.

Net worth - Rs. 1,383 crs

CAR - 23.1% (RBI Requirement

15%)

# On and Off balance sheet loans including processing fee

2015 -16

SKS

Disbursement

share 18%* in

Q3FY16

* Industry

disbursements

for Q3FY16 is

Rs.16,580 crs.

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

15%6,177

42.251

DURABLE FOUNDATION FOR SUSTAINABLE GROWTH (1/2)

Market Share Regained

Technology Upgraded

Capital Reinforced

Efficiency Gains

Installed Computers at all branches with In-House lending system

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

Refactoring of In-house lending system

Equipped Loan Officers with tablets

Mobile/ digital/ cashless transactions

74.5%

61.1%48.3% 47.5%

FY14 FY15 FY16 Q4FY16

Cost to Income

12.6% 11.9% 10.2% 9.3%

FY14 FY15 FY16 Q4FY16

Marginal Cost of Borrowing#

11

29.25%

24.55%23.55%

22.00%20.75%

19.75%

Oct-10 Jan-11 Oct-14 Jul-15 Oct-15 Dec-15

Lowest interest rate

charged by any private

sector MFI in the globe

4.8% reduction in one year

GLP: Gross Loan PortfolioTerm loan and cash credit facilities

Interest rate on income generation loans

74%

50%

Mar-13 Mar-16

Share of borrowing from top 5 banks

53%

44%

Sep-10 Mar-16

Top three states share in GLP

Political Risk Mitigation through interest rate reduction

Reduced Borrowing Dependence Lower State Concentration

DURABLE FOUNDATION FOR SUSTAINABLE GROWTH (2/2)

12

CLARITY ON MAJOR UNCERTAINTIES

POST AP MFI CRISIS

13

WHAT DOESN’T KILL YOU, MAKES YOU STRONGER - POSITIVE DEVELOPMENTS POST AP MFI CRISIS

14

Will there be multiple

regulators?

Regulatory clarity – RBI to be the sole regulator

Funding uncertainty?

Priority sector status continues

MFIs are the only indirect priority sector dispensation

Will there be contagion?

No contagion

Since past 5.5 years no other state has followed suit

Has the operating model

been challenged?

Collection efficiency maintained despite disbursements being a fraction

of collections during the wind-down mode i.e. Oct’2010 to June’2012.

No alternative credit delivery model has gained currency.

What will be the economics

under regulated interest

rate regime?

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

Concerns Clarity

OPERATING MODEL VAILIDITY ESTABLISHED

15

3,942 3,526

2,706

2,101

1,635

1,185 1,320 1,229

Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13

Collection efficiency of 97% during wind-down mode dispels ever greening myth

Non-AP

Loan

Portfolio

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

during this period5.2

No. of non-AP members who availed loans

during this period3.3

No. of non-AP members who didn’t

receive any incremental credit from SKS

during this period

1.9

in Millions

1.9 million borrowers repaid loans

without incremental lending

INR crs

Internal generation -- and not incremental debt --

aids prompt repayment

MFI Industry non- AP Portfolio Outstanding (Rs Cr)

Oct’10 28,300

June’12 14,600

Sector outstanding

Non-AP Portfolio

Oct ’10 – 28,300

Mar’14 – 24,615

Mar’15- 40,138

Dec’15- 42,251#

Market Share Dynamics

2nd, 3rd, 4th and 5th

largest MFI playerswith 40% Non-APmarket share areunder CDR.

Institutional Infrastructure

Credit Bureaus-

- Equifax & Highmarkare functional

- 95% of MFIs now use CB reports for disbursements

COMPETITIVE LANDSCAPE CHANGES TO SKS’ ADVANTAGE

16

INR crore

• No. of loan records - 17.8 Crore

• No. of borrower records – 7.0 Crore

• No. of loan records (live) – 4.6 Crore

• No. of borrower records (live) – 3.3 Crore

• No. of MFIs reporting – 117

• Frequency of sharing the records – Weekly

Snapshot of Equifax Credit Bureau*:

* Source: Equifax (as on Jan 2016)

# Dec-15 data as per MFIN; excludes data for Bandhan bank;

Equitas (Q1FY16) and Ujjivan (Q2FY16)

STEADY-STATE ROA OF 4% CAN BE TARGETED

17

Processing fee

Interest rate

RevenueProfitTaxesProv. &

Write-off

Operating

cost

Financial cost

Marginal Cost of

borrowings: 9.3%.

Portfolio funded by debt:

80%

7.4

7.1

1.01.5

4.5

1.7

19.75

21.5

*interest rate charged is 19.75% for new loans effective from 7th Dec’15

#Processing fee is calculated based on weighted average portfolio mix of 70% IGL (1 Yr. loan) and 30% LTL (2 Yr. loan).

*

#

Minimum Alternate Tax @ 21%

FUTURE STRATEGY

18

OPPORTUNITIES CHALLENGES

A COMPARATIVE STUDY OF STRUCTURAL OPPORTUNITIES & CHALLENGES

Access to low cost funds/deposits

Bank accounts to customers

Political risk mitigation

× CASA can be competitive only in the long

term

× CRR and SLR drag

× No PSL benefit on bank borrowings

× Interbank borrowings capped at 3x Net

Worth

× Cannot act as Business Correspondent

(BC) to other banks

× Investment in technology, infrastructure

and functional capabilities for banking

SFB

Generate Agri-allied/ PSL for banks

Leverage Business Correspondent (BC)

model to offer bank accounts and saving

products to customers without CRR and

SLR drag

× Political risk beyond a size

× Cannot access deposits

NBFC-MFI

19

Political Risk mitigation Sub-20% interest rate mitigates political risk

• SKS becomes the lowest cost lender with 19.75%

interest rate1

Access to refinance Access to refinance is now available to NBFCs also

• SKS has accessed Rs.100 Cr refinance from

MUDRA @ 10%2

Bank accounts for

customers

• Migration to cashless

regime to reduce opex

• Seed Jan-Dhan accounts of members

• Open bank accounts for members as BC for other

banks3

Downward adjustment of

risk premium to reduce

cost of borrowings

• Lowest borrowing cost in the sector

• Highest rating in the MFI sector - A1+ for short

term and A+ for long term

• Strong Balance Sheet : Strong solvency and

sufficient liquidity

• Relationship premium from credit grantors

4

Rationale for SFB application Mitigants / Counter Strategies

SFB - MISSED OPPORTUNITY BUT NOT A SETBACK

20

UNMATCHED LEADERSHIP

21

Unique

Operating Model

Extensive Reach

Best of Breed

financial ratios

Lowest Cost

Producer

External

endorsements

Parameter

Interest rate

No. of districts

No. of customers

Group Lending

Rural customer base

Opex to GLP

Cost to Income

Earnings growth

RoA, RoE

Rating

Status

100%

75%

Lowest interest rate of

19.75% among global

private sector MFI

305

5.6 Mn

7.1%

48.3%

61% yoy

4.2%, 25.1%

Highest Long-term rating (A+) and

Short-term rating (A1+) amongst

NBFC-MFIs

THE MOST EFFICIENT MFI IN THE GLOBE

10

Metric

Sub-20

Interest

Rate to

Borrower

Cost to

Income

Ratio

Balance sheet

strength

Stellar

repayment

record

Judicious

sources mix

Technology

initiatives

Scale

AUM

growth

Operating

leverage

Non-Loan

revenue

Drivers

Marginal

cost of

Borrowing

Cumulative

next 2

years salary

increase to

field staff

Target %

Annualised

earnings

growth

Medium Term Strategic Priorities:

20 30 40 50

Low marginal

cost of borrowing

Scale &

Efficiency

Productivity &

Efficiency

Status –FY16

22

9.3* 19.75* 15 48.3 61

*Q4FY16

CREATIVE DISTURBANCE TO ASSET-REVENUE-EARNING CORRELATION

23

15%

85%

Revenues

10%

90%

Assets*

20%

80%

Earnings

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

Medium-Term Targets

MFI

Non - MFI

Non-MFI Actuals – FY16

9.3%

3.8%

1.3%

Q4FY16

PERFORMANCE HIGHLIGHTS

24

HIGHLIGHTS OF Q4FY16

Incremental drawdowns of Rs.3,224 Crs. in Q4FY16 (Rs.2,414 Crs. Q4FY15) and full year drawdowns in FY16

were Rs.7,317 Crs. (growth of 46% YoY) excluding origination under managed loans. SKS also originated Rs.326

Crs. and Rs.1,064 Crs. loans under managed portfolio in Q4FY16 and FY16 respectively.

Completed securitization transactions of Rs.1,621 Crs rated as ‘AA (SO)’ and asset assignment of Rs.507 Crs. in

Q4FY16.

Loan disbursement of Rs.4,066 Crs. in Q4FY16 (growth of 63% YoY and 36% QoQ). Disbursements in FY16 was

Rs.12,088 Crs (growth of 75% YoY).

Non-AP Portfolio grew by 84% YoY and 24% QoQ to Rs.7,677 Crs. as of March 31, 2016.

Marginal Cost of Borrowings* reduced from 9.9% in Q3 FY16 to 9.2% in Q4FY16 and Weighted Average cost of

Borrowings# (historical) also reduced from 11.5% in Q3 FY16 to 11.1% for Q4FY16.

The un-availed deferred tax benefit of Rs.357 Crs. and MAT credit of Rs.97 Crs. will be available to offset tax on

future taxable income.

PAT of Rs. 84 Crs. in Q4FY16 (growth of 108% YoY and 6% QoQ ) and Rs.303 crs for FY16 (growth of 61% YoY).

QoQ PAT movement has been impacted by increase in standard asset provisioning of Rs. 5 Crs and income

deferral of Rs. 6 Crs due to securitization and assignment.

Networth of Rs.1,383 Crs. and Capital adequacy at 23.1% as of March 31, 2016.

Cash & Cash equivalent^ of Rs.1,660 Crs.

25

Note:

^ Excluding security deposit.

# including processing fee of Rs.2.5 Crs paid on Loans on Balance sheet in Q4FY16.

* Includes on and off b/s borrowings, excluding processing fees.

Figures rounded off to the nearest digit across the presentation. Figures and ratios have been regrouped wherever necessary.

OPERATIONAL HIGHLIGHTS

Particulars Mar-15 Mar-16 YoY% Dec-15 QoQ%

Branches# 1,268 1,324 4% 1,300 2%

Centers (Sangam) 227,125 246,647 9% 227,214 9%

- Centers in non-AP States 156,457 175,774 12% 156,341 12%

Employees (i) + (ii) + (iii) + (iv) + (v) + (vi) 9,698 11,991 24% 11,086 8%

• Field Staff (i) + (ii) + (iii) + (iv) + (v) 9,416 11,689 24% 10,794 8%

– Sangam Managers* (i) 5,286 6,884 30% 6,415 7%

– Sangam Manager Trainees(ii) 777 1,008 30% 654 54%

– Branch Management Staff (iii) 2,266 2,576 14% 2,537 2%

– Area Managers (iv) 99 155 57% 144 8%

– Regional Office Staff (v) 988 1,066 8% 1,044 2%

• Head Office Staff (vi) 282 302 7% 292 3%

Members in non-AP States (in '000) 4,482 5,566 24% 4,957 12%

− Members added (in the quarter) (in ‘000) 483 806 67% 540 49%

Active borrowers in non-AP States (in '000) 3,648 4,637 27% 4,158 12%

− Active borrowers added (in the quarter) (in ‘000) 382 845 121% 537 57%

No. of loans disbursed (in '000) 1,857 2,386 29% 1,899 26%

Disbursements (for the quarter) (INR Crs.) 2,494 4,066 63% 2,980 36%

Gross loan portfolio – Non-AP (INR Crs.) (A+B+C) 4,171 7,677 84% 6,177 24%

• Loans outstanding (A) 2,911 4,965 71% 5,035 -1%

• Securitized/Assigned (B) 918 2,023 120% 557 263%

• Managed loans (C) 342 688 101% 586 18%

Operational Efficiency – Non-AP :

Off-take Avg (Disbursements/ No of Loans disbursed) (INR) 13,443 17,049 27% 15,701 9%

Off-take Avg Excluding Cross Sell 15,473 20,578 33% 18,184 13%

Gross loan portfolio/ Active Borrowers (INR) 11,434 16,557 45% 14,857 11%

Gross loan portfolio/ No. of Sangam Managers (Rs. '000) 8,994 12,141 35% 10,611 14%

Active borrowers / No. of Branches 3,214 3,893 21% 3,563 9%

Active borrowers / No. of Sangam Managers 787 733 -7% 714 3%

*Sangam Managers are our loan officers who manage our centers (also called Sangams). As of March’16, we had 6,323 Sangam Managers in

Non-AP States # Incl. 44 Gold loan branches 26

21% 10% 16% 56%

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

Increase in

No. of

Borrowers

Increase in

Ticket sizeChange in Loan

duration^ AUM growth

27% 22% 18% 84%FY16

12% 6% 24% 47%FY15

26% 4% 8% 41%FY14

Notes:

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

CAGR last

3 yrs.

27

PRODUCTIVITY GAINS & COST EFFICIENCY ENABLE SKS TO LEVERAGE THE CONDUCIVE ENVIRONMENT

28

Best before

AP MFI

crisis

Worst

during AP

MFI crisis

FY14 FY15 FY16 Q4 FY16

Productivity – Non-AP:

Borrowers/ SM 489* 287 721 787 733 733

Gross Loan Portfolio/ SM ('000) 3,640* 1,320 6,275 8,994 12,141 12,141

Offtake Avg. 10,299* 9,237 11,849 12,273 15,024 17,049

Offtake Avg. (Excl Cross-sell) 10,383* 11,021 12,277 14,149 18,102 20,578

Cost Efficiency:

Financial Cost %$ 6.6% 9.8% 8.3% 8.3% 8.5% 7.7%

Cost of borrowings % (without

processing fees)9.7% 12.9% 12.7% 12.1% 11.4% 10.8%

Cost of borrowings % 10.3%^ 16.0%^ 13.6%# 12.8%# 11.6%# 11.1%#

Opex/ Gross Loan Portfolio % 10.4% 21.7% 9.6% 9.5% 7.1% 6.5%

Cost to Income Ratio 52.4% 275% 74.5% 61.1% 48.3% 47.5%

Credit Quality - Non-AP:

Gross NPA% 0.20%* 5.5% 0.1% 0.1% 0.1% 0.1%

Net NPA% 0.16%* 2.9% 0.1% 0.1% 0.04% 0.04%

Collection Efficiency % 99.8%* 94.9% 99.9% 99.8% 99.8% 99.8%

*Enterprise figures - includes figures from AP state

$ Financial expenses to Avg. Gross Loan Portfolio

^Includes processing fee for on and off balance sheet (b/s) funding

# Includes processing fee for on b/s funding only, for FY 14 Rs. 13 Crs, FY15 Rs. 14.3 Crs. FY16 Rs.10.5 Crs. and for Q4FY16 Rs. 2.5 Cr

PORTFOLIO MIX

29

CONCENTRATION NORMS

Metric % Cap on Disbursement* POS % Cap of Networth*

State

<15%

(20% for Karnataka &

Odisha)

75%

(100% for the state of

Odisha, Karnataka and

Maharashtra)

District

<3 %

(4% for Karnataka &

Odisha)

5%

(Only 5% of total operating

districts can go up to 10% of

Networth)

Branch

<1 %

(1.25 % for Karnataka &

Odisha)

1%

(Only 5% of the total

operating branches can go

up to 2% of Networth )

NPA No disbursement to a

branch with NPA > 1 %

Collection

efficiency

No disbursement to a

branch with on-

time collection efficiency of

< 95%

15% Cap on portfolio outstanding for each state (20% for Karnataka and

Odisha)

*Subject to tolerance of 10%

Note: Portfolio percentage are based on proportion of

gross loan portfolio of respective states.

State %

Odisha, Karnataka and Maharashtra exposure are at 98%, 79% and 68%

respectively of our networth.

1.2%

1.2%

1.8%

1.5%

4.1%

4.8%

5.3%

5.8%

8.7%

10.9%

11.2%

11.6%

15.2%

16.8%

0.1%

0.1%

1.1%

1.3%

1.6%

1.8%

4.0%

4.8%

5.3%

5.8%

9.4%

9.6%

11.1%

12.2%

14.2%

17.7%

Delhi

Himachal Pradesh

Uttarakhand

Chattisgarh

Punjab

Haryana

Jharkhand

Rajasthan

Madhya Pradesh

Kerala

Uttar Pradesh

West Bengal

Bihar

Maharashtra

Karnataka

Odisha

GLP Q4FY16

GLP Q4FY15

As of Mar 2016

* Excludes 44 Gold Loan Branches.

VINTAGE OF NON-AP BRANCHES IS 7.1 YEARS PORTFOLIO OUTSTANDING BY ECONOMIC ACTIVITY

StateNo. of

Branches

Wt. Avg. Vintage

(in Yrs.)*

Karnataka 171 8.1

Odisha 150 7.7

Uttar Pradesh 136 6.9

Bihar 133 6.1

West Bengal 126 7.4

Maharashtra 118 7.6

Madhya Pradesh 69 7.6

Rajasthan 59 7.4

Kerala 53 5.5

Jharkhand 47 6.4

Chhattisgarh 28 5.9

Haryana 22 4.8

Punjab 18 6.6

Uttarakhand 12 5.5

Himachal Pradesh 3 1.3

Delhi 1 6.7

Non-AP 1,146 7.1

Purpose % Mix

Livestock 32%

Tailoring, Cloth weaving 11%

Grocery stores and other retail outlets 10%

Agriculture 8%

Trading of Vegetable & fruits 7%

Masonry, Painting, Plumbing,

Electrician, Carpenter and related

7%

Vehicle repairs 5%

Eateries 4%

Trading of Agri-commodities 4%

Garments & Footwear retailing 2%

Trading of Utensils, Plastic items 1%

Scrap business 1%

Bangles shop 1%

Other income generating activities 8%

30

REVIEW OF FINANCIALS

31

ROBUST FY16 PERFORMANCE EXCEEDS COMBINED PERFORMANCE OF RECOVERY PERIOD OF FY14 AND FY15

32

FY16

FY15

FY14

12,063

4,769

6,860

FY16 FY14+FY15

Non -A.P Disbursements

11,628

>

FY16

FY13

FY12

FY11

7,677

2,837

4,171

FY16 FY14+FY15

Non-A.P AUM

7,008

>303

70

188

FY16 FY14+FY15

PAT

258

>

7,677

2,706

1,320

2,016

FY16 FY11+FY12+FY13

Non-A.P AUM

6,041

>

6,949

3,790

857

1,320

FY16 FY11+FY12+FY13

Market Cap

5,967

>

FY 16 > FY14 + FY15

FY 16 > FY11+ FY12 + FY13

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

INR Crs.

STRONG SOLVENCY AND SUFFICIENT LIQUIDITY

33

INR Crs.

Capital AdequacyNetworth

Cash and Cash Equivalent^Drawdowns*

^ Excluding security deposit

15.0%

23.1%RBI Requirement

Q4FY16

2,414

1,478

3,224

5,020

7,317

Q4FY15 Q3FY16 Q4FY16 FY15 FY16

1,046

1,292 1,383

Q4FY15 Q3FY16 Q4FY16

*Excluding Managed Loans

1,437

886

1,660

Q4FY15 Q3FY16 Q4FY16

PAT GROWS TO RS. 303 CRS

34

PATOperating CostNet Interest Income*

*Interest income on Portfolio loans + Excess interest spread on securitization/Income from assignment + Loan processing fees + BC Fee – Financial Cost

Disbursements Non-AP Gross Loan Portfolio Gross Revenue

INR Crs.

2,494 2,980 4,066

6,891

12,088

Q4FY15 Q3FY16 Q4FY16 FY15 FY16

75%

YoY

63%

YoY

36%

QoQ

4,171

6,177

7,677

Q4FY15 Q3FY16 Q4FY16

84%

YoY 24%

QoQ

226 343 370

803

1,321

Q4FY15 Q3FY16 Q4FY16 FY15 FY16

64%

YoY

8%

QoQ

64%

YoY

112 182 207

423

714

Q4FY15 Q3FY16 Q4FY16 FY15 FY16

13%

QoQ

84%

YoY

69%

YoY

84 99 112

320

404

Q4FY15 Q3FY16 Q4FY16 FY15 FY16

13%

QoQ

34%

YoY26%

YoY

Tax

Exp:

Rs.

6 Crs

Rs.

24 Crs

Rs.

26 Crs

Rs.

6 Crs

Rs.

91 Crs

41 79 84

188

303

Q4FY15 Q3FY16 Q4FY16 FY15 FY16

61%

YoY108%

YoY

6%

QoQ

ROBUST EARNINGS MODEL DELIVERS IMPROVED PROFITABILITY

35

Particulars Q4FY15 Q4FY16 YoY%

Q4FY16

As % of Total

Revenue

Q3FY16 QoQ%

Income from Operations

Interest income on Portfolio loans 152 239 58% 65% 263 -9%

Excess interest spread on securitization

/ Assignment25 61 144% 16% 17 256%

Loan processing fees 13 23 79% 6% 19 22%

Other Income

Income on investments 14 12 -12% 3% 14 -16%

Recovery against loans written off 4 3 -42% 1% 4 -34%

Facilitation fees from Cross-sell 10 15 49% 4% 9 61%

BC fees 8 18 117% 5% 16 12%

Other miscellaneous income 0.5 0.2 -60% 0.1% 1.1 -80%

Total Revenue 226 370 64% 100% 343 8%

Financial expenses 85 134 57% 36% 133 1%

Personnel expenses 60 80 33% 22% 72 12%

Operating and other expenses 22 29 30% 8% 25 19%

Depreciation and amortization 1 3 - 1% 3 4%

Total Operating Cost 84 112 34% 30% 99 13%

Provision & Write-offs 11 14 30% 4% 9 59%

Total Expenditure 180 260 45% 70% 240 8%

Profit before Tax 46 110 137% 30% 103 7%

Tax expense 6 26 - 7% 24 9%

Profit after Tax 41 84 108% 23% 79 6%

INR Crs.

QOQ PROFITABILITY ANALYSIS

36

Particulars Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 FY16 FY15

AUM growth rate (QoQ) Closing 31% 15% 14% 13% 24% 84% 47%

AUM growth rate (QoQ) Monthly Averages 21% 22% 17% 10% 22% 80% 42%

PAT 41 61 78 79 84 303 188

PAT Growth rate ( QoQ) -1.3% 51% 27% 2% 6% 61% 169%

Non-Core Drivers

Cross sale fee (Facilitation fees) 10.0 12.8 12.7 9.3 14.9 49.7 29.2

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

Daily712 1,036 439 789 681 735 470

Non-Core Drags

AP Recovery 4.0 3.5 3.4 2.5 1.4 10.8 31.3

Income deferred (net*) on account of

Securitisation/assignment5.8 (0.9) (1.0) 2.3 8.7 9.1 3.3

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

1%)9.4 4.9 6.1 7.3 12.5 30.8 12.1

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

Closing figs)22.0% 9.9% 3.3% 9.0% 26.4%

Average gross interest yield (Non-AP) QTR average 23.24% 23.2% 23.6% 21.7% 21.2% 22.0% 22.9%

Interest rate on new loans 23.55% 23.55% 22.0%20.75%

& 19.75%19.75%

INR Crs.

*Net of flow back from earlier deferrals

PAT GROWS BY 61% YOY

37

Particulars FY15 FY16 YoY%

FY16

As % of Total

Revenue

Income from Operations

Interest income on Portfolio loans 566 954 68% 72%

Excess interest spread on securitization /

Assignment67 110 65% 8%

Loan processing fees 46 73 60% 5%

Other Income

Income on investments 44 56 27% 4%

Recovery against loans written off 26 15 -44% 1%

Facilitation fees from Cross-sell 29 50 70% 4%

BC fees 23 62 167% 5%

Other miscellaneous income 2 2 15% 0%

Total Revenue 803 1,321 64% 100%

Financial expenses 279 485 74% 37%

Personnel expenses 232 292 26% 22%

Operating and other expenses 84 103 22% 8%

Depreciation and amortization 5 8 83% 1%

Total Operating Cost 320 404 26% 31%

Provision & Write-offs 10 39 285% 3%

Total Expenditure 609 927 52% 70%

Profit before Tax 194 394 103% 30%

Tax expense 6 91 - 7%

Profit after Tax 188 303 61% 23%

INR Crs.

STRONG CAPITAL BASE AND ROBUST LIQUIDITY DRIVE SKS BALANCE SHEET

38

Particulars Q4FY15 Q4FY16 YoY% Q3FY16 QoQ%Equity Share Capital 126 127 1% 127 0.2%

Stock Options Outstanding 25 25 -2% 25 -1%

Reserves And Surplus 895 1,231 38% 1,140 8%

Capital & Reserves 1,046 1,383 32% 1,292 7%

Loan Funds 3,280 5,130 56% 4,651 10%

Payable Towards Assignment/Securitisation 180 247 37% 57 -

Expenses & Other Payables 23 44 91% 29 52%

Provision For Taxation 2 2 0% 3 -50%

Unamortised Loan Processing Fees 31 64 105% 48 32%

Employee Benefits Payable 19 24 31% 20 20%

Interest Accrued But Not Due On Borrowings 10 38 - 52 -27%

Interest Accrued And Due On Borrowings 6 - - - -

Provision For Leave Benefits & Gratuity 14 21 46% 20 8%

Statutory Dues Payable 3 4 36% 7 -45%

Unrealised Gain On Securitisation Transactions 42 124 191% 54 129%

Provision For Standard And NPA - Non-AP 42 74 76% 63 18%

Provision For Standard And NPA - AP 0.1 0.1 -17% 0.1 -22%

Liabilities 3,652 5,771 58% 5,004 15%

Total Liabilities 4,699 7,154 52% 6,295 14%

Fixed Assets 5 11 122% 13 -9%

Intangible Assets 5 5 0% 5 -2%

Investment 0.2 0.2 - 0.2 -

Cash And Bank Balances (Incl. Security Deposits) 1,659 1,942 17% 1,085 79%

Trade Receivable 9 6 -26% 2 249%

Interest Accrued And Due On Loans 1 0 -77% 1 -66%

Interest Accrued But Not Due On Loans 11 10 -6% 12 -17%

Interest Accrued But Not Due On Deposits With Banks 8 12 53% 11 8%

Interest Strip On Securitization Transactions 42 124 191% 54 129%

Portfolio Loans -- Non-AP 2,824 4,806 70% 4,984 -4%

Portfolio Loans -- AP 13 11 -17% 14 -22%

Loans Placed As Collateral 86 160 85% 51 212%

Security Deposits For Rent And Other Utilities 4 4 3% 4 0%

Advances For Loan Cover Insurance 1 1 10% 1 -39%

Loans To SKS Employee Benefit Trust 5 3 -44% 5 -44%

Advance Income Tax 14 16 11% 14 11%

Prepaid Insurance 3 4 35% 5 -25%

Other Advances / Other Assets 8 39 399% 34 15%

Total Assets 4,699 7,154 52% 6,295 14%

Note:1 Non-AP Securitized/Managed/Assigned Portfolio 1,260 2,711 115% 1,142 137%

2. Non-AP Gross Loan Portfolio 4,171 7,677 84% 6,177 24%

INR Crs.

BEST OF BREED RATIOS

39

Particulars Q4 FY15 Q3 FY16 Q4 FY16

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

Gross Yield (I) 24.2% 23.5% 21.3%

Portfolio Yield* 18.9% 19.2% 17.3%

Financial Cost (a) 9.1% 9.1% 7.7%

Operating Cost (b) 8.9% 6.8% 6.5%

Provision and Write-offs (c) 1.1% 0.6% 0.8%

Taxes (d) 0.6% 1.6% 1.5%

Total Expense II = (a+b+c+d) 19.8% 18.1% 16.5%

Return on Avg. Gross Loan Portfolio (I) - (II) 4.3% 5.5% 4.9%

Efficiency:

Cost to Income 59.4% 46.9% 47.5%

Asset Quality – Non-AP:

Collection Efficiency 99.8% 99.8% 99.8%

Portfolio at Risk >30 Days 0.2% 0.2% 0.1%

Gross NPA 0.1% 0.1% 0.1%

Net NPA 0.05% 0.1% 0.04%

Gross NPA (INR Crs.) 2.4 6.3 4.1

Net NPA (INR Crs.) 1.3 3.0 1.9

Leverage:

Debt : Equity 3.1 3.6 3.7

Debt : Equity (Incl. Securitised, Assigned & Managed Loans) 4.5 4.5 5.9

Capital Adequacy: 31.7% 23.9% 23.1%

Profitability:

Return on Avg. Assets (Incl. Securitised, Assigned & Managed Loans) 3.2% 4.5% 3.9%

ROE 15.9% 25.5% 25.3%

EPS - Diluted (INR) (Not Annualised) 3.2 6.2 6.6

Book Value (INR) 82.9 101.6 108.6

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

OPERATING AND FINANCIAL LEVERAGES PLAY OUT

40

Particulars FY15 FY16

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

Gross Yield (I) 23.9% 23.3%

Portfolio Yield* 18.8% 18.8%

Financial Cost (a) 8.3% 8.5%

Operating Cost (b) 9.5% 7.1%

Provision and Write-offs (c) 0.3% 0.7%

Taxes (d) 0.2% 1.6%

Total ExpenseII =

(a+b+c+d)18.3% 17.9%

Return on Avg. Gross Loan Portfolio (I) - (II) 5.6% 5.3%

Efficiency:

Cost to Income 61.1% 48.3%

Asset Quality – Non-AP:

Collection Efficiency 99.8% 99.8%

Portfolio at Risk >30 Days 0.2% 0.1%

Gross NPA 0.1% 0.1%

Net NPA 0.05% 0.04%

Gross NPA (INR Crs.) 2.4 4.1

Net NPA (INR Crs.) 1.3 1.9

Leverage:

Debt : Equity 3.1 3.7

Debt : Equity (Incl. Securitised, Assigned & Managed Loans) 4.5 5.9

Capital Adequacy: 31.7% 23.1%

Profitability:

Return on Avg. Assets (Incl. Securitised, Assigned & Managed Loans) 4.3% 4.2%

ROE 21.6% 25.1%

EPS - Diluted (INR) 15.0 23.6

Book Value (INR) 82.9 108.6

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

SKS BEATS THE GUIDANCE

41

FY16 FY17

Guidance Actual Guidance

Incremental debt requirement 7,000 8,385 10,000

Non-AP Disbursement 10,000 12,063 16,500

Non-AP Gross Loan Portfolio 6,250 7,677 11,000

Profit After Tax

(Post MAT @ 21%)290 303 450^

INR Crs.

MAT credit will be recognised from FY17, including unrecognized MAT credit of Rs.97

Crs (as on 31st March’16).

Recognition is based on extant guidance note issued by ICAI.

^ Excludes MAT credit recognition

Note on MAT credit recognition:

FINANCIAL ARCHITECTURE

42

On Balance Sheet* Q4FY15 Q3FY16 Q4FY16

State Bank Group 8% 12% 13%

Dena Bank 8% 10% 12%

Yes Bank 15% 14% 10%

SIDBI 7% 9% 8%

IDFC Bank 3% 7% 8%

IDBI Bank 6% 3% 7%

ICICI Bank 7% 4% 5%

HDFC Bank 5% 4% 5%

Bank of Maharashtra 6% 6% 4%

Standard Chartered Bank 3% 2% 4%

HSBC Bank 3% 2% 3%

Kotak Mahindra Bank 4% 5% 3%

Andhra Bank 6% 5% 3%

Ratnakar Bank 3% 3% 2%

Mudra 0% 3% 2%

South Indian Bank 2% 1% 2%

Bank of India 4% 3% 2%

Barclays Bank PLC 0% 0% 2%

Citi Bank 2% 2% 1%

Union Bank of India 0% 1% 1%

DCB Bank 1% 1% 1%

Axis Bank 4% 1% 1%

Others 5% 1% 1%

Total 2,990 3,748 4,440

FINANCIAL ARCHITECTURE

43

Diversified Source MixLenders Mix (On B/S) Devoid Of Dependence Risk

* Includes Term loan and cash credit facilities

Q4FY

15% Mix

Q3FY

16% Mix

Q4FY

16% Mix

Term Loans 2,867 61% 3,660 62% 4,307 53%

Securitisation 1,090 23% 610 10% 1,886 23%

Managed

Loans348 7% 595 10% 708 9%

Assigned - - - - 367 5%

NCD 200 4% 400 7% 400 5%

CP 89 2% 503 9% 290 4%

CC 124 3% 89 2% 133 2%

Total 4,718 100% 5,857 100% 8,091 100%

Securitised / Assigned Q4FY15 Q4FY16

Yes Bank 58% 32%

IDBI Bank 4% 22%

Bank of India - 16%

ICICI Bank 19% 11%

Kotak Mahindra Bank - 9%

HDFC Bank 6% 8%

Ratnakar Bank - 2%

DCB Bank 5% -

IndusInd Bank 9% -

Total 1,090 2,253

Investor Mix (Off B/S) Broad-based

INR Crs.

SUB 10% MARGINAL COST OF BORROWING

44

# processing fees is amortized for marginal cost calculation.

*The above percentages are based on monthly averages. Expenses towards loan processing fees are recognized upfront whereas loan processing fees

received from borrowers are amortized over the period of contract.

Metric FY14 FY15 FY16 Q4FY15 Q3FY16 Q4FY16

Marginal cost of

borrowing

on and off b/s loans (excluding

processing fees)12.2% 11.7% 10.1% 11.0% 9.98% 9.2%

on and off b/s loans (including

processing fees)#12.6% 11.9% 10.2% 11.1% 10.0% 9.3%

on b/s loans (excluding

processing fees)12.9% 12.3% 11.0% 12.0% 10.8% 10.3%

on b/s loans (including

processing fees)#13.6% 12.6% 11.1% 12.2% 10.9% 10.3%

Wt. avg. cost of

borrowing (on b/s

loans) *

excluding processing fee paid

& other charges12.7% 12.1% 11.4% 11.4% 11.3% 10.8%

including processing fee 13.6% 12.8% 11.6% 11.8% 11.5% 11.1%

Loan Processing Fees (INR Crs.) 17.3 16.9 11.6 4.7 1.4 3.6

Drawdowns (INR Crs.) 3,503 5,020 7,317 2,414 1,478 3,224

Financial Cost^ 8.3% 8.3% 8.5% 9.1% 9.1% 7.7%

Funding Cost Analysis

^ Financial expenses to quarterly Avg. Gross Loan Portfolio.

39% 43% 47%

61% 57% 53%

Q4FY15 Q3FY16 Q4FY16

Floating Fixed

* Excludes managed loans ALM data includes Securitized/ Assigned loans

Positive ALM Mismatch

4.9 5.7 6.4 6.2 6.3

9.2

11.5 10.2

FY14 FY15 Q3FY16 Q4FY16

Avg maturity of assets Avg maturity of liabilities No. of

months

Interest Rate Mix of Borrowings*

EXTERNAL ASSESMENT

45

Rating Instrument Rating Rating Agency

Rating Amount Limits

(Rs. Crs.)

Q3Y16 Q4FY16

MFI Grading MFI 1 CARE Ratings N/A N/A

Bank Loan Rating (Long-term

facilities)CARE A+ CARE Ratings

4,500 4,500Bank Loan Rating (Short-term

facilities)CARE A1+ CARE Ratings

Long-term Debt (NCD) CARE A+ CARE Ratings 400 400

Short-term Debt (CP/NCD) CARE A1+ CARE Ratings 200 200

Long-term Debt [ICRA] A+ ICRA Limited750 750

Short-term Debt [ICRA] A1+ ICRA Limited

Securitisation PoolCARE AA (SO) CARE Ratings 327 1,731*

ICRA AA (SO) ICRA Limited 372 589*

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

RISK MANAGEMENT

46

KEY RISKS AND MANAGEMENT STRATEGIES

47

Management

Strategy

Key Risks

Risk Management

Political Risk

Responsible lending and fair

pricing

Concentration Risk

Geographic & dependence

norms

Operational Risk

Cash management system and

process controls

Liquidity Risk

Liquidity metrics

o Low cost lender

o Voluntary Cap on

RoA from core

lending

o Robust Customer

grievance redressal

(CGR) Mechanism

with Ombudsman

o Calibrated Growth

o Geographic

concentration

norms

- Disbursement

Related Caps

- Portfolio

Outstanding

Related Caps

o Borrowing

dependence norms

- Cap on borrowing

from any single

credit granter (15%

of funding

requirement)

o Integrated cash

management system

o Product and process

Design

o ISO Certified Internal

audit

o Well defined metrics

for

- Cash burn

- Business continuity

- Growth

CAPITAL STRUCTURE

48

CAPITAL STRUCTURE AS ON 31ST MARCH 2016

49

Excludes no. of Outstanding ESOPs 0.3 Crs.

Note: The Investment under different accounts by a fund are clubbed

under their respective names

SHAREHOLDING PATTERN

41.8%

1.0%

1.1%

1.2%

1.2%

1.3%

1.3%

1.4%

1.5%

1.5%

1.6%

1.6%

1.7%

1.7%

1.9%

2.2%

2.2%

2.5%

2.7%

2.8%

3.0%

3.3%

3.4%

3.6%

4.1%

4.2%

4.4%

Others

Columbia Threadneedle…

Credit Suisse Singapore

SIDBI

GMO

Morgan Stanley Mauritius

ICICI Prudential Mutual Fund

Vanguard

Wasatch Funds

Kotak

Amundi

William Blair

Wellington

Goldman Sachs

Kismet SKS II

Birla Sun Life Mutual Fund

Alliancebernstein

Baron Capital Management

Kismet Microfinance

Indus Capital Partners

Tree Line

Vinod Khosla

IDFC Mutual Fund

Max Life Insurance Company…

Sandstone

Amansa Capital PTE Limited

Morgan Stanley SG PTE

No. of shares -12.7 Crs.

FII, 33.5%

Domestic MFs,

Insurance co's & FIs ,

18.1%

Foreign Corporates,

9.8%

FPI, 23.2%

Domestic Individuals,

9.4%

NRI, 4.3%

Domestic Corporates,

1.7%

ADJUSTED PRICE TO BOOK COMPUTATION

50

Mar-16

Book value per share (A) 109

Present value of DTA per share (B)^ 22

MAT per share (C)* 8

Book value per share – Including PV of DTA and MAT (A+B+C) 139

Adjusted Price to Book Ratio (times) 4.3

Note:

^ Estimated Present Value of Deferred Tax Assets(DTA).

* MAT credit as on Mar 31, 2016 is Rs.97 Crs.

DTA as on Mar 31, 2016 is Rs. 357 Crs.

Discount rate assumed at 10.9% and applied over next 3 years’ estimated profit.

SKS Market Price as of May 04, 2016 – Rs. 596

INR

ANNEXURES

51

ANNEXURES - OPERATIONS

52

DIFFERENCES IN LENDING MODEL BETWEEN SHG & JLG

53

SHG JLG (SKS)

ModelSavings led (Members collectively save

money for 6 months to avail credit)

Credit led (No savings required, members have

an access to the finance as per the requirement)

Borrowers Segment Women/Men Women

Lending Methodology Group (Size 10-20 members) Group (5 members)

Loan Processing time 4 Months 1 week

Repayment frequency Monthly Weekly

Credit DecisionGroup leader decides the quantum of

loan for the member

Entire group and the center decides the quantum

of loan

Credit Bureaus Reporting

Not much information available (RBI

mandated the SHGs to share data from

July 2016)

Weekly sharing of the data with CICs

NPAs 7.4% as on Mar-15 0.1%

Top 5 States % Mix in Portfolio (Mar-15) Portfolio O/S (Mar-15) INR Crs.

Andhra Pradesh & Telangana 47% 24,187

Tamil Nadu 12% 6,218

Karnataka 11% 5,928

West Bengal 6% 2,864

Kerala 4% 2,237

Others 20% 10,111

Total 100% 51,545

SHG Concentration:

Source: Philip capital report , NABARD

IGL MTL LTL

Other product

offerings^^

Loan portfolio (INR

Crs) / (% Mix)3,702 (48%) 1,593 (21%) 2,259 (29%) 102 (1%)

Ticket size range

(w.e.f 7th Dec’15)

INR 9,100 to

INR 29,565

INR 9,100 to

INR 15,010

INR 30,915 to

INR 49,785

INR 1,786 to

INR 5,001

Avg. Ticket Size (INR)

For Q4FY1620,951 14,783 36,812 2,422

Eligibility*

Completion of CGT /

GRT

Age limit 18 years to

55 years

Maximum limit of

INR. 20,010 for

IGL 1

With IGL - Between

20th to 46th week

With LTL – Between

20th to 96th week

Minimum Two IGL

Loan cycle completed

Maximum limit of INR.

38,635 for

LTL 1

With IGL – Between

4th to 46th week

With LTL – Between

4th to 100th week

Tenure 50 weeks 104 weeks 25 weeks

Annual effective

interest rate

19.75%

(w.e.f 7th Dec’15 for new loans) 19.60% - 20.20%

Processing fee (Incl.

Service Tax)1.14% 0.94% -1.14%

* Eligibility criteria over and above the criteria prescribed by the RBI

Stopped disbursement of gold loans from January 2016 (Portfolio outstanding as on 31st March 2016 is Rs. 21 Crs.)

^^Loans for Mobile Phones, Solar lamps, Sewing Machines, Bio-Mass Stove, Water-purifier, Solar fan and Bicycle.

PRODUCT OFFERINGS

54

HIGHLIGHTS - LONG TERM LOANS (LTL)

55

Product Details

Purpose Income generating activity

Ticket Size Rs.30,915 to Rs.49,785

Tenure 104 Weeks

Eligibility Minimum Two IGL Loan cycle completed

Maximum limit of INR. 38,635 for LTL 1

Product design Equal weekly installment (EWI) similar to IGL

Eg.: IGL Rs.15K Ticket size : Rs. 330 EWI

LTL Rs. 30K Ticket size : Rs. 360 EWI

LTL Enterprise % Mix LTL

Q4FY

15

Q3FY

16

Q4FY

16

Q4FY

15

Q3FY

16

Q4FY

16

Q4FY

15

Q3FY

16

Q4FY

16

No. of Loans Disbursed in '000 127 226 168 1,857 1,899 2,386 6.8% 11.9% 7.1%

Avg. Ticket Size INR 28,903 31,968 36,812 13,435 15,689 17,041

Amount of Loan Disbursed ('In Crs.) 367 724 619 2,494 2,980 4,066 14.7% 24.3% 15.2%

Portfolio Outstanding (in Crs.) 675 1,980 2,259 4,171 6,177 7,677 16.2% 32.0% 29.4%

*Disbursement capped at 25% of overall disbursement

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

Snapshot

56

Product

Avg. Offtake

% Increase

Offtake1st Oct -

7th Dec

2016

8th Dec -

Mar 2016

IGL 14,759 20,836 41%

LTL 30,339 36,719 21%

INCREASE IN IGL TICKET SIZE LOWERS SHARE OF LTL DISBURSEMENT

Product

Disbursement Mix %

% Change1st Oct - 7th

Dec 2016

8th Dec -

Mar 2016

IGL 42% 61% 19%

LTL 27% 16% (11%)

MTL 28% 21%

Cross

Sell2% 3%

Total 100% 100%

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

FY14 FY15 FY16Cumulative past

3 years

Mobile Phone 2.5% 7.4% 12.7% 22.7%

Solar Lamp 1.5% 6.5% 9.5% 17.6%

Sewing Machine - 0.2% 2.3% 2.5%

Bicycle - - 1.9% 1.9%

Bio-mass stove - 0.3% 0.8% 1.1%

Water Purifier - - 0.6% 0.6%

Solar Fan - - - -

Total 4.0% 14.5% 27.9% 46.4%

LEVERAGING THE DISTRIBUTION STRENGTH

57

FY15 FY16 Q4FY16

TotalMobile

phone

Solar

lamp

Sewing Machine

CycleOthers

^Total

Mobile

phone

Solar

lamp

Sewing Machine

CycleOthers

^Total

No. of Units Facilitated (in

Lacs)8.4 7.1 5.3 1.3 1.0 0.8 15.6 2.0 1.4 0.6 0.5 0.1 4.6

Gross Fees (after service

tax) INR Crs.28.3 21.9 18.2 4.1 3.1 2.4 49.7 5.9 4.9 2.2 1.5 0.4 14.9

Less: Incentives INR Crs. 4.6 6.3 4.7 1.2 0.9 0.7 13.8 1.7 1.2 0.5 0.5 0.1 4.0

Net Fees INR Crs.# 23.7 12.2 10.6 2.3 1.7 1.4 28.3 3.3 2.9 1.3 0.8 0.2 8.6

Loan Portfolio INR Crs. 58.3 36.3 24.6 22.0 16.8 2.3 101.9 36.3 24.6 22.0 16.8 2.3 101.9

Net Fee Income as % of

PAT12.6% 4.0% 3.5% 0.8% 0.6% 0.4% 9.3% 4.0% 3.4% 1.6% 1.0% 0.3% 10.2%

Loan Portfolio Mix 1.4% 0.5% 0.3% 0.3% 0.2% 0.03% 1.3% 0.5% 0.3% 0.3% 0.2% 0.03% 1.3%

# Net fee post the incentive payout and sans transfer pricing of other operating cost.

^Loans for Bio-Mass Stove, Water-purifier and Solar Fans

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

Frequency of

Loans (for the

period)

FY14 FY15 FY16Cumulative

past 3 years

#1 3.7% 12.3% 21.6% 27.0%

#2 0.2% 1.1% 2.8% 7.2%

#3 - - 0.3% 1.9%

#4 - - - 0.4%

#5 - - - 0.1%

Total 3.9% 13.4% 24.7% 36.7%

Penetration Based On Total No. Of Loans Frequency of Loans Based On Current Member Base

CREDIT BUREAU DATA

58

15.0%

23.0% 23.0%

FY-15 FY-16 Q4-FY16

FY-15 FY-16 Q4-FY16

Major Initiatives Impacting Credit Bureau Decision:

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

KYC (April’16) .

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

29%

38%

46%

FY-15 FY-16 Q4-FY16

Rejection rate for Long Term loansRejection rate for All Products

87.0%

83.0%

80.0%

FY-15 FY-16 Q4-FY16

FY-15 FY-16 Q4-FY16

Hit rate^ for all products

^ Hit rate = % of loan

applications with

matching record in

credit bureau

Reasons All Products LTL

Loans from =>2 MFIs 84% 72%

Eligibility < Min Ticket

Size9% 23%

Outstanding Balance >

60K4% 2%

Default History 3% 3%

Total 100% 100%

Rejection Reasons* - FY16 % Mix

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

bureau

SKS FINANCIAL INCLUSION COVERAGE…

59

Doorstep Service Financial literacy Dedicated customer service

Doorstep delivery (i.e. at Center

meetings)

2 day process consisting of hour-long

sessions designed to educate clients

on SKS processes and credit

discipline.

Toll-free helpline number with seven

different vernacular languages

Strong reach in under-banked areas Weaker & Minority section coverage

68% of SKS branches are in RBI under-

banked district list

SKS covers 68% of below average &

low financial districts identified by

CRISIL

20096 175

SKS 296 districts RBI 375 districts*

68%

68% of SKS branches are in RBI under-banked districts list SKS covers 68% of below average & low financial inclusion districts identified by Crisil

CRISIL level of financial inclusion

SKS Coverage of thosedistricts

High 18%

Above average 15%

Below average 51%

Low 16%

Grand Total 100%

68%

Weaker & Minority section coverage

16%

71%

100%

Minority

Economically Weakersection

Women

…. IS SUPPORTED BY ROBUST CUSTOMER CENTRIC PRACTISES

* Source: RBI under-banked districts data

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

WHAT ARE CLIENTS DOING POST THE ANDHRA PRADESH MFI CRISIS?

60

Interest rates charged by informal sources (in the

absence of MFIs)

Willingness to repay

Data relates to Andhra Pradesh & Telangana

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

59%

37%

22%

12%

29%

0%

10%

20%

30%

40%

50%

60%

70%

Money Lender SHG Pawn Broker Bank DFC

Sources of Credit (in the absence of MFI Loans) Reasons for not repaying MFI loans

ANNEXURES - FINANCIALS

61

HISTORICALLY, AUM GROWTH IS STRONGEST IN Q4 & NII GROWTH IS STRONGEST IN Q1

62

NII Growth QoQ Growth %AUM Growth

Reasons:

• Deferral of income due to higher volume of securitisation and asset assignment in Q4;

or/and

• Higher Cash balances at the end of Q4

FY15 FY16FY14

35%

-1%

1%

17%20%

-2%

9%

5%

31%

15% 14% 13%

24%

16%

26%

7%

2%

11%

25%

19%

12%

28%26%

1%

13%

-3%

2%

7%

12%

17%

22%

27%

32%

37%

CASH AND CASH EQUIVALENT BALANCES

63

^fixed deposits, excluding margin money deposits.

^^Includes current account and cash balances

Note: Daily Average figures

INR Crs.

Q1FY16 Q2FY16 Q3FY16 Q4FY16 FY15 FY16

Interest Yielding^ 860 255 581 427 314 530

Non Interest

Yielding^^176 184 208 254 156 205

Total 1,036 439 789 681 470 735

OUR PROVISIONING POLICY

64

RBI norms for NBFC-

MFIs

SKS compliance

Asset

Classification

Standard Assets 0-90 days 0-60 days

Sub-Standard Assets 91-180 days 61-180 days

Loss Assets >180 days >180 days

Provisioning

Norms

Standard Assets

1% of overall Portfolio reduced

by Provision for NPA (If

provision for NPA < 1% of

overall Portfolio)

0.30-1% depending on NPA or

as stipulated by RBI,

whichever is higher

Sub-Standard Assets 50% of instalments overdue* 50% of outstanding principal*

Loss Assets 100% of instalments overdue* 100% of outstanding

principal/ write-off*

Provisioning

Norms for

Securitized &

Managed loans

-

1% of outstanding portfolio

as per company provisioning

policy, net-off losses, if any.

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

assets.

ANNEXURES - TECHNOLOGY

65

TECH ADVANCEMENTS DRIVEN BY INDUSTRY LEADING PARTNERSHIPS

Initiatives SolutionTechnology Partner Benefits

New Lending

Management Software

TABLETS’ - Hand held

device for field staff

Migrated from on-

premises email system

to hosted exchange

Data Centre– Migration

to Cloud

Network protection

ERP Implementation

In-House Team SKS SMART

Enterprise Mobility

Office 365

Data Centre Hosting

Enterprise Web and

Network Security

ERP

Enhances Productivity of SMs- Reduced time

spent at both center meeting and back office

Paper less transaction - Pre-printed loan

application form.

Enhanced email security, 99.99% uptime, On

mobile office 365 access.

Additional products such as One-Drive,

Enterprise Skype etc. for easy access of data

and better communication.

On-demand capacity scale-up.

Business Continuity Plan.

Improved performance and reliability of network

infrastructure and applications.

A robust framework that encompasses

workflow/reporting and analytic engines

Works in online/offline mode to mitigate

connectivity challenges.

ERP - Automation of financial accounting/

investment management, procurement and

payment process.

66

ANNEXURES – HR

67

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

RELATIVELY LOWER PERFORMANCE AND WITHIN 6 MONTHS OF THEIR JOINING

Who?

When?

Sangam

Manager

Attrition %

Why?

Retention

Strategy

27% for FY16

Sangam managers who earn lesser average monthly performance incentive i.e. ~Rs.

5,000 vis-à-vis ~Rs. 7,600 for other Sangam Managers .

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

Work conditions such as :

− Average distance travelled per day is ~30 kms.

− Work location is different from home location

− Branch Reporting time at 6:30 AM

2ND Best paying job (~Rs.16,000 pm) in the local milieu (1st – Govt. Job)

High growth career path – No lateral recruitments till 4 levels above loan officer.

68

ANNEXURES - COMPLIANCE

69

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

70

RBI norms for NBFC-MFIs SKS compliance

NBFC–MFIs

Qualifying assets to constitute not less than 85% of its

total assets (excluding cash and bank balances)

At least 50% of loans for income generation activities

Qualifying assets - 95%

Income generation loans 98%

Pricing Guidelines

Income of

Borrower’s Family

Rural : <=Rs.100,000

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

Ticket Size <= 60,000 – 1st cycle

<= Rs.100,000 – Subsequent cycle

Indebtedness <= Rs. 100,000

<= Rs. 60,000

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

Collateral Without collateral

Repayment Model Weekly, Fortnightly and Monthly

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

71

RBI norms for NBFC-MFIs SKS compliance

Pricing Guidelines

Interest Rate

A. Margin cap – 10% above cost of borrowings

B. Avg. base rate of top 5 commercial banks X 2.75

Lower of the A and B.

Interest rate 19.75% w.e.f

7th December’15 for new

loans

Processing Fees <= 1% of loan amt.

Insurance

Premium

Actual cost of insurance can be recovered from

borrower and spouse

Administrative charges can be recovered as per IRDA

guidelines

Penalty No penalty for delayed payment

Security Deposit

No security deposit/ margin to be taken

SKS has never taken

security deposit/ margin

SKS LOAN PORTFOLIO QUALIFIES FOR OVERALL PSL TARGET OF 40% AND ALL SUB-

TARGETS UNDER NEW PSL NORMS

Note:

* As per RBI notification dated 16th July 2015 Banks are directed to ensure overall direct lending to non-corporate farmers does not fall

below the system wide average of last three years achievement, which is notified as 11.57% as per RBI notification dated 18th

November 2015. They should also continue to maintain all efforts to reach the level of 13.5% direct lending to beneficiaries..

Refer Slide no.30 for details on purpose wise loan portfolio outstanding.

72

RBI SKS

S.no. Sector Category Target for Banks %Qualifying

Portfolio of SKS %Explanation

1

Agriculture Target 18%

38% Livestock, Agri & Allied- Direct Agriculture* Sub-target ~13.5%*

- Direct Small &

Marginal farmers*Sub-target

7% (Mar’16)

8% (Mar’17)

2 Weaker Target 10% 100%

100% Loans are to women

beneficiaries (with less than

Rs.1 lac).

Further, Minority communities

constitute 16% and

economically weaker sections

71% of loan portfolio.

3 Micro-enterprises Target7% (Mar’16)

100%Loans to MFIs for on-lending to

microenterprises. 7.5% (Mar’17)

ANNEXURES – INTERNAL AUDIT

73

INTERNAL AUDIT PLAYS A CRITICAL ROLE IN ASSESSING PROCESS CONTROLS

74

Scope of Audit

Audit area Frequenc

y

Client

Acquisitio

n

Center

Meeting

Proces

s

Document

verification

(KYC, Loan

utilization check

etc.)

Monitoring

process by

supervisor

s

Adheren

ce to

Process

/

Policies

Statutory

Requirement

s

(Credit

bureau, Fair

practices

etc.)

Client

Visits

*

High

Risk

items

(Fraud

s etc.)

Fixed

Assets

verific

ation^

IGL Branches Monthly √ √ √ √ √ √ √ √ √

Gold Loan

Branches45 days √ - √ √ √ √ - √ √

Regional

OfficesQuarterly - - - - √ √ - - √

Head office Quarterly - - - - √ √ - - √

Note:

* Approximately 30% of the clients are covered by Internal Audit in an year during the branch audits. Clients visited on a sample basis to check for

Loan confirmations, Loan utilization (LUC) , arrears and awareness on Client Protection Principles (CPP)

^ Fixed Assets are verified on Annual basis

• 206 strong headcount

• ISO 9001:2008 certified process

• All branches are inspected monthly based on a 4 tier grading system

• Grading linked to incentives/appraisals of field staff

• Head Office audit by KPMG

Strength

• Branches 1,324

• Branches per Internal Audit staff 6

• Regional Offices 22Scope

This report is for information purposes only and does not construe to be any investment, legal or

taxation advice. It is not intended as an offer or solicitation for the purchase or sale of any financial

instrument. Any action taken by you on the basis of the information contained herein is your

responsibility alone and SKS and its subsidiaries or its employees or directors, associates will not be

liable in any manner for the consequences of such action taken by you. We have exercised due

diligence in checking the correctness and authenticity of the information contained herein, but do not

represent that it is accurate or complete. SKS or any of its subsidiaries or associates or employees

shall not be in any way responsible for any loss or damage that may arise to any person from any

inadvertent error in the information contained in this publication. The recipient of this report should

rely on their own investigations. SKS and/or its subsidiaries and/or directors, employees or

associates may have interests or positions, financial or otherwise in the securities mentioned in this

report

Forward Looking Statement

Certain statements in this document with words or phrases such as “will”, “should”, etc., and similar

expressions or variation of these expressions or those concerning our future prospects are forward

looking statements. Actual results may differ materially from those suggested by the forward looking

statements due to a number of risks or uncertainties associated with the expectations. These risks

and uncertainties include, but are not limited to, our ability to successfully implement our strategy and

changes in government policies. The company may, from time to time, make additional written and

oral forward looking statements, including statements contained in the company’s filings with the

stock exchanges and our reports to shareholders. The company does not undertake to update any

forward-looking statements that may be made from time to time by or on behalf of the company

For any investor relations queries, please email to investor.relations@sksindia.com 75