Experienced management and established presence in area of operation

BWDC, commenced its lending operations in 2009, offering micro-credit to women engaged in income generating activities under the Joint Liability Group (JLG) model and Self Held Group (SHG) model. The society also extends Small Business Loan, Agriculture Loans and Water &
Sanitation loans. BWDC caters to rural areas of Tamil Nadu and Puducherry with its network of 15 branches across 8 districts. BWDC is promoted by Mr. M. Nagarajan (CEO). The board members are Ms. VS Kusala Kumari (President), Ms. Amirthavalli. R (Vice President). BWDC’s managing committee includes seasoned professional like Ms. J. Selva Kumari (Joint Secretary) and Dr. K. Baskar (Treasurer), who have over three decades of experience working with various societies engaged in microfinance lending. Over the years, BWDC has expanded its operations to build an AUM of Rs. 50.15 Cr. as on March 31, 2023 as compared to Rs. 38.71 Cr. as on March 31, 2022. The loan book moderated to Rs 43.4 Cr as on June 30, 2023.
Acuité believes that experience of the promoters and management will be central to support the business risk profile of the society.

Healthy Asset Quality; Adequate Profitability

BWDC has been able to maintain healthy asset quality metrics on account of its established business model. BWDC receives 99% the dues within time, which ensures the asset quality. AUM has also increased to Rs. 50.15 crore as on March 31, 2023 from Rs. 38.71 crore in FY2022. The overall profitability has largely been stable, BWDC reported a marginal decline in the bottom-line to Rs. 1.40 Cr in FY2023 as compared to Rs. 1.43 Cr in FY2022. (Rs. 1.40 Cr in FY2021).  
Acuité believes that going forward the ability of the company to maintain sound asset quality and adequate profitability will be key rating sensitivity.

Modest scale of operations and low geographic concentration

BWDC has a major presence in Tamil Nadu and remaining towards Puducherry. This exposes BWDC to high geographical concentration risk. Thus, business performance is expected to remain exposed to the competitive landscape in these regions and the occurrence of events such as natural calamities, which may adversely impact the credit profile of the borrowers. The microfinance sector is also susceptible to regulatory risks. Such institutions lend to the poor and downtrodden sections of society, and will therefore remain exposed to socially sensitive factors and, consequently, to tighter regulations and legislation.
 
Acuité believes that modest scale of operations coupled with geographic concentration in its portfolio will continue to weigh on BWDC’s credit profile over the near to medium term.

Limited Financial Flexibility

BWDC being a non-profit organization, has limited scope of raising equity capital which further constrains its ability to borrow and scale up business operations. BWDC relies on external borrowings which comprises of term loans from banks and NBFCs/FIs that amounts to Rs. 50.97 crore as on March 31, 2023. The gearing levels as on March 31, 2023 remained at 4.66x as compared to 3.95x as on March 31, 2022. Further, due to highly leveraged capital structure the society might face difficulty in attracting additional funding to support the growth in operations which may consequently impact its profitability and hinder growth plans.
Acuité believes that going forward the company’s ability to maintain prudent capitalisation and gearing levels would be critical.