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Established presence in microfinance lending coupled with experienced management and reputed investors, healthy growth in AUM
SML, a Delhi based NBFC-MFI, commenced microfinance lending to woman borrowers organized in Joint Liability Groups in 2016. The company is also engaged in extending individual micro business loans to women entrepreneurs in rural and semi-urban areas for income-generating activities. SML has well diversified portfolio spread across 21 states. As on May 31, 2022, Uttar Pradesh accounted for ~21 percent of portfolio, followed by Bihar for ~16 percent and ~9 percent for Punjab and ~8 percent for Haryana, and 7 percent for Rajasthan, and remaining accounting for other states like Odisha, Assam, Madhya Pradesh, Jharkhand, Tamil Nadu amongst others.
SML is managed by Mr. Vivek Tiwari (Managing Director, CEO & CIO). He has nearly two decades of experience in the microfinance space, social entrepreneurship, and impact investing. Prior to SML, Mr. Tiwari had about nine years of experience in Satin Credit Care Network limited (SCCL) as Chief Operating Officer.
SML’s equity shareholding includes Mr. Tiwari share (21.46 percent), Gojo & Company Inc (55.09 percent), Dia Vikas Capital Private limited (12.46 percent) and remaining 10.98 percent held by promoter’s family, friends, employees, and SATYA Employee Welfare Trust, as on June 30, 2022.
Gojo & company, Inc invested in SML, in from of compulsorily convertible preference capital, will be converted to equity which lead to increase its shareholding to 55.09 percent as on June 30, 2022 from 49.54 percent as on March 31, 2021 and from 24.42 percent as on March 31, 2020. Gojo & Company, Inc, a Tokyo based company, established in July 2014 has supported microfinance institutions in Cambodia, Sri Lanka, Myanmar and India. It has been actively involved in providing capital infusion to SML since its inception.
SML’s board comprises 8 members with one Managing Director, four Independent Director, one non- executive Director and two Nominee Directors. The Board of directors has a vast industry experience. The MD, CEO& CIO has been involved in microfinance and development sector for nearly 20 years and was associated with Satin Creditcare Network Ltd as the COO. The management has a good experience in the microfinance industry. SML’s board has representation from Gojo & Company, Inc. (Mr. Sanjay Gandhi & Mr Taejun Shin). Mr. Sanjay Gandhi, co-founder of Gojo & Company, Inc, joined the microfinance industry in 2003 and has international experience in MFI industry. Mr Taejun Shin is a Founder, Representative Director & CEO of Gojo & Company, Inc. SML continues to benefit from the expertise of their directors.
The established track record of promoters in microfinance lending has supported SML’s growth strategy. The company’s Asset Under Management (AUM) has grown significantly to Rs. 2,883.99 Cr. as on March 31, 2022 from Rs.1,476.16 Cr. as on March 31, 2021.Further it grew to Rs. 2,815.38 Cr. As on June 30, 2022(Provisional). The off-book portfolio stood at ~Rs. 522.47 Cr. as on June 30, 2022(Provisional), vis. a. vis ~Rs.590.1 Cr. as on March 31, 2022. SML has off- book exposure in the form of business correspondence relationships with Ananya Finance for Inclusive Growth Private Limited and DA transactions with 7 institutions. Acuité believes that SML’s business profile will continue to benefit from the established presence in microfinance lending backed by strong promoter support.
Healthy capital raising ability with diversified funding mix
SML’s net-worth increased to Rs. 611.58 Cr. as on June 30, 2022(Provisional)from Rs. 552.27 Cr. As on March 31, 2022.The company reported a capital adequacy ratio (CAR) of 22.95 percent comprising Tier 1 capital at 19.51 percent and Tier II capital at 3.44percent (as per Ind AS) as on March 31, 2022. Further the CAR improved to 25.95 percent as on June 30, 2022. The company’s leverage increased to 4.13 times as on March 31, 2022, from 2.79 times as on March 31, 2021. The company has a strong lender profile comprising Banks and Financial Institutions, with total debt increasing to Rs. 2315.57 Cr. outstanding as on June 30, 2022, as compared to Rs.1,127.08 Cr. outstanding as on March 31, 2021. SML’s borrowing profile comprised Term loans, NCD’s and subordinated debt from IDFC Capital, UC Inclusive Credit private Limited, Northern Arc Capital as on March 31, 2022. The ability to raise debt for microfinance activities remains challenging due to a very selective and cautious approach adopted by Banks and NBFC/FIs. However, SML has demonstrated access to funding from both banks and large NBFC/FIs. SML raised ~Rs.1,131 Cr. from various lenders in FY2021. With improved capitalization levels SML was further able to raise funds in the form of terms loans. NCD’s and securitizations of around ~Rs. 2,768.6 Cr. in FY2022.
Comfortable asset quality supported by digital collections
SML reported comfortable asset quality as reflected in on-time portfolio at 92.76 percent as on June 30, 2022 (93 percent as on March 31, 2022) and collection efficiency at ~94 percent for March 2022. Given the risks inherent to microfinance segment, a surge in the delinquencies has been observed, the company reported GNPA at 3.58 percent as on June 30, 2022, as against 3.33 percent as on March 31, 2022.The company has made Impairment loss allowance of Rs. 39.99 Cr. as on March 31, 2022. SML’s restructured portfolio comprised ~7 percent of its on-book portfolio as on March 31,2022. Prudent risk management practices and digital collections mechanism have helped SML in maintaining asset quality metrics. SML established various collection points by collaborating with banks in its operating area which enabled smooth collections.
Acuité believes, going forward, the ability of the company to maintain comfortable capitalization levels along with stable asset quality in the light of continuously evolving economic scenario will be a key monitorable.
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