SMERA Rating Report - unnatimfi.com · This rating is valid for a period of one year; subject to however, no significant changes / events occur during that period which could materially

SMERA MFI Rating Report

Date of Report : 22nd January, 2016 * Valid Till : 21st January, 2017

Legal Form : NBFC-MFI (Private Limited)

SMERA-MFI Rating : MF4 (Average)

MF1 Highest Credit Strength

MF2 High Credit Strength

MF3 Above Average Credit Strength

MF4 Average Credit Strength

MF5 Below Average Credit Strength

MF6 Inadequate Credit Strength

MF7 Low Credit Strength

MF8 Lowest Credit Strength

* This rating is a one-time exercise and does not envisage automatic surveillance. This rating is valid for a period of one year; subject to however, no significant changes / events occur during that period which could materially affect the business and financial parameters of the Microfinance Institution (MFI). SMERA recommends that the user of the rating may seek a review of the rating, if the rated MFI experiences significant changes / events in the business. Recommended for review in next financial year.

SHREE OM CREDIT COMPANY PRIVATE LIMITED

2302, 23rd Floor, G Square Business Park, Opposite Sanpada Railway Station, Sec-30, Vashi,

Navi Mumbai - 400 705 Maharashtra

India

SHREE OM CREDIT COMPANY PRIVATE LIMITED 1

SNAPSHOT

MFI Name SHREE OM CREDIT COMPANY PRIVATE LIMITED

Registered & Administrative Office Address

2302, 23rd Floor, G Square Business Park, Opposite Sanpada Railway Station, Sec-30, Vashi, Navi Mumbai - 400 705 Maharashtra India

Telephone (91) (22) (27811450) (91) (22) (27811460)

Website www.soccpt.com

Email [email protected]

Line of Business Microfinance services using Joint Liability Group (JLG) Model

Chief Executive Mr. Hanumant B. Ranjane, Director

SMERA MFI Rating MF4 (Average)

Legal Form Non-Deposit Taking Non-Banking Finance Company (NBFC) Microfinance Institution (MFI)

Registration Number U65923MH1996PTC203439

NBFC Registration Number B-13.01344

Incorporation Date 18/Dec/1996

Date of Commencement of Microfinance Operations

2012 (RBI – MFI License received on 05th January, 2016)

Total Employees 27

No. of Active Branches 03

Geographical Reach Mumbai, Navi Mumbai and Thane

Visit of the Assessment Team 19th January, 2016

http://www.soccpt.com/

mailto:[email protected]


RATING RATIONALE

SMERA has assigned a rating of MF4 to Shree Om Credit Company Private Limited (hereafter

referred as SOCC). The rating indicates that in SMERA’s current opinion, the rated MFI’s ability

with regards to credit strength is average.

The rating assigned to SOCC reflects following strengths:

Experienced Management

SOCC core management team and second line of management has an adequate understanding of

MFI ecosystem as a whole with considerable experience in microfinance space. Mr. Hanumant B.

Ranjane, has more than two decades of experience in financial service. He has earlier worked with

leading bank in Mumbai.

Asset Quality & Capital Adequacy

SOCC assets quality stands at almost ~99.83% on-time repayment rate during the period under

study. Further, SOCC is capitalized with capital adequacy ratio at 73.9 % as on March 31; 2015.

Credit Check

SOCC was found to have adequate policy to check multiple lending / indebtness of the

borrower through credit bureau check i.e. “EQUIFAX”

Software Based Tracking

The current MIS system deployed in SOCC is e-FIMO (Financial Information Monitoring

Organiser) which is very effective considering the scale of operations to access complete micro

finance solution like loan demand sheet, daily collection reports, Ageing and PAR Reports etc


However the rating is constrained by following weaknesses:

Limited years of operational track record

SOCC is relatively new in Microfinance Industry. SOCC has started its microfinance operations in

2012 and has to face competition from players, which are operating in same area.

Portfolio/geographical concentration coupled with sociopolitical risk

The portfolio of the MFI remains concentrated in Mumbai, Navi Mumbai and Thane region. Area

covered for lending purpose is well spread in the slums of Mumbai with 03 branches. As on

31/Dec/2015, total portfolio outstanding is ` 79,437 (in thousands). Hence; SOCC is susceptible to

portfolio/geographical concentration coupled with sociopolitical risk.

Non adherence to Loan utilization check

The branch staffs were found to be aware of how to conduct the Loan utilization check as per

the guidelines but the same was not being conducted effectively as per compliance. However

same was done at random basis during the internal audit. SMERA strongly recommends LUC

check to be undertaken at regular interval

Lack of Professional and Qualified Management SMERA observed SOCC is highly dependent on Mr. Hanumant B. Ranjane (Director) having around

more two decades of experience in Financial Service. However, SMERA recommends infusion of

professional and qualified management and additional manpower on priority to handle current

scale of operations and projected growth.


BACKGROUND Temperate Finance Private Limited, an NBFC engaged in extending business loans was acquired by

promoters Mr. Hanumant B. Ranjane and Mrs. Sonali H. Ranjane in November, 2009 and

subsequently renamed it to Shree Om Credit Company Private Limited (SOCC). Further, SOCC

received RBI – MFI License as on 05th January, 2016.

It operates exclusively to provide enterprise based income generation loans to people from low

income stratum of society within Maharashtra. It has been providing customized products that suit

client needs within the urban slum areas of Mumbai, Navi Mumbai and Thane.

The operations are spread in Mumbai with 03 branches and workforce of 27 employees through

Joint Liability Group (JLG) lending model. As on 31/Dec/2015 the total portfolio stands at ` 79,437

(in thousands). SOCC has 6,028 active borrowers as on 31/Dec/2015 with different loan products.

Vision

“SOCC vision is to enhance the socio-economic status of clients by providing a range of required

financial services”

Mission

“To reach 67,000 businesses and households with approximately ` 100 crores outstanding by the

year 2020 for improving business profitability and household financial security of urban and semi-

urban communities”


PROMOTERS’ BACKGROUND

Name Qualification Brief Profile Designation Years of

Experience

Mr. Hanumant B. Ranjane

B.Com, Diploma in

Microfinance, Diploma in Banking &

Finance

A commerce graduate from university of Mumbai and

diploma holder of Microfinance and Banking & Finance from IIBF with

over 23 years of experience in Financial Services. He has earlier worked with

leading bank in Mumbai.

Chairman and

Managing Director

23

Mrs. Sonali H. Ranjane

B.A.

A Bachelor of Arts with over 6 years experience in

the field of financial services She has a varied

work experience in the field of women Self Help Groups (SHGs) & social activities.

Director 06

Mr. Chetananand M. Raut

B.E., MBA

Mr. Chetananand M. Raut has sixteen years of

experience in operations and consulting in Finance,

Microfinance, Rural Development,

Entrepreneurship and Management

Independent Director

16

Mr. Abhijit H. Ranjane

B.Com, Diploma in

Microfinance, Pursuing MBA

Mr. Abhijit H. Ranjane has been associated with SOCC from last 2 years & worked

in multiple roles. Commerce graduate from Mumbai University & has completed his diploma in Micro-Finance from IIBF,

Mumbai. He is now pursuing his MBA.

He is responsible for overall control of financial

operations & accounting functions.

Executive Director - Finance

02


Board Processes

Governing body is actively involved in strategy formulation, developing & approving business

plans, fund mobilization. Board meetings are conducted every month to discuss about the growth

in operations and programme implementation. Board meeting are conducted to discuss the overall

performance, recruitment, updating policy, to ensure the use of resources, approve annual work

plan and budgets, implement programmes that are in line with the mission and vision, monitor

MFI’s performance and review monthly reports. The management team updates the board

regularly on operations and key developments in each department.


Management’s Profile

Name Position Qualification Profile

Mr. Ashish Waghmare Operation Manager B.Com

Mr. Ashish Waghmare has been

working with SOCC since

February 2014 having 12 years

experience working with credit

co-operative society, micro

finance companies in Mumbai

as assistant branch manager

and branch manager.

Mr. Dnyaneshwar

Sanas Audit Manager B. Com

Mr. Dnyaneshwar Sanas has

been working with SOCC since

April 2012 having 8 years of

experience working with co-

operative credit society in

Mumbai as branch manager

and internal auditor.

SMERA recommends infusion of manpower at second line of management to handle current scale

and projected growth


PRODUCTS

Loan

product

Loan

Amount

(Rs.)

Loan term

/ tenure

Fees and

other

charges

( %)

Interest

Rate

(Reducing

%)

Insurance

Premium

(Rs.)

Repaym

ent

Method

JLG 20,000 20,000

24 months

1 % Loan Processing Fees with

14.50% Service Tax

25.98

421

Monthly JLG 25,000 25,000 526

JLG 30,000 30,000 651


HIGHLIGHTS OF MICROFINANCE OPERATIONS

Particulars 31/Mar/2013 31/Mar/2014 31/Mar/2015 31/Dec/2015

No. of States 01 01 01 01

No. of Districts 02 02 02 02

No. of Branches 02 03 03 03

No. of JLGs 518 903 1,354 1,135

No. of active borrowers 2,588 4,513 6,768 6,028

No. of employees 16 21 29 27

No. of field officers (FOs) 7 11 17 12

Active borrowers per FOs 369 410 398 502

Cumulative loan disbursements (` thousands)

30,325 83,819 175,068 260,483

Loan disbursements during the year (` in thousands)

30,325 53,494 91,249 85,415

No. of Loans Disbursed during the year

2,590 4,665 6,815 3,958

Portfolio outstanding (`in thousands)

15,787 29,622 55,856 79,437

Loan outstanding per borrower (In Rs.)

6,100 6,563 8,252 13,177


BRANCH-WISE DETAILS (AMOUNT IN ` THOUSANDS)

As on 31/Mar/2015

Sr. No.

Branch Name No. of active

borrowers

Loan Outstanding

(in thousands)

Overdue Amount

(in thousands)

PAR > 30 days (in

thousands)

1 Ghansoli 1,811 14,916 4 11

2 Chembur 2,588 20,849 37 67

3 Ghatkopar 2,369 20,090 49 56

TOTAL 6,768 55,855 90 134

As on 31/Dec/2015

Sr. No.

Branch Name No. of active

borrowers

Loan Outstanding

(in thousands)

Overdue Amount

(in thousands)

PAR > 30 days (in

thousands)

1 Ghansoli 1,707 25,997 13 30

2 Chembur 2,212 27,900 13 17

3 Ghatkopar 2,109 25,540 38 40

TOTAL 6,028 79,437 64 87


SECTOR-WISE LOAN DISBURSEMENT (` IN THOUSANDS)

For the period ended as on

31/Mar/2014 31/Mar/2015 31/Dec/2015

Industry Amount % Amount % Amount %

Income Generating Activities

27,010 50.49 47,338 51.88 74,678 63.85

Consumption (Education, House Construction, etc)

26,484 49.51 43,911 48.12 42,264 36.14

Total 53,494 100 91,249 100 116,942 100

SECTOR-WISE LOAN OUTSTANDING (` IN THOUSANDS)

For the period ended as on

31/Mar/2014 31/Mar/2015 31/Dec/2015

Industry Amount % Amount % Amount %

Income Generating Activities

14,985 50.59 29,446 52.72 54,967 69.19

Consumption (Education, House Construction, etc)

14,636 49.41 26,409 47.28 24,469 30.81

Total 29,622 100.00 55,855 100.0 79,436 100.00


AGEING SCHEDULE OF THE LOAN PORTFOLIO

Period

FY 2013 FY 2014 FY 2015 FY 2016

(up to 31/Dec/2015)

Value of Portfolio o/s




On time 15,771 29,550 55,722 79,350

1-30 days 5 11 27 0

31-60 days 9 41 16 12

61-90 days 0 05 17 0

91-180 days 0 15 67 28

181-360 days 2 0 7 46

> 360 days 0 0 0 0

Total 15,787 29,622 55,856 79,436


ORGANOGRAM


Lending Methodology

Member selection and Group Formation

Locality Survey After identification of a location, the operation

manager along with the managing director

travels to such place to collect basic details about

socio-economic situation, livelihood profile,

infrastructure facilities, and existing level of

indebtedness of people, other MFIs and financial

institutions in catchment area.

Meeting It is the process of making local people/target

segment aware about organization, its

mission/vision, customer’s eligibility, product,

services, process, and documentation, policies

and procedures. This process is normally

undertaken by concerned FO/ABM/BM.

Primary Member Selection, House Visit & KYC

Verification

FO will select 05 to 10 members and conduct

household visit. In this process all the necessary

client details will be collected and will be sent to

head office for credit bureau clearance.

Credit Bureau & Members Finalization Credit bureau check is conducted at Head Office

and eligible final list of members are sent to

branch office.

Compulsory Group Training (CGT)

To avail loan from SOCC members must

successfully complete 2 days of training. Under

this awareness is created among the client

regarding the organizational mission and vision,


pledge, importance of JLG, loan products,

documents required, importance and conduct of

center meeting, center leaders responsibility,

disbursement and collection process and other

related norms and procedures. This facilitates

SOCC to know more and more about the

customers before actually lending them.

GRT & Appraisal ABM/BM conducts GRT in a specific format to

ensure that all the members selected for

disbursement are aware of the products and

policies of SOCC and fix loan amount as per cash

flow of borrowers. ABM/BM will then visit each

and every household and re-check KYC

documents to ensure the authenticity of

borrowers.

Cross Verification OM does verification of loan applications on

sample basis to ensure the viability of loan

amount and enterprise.

Disbursement After finalizing the applications, the branch staff

forwards the loan demand to head office (HO).

The finance executive after verifying the

applications sends the complete documentation

(promissory note, mutual agreement, cheques,

insurance policy certificate and pass book) to

branches where disbursement takes place.


FISCAL BALANCE SHEET (` IN THOUSANDS)

As on date 31/Mar/2013 31/Mar/2014 31/Mar/2015 31/Dec/2015

Audited Audited Audited C.A. certified provisional

SOURCES OF FUNDS

Equity Share Capital 4,801 9,204 46,529 46,529

Reserves 559 1,253 4,093 8,621

Total Equity 5,360 10,457 50,622 55,150

Liabilities

Short-Term liabilities

Commercial Loans from Banks/FIs

2,635 10,135 10,854 16,739

Unsecured loan from members of SOCC and other parties

5,786 15,027 0 0

Account payable & Other short-term liabilities

311 898 1,104 1,810

Total Short-Term Liabilities 8,732 26,060 11,958 18,549

Long-Term Liabilities

Commercial Loans from Banks/FIs

0 0 0 6,250

Unsecured loan from directors 5,146 2,360 6,297 10,569

Total Long-term liabilities 5,146 2,360 6,297 16,819

TOTAL OTHER LIABILITIES

13,878 28,420 18,255 35,368

Deferred Tax Liability 19 19 19 19

TOTAL LIABILITIES 19,257 38,896 68,896 90,537


APPLICATION OF FUNDS

Fixed Assets

Gross Block 325 451 500 995

Less: Depreciation (116) (198) (276) (379)

Net Block 209 253 224 616

Other Long Term Investments 0 0 0 1,250

Current Assets

Cash and Bank Balances 46 66 200 3,293

Security Deposits 45 171 175 475

Investment in Fixed Deposit and others

3,000 11,339 12,441 3,628

Total Current Assets 3,091 11,576 12,816 7,396

Loan Portfolio 15,787 27,047 55,856 79,437

Accounts Receivable and Other Assets

170 20 0 1,838

TOTAL ASSETS 19,257 38,896 68,896 90,537

The above figures are taken from audited financials.


PROFIT AND LOSS ACCOUNT (` IN THOUSANDS)

Period FY 2013 FY 2014 FY 2015 FY 2016

Months 12 12 12 09

Financial revenue from operations

4,100 9,930 17,308 16,616

Less - Financial expenses from operations

(811) (2,886) (3,952) (3,223)

Gross financial margin 3,289 7,044 13,356 13,393

Provision for Loan Loss / Write off

(158) 0 0 0

Net financial margin 3,131 7,044 13,356 13,393

Less - Operating Expenses (2,829) (6,269) (9,259) (8,745)

Personnel Expense (1,932) (4,708) (7,220) (6,464)

Depreciation and Amortization Expense

(89) (83) (77) (103)

Other Administrative Expense

(808) (1,478) (1,962) (2,178)

Net operating income/(loss) 302 775 4,097 4,648

Less: Current Tax 0 (82) (1,200) 0

Less: Earlier Tax (3) 0 (56) (121)

Net income after Tax 299 693 2,841 4,527

AUDITOR

Dhanesh A. Savani, (Chartered Accountants) Membership No. 111805 401, Atlantic Tower Commercial Premises CHS, Near Patel Chowk, R. B. Mehta Road, Above Vodafone Gallery, Ghatkopar (East), Mumbai – 400 077 Maharashtra India


PROJECTED FISCAL BALANCE SHEET (` IN THOUSANDS)

As on date 31/Mar/2016 31/Mar/2017 31/Mar/2018

SOURCES OF FUNDS

Equity

Share Capital 54,529 59,529 64,529

Reserves & Surplus 12,406 28,402 55,519

Total Equity 66,935 87,931 120,048

Liabilities

Short-Term liabilities

Commercial Loans from banks/FI 108,134 123,194 318,148

Account payable & Other short-term liabilities 1,123 1,123 1,123

Total Short-Term Liabilities 109,257 124,317 319,271

Long-Term Liabilities

Commercial Loans from Banks/FIs 6,297 6,296 6,296

Total Long-term liabilities 6,297 6,296 6,296

TOTAL LIABILITIES 182,489 218,544 445,615

APPLICATION OF FUNDS

Fixed Assets

Net Block 574 715 899

Other Long Term Investments 175 175 175

Current Assets

Cash and Bank Balances 1,933 2,023 4,647

Loan Portfolio

Net Loan Portfolio 179,807 215,631 439,894

Accounts Receivable and Other Assets 1,168 1,168 1,168

TOTAL ASSETS 182,489 218,544 445,615


PROJECTED PROFIT AND LOSS ACCOUNT (` IN THOUSANDS)

Period FY 2016 FY 2017 FY 2018

Months 12 12 12

Financial revenue from operations 34,066 55,688 94,425

Less - Financial expenses from operations (8,470) (18,493) (33,700)

Gross financial margin 25,596 37,196 60,726

Provision for Loan Loss / Write off (1,816) (362) (2,265)

Net financial margin 23,780 36,834 58,460

Less - Operating Expenses (11,950) (13,999) (19,740)

Personnel Expense (9,337) (10,970) (15,098)

Depreciation and Amortization Expense (114) (142) (220)

Other Administrative Expense (2,499) (2,887) (4,422)

Net operating income/(loss) / Net income before taxes and donations

11,874 22,852 38,738

Current Tax (3,562) (6,856) (11,621)

Net income after Tax 8,312 15,997 27,117

The above financials are taken from the projections submitted by SOCC.


RATIOS

Ratios Mar-2013 Mar-2014 Mar-2015

12 12 12

Capital Adequacy Ratio (CAR)

Capital Adequacy Ratio (%) 28.0% 27.0% 73.9%

Productivity / Efficiency Ratios

No. of Active Borrowers Per Staff Member 162 215 233

No. of Active Borrowers per field executives 370 410 398

Gross Portfolio o/s per field executive (` in thousands)

2,255 2,459 3,286

Average Outstanding Balance Per borrower (In `)

6,100 6,564 8,253

Cost Per Active borrower (In `) 1,093 1,389 1,368

Asset / Liability Management

Yield on Portfolio (%) 39.2% 42.9% 39.0%

Profitability / Sustainability Ratios

Operational Self Sufficiency (%) 108.0% 108.5% 131.0%


Information on BANK(S) / FINANCIAL INSTITUTION(S) as on 31/Mar/2015

Name of the

Funding Agency

Date of Sanction

Amount Sanctioned (` in ‘000)

Interest rate (%)

Loan Tenor

(in months)

Repayment Frequency

Amount Disbursed (` in ‘000)

Amount Out-

standing (` in ‘000)

Mas Financial Services Limited (Loan – I)

15/07/15 5,000 16.25 12 Monthly 4,180 2,917

Mas Financial Services Limited (Loan – II)

14/08/15 5,000 16.25 12 Monthly 4,180 3,333

Mas Financial Services Limited (Loan – III)

16/10/15 5,000 16.25 12 Monthly 4,180 4,167

Mas Financial Services Limited (Loan – IV)

23/12/15 2,500 16.25 12 Monthly 2,089 2,500

Reliance Capital

28/08/15 5,000 15.75 12 Monthly 4,000 3,828

Electronica Finance Limited

10/12/15 6,250 16.25 24 Monthly 6,250 6,250


EMPLOYEE(s) DETAILS FOR OPERATIONS

Particulars FY 2013 FY 2014 FY 2015 31/Dec/2015

No. of managerial / Support staff

9 10 12 15

No. of FOs 7 11 17 12

Total staff 16 21 29 27

EXPANSION PLANS

Particulars FY 2016 FY 2017 FY 2018

No. of States 01 01 01

No. of Districts Covered 02 02 02

No. of Branches 05 07 10

No. of JLGs 1,866 3,334 5,000

No. of Active Borrowers 11,200 20,000 30,001

No. of FOs 20 36 43

Total No. of Employees 40 65 85

Loan disbursements during the period (` in thousands)

224,000 176,000 469,400

Portfolio outstanding (` in thousands) 181,623 217,810 444,338


CURRENCY: All amounts in this report are in local currency unless otherwise stated.

----------------------------------------------------------------------------------------------------------------------------- -------

RIGHTS TO THE REPORT ARE WITH SMERA RATINGS LIMITED. THIS REPORT MAY NOT BE REPRODUCED IN WHOLE OR IN

PART IN ANY FORM OR MANNER WHATSOEVER. ----------------------------------------------------------------------------------------------------------------------------- ------- The SMERA – MFI Rating shall be read with the SMERA – MFI Rating Report on the subject issued by SMERA. All information contained in the SMERA – MFI Rating Report is obtained by SMERA from the subject and third party sources, and is believed to be accurate and reliable. Although reasonable care has been taken to ensure that the information in the Rating Report is true, such information is provided “as is” without any warranty of any kind and SMERA, in particular, makes no representation or warranty, express or implied, as to the accuracy, timeliness or completeness of any such information SMERA is not responsible for any errors in transmission and specifically states that SMERA shall have no financial liability whatsoever to the users of the Rating Report. The rating does not constitute an audit and SMERA’s work is significantly different from that of an audit and accordingly, cannot be relied upon to provide the same level of assurance as an audit. Please note that the SMERA – MFI Rating Report is not a recommendation to purchase, sell or hold any securities and investors should take their own decision. In providing this Rating, SMERA does not underwrite the risks of any third party or that of the subject. SMERA is not liable to the Company or any third party in respect of any matter specified in the Rating Report. SMERA may revise, suspend or withdraw the rating at any time in the future as a result of information changes in circumstances or unavailability of information. The SMERA – MFI Rating Report is not intended for distribution/ publication/ reproduction in any form without SMERA’s prior written approval.

-- End of Report --

SMERA Rating Report - unnatimfi.com · This rating is valid for a period of one year; subject to however, no significant changes / events occur during that period which could materially

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