more on the MFIs
MURUGAVEL
This is how the numbers compare
a. ROA for banks is ~ 1 %, for SKS it is 4.98%
b. ROE for banks was 13.2% , for SKS it was 21.54%
The interest cost to income from operations stood at 33 %
Employee cost to income from operations stood at 24.77%
But some of the more interesting numbers are
a.Cash and bank balance of 973.51 crores ( !!) - of which Rs 224 Crores was in Current accounts ( non interest bearing !!! and the balancesheet does not report that any lien was marked on this deposit )
b. Loans and advances of 2974.6 Crores . In addition during the year, Rs 1776.1 Crore was assigned by SKS ( outstanding was Rs 1383 Crores at the end of the year) and it booked an income of Rs 101.25 Crores on this assignment in 2009-10 ( pl compare with net profit of Rs 173 crores that the company reported) . For this deal , it has placed a cash margin of Rs 119.8 crores with banks - as FD.
In 2008-09, it assigned Rs 1397 Crores and booked an income of Rs 48.02 Crores. Now the catch - most of the loans are short duration loans and the company booked a loss of Rs 16.89 Crores from the assigned loans in the current year !!!.
c. Secured loans of 2579. 5 Crores
And, SKS does make other income : It had collected membership fee of Rs 15 Crores ( over and above interest on the loans ) , insurance commission of Rs 19.2 crore , group insurance admin charges of Rs 32.3 Crores, and 27.2 crores as income from deposits. These total to 78 crores.
The rapid expansion is certainly to be noted.
a. Disbursement up 69%
b. Assets up 75.9%
c. Members up 71%
d. Employee number up 40%
and PAT up 117 % ....
way too fast for comfort ...As Shri Vijayaraghavan mentioned - these numbers are certainly interesting.
The details of the AP Gov ordinance are not yet in public domain . But the Principal Secretary of AP was on TV a short while ago. Without divulging the details of the ordinance, he hinted at the following offences during recovery - molestation, pushing to prostitution and pushing to commit suicide. This was something that many people in the know silently hinted ...looks like it is not entirely untrue. I remember writing sometime back that bank recovery agents are begining to look like saints compared to MFI recovery agents. Sadly, my stance seems to be vindicated.
regards
Murugavel
----- Original Message -----
From: "Vijayaraghavan SV" <vijay...@gmail.com>
To: "bim finance" <bim_f...@googlegroups.com>
Sent: Saturday, 16 October, 2010 13:20:57 GMT +05:30 Chennai, Kolkata, Mumbai, New Delhi
Subject: Re: Abridged summary of BIM_F...@googlegroups.com - 1 Message in 1 Topic
To me the whole set of financial statements is questionable. SKS is a Financial Services Company and fund based financial services company at that. Prof. Murugadas should be able to comment on what would be the operating expenses ratios of a typical fund based financial services company - Interest cost to Gross Income, Employee Cost to Gross Income and other Operating costs to Gross Income. From my understanding of such business, Interest cost to Gross Income would range from 60%-70%, Employee cost from 5% to 8% and Operating cost to Gross Income about 3% to 5%. In other words, what is the spread in 'Banking Industry' - the difference between what the bank charges out to its borrowers to what it pays its lenders. It ranges from 5% to 8%. And that is all it could earn. The Bank is squeezed on both sides and hence the profitability is all about efficiency in operations and possibly increasing its fee based business. Prof. Murugadass - what is your take on this?
Of course, Micro Finance Institutions (MFIs) do not suffer the 'customer competitive force' (Porter's 5 model). It can charge whatever it can on its customers and, therefore in some way is different from the way banks operate. MFIs also have to employ significantly more number of employees than a traditional bank.
However, i am not willing to buy the argument that "Financial Expenses" are 23% of Gross Total Income for SKS Finance (which means that SKS is over charging its customers - no wonder that today's paper carries a newstory where Akula is willing to reduce the interest rate by 2%. A more reasonable reduction has to be multiple times of 2%). Neither am I willing to accept that Employee costs are 26% of Gross Income (It sounds that SKS is more like a Mini-IBM Consulting rather than a Finance Company!). Looks like the company is having one employee for each borrower!
There is something fishy about the company's financials - on many counts. Notwithstanding that the company's books are audited by EnY, notwithstanding that it has Katamaran as one of its investors and is otherwise funded by other investors, etc (Remember that Satyam was audited by PwC, a listed company and a Golden Peacock Award Winner for 2008 for Corporate Governance), watch out for this counter.. More interesting news could tumble down!
Vijayaraghavan SV
Group: http://groups.google.com/group/BIM_Finance/topics
- Regulating the MFIs [1 Update]
Topic: Regulating the MFIs--
DC <deep...@gmail.com> Oct 14 11:18PM -0700 ^
i Guys,
Since to see a debate about the way MFIs works. Attached an interview
of Vikram Akula (Founder of SKS) as a file rather than copying and
pasting it here.
Before concluding anything more
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J.Murugavel
Bharathidasan Institute of Management
PB No 12, MHD Campus, BHEL Complex
Thiruchirapalli 620014
Hand phone: 93633 14015 / 96986 37776
MURUGAVEL
Let us for a moment assume that all these numbers in the annual report ( which had as many pages allocated to discussion on esops as there were on financials - around 17 pages each, the rest of which was english and pictures of smiling directors and smiling women ) per se are correct, for it is possible that the company had assigned the loans, got cash and the cash has not been disbursed in full yet ..... (which in itself does not appear correct as of the loans assigned - i.e., 1776.1 cr in 2009-10, 393.1 cr had been paid back by March 2010 - probably indicating that the loans are of short maturity)
The issues are
a. when the company has an OD limit ( o/s remaining at Rs 101.43 Cr, why park money in current accounts )
b. looking at the average assets and average borrowings, it doesnt look like the cost of funds is around 10-11% , nor does the op cost look like 10-11%. There is surely enough room for reduction of interest rates. Under the name of insurance commission, admin charges and membership fees, the company nets 2% of the average assets - Rs 67 crores.
Yesterday's media reported that the actual tiff between the sacked MD and others had - not surprisingly - more to do with the ESOPs than with 'interpersonal relationships' !!! .....
We will keep waiting .....
Regards,
Murugavel
----- Original Message -----
From: "MURUGAVEL" <murugavelj@
bim.edu>
To: "bim finance" <bim_f...@googlegroups.com>
Sent: Sunday, 17 October, 2010 19:52:55 GMT +05:30 Chennai, Kolkata, Mumbai, New Delhi
Subject: more on the MFIs