Saija Finance Private Limited

December 21, 2018

Summary of rating action

Previous Rated Amount Current Rated Amount
Instrument* Rating Action
(Rs. crore) (Rs. crore)
Non-convertible debenture 79.00 79.00 [ICRA]BBB-(Stable); reaffirmed
Long-term bank lines 100.00 100.00 [ICRA]BBB-(Stable); reaffirmed
Total 179.00 179.00
*Instrument details in Annexure-1

Rationale
The rating factors in Saija Finance Private Limited’s (SFPL) experienced management team, good investor profile, good
systems and processes and its stable asset quality indicators (gross NPA of 2.94% and net NPA of 0.17% as on September
30, 2018). The rating is, however, constrained by the moderate scale of operations (managed portfolio of Rs. 442.57
crore as on September 30, 2018), dependence on NBFC-MFIs for funding, and moderate capitalisation indicators. The
rating factors in the improved profitability profile on account of low credit costs in H1 FY2019 (profit after tax (PAT) in
relation to managed advances of 3.38% and return on net worth of 27.19%). Overall, SFPL’s ability to improve
capitalisation levels, diversify the funding mix and maintain good asset quality and profitability indicators, as it diversifies
geographically, will be important from a credit perspective.

The rating factors in the risks associated with the unsecured nature of microfinance loans, the credit risk emerging from
the marginal profile of the borrowers and other socio-political and operational risks inherent in the microfinance
business.

Outlook: Stable
ICRA expects SFPL to continue to benefit from the experience of its promoters in microfinance operations. The outlook
may be revised to Positive if the company is able to profitably scale up operations, improve liquidity and raise equity to
support the capitalisation profile. The outlook may be revised to Negative if there is a delay in equity infusion leading to
a stretched capitalisation profile and if there is a deterioration in the asset quality that poses a risk to the financial risk
profile.

Key rating drivers

Credit strengths
Experienced promoters, management team and board members - The promoters are experienced and have been
managing the company over the past 10 years. In addition, the senior management team comes from a professional
background and has experience in banking, financial services and microfinance operations. The board, comprising 10
members, is responsible for giving direction to the company. The board includes four independent directors with
experience in the fields of micro lending, BFSI operations, social transformation and advisory and four nominee directors
from the investors - Accion International, Pragati India Fund and SIDBI.

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Stable asset quality indicators - The company reported collections of more than 98% on all loans disbursed post
demonetisation that helped it to report stable asset quality indicators with gross NPA and net NPA of 2.94% and 0.17%,
respectively, as on September 30, 2018 (3.62% and 0.14%, respectively, as on March 31, 2018). Most of the overdue
loans resulted from weak cash flows post demonetisation and the company has made adequate provisions against the
same. SFPL’s ability to maintain the asset quality while scaling up operations in new and existing states will remain
monitorable.

Improved profitability profile on the back of lower credit costs - The profitability profile improved with PAT in relation
to managed advances of 3.38% and return on net worth of 27.19% in H1 FY2019 compared to -1.23% and -11.12%,
respectively, in FY2018. While the company has not written off loans that were overdue during demonetisation, it has
adequate provisions for such loans. As it is expanding to new regions in Haryana and Punjab, the trend in collections will
drive its credit costs and the profitability. Going forward, SFPL’s ability to improve its profitability by controlling operating
expenses and credit costs as it scales up operations will remain a key rating sensitivity.

Credit challenges
Moderate scale and geographically concentrated nature of operations - The company had a moderate scale of
operations with a managed portfolio of Rs. 443 crore as on September 30, 2018 (Rs. 233 crore as on September 30,
2017). While SFPL expanded operations in Haryana and Punjab, Bihar continued to contribute a high share of 57% as on
September 30, 2018, though this declined from 73% as on March 31, 2017. This is also reflected in the decline in the
share of the top 10 districts (in relation to net worth) to 397% as on September 30, 2018 from 525% as on March 31,
2017. However, all these districts were in Bihar. While the portfolio concentration makes the company vulnerable to
regional and political risks, geographical expansion in other states is likely to mitigate the same going forward.

Moderate capitalisation profile - While the company raised Rs. 30 crore of capital in FY2018, capitalisation levels were
moderate owing to the losses reported in FY2018 and the higher pace of growth versus capital raised. As a result, net
worth/managed portfolio was 14.20% as on September 30, 2018. Going forward, SFPL’s ability to tie up equity capital
while maintaining adequate capitalisation indicators will be important from a credit perspective.

Liquidity profile adequate to support repayments but fresh sanctions critical for growth plans - As on November 30,
2018, SFPL had adequate liquidity to service debt obligations falling due over the remaining part of FY2019. However,
growth may be limited in the absence of fresh sanctions and lack of traction in building the off-book portfolio. Though
the company is in the process of raising fresh debt, the timely receipt of the same will be critical from a growth
perspective.

Marginal profile of borrowers and risks associated with microfinance sector may result in high volatility in asset
quality - Unsecured lending to a marginal borrower profile and the political and operational risks associated with
microlending may result in high volatility in the asset quality indicators. Political, communal, overleveraging and other
risks associated with the borrower profile in the microfinance sector across geographies of operations will remain key
sensitivities.

Liquidity position
As on November 30, 2018, the company had unencumbered cash of nearly Rs. 29 crore. Further, it has repayments of
around Rs. 8-10 crore per month over the last four months of the financial year with collection of existing repayments of
Rs. 40 crore per month during December 2018 to March 2019. While the liquidity is comfortable for the servicing of debt

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obligations, tie-ups for fresh sanctions and arrangements with business correspondent (BC) partners will be critical for
supporting the planned growth of the managed portfolio.

Analytical approach
Analytical Approach Comments
Applicable rating methodologies
ICRA Rating Methodology for NBFCs
Parent/Group support
NA
Consolidation/Standalone
The rating is based on the standalone financial profile of the company

About the company

The promoters of Saija Finance Private Limited (SFPL), Mr. S.R. Sinha and Mrs. Rashmi Sinha, started microfinance
operations in November 2007 as a programme under Saija Vikas, a society formed by them in July 2007. The current
management acquired the NBFC, Saija Finance Private Limited, in April 2008. The NBFC was granted an NBFC-MFI licence
in December 2013 by the RBI. The company follows the Grameen model of lending and offers loans under Saija Mahila
Rin (group loans to women) and Saija Karobar Rin (loans for business). It also offers a small portion of individual loans for
solar lamps, fans and stoves. As on September 30, 2018, the company reported a managed portfolio of Rs. 443 crore
spread across 61 districts in five states - Bihar (57%), U.P. (18%), Jharkhand (14%), Haryana (7%) and Punjab (4%).

In FY2018, SFPL reported a loss of Rs. 4.70 crore on a managed asset base of nearly Rs. 375 crore vis-à-vis a net profit of
Rs. 2.14 crore on a managed asset base of nearly Rs. 251 crore in FY2017. In H1 FY2019, the company returned to a profit
with PAT of Rs. 8.08 crore on a managed asset base of nearly Rs. 443 crore.

Key financial indicators (Audited)

FY2017 FY2018 H1 FY2019*
Net interest income 13.37 21.77 24.28
Profit before tax 2.27 (6.81) 12.29
Profit after tax 2.14 (4.70) 8.08
Gross advances (on-book) 213.20 338.43 408.71
Gross advances (including off-book) 251.42 375.08 442.57
Total managed assets 311.79 454.78 491.90

% Tier-1 10.90% 13.50% 13.94%

% CRAR 16.10% 21.26% 22.03%
Gearing 7.75 6.10 5.90

% Net profit/Average managed assets 0.68% (1.23)% 3.38%

% Return on net worth 7.41% (11.12)% 27.19%

% Gross NPA 4.00%^ 3.62% 2.94%

% Net NPA 0.03% 0.14% 0.17%
Net NPA/Net worth 0.20% 0.38% 1.11%
*Provisional numbers for H1 FY2019
^Excluding RBI dispensation; 0.48% as per FY2017 audited financials

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Status of non-cooperation with previous CRA: Not applicable

Any other information: None

Rating history for last three years

Current Rating (FY2019) Chronology of Rating History for the Past 3 Years
Date &
Amount Amount Date & Rating in Date & Rating in Date & Rating
Rated Outstanding Rating FY2018 FY2017 in FY2016
Instrument Type (Rs. crore) (Rs. crore) Dec-18 Dec-17 Jul-16/Nov-16 Sep-15/ Jan-16
1 NCD Long 79.00 79.00 [ICRA]BBB- [ICRA]BBB- [ICRA]BBB- [ICRA]BBB-
Term (Stable) (Stable) (Stable) (Stable)
2 Term Loans Long 100.00 100.00 [ICRA]BBB- [ICRA]BBB- [ICRA]BBB- [ICRA]BBB-
Term (Stable) (Stable) (Stable) (Stable)
Source: Company

Complexity level of the rated instrument

ICRA has classified various instruments based on their complexity as "Simple", "Complex" and "Highly Complex". The
classification of instruments according to their complexity levels is available on the website www.icra.in

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Annexure-1: Instrument details
Date of Amount
Instrument Coupon Maturity
ISIN No Issuance Rated Current Rating and Outlook
Name rate Date
/Sanction (Rs. crore)
INE637O07092 NCD 03-Nov-16 14.25% 30-Nov-20 24.00 [ICRA]BBB-(Stable); reaffirmed
INE637O07050 NCD 30-Mar-16 13.53% 30-Mar-21 15.00 [ICRA]BBB-(Stable); reaffirmed
INE637O08017 NCD 31-Dec-15 15.00% 15-Apr-22 20.00 [ICRA]BBB-(Stable); reaffirmed
INE637O07100 NCD 22-Dec-17 13.72% 22-Dec-22 10.00 [ICRA]BBB-(Stable); reaffirmed
INE637O07118 NCD 30-Jul-18 12.72% 30-Jul-23 10.00 [ICRA]BBB-(Stable); reaffirmed
Sub-total (A) 79.00
NA Term loan-1 04-Apr-17 11.00% 25-May-20 15.00 [ICRA]BBB-(Stable); reaffirmed
NA Term loan-2 30-Jan-18 12.60% 30-Jan-20 15.00 [ICRA]BBB-(Stable); reaffirmed
Term loan:
NA NA NA NA 70.00 [ICRA]BBB-(Stable); reaffirmed
Unallocated
Sub-total (B) 100.00
Total: (A)+(B) 179.00
Source: Company

Annexure-2: List of entities considered for consolidated analysis

Company Name Ownership Consolidation Approach

NA

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ANALYST CONTACTS
Karthik Srinivasan Supreeta Nijjar
+91 22 61143444 +91 124 4545324
karthiks@icraindia.com supreetan@icraindia.com

Rajat Mehta Deeksha Agarwal

+91 124 4545377 +91 124 4545833
rajat.mehta@icraindia.com deeksha.agarwal@icraindia.com

RELATIONSHIP CONTACT
Jayanta Chatterjee
+91 80 4332 6401
jayantac@icraindia.com

MEDIA AND PUBLIC RELATIONS CONTACT

Ms. Naznin Prodhani
Tel: +91 124 4545 860
communications@icraindia.com

Helpline for business queries:

+91-124-2866928 (open Monday to Friday, from 9:30 am to 6 pm)

info@icraindia.com

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For more information, visit www.icra.in

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