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Autoinvest Leasing and Finance(I) Private Limited
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Analytical Contacts
Mr. Ramraj PaiDirector
[email protected]+91 22 3342 3036
Mr. T Raj SekharSr. Manager
[email protected]+91 44 66563136
Microfinance InstitutionGradings
Date Assigned
October 12, 2010
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DISCLAIMER
CRISIL's microfinance institution (MFI) grading reflects CRISILs current opinion on the ability of an
MFI to conduct its operations in a scalable and sustainable manner. In the case of NGO-MFIs and
entities with multiple businesses, CRISILs MFI Gradings apply only to their microfinance
programmes. The MFI Grading is a one-time exercise and the Grading will not be kept under
surveillance. However, the MFI Gradings are revised as and when circumstances so warrant.
CRISIL recommends that the user of the Grading seeks a review of the Grading if the graded
institution/microfinance programme experiences significant changes/events during this period
which could impact the graded institution/its grading.
CRISIL MFI Gradings are based on the information provided by the Institution, or obtained by
CRISIL from sources it considers reliable. CRISIL does not guarantee the completeness or accuracyof the information on which the MFI Grading is based. CRISIL MFI Grading is not a
recommendation to purchase, sell or hold any financial instrument issued by the graded MFI, or to
make loans and donations / grants to the institution. The MFI Grading does not constitute an audit
of the graded MFI by CRISIL.
The MFI Grading Report and the information contained therein are the intellectual property of
CRISIL. The MFI Grading Report should not be reproduced or distributed or communicated directly
or indirectly in any form to any other person or published or copied in whole or in part, for anypurpose or by any means without the prior written permission of CRISIL. The MFI Grading should
not be used for mobilising deposits/savings/thrift/insurance funds/other funds (including equity)
from their members/clients or general public and should not be used in its external
communications, promotional materials or member/client passbooks. CRISIL is not responsible for
any errors and especially states that it has no financial liability, whatsoever, to the subscribers/
users/transmitters/distributors of its MFI Gradings. For the latest information on any outstanding
CRISIL MFI Gradings, please contact CRISIL RATING DESK at [email protected] or at
(+91-22)-3342 3047/3064.
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MFI GRADING
MFI GRADING HISTORY
None
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CRISILs microfinance institution (MFI) grading is a current opinion on the
ability of an MFI to conduct its operations in a scalable and sustainable
manner. The grading is assigned on an eight-point scale, with mfR1 being
the highest, and mfR8 the lowest. The MFI grading is a measure of the
overall performance of an MFI on a broad range of parameters under
CRISILs MICROS framework. It includes a traditional creditworthiness
analysis using the CRAMEL approach, modified to be applicable to the
microfinance sector. The acronym MICROS stands for Management,
Institutional arrangement, Capital adequacy and asset quality, Resources
and asset-liability management, Operational effectiveness, and Scalability
and sustainability.
MFI Grading Scale: mfR1 - highest; mfR8 lowest
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FACT SHEET
Name of the MFI : Autoinvest Leasing and Finance (I) Private Limited(Vistaar Livelihood Finance )
Year of Incorporation : September 1991
Year of commencement ofmicrofinance programme
: June 2010
Legal status : Non deposit taking non banking financial company
Chief Executive/Functionary : Mr. Brahmanand Hegde, Managing Director
Contact details : Mr. Brahmanand HegdeManaging DirectorAutoinvest Leasing and Finance (I) Private LimitedNo.9, 3rd Cross37th Main, KAS Officers ColonyBTM 2nd StageBengaluru - 560076Tel: +91-80-40463218Email-id: [email protected]: www. vistaarlfi.com
Lenders : Ananya Finance for Inclusive Growth, DevelopmentCredit Bank, HDFC Bank Ltd
Statutory Auditors : Walker Chandiok & Co., Chartered Accountants(Grant Thorton), New Delhi
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ABOUT THE MFI
Lending model : Group based lending model
Products : Joint Liability loan with loan size ranging fromRs.8,000Rs.25,000 per member. The MFI currentlyextends 50 week loans at an interest rate of 27 percent on reducing basis.
Borrower base : 2690 borrowers as on August 31, 2010
Employees : 147 (95 credit officers) as on August 31, 2010
Number of branches : 9 as on August 31, 2010
Loan outstanding : Rs.31.9 million as on August 31, 2010
Loans disbursed : Rs.33.6 million during the 2 months ending August 31,2010.
Operational areas : Nine districts (Eight districts in Tamil Nadu and Onedistrict in Karnataka) as of August 31, 2010
OUTREACH SUMMARY
Particular Aug-10No. of groups 538
No. of members 2690No. of borrowers 2690
No. of branches 9No. of districts covered 9
Women borrowers 100%Disbursements (Rs.million) 33.6
Loan outstanding (Rs.million) 31.9
PRODUCTIVITY AND EFFICIENCY INDICATORS
As on/For the period ending, Aug-10Members/branch (No.) 299
Borrowers/ branch (No.) 299Loan outstanding/branch (Rs.million) 3.5
Loan outstanding/ credit officer (Rs.million) 0.3Loan outstanding/ borrower (Rs.) 11859
Members / credit officer (No.) 28
Borrowers / credit officer (No.) 28Groups / credit officer (No.) 6
Borrowers/members (%) 100
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Social Indicators and Transparency Indicators
As on August 31, 2010Average loan outstanding/per capita GNI (2009 figure)* (in %) 32.6Women staff/total staff (in %) 0.7
Women borrowers/total borrowers (in %) 100Effective IRR (including interest rates, processing fees, security deposit & any otherfees charged by the organisation)? (in %) 30.2Are interest rate (on declining basis) communicated to clients in writing? YesAre processing charges communicated to clients in writing? YesIs an official receipt provided by the MFI to clients after repayment collections? YesIs access to loan of other MFIs one of the parameters to select/screen clients? YesIs access to loan of other MFIs/residual income one of the factors to appraiserepayment paying capacity of clients? YesDoes the MFI appraise the client's income/poverty/asset level and use it to targetlow income clients? YesDoes the MFI capture and analyse reasons for client drop out rate?
YesIs any head office designated contact details provided to clients as part of grievanceredressal mechanism offered to clients? Yes
*Per capita GNI is based on current prices. Source: CCER computations based on CentralStatistical Organisation (CSO) data
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GRADING RATIONALE
The microfinance institution (MFI) grading assigned to Autoinvest Leasing and Finance (I)
Private Limited (Vistaar) reflects the MFIs:
Experienced board and senior management team Commitment to implementation of strong processes and systems Adequate capitalisation
The above-mentioned grading strengths are partially offset by Vistaars:
Short operating track record Asset quality and credit risks untested through a full business cycle Modest expected earnings profile over next two years
PROFILE
Autoinvest Leasing and Finance (I) Private Limited is a non-deposit-taking non-banking
financial company (NBFC-ND) registered as a loan company with the Reserve Bank of
India (RBI). The company was incorporated in September 1991. The present promoters
acquired this company in March 2010 and have applied for the name change to Vistaar
Livelihood Finance. The company started its microfinance operations on June 17 2010, and
has since expanded to nine brancheseight in Tamil Nadu and one in Karnataka. As on
August 31, 2010, the company had 2690 borrowers and loans outstanding of Rs.32 million.
Mr. Brahmanand Hegde, former director microfinance, Fullerton India Credit Company
Ltd (FICC) and Mr. Ramakrishna Nishtala, former head microfinance, FICC are the core
promoters of the company. Mr. G S Sundararajan, managing director, Shriram Capital Ltd,
and former chief executive officer and managing director of FICC, is also a significant
shareholder. The three promoters together hold 55 per cent of the companys stake. The
other shareholders include Elevar Equity (22.5 per cent stake), the equity fund manager of
Unitus Capital and SVB India Capital Partners, a venture fund (22.5 per cent).
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Vistaars mission is to make a significant and sustainable impact on the lives of under-
served entrepreneurs, across rural and urban India, by enhancing the economic output of
their livelihoods. The companys vision is to provide customised financial services and
other value-added enablers, focused on customers livelihoods, in a transparent and
innovative manner.
Loan Methodology and Product Offerings
*To be introduced shortly**Tie-up with Kotak Mahindra Old Mutual Life Insurance Ltd.
Vistaars lending model is similar to the Grameen Bank model. Vistaar offers loans to
women organised into joint liability groups (JLGs). Currently, the company offers only one
loan product, which is differentiated by the loan amount (refer to Table 1). In the near future,
the MFI aims to offer larger-ticket customised loan products with repayment flexibility.
Such loans will be focussed on livelihood activities such as dairy, power loom, handloom,
home-based industries, and handicrafts.
Table 1: Loan ProductsParameters Weekly Fortnightly* Monthly*Loan amount offered(Min. to Max.) Rs.8,000- Rs.25,000 Rs.10,000-Rs.40,000 Rs.10,000-Rs,40,000
Tenor (Min. to Max.) 50 weeks 12-24 months 12-24 months
Interest rate
27 per cent(reducing basis)
29 per cent (reducingbasis)
29 per cent (reducingbasis)
Documentation/Enrolment Fees Rs.350
350 for loans up to
Rs.15,000;Rs.450 upwards for
larger loans
Rs.350 for loans up to
Rs.15,000;Rs.450 upwards for
larger loans
Insurance Fees (forcustomer andspouse) ** Rs.200
Rs.200 for loans up toRs.15,000;Rs.300
upwards for largerloans of tenure
greater than 1 year.
Rs.200 for loans up toRs.15,000;
Rs.300 upwards forlarger loans of tenure
greater than 1 year.
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MANAGEMENTShort operating trackrecord
The grading is constrained by Vistaars short operatingtrack record in microfinance; Vistaar has only about 3
months of experience in microfinance.
Differentiating factorsprovide a definite edge overother start-ups
The company has the advantage of qualified promoterswith vast experienced in rural business and microfinance.
The MFI has several differentiating factors to its credit, in
terms of process and product innovations. CRISIL believes
that if these innovations are successful, Vistaar will acquire
capabilities to expand to new regions, widen its product
range and tie-up for third-party distribution of products
and services. Adequate technologicalarchitecture; scope forbroadening the softwareutilisation
Vistaar has an internet-based loan tracking software (basedon .Net platform). The software is integrated with
biometric devices; such devices are currently being used for
recording collection and attendance details of borrowers.
Data entry and processing is handled by the administrative
team at the branch level. The software solution will support
Vistaars growth plans in the next three years.
However, CRISIL believes that the scope of utilisation ofthe existing technology can be broadened to include several
more aspects of the companys microfinance operations,
namely automatic data consolidation of the branch level
audit reporting and cash flow management, and enable
finer customer authentication at the time of collections.
Elaborate human resource(HR) initiatives
Vistaars HR initiatives are elaborate and aimed at ensuringlow attrition. All the key positions have been filled. The
company had 147 employees as on August 31, 2010. It
follows an elaborate selection and recruitment process, and
has recently started tapping neighbouring catchments for
hiring field staff, in addition to the conventional hiring
methods such as campus interviews, walk-ins, and branch
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manager references. The chosen candidates are provided
first-hand experience of the companys operations before
they join. This is to prevent early attrition of field staff
during the first few months of joining the company.
Furthermore, Vistaar has taken steps to ensure periodicalrefresher training and to reinforce adequate discipline at
the branch level.
Very high cash balance Vistaar has an unusually high branch-level cash balancepolicy compared to most other MFIs. As per the mandated
norm, the cash balance maintained at the branch level
ranges from Rs.50,000 to Rs.900,000. CRISIL believes that
high cash balance at branches exposes the company to
significant operating risks, with the branch staff residing atthe branch premises and having constant access to the vault
and its keys. High cash balance also results in a high cash
float. In order to mitigate the risk of cash holding, the
company has put in place a dual key arrangement at the
branch; however, the effectiveness of the same needs to be
seen.
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INSTITUTIONAL ARRANGEMENTStrong board and seniormanagement team
Vistaar is governed by a five-member board. The boardcomprises of experienced and recognised personnel from
the financial sector. The board includes two nominee
directors representing the investors, Elevar Equity
Mauritius and ICP Holdings. In CRISILs opinion, Vistaars
board composition and shareholder base should provide
the company with sound corporate governance and
transparency. Similarly, Vistaar has a competent senior
management team, experienced in microfinance and retail
finance. Majority of the officials of the key management
team, including the promoters, are from FICC, a leading
NBFC, and have worked together in the past.
The companys management has indicated its commitmentto transparency at all levels, including communication of
interest rates and fees charged to customers. Accordingly,
all the loan terms and conditions are provided to the
customer in a detailed manner at the time of loan
disbursement.
The management is equally focussed on enhancing theefficiency of processes and systems alongside theorganisational growth. In keeping with this, Vistaar has
laid out a strategic road map to grow to 300 branches
within the next three years by effectively utilising its
technological and human infrastructure.
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CAPITALADEQUACYANDASSETQUALITYAdequate capitalisation As on August 31, 2010, Vistaar is capitalised at Rs.153
million, one of the highest for a start-up MFI in India. The
companys net worth was at Rs.127 million as on the same
date. The company expects to disburse a total of Rs.400
million during 2010-11. Vistaar is adequately capitalised for
the level of business it expects to undertake for the rest of
2010-11 (refers to financial year, April 1 to March 31). As on
August 31, 2010, two microfinance investment vehicles
held 45 per cent of the stake in Vistaar.
The company expects to maintain gearing at 4.5 to 5.5 timesand capital adequacy of above 15 per cent over the long
term. Given the managements standing and experience,
CRISIL expects Vistaar to raise timely capital to fund its
medium-term growth plans.
Loan portfolio yet to season Vistaar has healthy asset quality with 100 per cent of itsloan portfolio being current as on August 2010; the on-time
repayment rate has been consistently high since the start of
operations in June 2010. However, with only a few months
of operations, the loan portfolio is yet to season and the
true asset quality will be evident only when Vistaarcompletes one loan cycle. Similarly, the efficacy of the
detailed borrower appraisal and other credit and
operational risk management (current and proposed)
measures, undertaken for large-ticket loans, needs to be
seen over a period of time.
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RESOURCESANDASSETLIABILITYMANAGEMENTAdequate resource profile Given the experience of Vistaars management team,
CRISIL believes that the MFI will manage liquidity and
raise resources on time to fund its expansion plans.
Currently, the companys disbursements are being funded
out of the initial capital raised; the mobilised resource is yet
to be utilised towards on-lending. The companys
confidence in its on-time resource-raising capabilities is
reflected in its on-going branch expansion and product
diversification plans.
Vistaar plans to raise funds through borrowings withtenure of upto two years from a mix of lenders such as
private banks, public banks, apex MFIs, and NBFC, over
the medium term. Presently, it has sanction of Rs.30 million
from HDFC Bank, Rs.20 million from Development Credit
Bank, and Rs.20 million from Ananya Finance for Inclusive
Growth and is in discussions with other lenders to meet its
fund requirement over the medium term.
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OPERATIONALEFFECTIVENESSProfitability expected toremain negative overmedium term
Vistaars projections indicate that given its high start-upcosts and the time taken for branches to reach optimal
capacities, the company will not register profits in 2010-11
and 2011-12. However, with tight monitoring of
productivity and efficiency levels, the company believes
that it will be able to achieve break-even earlier than
projected. Nevertheless, CRISIL does not expect any
significant improvement in Vistaars operating expense
over the medium term without a corresponding
improvement in the companys field-level productivity.
Vistaar started lending in June 2010, and reported anincome of Rs.2.6 million and loss of Rs.23.6 million for the
period between April 01, 2010 and August 31, 2010,
factoring the pre-operative expenses.
As per the companys projections, the spread on lending isexpected to remain low in the next two years. Additionally,
with high operating expense level of beyond 15 per cent of
average funds deployed, Vistaars net profitability margin
is expected to be negative during 2010-11 and 2011-12.
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SCALABILITYANDSUSTAINABILITY Ability to scale up andsustain operations
Vistaars managements strategy is to provide easy accessto cost-effective credit in a transparent manner to low-
income, mass market borrowers who do not have access to
banking channels. At the same time, it also intends to
achieve acceptable returns on investment so that it can
attract capital and human resource to serve the chosen
target segments better. CRISIL believes that the entry of
professionally managed companies into microfinance will
immensely benefit the sector, and companies such as
Vistaar, which attract talent and have adequate funding
resources, have greater ability to scale up and sustain
operations.
Vistaar plans to focus on a few districts in Tamil Nadu andKarnataka during 2010-11 and during Q12011-12. The
company plans to diversify its portfolio to Maharashtra
and Gujarat from Q2 2011-12. CRISIL believes that, as the
company gains experience, the ease of replication in other
states should increase. Similarly, investment in information
technology at an early stage should support improved
service and turnaround capacity and facilitate greatereconomies of scale.
Processes and controlsystems in initial phase,and their efficacy is yet tobe demonstrated
The promoters experience has helped them put in place acompetent senior management team and well-defined
processes and policies with detailed manuals at the very
start of the microfinance operations. However, CRISIL
believes that the efficacy of Vistaars processes and control
systems is yet to be adequately demonstrated, in the light
of its growing and diversifying portfolio, over a period oftime.
Need for timely capitalinfusion to support proposed growth in themedium term
Vistaars net profitability margin is expected to remainnegative over the medium term, given the high business
costs associated with a start-up and the companys growth
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strategy. As a result, it will be some time till Vistaar creates
strong organic capital generation. Therefore, there will be a
need for timely capital infusion in the next three years to
support the companys growth plans and enable it to
maintain adequate capital adequacy.Grading sensitivity factors Positive grading actions at the time of subsequent
assessments will depend on whether Vistaar achieves
strong asset quality, fund and geographic diversification,
improves earnings, and demonstrates adherence to the
processes and policies that have been laid down. On the
other hand, negative grading action will occur if the high
loan growth is not matched by capital increases and if there
are high delinquencies.
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FINANCIAL INDICATORS
Income and expenditure statementRs. million
For the period ended, Mar-13 Mar-12 Mar-11 Aug-10Management Projections Unaudited
Fund based incomeInterest income from loans 853.2 197.2 26.7 0.4
Income from investments /bankdeposits - - - 1.0
Total fund based income 853.2 197.2 26.7 1.4
Interest and finance chargesOn borrowings 358.8 79 12.6 0.0
Finance charges 30.3 18 4.5 0.2
Total interest and finance charges 389.1 97.0 17.1 0.2Gross spread 464.1 100.2 9.6 1.3Total fee based income 215.50 65.00 13.90 1.19Total income 1068.7 262.2 40.6 2.6Gross surplus 679.6 165.2 23.5 2.4
ExpensesPersonnel expenses 282.5 115.2 50.4 14.8Administrative expenses 208.7 84.4 34.5 10.4
Total expenses 491.2 199.6 84.9 25.2Write-offs and provisions 81.1 18.9 2.6 0.3
Depreciation 37.2 13.1 3.5 0.5
Profit/(loss) before tax 70.1 -66.4 -67.5 -23.6
Tax - - - -Profit/Loss after tax 70.1 -66.4 -67.5 -23.6
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Balance sheetRs. million
Balance sheet as on Mar-13 Mar-12 Mar-11 Aug-10Management Projections Unaudited
Liabilities
Share capital 1252.8 652.8 152.8 133.3Share application money - - - 20.1Reserves and surplus -66.6 -136.7 -70.3 -26.7
Net worth 1186.2 516.1 82.5 126.8Borrowings 4902.7 1578.2 373.6 0.0
Total long term borrowings 4902.7 1578.2 373.6 0.0Provision for bad debts 51.9 13.3 2.4 0.3
Other liabilities 4.3
Total current liabilities 51.9 13.3 2.4 4.7Total liabilities 6140.8 2107.6 458.5 131.4
AssetsLoans and advances 5356.8 1646.4 337.3 31.9
Investments 0.0 0.0 0.0 75.5Cash & bank balances 646.1 393.9 107.0 11.9Other assets & advances 0.0 0.0 0.0 3.3
Total current assets 646.1 393.9 107.0 15.2Total funds deployed 6003.0 2040.3 444.3 122.5Net fixed assets 137.9 67.3 14.3 8.9
Total assets 6140.8 2107.6 458.5 131.4
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Ratios
In per cent
As on /For the year ended March 31, 2013P 2012P 2011PYield
Fund based yield (A) 21.22 15.87 9.42Portfolio yield 24.37 19.88 14.46Fee based income /Avg. funds deployed 5.36 5.23 4.90
Total income / Avg. funds deployed 26.57 21.11 14.33
Cost of borrowingInterest paid/Avg. borrowings (B) 12.01 9.94 9.15
Interest spreadSpreads on lending (A) (B) 9.21 5.93 0.27
OverheadsOperating expense ratio 12.21 16.07 29.96Personnel expense ratio 7.02 9.27 17.78
Administrative expense ratio 5.19 6.79 12.17
ProfitabilityReturn on net worth 8.24 -22.18 -64.52Return on funds deployed 1.74 -5.34 -23.82
Operational self sufficiency 107.02 79.79 37.56
Asset qualityProvisioning / Avg. loan outstanding 1.48 1.35 1.32
CapitalisationTotal debt/net worth (times) 4.13 3.06 4.53Capital adequacy 21.59 30.12 23.46
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1 Annexures1.1 Loan purpose-wise outstanding as on August 11, 2010 .................... .............. ....... ....... 211.2 Human resource summary ..............................................................................................211.3 Asset quality .....................................................................................................................21
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