IFMR Trust Annual Report Final

Annual Report
2010 - 2011
Our mission is to ensure that every individual and every enterprise has complete access to financial services.
Contents
01
From the Chairperson
06 13
From the President
Our Investee Companies
21
People and Values
28
Financials

Financial inclusion is not a new goal for India and it has always been the stated aim of financial sector policy to seek to include four critical segments: project finance, small and medium enterprises, low-income households and farmers. More recently, infrastructure and municipal finance have been added to the list. I can think of three distinct phases in the Indian journey towards this goal. The first phase was pre 1994, before the arrival of the new-generation private sector Deposit taking Institutions (DIs). During this phase, post the nationalisation of DIs almost two decades earlier, the system was dominated by the government owned DIs that sought to achieve financial inclusion largely through branch based efforts, for small businesses, low-income households and farmers and through specialised Development Finance Institutions (DFIs), for project finance. While researchers (Pande and Burgess, 2005) found clear impact on poverty wherever branches were opened by these DIs, the impact on the overall challenge of financial inclusion was very limited. In addition, asset quality/solvency and cost to serve were the serious challenges associated with the model and even led to a few DIs ending up with a negative Net Worth. These solvency problems were however, not visible to their depositors since the DIs were largely government owned and were, almost automatically, recapitalised. Liquidity was also not much of a challenge during this period due to the limited nature of inter DI trading and liquidity transfers therefore largely taking place between various internal divisions of the DIs. For a variety of reasons, the efforts on DFI led project finance also did not make the desired level of progress. Post the 1991 liberalisation of the Indian economy, most of the DFIs eventually became insolvent and transformed themselves into full service DIs by raising capital through either commercial sources or recapitalisation by the government and for a period of time almost entirely ceased project finance activities. In the second phase post 1994, several new-generation private sector DIs were licensed and parallely there was the emergence of high-quality institutional equity market infrastructure (SEBI, NSE, NSDL) coupled with the entry of Foreign Institutional Investors (FIIs). As a direct consequence of these developments, there were some improvements on the inclusion front,
Pre
Dominated by government owned DIs
1994:
Post
Emergence of high-quality institutional equity market infrastructure and Foreign Institutional Investors
01
1994:
IFMR Trust Annual Report 2010 - 2011
particularly for middle-income households for products such as home and two-wheeler loans offered to them through a combination of branch based efforts and a few specialised intermediaries, as well as for larger companies seeking equity finance directly through capital markets. There was however, very limited progress on the inclusion of low income households, small and medium enterprises and farmers. During this phase there were distinct improvements in asset quality and solvency of DIs on account of the fact that there were more DIs that were closer to the customer and some degree of inter DI transfer of assets created visibility on asset quality. However, for this very reason and because of the fact that the government was no longer the sole owner of all the large DIs, there was a definite increase in the risk of liquidity and solvency shocks.
Late
90s:
The third phase started in the late nineties and has seen the emergence of specialised Non-Deposit Taking Institutions (NDIs) focussing on financial inclusion. They have started to make contributions to inclusion for various segments including short-term liquidity needs of low-income households through jewel loans and microfinance; second-hand vehicle finance and other kinds of equipment and commercial vehicle finance at the retail end of the spectrum; and debt finance for infrastructure and distressed assets at the wholesale end. These NDIs have largely accessed liquidity via the DIs with some access to debt-capital markets and have brought to bear additional equity capital of their own to cushion the DIs against possible credit risks arising from these less familiar businesses. With the exception of asset problems arising out of the challenge posed by the Andhra Pradesh government to the RBI on the regulation of financial institutions (both DIs and NDIs), the quality of assets originated by these specialised NDIs has been consistently strong. This approach, even though narrowly product-focussed, seems promising and was also underscored by RBIs Narasimhan Committee in 1998. However, during this period for some reason, official policy seems to have become considerably more hawkish towards these specialised NDIs viewing them as competitors of DIs instead of, as had been originally envisioned by the Narasimhan Committee, as extenders of the outreach that DIs could provide on their own and as innovators and risk takers that would cushion
Emergence of specialised NDIs
02
the DIs from credit losses and costs arising from these newer businesses, through their additional capital and their much lower-cost delivery structure. Rather than encourage the deployment of additional capital by these NDIs and the naturally emerging specialisation in roles between DIs and NDIs, policy seems much more supportive of direct efforts by DIs (through owned branch networks or agents who dont have capital at risk) almost to the point of compelling them to do this, even though the rising tide of non-performing assets amongst the DIs, particularly in the priority sectors and the failure of the no-frills savings accounts to take off, seems to challenge the wisdom of such an approach and harks back to the first, pre-1994, phase of this journey. In my view, this approach is not only not serving the interests of high-quality financial inclusion but is also potentially building-up a non-performing asset bubble even in systemically important DIs that may become too large for fresh rounds of recapitalisations and farm-loan waivers by the central government to be feasible. This could therefore start to weaken systemic stability because the institutions at risk will no longer be small Regional Rural Banks and Cooperative Banks, as in the past, but large systemically important DIs. The third phase has also seen the emergence of another set of very important phenomena - the increase in the use of non-branch channels such as ATMs for cash and non-cash channels for payments (credit cards and electronic transfers) and integrated customer level sales channels for multiple financial products (bancassurance, Business Correspondents). These trends, which are currently in their early stages, coupled with efforts such as the Universal Identity (Aadhaar), have the potential, over time, to bring about some fundamental change in the very architecture of financial services and their regulation. In my view, all of these experiences and concerns need to be borne in mind as we think ahead on the directions we should pursue if we want to significantly impact inclusion while ensuring that depositor protection, systemic stability and national growth objectives are not compromised. We must not repeat phase one mistakes or fail to capitalise on the momentum of phase three. It seems clear to me that issues such as customer protection are going to become more and more important even while we are pursuing financial inclusion goals. And, while the country definitely needs to improve 03
outreach in a manner that achieves these objectives, it also needs to ensure that there is the rise of very large financial institutions that are equal to the task of meeting the project, infrastructure and municipal finance needs of one of the fastest growing economies in the world while simultaneously ensuring systemic stability. IFMR Trusts (the Trust) goal has been to identify and make progress on directions that make access to financial services universal but do not compromise systemic stability. The Trust has taken the carefully considered view that the only way to do this is to build on the separate natural strengths of DIs and specialised NDIs. In the Trusts view the DIs need to grow into directly regulated, very transparent, very large institutions while the NDIs need to proliferate with regulatory oversight coming not from the regulator directly, but indirectly from the DIs and the capital markets. One of the goals that the Trust has set for itself has been to demonstrate that NDIs that simultaneously meet the goals of extremely low-cost financial inclusion and very high-quality of customer protection are not merely a utopian ideal but are indeed feasible to build and operate. Since 2008, the Trust team has made excellent progress on this goal. Through IFMR Rural Finance and its Kshetriya Gramin Financial Services (KGFS) companies, they have delivered on a new approach to origination that takes a Wealth Management approach (rather than a product-selling approach) and yet keeps costs low by bringing to bear cutting-edge technologies and superior training of locally hired staff. This approach tightly customises a portfolio of financial products for a household depending on its unique needs and in the process, transfers complexity from the household to the provider while holding the provider responsible for the quality of guidance and the appropriateness of the products offered to the household on a longer term basis. On the issue of provision of liquidity from the DIs to the NDIs, while maintaining enhanced oversight of the NDIs, the view that the Trust has taken is that there is a need for large national level bridge institutions that focus entirely on linking the myriad NDIs that are necessary for financial inclusion with the large DIs and capital markets and effectively transmit systematic
Since
2008
the Trust has demonstrated that it is feasible for NDIs to simultaneously meet the goals of extremely low-cost financial inclusion and very high quality of customer protection
04
risk and liquidity, while retaining idiosyncratic risk with the original NDIs. Towards this goal, through IFMR Capital, they have made important contributions towards demonstrating the manner in which large volumes of liquidity can be provided from DIs and capital markets to NDIs and have innovated several products that enable this liquidity transfer to happen smoothly and without moral hazard. The Trust has also contributed strongly to the emerging dialogue on national regulatory systems with regard to customer protection and to the direction in which the regulation of DIs and NDIs must proceed. I want to wish the team the very best in their journey ahead.
Nachiket Mor
05
From the President

The mission of IFMR Trust is to ensure that every individual and every enterprise has complete access to financial services. I take this opportunity to share our progress towards the mission. In order to achieve and sustain the mission, it is our belief that the three pillars of the Indian financial system have to be significantly strengthened: Origination, Risk Transmission and Risk Aggregation. Within these three pillars, we have chosen to directly focus more on Origination and Risk Transmission while staying broadly engaged on the Risk Aggregation issues. I briefly summarise our progress so far under each pillar below:
Origination includes all the customer facing functions across various financial services It is our belief that good origination follows a Wealth Management approach with the customer.
1. Origination 1.1: The IFMR Trust Vision for Origination: This pillar includes all the customer facing functions across various financial services - be it underwriting a loan, selling/settling an insurance policy or accepting savings/money market fund deposits. It is our belief that good origination follows a Wealth Management approach with the customer. The key elements of this approach are: 1. A deep understanding of the circumstances and aspirations of each household; 2. An ability to execute a customised financial plan for every household, of which products are the instruments to do so; 3. Origination processes that are characterised by the Jonathan Morduch tests of continuity, reliability, flexibility and convenience; 4. All success metrics of the originator to be linked to financial wellbeing of the customer household, including ex-post liability for poor outcomes that result from mis-sale of financial services; 5. Originator to deploy capital against associated credit, market and operational risks even when performing the role of an agent for a national entity; 6. Originator to be local in character with a population served not exceeding 5 million individuals (typically two to three districts of the country); 7. Operations to be branch based with a strong physical presence, supported by very high levels of automation and technology to keep costs low. 1.2: Strategy: Our key intervention here is the development and replication of the Kshetriya Gramin Financial Services (KGFS) model as the gold standard of
06
high-quality origination. In the process of building out the KGFS, we will engage with the practical and regulatory barriers that are constraints. We will put in the public domain all our learning associated with this process. Through advocacy, we will participate actively in the process of re-defining the standards and expectations of an originator. While KGFS Capital Partners will own a set of KGFS directly; through IFMR Rural Finance, we expect to work with a wide variety of institutions to replicate the KGFS model. We estimate that the country needs at least 300 KGFS-type entities. In addition, we will continue to provide product design and other forms of support to other originators (such as Microfinance Institutions, Regional Rural Banks, Cooperative Banks, Local Area Banks, Housing Finance Companies, Business Correspondents, Business Facilitators, SME focussed Non-Bank Finance Companies) recognising that in order to serve under-banked populations a multiplicity of approaches would be needed, not just the KGFS model. 1.3: Progress to date: The key milestones on this function to date are: Implementation of the KGFS model in three distinct regions of Tamil Nadu, Orissa and Uttarakhand with a network of 106 branches serving about 1415 villages and a client base of 150,000. Articulating and implementing the Wealth Management approach on the ground. We have overcome the perception that while being a worthy goal, the execution of this approach is not possible at scale. We have addressed this through codification of the process and building back-end diagnostic capability that aids the wealth managers to do their roles. Today, across all 106 KGFS branches, Wealth Managers practise their daily ritual of discussing a customer case, are able to understand and share with the customer a financial wellbeing strategy based on the Plan-Grow-Protect-Diversify framework and take moral responsibility for the customers financial wellbeing. We have demonstrated the validity of the business model. A significant cohort of branches across all three regions has achieved break-even and the path to the entitys profitability is visible. This is an
Our key intervention here is the development and replication of the Kshetriya Gramin Financial Services (KGFS) model as the gold standard of high-quality origination.
07
As a direct consequence of our work with the PFRDA, they have formulated the Aggregator guidelines.
important pre-condition for replication. We have built out a product suite that is more complete than anything offered by a rural financial institution to date. The product range today includes unsecured and secured loans (for households and businesses), insurance (life, personal accident, and livestock), pensions, and remittances. Any interested originator can leverage this product development effort. More broadly, we have brought to the fore the need to take a demand-centric approach to financial inclusion. Through a variety of research projects that we have supported and through incubation support to research institutions such as the Centre for Micro Finance, the Centre for Innovations in Financial Design and Inner Worlds, there is a lot of attention to the demand side issues. We have had good success with the Pension Funds Regulatory and Development Authority (PFRDA) in persuading them of the validity of the Accredited Intermediary (AI) model as an approach to origination for pension products. As a direct consequence of our work with them, they have formulated the Aggregator guidelines. As of March 31, 2011, more than 800,000 customers were enrolled under the New Pension SchemeLite through various Aggregators. We have built a strategic partnership with the State Bank of India (SBI) with a view to impact their own origination strategy in the long-term. In the short-term, we have worked with them to refine their BC/BF models. We have incubated IFMR Mezzanine to increase the base of local high-quality originators in the country. 1.4: Key priorities for the future: We need to build regulatory support for the notion of specialised high-quality originators or Accredited Intermediaries (AIs). AIs can be of multiple legal forms, but will have adequate operating capability and an ability to commit capital to the relevant Financial Institution that they partner with. The current regulatory/policy framework is aligned to direct large aggregators to originate directly/through remote operations rather than to partner with specialised originators who are able to deploy risk capital. Achieving regulatory clarity and certainty of frameworks for non-bank originators like KGFS, such that a unified front-end is feasible for the customer. Currently, multiple regulatory frameworks have resulted
As of March 31, 2011, more than
800,000
customers were enrolled under the New Pension SchemeLite through various Aggregators
08
From the President
in restrictions on services that can be offered at the front-end. We are pursuing the Accredited Intermediary approach with the Securities Exchange Board of India (SEBI) for origination of money market and index funds. Entering into strategic alliances with domestic financial institutions and others to take forward the KGFS replication in a non-linear manner. Solving the product gap for a high-quality short-term savings product. Product/model development for rural infrastructure (roads, sanitation) finance. Defining and building regulatory support for the notion of originators responsible for financial wellbeing with ex-post liability. 2. Risk Transmission 2.1: The IFMR Trust vision for transmission: Here, the attempt is to ensure that systematic risk (defaults due to exogenous factors such as rainfall failure and political events, for example) can be transferred in an orderly manner from local originators to national aggregators, who are much better placed to diversify these risks across multiple originators and geographies. This is an important complement to the notion of local originators so that their access to liquidity can be smooth without compromising on the principles of sound origination. Our vision is to create infrastructure that will enable such risk transmission as well as create a conducive policy environment for the same. For most other products while this is relatively straight forward through the use of technology directly at the level of the originator, for transmission of credit risk since, in our thinking, the local originator is expected to continue to hold on to idiosyncratic risk and only shed systematic risk, a special effort needs to be launched to address the challenges of credit risk transmission. 2.2: Strategy: We have incubated IFMR Capital as a vehicle in order to enable systematic credit risk transmission for local originators such as KGFS and Microfinance Institutions (MFIs) to begin with. We will grow IFMR Capital to be a significant-sized Financial Institution that can provide risk transmission to a large number of originators across diverse asset classes: microfinance, low-income housing finance, small business finance and others.
Our vision is to create infrastructure that will enable risk transmission as well as create a conducive policy environment for the same
We will grow IFMR Capital to be a significant-sized Financial Institution that can provide risk transmission to a large number of originators across diverse asset classes
09
In our advocacy work, we are opposed to the notion of warehousing of systematic risks by small, under-capitalised entities. For instance, we have expressed concern regarding the proposed legislation to permit deposit taking for small NGOs in the country. We will continue to advance this position. 2.3: Progress to date: IFMR Capital Through its work, IFMR Capital has been successful in providing capital markets access to 15 small and medium sized MFIs in India and unlocked cumulative debt of INR 8.00 billion for these entities. IFMR Capital has received a first-time credit rating of A (long term) and is a profitable entity (INR 16.0 million PAT in 2010-2011). The underwriting guidelines developed by IFMR Capital are rapidly emerging as a robust framework to assess MFI risk. We have developed a number of capital market products that allows originators to transfer risk. This includes securitisation for MFIs, multi-originator securitisation for small MFIs, Non-Convertible Debentures and rated portfolio assignments. We have diversified the base of investors in MFIs by bringing in Mutual Funds, Non-Banks and Private Wealth. This creates a buffer against liquidity shocks and increases the intensity of market supervision. We have participated in shaping regulation for securitisation and the listing of securitised debt. Savings, Insurance and Derivatives
Through the work of the Agricultural Terminal Markets Network Enterprise (ATMNE), we have developed a model for small farmers to access national commodity spot markets
10
- Through the work of the Agricultural Terminal Markets Network Enterprise (ATMNE), we have developed a model for small farmers to access national commodity spot markets to manage post-harvest commodity price risk. 2.4: Key priorities for the future: For IFMR Capital Increasing the scope of work to include originators beyond MFIs to also include originators of other products such as home improvement loans, housing loans, small business working capital and asset-backed finance (gold, light commercial vehicles). Ensuring that the policy framework for securitisation is enabling.
From the President
Savings, Insurance and Derivatives Expanding the scope of the risk transmission work into insurance markets to understand barriers to reinsurance in life and non-life products. Developing products for interest rate risk management for local originators. Strengthening the Business Correspondent framework so that the case for small originators taking deposits on their own is weakened. Product development to improve ability of farmers and farm enterprises to transfer price and weather risk.
3. Risk Aggregation: This pillar entails the presence of a set of well-capitalised, well-managed, well-supervised and large financial institutions (Commercial Banks, Asset Management Companies, Insurance Companies) that can manage risk effectively. In the absence of this, the ability of originators to access liquidity smoothly is constrained. This pillar largely speaks to the depth of the financial sector and therefore its capacity to intermediate. Since this is an issue that many groups and institutions are engaged with, we have felt that our comparative advantage is low here. However, through a proposed Summer Conference series commencing in August 2011, we will shine the light on issues to do with adequacy and performance of Aggregators. We will engage with a group of financial market researchers in India and abroad who are tracking this issue over a long-term.
Risk aggregation entails the presence of a set of well-capitalised, well-managed, well-supervised and large financial institutions that can manage risk effectively
I hope the report was successful in conveying my sense that we have unique opportunities as a country to make rapid advances on financial inclusion without in any way compromising the stability of our financial system, some of which we are leveraging and others where we are dithering. At IFMR Trust, we remain deeply committed to participate in and accelerate this process. Success here is critical to realising the national goal of growth with inclusion.
11
I want to thank the Governing Council of IFMR Trust for their constant support and guidance. I also thank the team at IFMR Trust and our investee companies for bringing deep expertise and commitment to the achievement of our mission.
Bindu Ananth
12

IFMR Capital IFMR Capital connects high-quality originators so that they may deepen their presence and provide access to financial services to millions of under-served households. IFMR Capital does this by, (i) identifying high-quality originators using its stringent Underwriting Framework; (ii) catalysing debt capital markets by investing its capital and providing financial guarantees; (iii) using financial structuring expertise to achieve efficient pricing for clients and (iv) by utilising financial tools such as repackaging, securitisation, and credit enhancement to tailor products to match the risk profiles of different categories of investors. IFMR Capital commenced the last financial year with a commitment to scale up its impact, strengthen its risk management and develop new products which would provide complete debt financing solutions. IFMR Capital was able to achieve significant progress in these objectives, despite the microfinance sector facing significant headwinds. Presented below is a snapshot, capturing IFMR Capitals achievements over the past year.
Volume of Transactions
Total volume of Debt
INR 168mn 11
INR 951mn 313
INR 6045mn 945
157
638
5100
2009
2010 Loans to Originate
2011 Securitisation
13
Geographic Distribution of Portfolio
Asirvad Micro Finance Cashpor Micro Credit Capital Trust Disha Micro Finance Equitas Micro Finance Grama Vidiyal Micro Finance Grameen Financial Services Mimoza Enterprises Finance Pvt. Ltd. Pudhuaaru Kshetriya Gramin Financial Services Sahayata Microfinance Samasta Microfinance Satin Creditcare Sonata Shalom Microfinance Suryoday Micro Finance SV CreditlinePrivate Limited Utkarsh Micro Finance VistaarLivelihood Finance Janalakshmi Financial Services Ujjivan
14
Investor Classes 2009
2010
2011
Banks Mutual Funds NBFCs Private Wealth Offshore Funds
IFMR Rural Finance IFMR Rural Finance has developed the Kshetriya Gramin Financial Services (KGFS) model. These geographically focused entities, covering a population of around five million, provide customised financial products and services that are relevant to the customers in an efficient and convenient manner through a network of branches in remote rural areas. IFMR Rural Finance has, over the years, developed several innovative financial products spanning assets, investments, insurance and remittances. In the last financial year, KGFS expanded its product portfolio with the launch of Livestock and Housing Finance products; NPS-Lite (National Pension Scheme - Pension Fund Regulatory and Development Authority (PFRDA)); Group Term Life Insurance and Shopkeepers Insurance Policy (Sahastradhara KGFS); and International Remittance and Domestic Remittance. The Core Banking Solution (CBS) is used in KGFS Branches to capture and update transaction data on a real-time basis. The Fidelity Information Services (FIS) Core Banking Solution (CBS) was operationalised on April 1, 2010. All KGFS Branches access the Fidelity profile on a real-time basis. A full Customer Management System (CMS) acts as an online centralised warehouse of all customer data. The CMS is a comprehensive enrollment and transaction processing system, developed in-house and supports multi-product and multi-tenant architecture. It provides interfaces to integrate with other service providers
15
systems like Insurance and Computer Age Management Systems (CAMS). Forms and transactions are generated and submitted electronically to reduce paper usage. The Learning Management System (LMS) platform is a one-stop shop for all learning and content management needs of KGFS. This platform has been developed using open source tools. The Centralised Audit System (CAS) is an online system developed using open source tools, which captures the audit findings of KGFS Branches in a structured manner. It tracks audit issues as per the scheduled routine and captures them in a format that renders data warehousing easy and the same can be used for analysis at a later stage.
PRODUCT PORTFOLIO
Asset Products
Liability and Investment Products
Joint Liability Group Loan Emergency Loan Jewel Loan Housing Finance Retailer Loan (Working Capital and Term Loan) Gold Plan Salary Loan Livestock Loan
Personal Accident Insurance Term Life Insurance Livestock Insurance Money Market Mutual Funds National Pension Scheme-Lite Gold Coin Scheme
16
KGFS Capital Partners (KCP) KGFS Capital Partners (KCP) invests in Kshetriya Gramin Financial Services (KGFS) companies. KCP owns three KGFS - Pudhuaaru KGFS, Dhanei KGFS and Sahastradhara KGFS. As of March 2011, all three KGFS together had an extensive network of 104 branches with more than 150,000 enrolled customers, and 481 staff members, including 389 Wealth Managers. KGFS ended the financial year with an asset portfolio of INR 560 million, over 50,000 borrowers and more than 76,000 customers availing of non-asset products. KGFS added four new funding partners, both banks and non-banks, raising a total of INR 536 million, INR 337 million as senior debt and INR 66 million through portfolio sale. Pudhuaaru KGFS also completed its first securitisation transaction worth INR 133 million. It received a rating of alpha minus (-) from M-CRIL and LBB from ICRA.
Sahastradhara
KGFS under management
Dhanei
Pudhuaaru
17
Geographic Spread
Sahastradhara
Tehri Garhwal villages
682
Dhanei
Ganjam villages
614
Pudhuaaru
Thanjavur villages
119
18
IFMR Mezzanine IFMR Mezzanine believes that access to adequate long-term risk capital can provide a fillip to existing players that have strong systems and processes, but are unable to attract equity or capital from mainstream institutions for reasons such as legal structure or size. IFMR Mezzanine focuses on identifying such institutions in the microfinance sector, needing access to risk capital but unable to access it, by providing access through instruments like deeply subordinated debt. In the past year, IFMR Mezzanine conducted preliminary due diligence on over fifty MFIs including Societies, NBFCs and Section 25 companies. The company also completed its first investment in an NBFC-MFI based in Bihar, Saija Finance Private Limited. IFMR Ventures IFMR Ventures is focused on enabling access to finance for Small, Medium and Micro Enterprises. Small, Medium and Micro Enterprises (SME) viability is hard to establish and risks are hard to quantify. There are a set of external risks that can threaten the viability of a well-run SME. Lenders are usually deterred by the high exposure of SMEs to these risks. As the primary reason behind the lack of flow of debt funds into SMEs is their exposure to risks, a suitable solution to this problem would entail a set of measures which address these external risks that the SMEs face. In order to enable that, IFMR Ventures is incubating multiple sector focussed supply chain companies, called Network Enterprises (NEs), which are looking at SMEs from a supply chain lens and are designing solutions which address the external risks faced by the SMEs in that sector. Through different pilots across India, these NEs are trying to validate the business model around the solutions.
19
Presented below are the highlights of the year for IFMR Ventures' incubatee companies.
Focus Sectors
Agricultural Terminal Markets AgriNE
Rural Energy RENE
Dairy DNE
Rural Tourism RTNE
Highlights
Agri NE: 1000 Farmer Customers. 10 Procurement Agents. Total Volume (Total of both exchange traded volume and volume traded off-exchange) INR 28,910,594 and 812 Metric Tonnes. RENE: 30 agents network built in Thanjavur. 19 innovative product companies and a total of 30 products listed on goScale (www.goscale.in).
DNE: Facilitated cattle insurance product development and sale to 600 farmers. 25 village level entrepreneur networks built in Tamil Nadu.
RTNE: 500 home stays. 15 active agents. Total room nights sold: 3157. Total Value of Sales facilitated: INR 6,764,787.
20
People and Values

Our Values 1. We have a deep belief in the power of financial markets to positively impact wealth and wellbeing. Individuals should have the freedom to access financial markets independently. We strongly believe in decision making capabilities of individuals using market information. 2. We will bring a sense of ownership and urgency towards every aspect of our work and to the achievement of our mission. Our work is important and the time to act is NOW. Our collective mission to ensure complete access to finance to every individual and every enterprise will be realised through our collective efforts and each of us has a responsible role to play. We will not rest until our mission is accomplished. 3. We will bring deep expertise and excellence to bear in everything that we do. We recognise the importance of investing in our skills. Our work has a deep impact in the lives of many households. Our expert advice will positively impact their lives. We will continuously sharpen our skills to stay ahead of the curve and set benchmarks for others to follow. 4. We recognise that profitability is essential to the achievement of our mission. We recognise that if every individual and every enterprise has to have complete access to financial services that are continuous and reliable, then these services must be sustainable in the long term. Governing Council Nachiket Mor Nachiket Mor is a Yale World Fellow; has a Ph.D. in Economics from the University of Pennsylvania with a specialisation in Finance from the Wharton School; an MBA from the Indian Institute of Management, Ahmedabad; and an undergraduate degree in Physics from the Mumbai University. While completing his Ph.D., he was associated with a Philadelphia based hedge fund (Quantitative Financial Strategies) for three years. He has worked with ICICI from 1987 to 2007 in a variety of jobs, including Corporate Planning, Project Finance, Rural Finance and Treasury and was a member of its Board of Directors from 2001 to 2007. From October 2007 to August 2010, he assisted ICICI in setting up a philanthropic foundation, the ICICI Foundation for 21
Inclusive Growth and served as its founding President. He is now the Chairman of the Boards of Sughavazhvu Health Care, CARE India and IFMR Trust and is closely involved in the evolution of these three organisations in India. He is currently also an independent member of a few other Boards including CRISIL, IKP Trust and IKP Centre for Technologies in Public Health and the Institute for Financial Management and Research. He was a member of three recent Central Government Committees: the High Powered Expert Committee on Urban Infrastructure, the Technical Advisory Group on Unique Projects and the Committee to Review Implementation of Informal Sector Pension. In the past he has served as the Chairman of the Fixed Income Money Market and Derivatives Association of India for two years and as a Board Member of Wipro Limited for five years. Deidra Wager Deidra Wager, Executive Vice President, Starbucks Coffee Company, retired in 2005 to pursue an interest in non-profit work and sustainable agriculture. She is on the board of CARE USA and is a founding member and board member of The Lacewing Foundation dedicated to girls' education and maternal health. She is also on the board of YouthCare, a Seattle-based agency serving homeless youth. During her 13-year tenure at Starbucks, Ms. Wager was instrumental in developing the company's operating infrastructure. She has a consulting practice specialising in retail strategy development and implementation. Dr. Tilman Ehrbeck Dr. Tilman Ehrbeck joined CGAP as its CEO in October 2010. Prior to CGAP, Dr. Ehrbeck was a partner with management consulting firm McKinsey & Company, where he held a series of leadership positions in the firms global Banking & Securities and Healthcare Payor & Provider Practices. He has worked in Africa, Asia, Europe, and North America. He was part of the leadership of the firms Indian operations in 20052009. 22
People and Values
Over the past 10 years, he has advised a number of governments, microfinance networks, foundations, and commercial players on a variety of financial inclusion issues ranging from new products and services aimed at better meeting underlying end-user needs, to new business models significantly lowering operating costs, to enabling infrastructure and policy interventions. Dr. Ehrbeck holds a Ph.D. in Economics from the European University Institute, the graduate school and research centre sponsored by the European Union, and an undergraduate degree from the University of Hamburg. W Bowman Cutter Bowman Cutter joined the Roosevelt Institute in New York City on October 1, 2009 after retiring as a Managing Director from Warburg Pincus. Prior to Warburg Pincus, Mr. Cutter came directly from a senior economic policy role in the Administration of President William Clinton. He has served with distinction during two Democratic presidencies: as Director of the National Economic Council and Deputy Assistant to the President from 1992 to 1996 during the Clinton Presidency; and as Executive Director for Budget at the Office of Management and Budget (OMB) from 1976 to 1981 during the Carter Presidency. Mr. Cutter also served as leader of the OMB transition team after the election of President Obama. From 1981 to 1993 Mr. Cutter was Vice Chairman and Managing Partner at Coopers & Lybrand, the large, decentralised global accounting and consulting firm that subsequently merged with Price Waterhouse. Mr. Cutter's central public policy interest has been the development and management of economic policy, and in particular the issues related to economic growth, development, and the alleviation of poverty. He has worked extensively with the World Bank; he is currently the Chairman of the Board of CARE, and is also a founder and current Chairman of MicroVest. Mr. Cutter holds degrees from Harvard University, the Woodrow Wilson School at Princeton University, and Oxford University, where he was a Rhodes Scholar. He is a member of the Executive Committee and immediate past Co-chairman of
23
the Committee for Economic Development, a Board member of Resources for the Future; and a Board member of the Russell Sage Foundation. He is also a member of the New York Council on Foreign Relations. H N Sinor H.N. Sinor is a graduate in Commerce and Law. His illustrious career has spanned 43 years in the banking sector. He has had exposure to the working of both public sector and private sector banks and has hence, had the experience of both the phases of nationalisation and liberalisation in this sector. He started his career in 1965 with Central Bank of India and in 1969 moved to Union Bank of India where he worked for 28 years. In 1996, he was appointed as Executive Director of Central Bank of India. After serving for 7 months in Central Bank of India, he moved to ICICI Bank in July 1997 as Executive Director. On June 1, 1998, he took over as Managing Director & CEO of ICICI Bank. After the merger of ICICI and ICICI Bank in 2002, he was the Joint Managing Director of ICICI Bank Limited and retired from the services of the Bank w.e.f. May 31, 2003. Thereafter, he joined Indian Banks Association as Chief Executive on June 1, 2003 and held this position till July 31, 2008. Currently he is the Chief Executive of the Association of Mutual Funds in India, to which post he was appointed on February 25, 2010. Bindu Ananth Bindu Ananth is currently the President of IFMR Trust and has held that position since January 2008. In this capacity, she also chairs the Boards of all investee companies of IFMR Trust. Prior to this, Ms. Ananth worked in ICICI Banks microfinance team between 2001 and 2005 and was Head of the new product development team within the Rural Banking Group in 2007. She has an under-graduate degree in Economics from Madras University and masters degrees from the Institute of Rural Management (IRMA) and Harvard Universitys John. F. Kennedy School of Government. She is a Fellow of the Global Economic Society.
24
People and Values
Ms. Ananth has published in the Economic and Political Weekly, OECD Trade Paper Series and the Small Enterprise Development Journal. She is also a member of the FICCI taskforce on financial inclusion. Our Team We are a team of professionals with a deep belief in the transformational impact of finance and well-functioning finance markets, particularly for low-income households.
25
IFMR Trust Executive Group
Bindu Ananth Puneet Gupta Puneet Gupta has been working with IFMR Trust since October 2007. Prior to his joining IFMR Trust, Mr. Gupta worked for ICICI Bank for a period of 6 years in the areas of education, microfinance and rural finance. He was responsible for identification and development of new channels and products for delivering microfinance and financial services to rural households. He was also involved in developing models for attracting private equity investment in the microfinance sector. Mr. Gupta is a commerce graduate with a masters degree in Rural Management from Institute of Rural Management, Anand (India). Sucharita Mukherjee Sucharita Mukherjee led the origination and structuring effort in credit derivatives and structured finance for corporates at Morgan Stanley in London before she joined IFMR Trust. Her work included developing innovative asset-backed financing structures in such areas as intellectual property and health-care receivables. She was also part of the credit derivatives team at Deutsche Bank in London, structuring credit-derivatives-linked repackaged investments for financial institutions. Ms. Mukherjee holds an MBA from IIM, Ahmadabad.
26
People and Values
S G Anil Kumar Anil Kumar spearheads the establishment of a nationwide network of Regional Financial Institutions called Kshetriya Gramin Financial Services. Mr. Kumar has been in the Rural and Microfinance space since 2005 as Head of Micro Finance Institution Development Team in ICICI Bank prior to this assignment. This team has been behind the creation of a footprint of over 200 MFIs across the country for ICICI bank. Mr Kumar holds a masters degree in Management from Asian Institute of Management, Manila, Philippines, and a bachelors degree from Osmania University, Hyderabad. Dave Wallack Dave Wallack served as a political campaign operative and consultant for dozens of political candidates throughout the United States of America and worked as an agent of several committees of the national Democratic Party in the United States of America. After completing his MBA he advised technology and entertainment ventures, nonprofit organizations, and political organizations on organizational and leadership development. Mr. Wallack earned his MBA from Stanford University after completing graduate study in Demography and Population Studies at Georgetown University.
27
Financials
Auditors Report to the Trustees of IFMR Trust 1. We have audited the attached Balance Sheet of IFMR TRUST (the Trust) as of March 31, 2011, the Profit and Loss Account and the Cash Flow Statement of the Trust for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Trusts Management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. We report that: (a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. (b) In our opinion, proper books of account as required by law have been kept by the Trust so far as it appears from our examination of those books. (c) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account. (d) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards issued by the Institute of Chartered Accountants of India. (e) In our opinion and to the best of our information and according to the explanations given to us, the said accounts give a true and fair view in conformity with the accounting principles generally accepted in India:
28
(i)
In the case of the Balance Sheet, of the state of affairs of the Trust as of March 31, 2011
(ii)
In the case of the Profit and Loss Account, of the loss of the Trust for the year ended on that date and
(iii)
In the case of the Cash Flow Statement, of the cash flows of the Trust for the year ended on that date.
For DELOITTE HASKINS & SELLS Chartered Accountants (Registration No. 008072S) Bhavani Balasubramanian Partner (Membership No. 22156) Place: Chennai Date: June 1, 2011
29
IFMR Trust Balance Sheet as of March 31, 2011 Amount in INR Schedule As of March 31, 2011 As of March 31, 2010
I.
SOURCES OF FUNDS General fund Loan funds Unsecured loan Term loan from bank (Refer Note No.3.2 of Schedule 12) Revocable grants from bank (Refer Note No.3.2 of Schedule 12) Total 1,000 1,000
1,500,000,000
1,500,000,000
564,628,532
564,628,532
2,064,629,532
2,064,629,532
II.
APPLICATION OF FUNDS Fixed assets Gross block Less: Accumulated depreciation Net block Capital advances Investments Advance subscription towards proposed investment in equity shares (Refer Note 3.1 of Schedule 12) Deferred tax ssset (Refer Note 3.10 of Schedule 12) Current assets, loans and advances Cash and bank balances Loans and advances 4 5 89,926,137 355,385,590 445,311,727 Less: Current liabilities and provisions Current liabilities Provisions 179,979,288 458,982,354 638,961,642 2 1 88,892,959 70,024,483 18,868,476 1,093,637,831 33,137,653 12,917,352 20,220,301 30,481,553 811,091,459
509,396,801
453,632,609
6 7
228,346,612 1,635,000 229,981,612
23,921,702 1,270,000 25,191,702 613,769,940 135,433,670 2,064,629,532
Net current assets Profit and loss account Total Notes forming part of accounts 12
215,330,115 227,396,309 2,064,629,532
30
Financials
Schedules referred to above form an integral part of this Balance Sheet In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants For and on behalf of IFMR Trust
Bhavani Balasubramanian Partner Place: Chennai Date: June 1, 2011
Bindu Ananth President
K.R. Chandra Vice President-Finance
31
IFMR TRUST Profit and Loss Account for the year ended March 31, 2011 Amount in INR Schedule For the year ended March 31, 2011 For the year ended March 31, 2010
INCOME Interest on loans (CY TDS INR 824,180 Previous Year INR 6,242,290) Interest on fixed deposits with bank (CY TDS INR 557,515 Previous Year INR 5,347,952) Interest on investments Other income Total EXPENDITURE Staff costs Administrative and other expenses Interest Depreciation Total Loss for the year Taxation -Current tax -Deferred tax -Fringe benefit tax relating to earlier years 9 10 11 43,458,553 84,793,295 161,072 57,347,250 185,760,170 (91,962,639) 29,654,625 172,429,965 19,598,139 7,995,015 229,677,744 (97,234,456) 8
12,031,485
58,944,229
5,355,034 756,189 75,654,823 93,797,531
50,295,306 23,203,752 132,443,287
11,348,213 46,051
11,394,264 (108,628,721) (26,804,949) (135,433,670)
Loss after tax Loss brought forward from previous year Loss carried to Balance Sheet Notes forming part of accounts 12
(91,962,639) (135,433,670) (227,396,309)
Schedules referred to above form an integral part of this Profit and Loss Account In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants For and on behalf of IFMR Trust
32
IFMR TRUST Cash Flow Statement for the year ended March 31, 2011 Amount in INR Particulars A. CASH FLOW FROM OPERATING ACTIVITIES: Loss for the year before Tax Adjustments for: Depreciation Interest on bank loan Interest income on fixed deposit Interest income on investments Interest income recognised in previous year charged off Loss on assets written off Profit on sale of investments Provision for gratuity Provisions for: Provision for doubtful loans and advances Provision for other advances considered doubtful Provision for diminution in value of investments Bad debts written off Amounts written back: Provision for bad debts provided in earlier years now written back Excess gratuity provision of earlier years written back Operating profit before working capital changes Adjustments for: Decrease in loans and advances Increase/(Decrease) in current liabilities and provisions Cash generated from operations Direct taxes - including fringe benefit taxes paid Net cash generated from operating activities B. CASH FLOW FROM INVESTING ACTIVITIES: Purchase of fixed assets (Net) Capital advances (asset) Investment in subsidiaries Investment in associates Investments - Others companies Other investments Subscription towards purchase of equity shares (Net) Advance received towards sale of shares Investment in deposits on lien (Net) Proceeds from/(Investment in) fixed deposits with banks (Net) Interest received - FD Interest received - Other investment Net cash used in investing activities (Continued on next page)
For the year ended March 31, 2011
For the year ended March 31, 2010
(91,962,639) 57,347,250 (5,355,034) (756,189) 896,614 (2,692,379) 365,000 3,725,857 6,847,271 4,096,240 456,187
(97,234,456) 7,995,015 19,554,506 (50,295,306) 3,008,573 34,362 69,486,085 25,092,200 4,904,771
(3,328,429) (30,360,251) 100,249,026 186,875 70,075,650 70,075,650
(18,699,302) (258,000) (36,411,552) 190,598,496 (12,319,025) 141,867,919 156,051 141,711,868
(25,364,777) 16,700,000 (13,350,033) (350,111,463) 203,192,328 33,600,000 8,074,150 730,994 (126,528,801)
(17,636,878) (30,481,553) (138,284,498) (49,000) (453,632,609) 328,000,000 (115,500,000) 75,146,859 (352,437,679)
33
IFMR TRUST Cash Flow Statement for the year ended March 31, 2011 Amount in INR Particulars For the year ended March 31, 2011 For the year ended March 31, 2010
C.
CASH FLOW FROM FINANCING ACTIVITIES: Repayment of borrowings Interest paid Net cash (used in)/generated from financing activities Net decrease in cash and cash equivalents (A+B+C) Opening balance of cash and cash equivalents Closing balance of cash and cash equivalents Reconciliation of cash and cash equivalents: Cash and cash equivalents as per Balance Sheet Less: Deposits maturing beyond a period of three months Closing balance of cash and cash equivalents as per Cash Flow Statement (56,453,151) 64,479,288 8,026,137 (300,205,479) (19,554,506) (319,759,985) (530,485,796) 594,965,084 64,479,288
89,926,137 81,900,000
179,979,288 115,500,000
8,026,137
64,479,288
In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants For and on behalf of IFMR Trust
34
IFMR TRUST
SCHEDULE OF FIXED ASSETS FOR THE YEAR ENDED March 31, 2011
Schedule 1
Gross block Assets Adjustments reclassified Deletions As of As of March 31,2011 April 1,2010 For the Assets Adjustments* year reclassified Depreciation Net block On As of As of As of deletions March 31,2011 March 31,2011 March 31,2010
Asset
As of April 1,2010
Additions
Tangible assets Furniture and fittings (880,706) 38,500 17,044,875 9,410,839 4,471,120 28,852 1,101,988 8,271,752 530,107 733,125 (19,786) -
7,314,239
2,940,207
(209,378) -
1,034,069 13,853,107
7,237,683 3,191,768
6,784,132 7,010,100
Computers*
16,420,939
662,436
Office equipments (1,491,177) 542,801 148,258 58,609 5,541 5,803,779 246,805 696,922 (23,287) 6,735
3,192,545
4,107,952
(1,538) -
918,902 206,867
4,884,877 335,934
2,945,740 387,808
Vehicles
536,066
Leasehold improvements 2,371,883 48,078,812 -
45,706,929
48,035,739
43,073
48,078,812
Intangible assets Software** 2,115 1,555,039 40,615 9,150,940
-5,673,864
3,479,191
351 -
5,932,726
Total
33,137,653 56,903,450
2,581,343 3,351,735 1,107,529 88,892,959 12,917,352 57,347,250 97,986 33,137,653 5,674,426 7,995,015
3,218,215 3,092,521 29,203 (210,916) 70,024,483 18,868,476 20,220,301 688,465 63,624 12,917,352 20,220,301 9,968,011
Previous year 15,642,437 19,148,241
* Adjustment to computer represents cost and accumulated depreciation of the assets transferred during the year to entities within the group.
** Adjustment to software represents service tax portion capitalised in earlier years, taken credit during the current year.
35
IFMR TRUST Schedules to the Balance Sheet as of March 31, 2011 Amount in INR As of March 31, 2011 2. Investments Investments unquoted (Long term - At cost): In fully paid-up equity shares of subsidiary companies: IFMR Capital Finance Private Limited (59,999,999 equity shares (PY 59,999,999 equity shares) of INR 10 each) IFMR Rural Finance Services Private Limited (Formerly IFMR Holdings Private Limited) (12,309,990 equity shares (PY 4,909,990 equity shares) of INR 10 each) Megha Holdings Private Limited (249,999 equity shares (PY 249,999 Equity Shares) of INR 10 each ) IFMR Mezzanine Finance Private Limited (1,000,000 equity shares (PY 400,000 Equity Shares) of INR 100 each) IFMR Finance Foundation (9,990 equity shares (PY 9,990 equity shares) of INR 10 each) IFMR Ventures India Private Limited (99,990 equity shares (PY 99,990 equity shares) of INR 10 each) Pudhuaaru Financial Services Private Limited (15,839,600 Equity Shares (PY 489,600 Equity Shares) of INR 10 each ) Pudhuaaru Kshetriya Gramin Financial Services (1,000 equity shares (PY 1,000 equity shares) of INR 100 each) Dhanei Kshetriya Gramin Services (1,000 equity shares (PY 1,000 Equity Shares) of INR 100 each) Sahastradhara Kshetriya Gramin Services (1,000 equity shares (PY 1,000 equity shares) of INR 100 each) NE Aqua Private Limited (9,990 equity shares (PY 9,990 equity shares) of INR 10 each ) 602,432,843 602,432,843 As of March 31, 2010
123,099,900
49,099,900
5,093,300
5,093,300
100,400,000
40,400,000
99,900
99,900
999,900
999,900
202,992,328
49,492,328
100,000
100,000
100,000
100,000
100,000
100,000
99,900
99,900
(Continued on next page)
36
IFMR TRUST Schedules to the Balance Sheet as of March 31, 2011 Amount in INR As of March 31, 2011 NE Crafts Apparel and Furnishings Company Private Limited (9,990 equity shares (PY 9,990 equity shares) of INR 10 each) NE Education Private Limited (9,990 equity shares (PY 9,990 equity shares) of INR 10 each ) NE Emerging Channels Services Private Limited (9,999 equity shares (PY 9,999 equity shares) of INR 10 each) Less: Provision for diminution (Refer Note no. 3.3 of Schedule 12) NE Green Power Private Limited (9,990 equity shares ( PY 9,990 equity shares) of INR 10 each ) NE Housing Company Private Limited* (NIL equity shares (PY 9,990 equity shares) of INR 10 each ) Less: Provision for diminution (Refer Note no. 3.3 of Schedule 12) NE Medicare Private Limited* (NIL equity shares (PY 9,990 equity shares) of INR 10 each ) Less: Provision for diminution (Refer Note no. 3.3 of Schedule 12) NE Milkrush Private Limited (9,990 equity shares (PY 9,990 equity shares) of INR 10 each ) NE Processed Foods Private Limited* (NIL equity shares (PY 9,990 equity shares) of INR 10 each ) NE Rural BPO Company Private Limited (9,990 equity shares (PY 9,990 equity shares) of INR 10 each ) Less: Provision for diminution (Refer Note no. 3.3 of Schedule 12) NE Rural Supply Chain Private Limited* (NIL equity shares (PY 9,990 equity shares) of INR 10 each ) NE Rural Tourism Private Limited (9,990 equity shares (PY 9,990 equity shares) of INR 10 each ) 99,900 99,990 (99,990) As of March 31, 2010
99,900
99,900
99,900
99,900
99,990
99,900
99,900
99,900
(99,900)
99,900
(99,900)
99,900
99,900
99,900
99,900
(99,900)
(99,900)
99,900
99,900
99,900

37
IFMR TRUST Schedules to the Balance Sheet as of March 31, 2011 Amount in INR As of March 31, 2011 NE Agri Services Private Limited (399,990 equity shares (PY 399,990 equity shares) of INR 10 each ) In fully paid-up equity shares of associates: IKP Center For Advancement in Agricultural Practices (4,900 equity shares (PY 4,900 equity shares) of INR 10 each) Grameen Capital India Limited (2,475,000 equity shares (PY 2,475,000 equity shares) of INR 10 each) In fully paid up shares of other companies: Aarusha Homes Private Limited (48,358 equity share (PY 48,358 equity shares) of INR 10 each) Desi Power (Kosi) Private Limited (3,198 preference shares (PY 3,198 preference shares) INR 100 each) Less: Provision for diminution (Refer Note no. 3.3 of Schedule 12) Financial Information and Network Operations Limited (500,000 equity shares (PY 500,000 equity shares) of INR 10 each) Education Initiatives Private Limited ^ (43,638 equity shares (PY 145,660 equity shares) of INR 1 each) In debentures of: Earthy Goods & Services Private Limited (91,(PY 91) 15% debentures of INR 100,000 each) Less: Provision for diminution (Refer Note no. 3.3 of Schedule 12) 1,750,000 483,580 483,580 3,999,900 As of March 31, 2010 3,999,900
49,000
49,000
24,750,000
24,750,000
1,750,000
(1,750,000)
(1,750,000)
5,000,000
5,000,000
5,991,497
19,999,118
15,985,000
15,985,000
(11,988,750)
3,996,250
(7,992,500)
7,992,500
Sandhi HandCrafts Private Limited # (47,(PY 47) 15% debentures of INR 100,000/- each) (40,(PY 40) 10% debentures of INR 100,000/- each) Less: Provision for diminution (Refer Note no. 3.3 of Schedule 12)
15,050,000
(15,050,000)
38
IFMR TRUST Schedules to the Balance Sheet as of March 31, 2011 Amount in INR As of March 31, 2011 Short term - Quoted: In mutual funds: Baroda Pioneer PSU Equity Fund Short term - Unquoted: Investment in loan portfolio of: Dhanei Kshetriya Gramin Services Sahastradhara Kshetriya Gramin Services As of March 31, 2010
2,000,000.00
5,275,223 6,074,810 1,093,637,831
811,091,459
* The Companies have gone into liquidation during the year 2010-2011 # Investment written off during the year ^ The Investee company has bought back 102,022 shares under a scheme of buy back
3. Advance subscription towards proposed investment in equity shares Advance for purchase of shares made (Refer Note 3.1 of Schedule 12) Less:- Amount considered doubtful 516,244,072 (6,847,271) 509,396,801 4. Cash and bank balances Cash and cheques on hand (Cheques on hand NIL (PY 99,000)) - in savings account - in deposit account 453,632,609 453,632,609
3,026,137 86,900,000 89,926,137
99,000 17,630,288 162,250,000 179,979,288
5. Loans and advances (Unsecured) considered good Advances recoverable in cash or in kind or for value to be received including advances to creditors Loans to group companies Loans to others Deposits Advance tax and tax deducted at source (Net of provision for tax) (Provision for tax - INR 5,714,051 (PY INR 5,714,051)
5,643,461 52,346,745 180,805,684 70,224,267 39,442,308
16,477,084 39,826,987 275,893,828 74,357,300 29,681,164

39
IFMR TRUST Schedules to the Balance Sheet as of March 31, 2011 Amount in INR As of March 31, 2011 Interest accrued but not due: - on loans given - on fixed deposits - on investments Amount recoverable towards remuneration Less: Remuneration payable to Trustees Considered doubtful Loans to others Less: Provision for doubtful advances (Refer Note no. 3.3 of Schedule 12) As of March 31, 2010
4,924,378 1,931,354 25,195 82,198 (40,000)
6,880,927
17,495,806 5,207,987 62,198 (20,000)
22,703,793
42,198
42,198
19,782,918 (19,782,918)
355,385,590
80,888,840 (80,888,840)
458,982,354
6. Current liabilities Sundry creditors Advance received towards sale of shares (Refer Note no.3.6 of Schedule 12) Other liabilities (Refer Note no. 3.11 of Schedule 12)
5,543,188 203,192,328
6,106,193
19,611,096 228,346,612
17,815,509 23,921,702
7. Provisions Provision for gratuity
1,635,000 1,635,000
1,270,000 1,270,000
Schedules referred to above form an integral part of this Balance Sheet In terms of our report attached Bhavani Balasubramanian Partner Place: Chennai Date: June 1, 2011 Bindu Ananth President K.R. Chandra Vice President-Finance
40
IFMR TRUST Schedules to the profit and loss account for the year ended March 31, 2011 Amount in INR As of March 31, 2011 8. Other income Excess provision for gratuity made in earlier years, written back Excess provision for doubtful advances made in earlier years no longer required written back fees for professional services rendered (TDS CY 3,05,019 (Previous year NIL)) Income from shared services (TDS CY 29,57,858 (Previous year NIL)) Income from infrastructure services (TDS CY 50,38,411 (Previous year NIL)) Profit on sale of investments Rent received (TDS CY 75,000 (Previous year NIL)) Others Total 9. Staff costs Salaries, allowances and bonus Company's contribution to provident fund Staff welfare expenses Gratuity Total 10. Administrative and other expenses grants Incubation expenses (Refer Note 3.9 of Schedule 12) Rent and amenities Repairs & maintenance - Computers - Building - Others Postage & telegrams Printing & stationery Telephone expenses Travelling & conveyance Consultancy charges Legal & professional charges Brokerage & commission Advertisement charges Conference & seminar expenses Recruitment charges Office expenses Subscription Sponsorship charges Software development exp Loss on assets written off Exchange variation (Net) As of March 31, 2010
3,328,429 2,719,857 27,096,841 38,671,786 2,692,379 679,965 465,566 75,654,823
258,000 18,699,302 3,541,659 704,791 23,203,752
38,200,063 1,899,855 2,993,635 365,000 43,458,553
25,828,952 3,045,111 780,562 29,654,625
5,000,000 22,047,402 8,612,136 462,029 7,186,548 247,889 457,893 2,107,316 408,686
28,693,588 2,060,560
7,896,466 97,040 961,543 2,405,288 3,783,458 2,798,660 4,177,147 36,761 453,471 91,571 7,233,406 95,211 679,637 110,939 896,614 876
2,973,895 156,303 662,958 949,723 3,694,614 4,058,480 13,596,408 35,946 152,212 2,885,944 228,090 3,732,812 108,121 2,058,337 608,891 34,362 18,186
41
IFMR TRUST Schedules to the profit and loss account for the year ended March 31, 2011 Amount in INR As of March 31, 2011 Website maintenance and internet expenses Auditors' remuneration For Statutory audit (inclusive of service tax) For Tax audit For Reimbursement of expenses Provision for doubtful loans and advances Provision for other advances Provision for diminution in value of investments Bad debts Less: Transfer from provision for Doubtful debts Interest income recognised in previous year charged off Miscellaneous expenses Total 11. Interest and finance charges Interest on bank loan Bank charges Interest on service tax Intererst on TDS Total 879,080 As of March 31, 2010 712,210
1,200,000 75,000 -
1,275,000 3,725,857 6,847,271 4,096,240
1,103,000 35,825
77,209,337 (76,753,150) 456,187 136,034 84,793,295
1,138,825 69,486,085 25,092,200 4,904,771
3,008,573 1,377,870 172,429,965
20,753 90,252 50,067 161,072
19,554,506 43,633 19,598,139
42
IFMR TRUST SCHEDULE 12 NOTES ON ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2011 1. BACKGROUND IFMR Trust is a private Trust established under the Indian Trusts Act 1882 on October 19, 2006 at Chennai represented by IFMR Trusteeship Services Private Limited acting in its capacity as trustee to IFMR Trust. IFMR Trusts mission is to ensure that every individual and every enterprise has complete access to financial services. The names and the business of the major Companies which are incubated/acquired by the Trust have been elucidated below: IFMR Capital Finance Private Limited (IFMR Capital): IFMR Capitals mission is to act as a bridge to mainstream capital markets for entities and asset classes of relevance to low-income households. It's objective is to provide liquidity and developing access to debt-capital markets for critical sectors such as, rural financial service providers, urban financial service providers that focus on low-income households, municipalities, rural infrastructure. IFMR Ventures India Private Limited (IFMR Ventures): IFMR Ventures is an Asset Management Company that has launched its first private equity fund, Network Enterprises Fund (NEF). The NEF intends to make investments in some key missing links in rural supply chains. The Network Enterprise Fund has been registered as a Private Equity Fund with SEBI; The Fund is proposed to make its first commercial investment in 2011-2012. IFMR Rural Finance Services Private Limited (formerly known as IFMR Holdings Private Limited) (IFMR Rural Finance): High quality delivery of financial services requires delivering them in a convenient, flexible, reliable and continuous manner. IFMR Rural Finance therefore has been set up by IFMR Trust with a mandate to design a model that can withstand scrutiny on the aforementioned essential parameters and thus pave the way towards complete financial inclusion in rural remote India. IFMR Finance Foundation: IFMR Trusts principal strategy for ensuring complete access to financial services is advocacy. IFMR Finance Foundation is looking to complement existing efforts in the arena of access to financial services by supporting practice-relevant action research and pilot projects on access to finance, and by influencing thinking and action among key sectoral actors. IFMR Mezzanine Finance Private Limited (IFMR Mezzanine): IFMR Mezzanine is established with the aim to facilitate access to risk capital to microfinance institutions (MFIs). It is intended that this Company will make investments in microfinancial institutions in the form of subordinated debt instruments with a quasi-equity nature that can be leveraged by the microfinance institutions with other lenders, allowing them to access funds that were hitherto unavailable to them. This is the first attempt to enable MFIs to use a new class of liability to leverage their equity capital for further expansion. Megha Holdings Private Limited (Megha Holdings) is a non-deposit taking NBFC, wholly owned by IFMR Trust. The Company was incorporated in September 1985, and was acquired by IFMR Trust from its erstwhile promoters in December 2009. During the year, this entity has acquired 2 non-deposit taking NBFCs, Radaur Holdings Private Limited and Ankur Securities Private Limited. Consequently the acquired entities have become the subsidiaries of the Trust. Kshetriya Gramin Financial Services (KGFS); KGFS is a working model for financial inclusion that seeks to assure financial wellbeing for every individual and enterprise in remote rural India. The first KGFS Company, Pudhuaaru KGFS, started operations in Thanjavur district of Tamil Nadu in June 2008. Two other KGFS entities were launched subsequently: Sahastradhara KGS in Uttarakhand, with operations in the districts of Tehri Garhwal, Pauhri, Haridwar and Dehradun, and Dhanei KGS in Orissas Ganjam district. Pudhuaaru Financial Services Pvt. Ltd is a non-deposit taking NBFC, wholly owned by IFMR Trust. The Company was incorporated on March 4, 1993, and is engaged in the business of providing financial services in remote rural parts of Thanjavur & Thiruvarur District. Network Enterprises: Network Enterprises represents a cluster of Private Limited enterprises set up by IFMR Trust that engage in incubation of sector specific business activities such as Rural Tourism, Agricultural Terminal Markets, Clean Drinking Water, Dairy Development and so on. IFMR Trust has set up a Network Enterprise Fund and envisages investment therefrom into the Network Enterprises that reach viability in terms of business model.
43
2. SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of preparation of financial statements: The financial statements are prepared under the historical cost convention, on the accrual basis of accounting and in accordance with accounting principles generally accepted in India and comply with the accounting standards issued by the Institute of Chartered Accountants of India (ICAI). The Trust is classified as a Level I enterprise as defined by the scheme of applicability of accounting standards issued by ICAI. Accordingly, the Trust is required to comply with all mandatory accounting standards prescribed by the ICAI. 2.2 Use of estimates: The preparation of the financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities on the date of financial statements and the reported amount of revenues and expenses during the reporting period. Management believes that the estimates used in the preparation of financial statements are prudent and reasonable. Future results could differ from these estimates. Fixed assets and depreciation: Fixed Assets are stated at cost less accumulated depreciation. Depreciation on assets is provided on the Written Down Value Method at the following rates: Asset Category Furniture and fittings Computers and software Office equipment Vehicles Leasehold improvements Depreciation Rate 10% 60% 15% 15% 100%
2.3
2.4
Impairment of assets: The Trust determines whether there is any indication of impairment of the carrying amount of its assets. The recoverable amount of such assets are estimated, if any indication exists and impairment loss is recognized wherever the carrying amount of the assets exceeds its recoverable amount. Investments: Long-term investments are stated at cost of acquisition. Provision for diminution is made if such diminution is considered as being other than temporary in nature. Investments in mutual funds are valued at lower of cost or market value, prevailing as at the Balance Sheet date. Revenue recognition: Interest income is recognized on accrual basis. Income arising from shared services and Infrastructure services between the group companies is recognised on accrual basis, in accordance with mutually agreed terms. Leases: Leases are classified as finance or operating leases depending upon the terms of the lease agreements. Finance leases Finance leases, which effectively transfer substantially all the risks and benefits incidental to the ownership of the leased item, are capitalised at the lower of the fair value or present value of the minimum lease payments at the inception of the lease term and disclosed as leased assets. Lease payments are apportioned between the finance charges and the reduction of the lease liability based on the implicit rate of return. Finance charges are charged directly against income. Operating leases Leases of assets under which all risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Lease payments under operating leases are recognised as an expense on a straight-line basis over the lease term.
2.5
2.6
2.7
44
2.8
Foreign currency transactions: Transaction in foreign currencies is accounted at the exchange rates prevailing on the date of the transaction and the realized exchange loss/gain are dealt with in the Profit & Loss account. Monetary assets and liabilities denominated in foreign currency are restated at the rates of exchange as on the Balance Sheet date and the exchange gain/loss is suitably dealt with in the Profit and Loss account. Employee benefits: Defined contribution plans: Fixed Contributions to Provident Fund made on monthly basis with relevant authorities are absorbed in the profit and loss account. Defined benefit plans (long term employee benefits): Gratuity The Trust accounts its liability for future gratuity benefits based on the actuarial valuation as at the Balance Sheet date, determined using the Projected Unit Credit method and is provided for. Compensated absences Benefits of Compensated Absences are not provided to the employees of the Trust.
2.9
2.10
Taxation: Current tax is determined in accordance with the provisions of Income tax act, 1961. Deferred tax is calculated at the tax rates and laws that have been enacted or substantively enacted as at the Balance Sheet date and is recognised for all the timing differences. Deferred Tax assets in respect of unabsorbed depreciation and carry forward of losses are recognised if there is virtual certainty that there will be sufficient future taxable income available to realize such losses. Other deferred tax assets are recognised if there is reasonable certainty that there will be sufficient future taxable income available to realise such assets.
2.11
Provisions, contingent liabilities and contingent assets: Provisions are recognised only when there is a present obligation as a result of past events and when a reliable estimate of the amount of obligation can be made. Contingent liability is disclosed for (i) possible obligation which will be confirmed only by future events not wholly within the control of the Trust or (ii) present obligations arising from past events where it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. Contingent assets are not recognised in the financial statements since this may result in the recognition of income that may never be realised. Provision for advances: Provision for advances given to various parties is made based on the managements analysis of the recoverability of such advances outstanding as at the balance sheet date.
2.12
3. NOTES FORMING PART OF ACCOUNTS 3.1 Advance subscription towards equity shares Advance subscription of INR. 516.24 (PY INR 453.63) million represents the proposed investment of INR 478.57 million in the shares of Megha Holdings Private Limited, INR 17.07 million in the shares of Pudhuaaru Kshetriya Gramin Financial Services, INR 13.75 million in the shares of IFMR Rural Finance Services Private Limited (formerly known as IFMR Holdings Private Limited) and INR 6.85 million in the shares of NE Emerging Channels Services Private Limited (NEECS). These shares are yet to be allotted. Of the above, advance of INR 6.85 million given to NEECS is considered doubtful and provided for as of March 31, 2011. 3.2 A. Unsecured loan Unsecured loan represents the interest-free term loans received from ICICI Bank Limited. Term loans are given for supporting/funding enterprises set up with the objective of providing services including but not limited to consulting, advisory, training services to low income, unbanked households and/or semi-urban/rural population in India. B. Revocable grants Revocable grants represent funding for specific purposes.
45
3.3
Provision for doubtful advances and diminution in the value of investments Provision for advances given to various parties is made based on managements analysis of the recoverability of such advances as explained in policy 2.12 above. Provision for diminution in value of investments is made if such diminution is considered other than temporary in nature. The details of movement of these provisions are given below: Opening balance Provision for doubtful loans and advances * Provision for doubtful other advances * Provision for diminution in value of investments Additions Utilisation/Release Closing balance
80,888,840
3,725,857
64,831,779
19,782,918
Nil
6,847,271
NIL
6,847,271
25,092,200
4,096,240
15,249,800
13,938,640
* Includes an amount of INR 6.85 million representing provision made for advances given towards proposed investment in NE Emerging Channels Services Private Limited, as it is considered doubtful. 3.4 Employee benefits The Trust's obligation towards gratuity is a defined benefit plan. The details of actuarial valuation have been given below: Valuation as of March 31, 2011 Movements in accrued liability Amount in INR 2010 - 2011 Accrued liability as at beginning of the period: Interest cost Current service cost Past service cost Curtailment cost Settlement cost Benefits transferred Actuarial gain/loss Accrued liability as at the end of the period: (No fund is being maintained) Amounts to be recognized in the Balance Sheet In INR 000's Present value of obligations as on the accounting date: Fair value of the plan assets: (Zero as no fund is being maintained) Liability to be recognised in the Balance Sheet In INR 000's 2009 - 2010
1,270,000 102,000 989,000
1,528,000 122,000 746,000
(726,000)
(1,126,000)
1,635,000
1,270,000
1,635,000
1,270,000
1,635,000
1,270,000
46
Expenses to be recognized in P/L Account In INR 000's Interest Cost Current service cost Past service cost Expected return on plan assets Curtailment cost (Credit) Settlement cost (Credit) Net Actuarial (Gain)/Loss Net Expenses to be recognised in P/L a/c Principal actuarial assumptions Interest rate (Liabilities) Return on assets Mortality table Resignation rate per annum Salary escalation rate 3.5 8% N.A. LIC (94-96) 10% 10% 7.50% N.A. LIC (94-96) 10% 10% 102,000 989,000 In INR 000's 1,22,000 746,000
(726,000)
(1,126,000)
365,000
(258,000)
Segment reporting The Trust is primarily engaged in the business of providing access to financial services to the underserved population in the country. Further, the Trust does not have any separate geographical segments other than India. As such there is no separate reportable segment as per AS-17, Segment Reporting. Related party disclosures a) List of related parties and nature of relationship (as identified by management and relied upon by Auditors) Parties where control exists: i) Trustee Company: IFMR Trusteeship Services Private Limited represented by Dr. Nachiket Mor, Director & Chairman Governing Council, IFMR Trust, Prof. G. Balasubramanian and Bindu Ananth, Director ii) Associates: Grameen Capital India Limited IKP Center for Advancement in Agricultural Practices iii) Subsidiaries: IFMR Capital Finance Private Limited IFMR Mezzanine Finance Private Limited IFMR Finance Foundation IFMR Rural Finance Services Private Limited Pudhuaaru Kshetriya Gramin Financial Services (PKGFS) Dhanei Kshetriya Gramin Services (DKGS) Sahastradhara Kshetriya Gramin Services (SKGS) Pudhuaaru Financial Services Private Limited (PFSPL) Megha Holdings Private Limited Radaur Holdings Private Limted (subsidiary of Megha Holdings Private Limted) Ankur Securities Private Limited (subsidiary of Megha Holdings Private Limted) IFMR Ventures India Private Limited NE Emerging Channels Services Private Limited. NE Agri Services Private Limited NE Crafts Apparel and Furnishings Company Private Limited NE Education Private Limited NE Green Power Private Limited NE Housing Company Private Limited (Till January 31, 2011)*
3.6
47
NE Medicare Private Limited (Till December 31, 2011) * NE Milkrush Private Limited NE Processed Foods Private Limited (Till January 31, 2011) * NE Rural BPO Company Private Limited NE Rural Supply Chain Private Limited (Till January 31, 2011) * NE Rural Tourism Private Limited NE Aqua Private Limited
* The Companies have gone into liquidation during the year 2010 - 2011. iv) Key Management Personnel: IFMR Trusteeship Services Private Limited represented by Dr. Nachiket Mor, Director and Bindu Ananth, President of IFMR Trust Remuneration is paid by the Trust to the President amounting to INR 3.8 million (Previous year INR 2.4million) a) Transaction with related parties during the year: Related Party Transaction For the year ended March 31, 2011 20,000 10,044 2,615,689 NIL 487,875 445,540 21,747,295 NIL 5,165,220 24,580,941 9,648 74,000,000 NIL Amount in INR For the Year ended March 31, 2010 20,000 44,048 6,228,078 NIL NIL NIL NIL 185,000,000 33,478,227 NIL 186,624 49,000,000 399,890
IFMR Trusteeship Services Private Limited *
Remuneration to Trustees Advance given Advance given Investment Equity shares Space sharing cost Employee sharing cost Share application money paid Refund of share application money Advances given Advances received back Assets transferred InvestmentEquity shares Purchase of shares held by them in Pudhuaaru Kshetriya Gramin Financial Services, Sahastradhara Kshetriya Gramin Services and Dhanei Kshetriya Gramin Services Space sharing cost Employee sharing cost Unsecured loan Unsecured loan-repaid during the year Advance given Investment in equity shares Share application Money paid Advance given Advance returned/received back Investment in portfolio Investment in equity shares Advance given Advance received back Investment in portfolio Investment Equity shares
IFMR Ventures India Private Limited
IFMR Rural Finance Services Private Limited (Formerly IFMR Holdings Private Limited)
7,513,275 12,238,402 3,803 7,504,313 3,803 NIL 17,069,903
NIL NIL 44,727,000 37,227,000 318,496 99,900 NIL
Pudhuaaru Kshetriya Gramin Financial Services
Dhanei Kshetriya Gramin Services
3,724 24,301 10,001,465 NIL 4,619 76,273 10,001,470 NIL
558,852 1,783,874 NIL 100,000 588,421 1,217,563 NIL 100,000
Sahastradhara Kshetriya Gramin Services
48
Related Party
Transaction
For the year ended March 31, 2011 510 455,498 6,847,271 NIL 10,284,308 23,138,108 NIL 6,830,250 7,346,005 7,141,419 7,841,207 20,670,000 145,320,000 60,000,000 NIL 25,852 2,838,605 5,167,744 10,217,324 8,786,733 NIL NIL 6,054,411 11,795,261 NIL NIL 1,756,350 4,018,267 5,000,000 9,690 1,266,861 150,000,000 153,500,000 3,030,793 5,208,391 362,990,821 83,893,827 NIL 390,300 671,860 203,192,328 35,432 NIL 3,560 NIL 558,824 NIL
For the Year ended March 31, 2010 6,639,977 20,858,811 NIL 99,990 19,341,755 596,800,080 NIL NIL 7,219,009 NIL 359,036,168 136,986,168 37,500,000 145,594 NIL NIL NIL 6,317,173 7,792,690 NIL 3,900,000 3,662,733 3,276,847 NIL 25,709 NIL NIL NIL 1,257,171 NIL 47,500,000 49,492,328 1,300,510 NIL 203,182,609 3,700,000 5,093,300 NIL NIL NIL 804 99,900 04 99,900 189,911 99,900
NE Emerging Channels Services Private Limited
Advance given Advance received back Share application money paid Investment in equity shares Advances given Advances received back Investment in equity shares Space sharing cost Employee sharing cost Advance given Advance received back Share application money paid Refund of share application money Investment in equity shares Assets transferred Assets returned back Space sharing cost Employee sharing cost Advance given Advance received back Share application money paid Investment in equity shares Advance given Advance received back Investment in equity shares Assets transferred Space sharing cost Employee sharing cost Grant given Advance given Advance received back Share application money paid Investment in equity shares Advance given Advance received back Share application money paid Refund of share application money Investment in equity shares Space sharing cost Employee sharing cost Advance received towards sale of share^ Advance given Investment in equity shares Advance given Investment in equity shares Advance given Investment in equity shares
IFMR Capital Finance Private Limited
IFMR Mezzanine Finance Private Limited
NE Agri Services Private Limited
IFMR Finance Foundation
Pudhuaaru Financial Services Private Limited
Megha Holdings Private Limited
NE Crafts Apparel and Furnishings Company Private Limited NE Education Private Limited
NE Green Power Private Limited

49
Related Party
Transaction
For the year ended March 31, 2011 50,653 81,618 54,827 81,563 615,848 NIL 58,507 74,892 NIL 2,871
For the Year ended March 31, 2010 1,416 NIL 35,120 NIL 26,282 99,900 804 NIL 99,900 1,216
NE Housing Company Private Limited Advance given Advance received back NE Medicare Private Ltd Advance given Advance received back Expenses reimbursement Investment in equity shares Advance given Advance received back Investment in equity shares Advance given
NE Milkrush Private Limited
NE Processed Foods Private Limited
NE Rural BPO Company Private Limited NE Rural Supply Chain Private Limited
Advance given Advance returned back Investment in equity shares Advance given Advance received back Investment in equity shares Space sharing cost Advance given Investment in equity shares Investment in equity shares
70,693 82,076 NIL 7,021,112 29,273 NIL 292,725 2,538 NIL NIL
804 NIL 99,900 1,201,686 968,176 99,900 NIL 1,824 99,900 49,000
NE Rural Tourism Private Limited
NE Aqua Private Limited
IKP Center for Advancement in Agricultural Practices
a) Outstanding balances with related parties as on balance sheet date: Related Party Transaction As of March 31, 2011 40,000 44,758 12,687,763 999,900 123,099,900 13,747,295 1,870,958 NIL 100,000 17,069,903 (2,119) 100,000 NIL 100,000 NIL 99,990 6,847,271
Ammount in INR As of March 31, 2010 20,000 34,714 9,138,659 999,900 49,099,900 66,000,000 1,524,904 7,500,510 100,000 (30,144) 100,000 71,654 100,000 454,988 99,990
IFMR Trusteeship Services Private Limited * IFMR Ventures India Private Limited IFMR Rural Finance Services Private Limited (Formerly IFMR Holdings Private Limited) Pudhuaaru Kshetriya Gramin Financial Services Dhanei Kshetriya Gramin Services Sahastradhara Kshetriya Gramin Services NE Emerging Channels Services Private Limited.
Remuneration to Trustees Advance given and outstanding Advance given and outstanding Investment in equity shares Investment in equity shares Share application Advance given and outstanding Unsecured loan Investment in equity shares Share application Advance given and outstanding Investment in equity shares Advance given and outstanding Investment in equity shares Advance given and outstanding Investment in equity shares@ Share application ***
50
Related Party
Transaction
As of March 31, 2011 3,909,823 602,432,843 14,500,228 100,400,000 NIL 7,740,630 3,999,900 99,900 1,365,406 202,992,328 NIL NIL 5,093,300 478,579,603 203,192,328 185,072 99,900 74315 99,900 29,943 99,900 774,314 NIL NIL NIL NIL 99,900 600,145 NIL NIL 99,900 33,636 NIL NIL 99,900 7,802,279 99,900 34,261 49,000 510 483,580
As of March 31, 2010 2,587,368 602,432,843 7,219,519 40,400,000 184,650,000 6,310,039 3,999,900 99,900 1,331,639 49,492,328 3,500,000 1,257,171 5,093,300 199,482,609 NIL 1,300,510 99,900 38,883 99,900 26,383 99,900 215,490 99,900 30,965 99,900 26,736 99,900 (15,703) 99,900 16,383 99,900 30,765 99,900 11,383 99,900 517,715 99,900 31,723 49,000 510 483,580
IFMR Capital Finance Private Limited IFMR Mezzanine Finance Private Limited NE Agri Services Private Limited IFMR Finance Foundation Pudhuaaru Financial Services Private Limited Megha Holdings Private Limited
Unsecured loan Investment in equity shares Advance given and outstanding Investment in equity shares Share application money Unsecured loan Investment in equity shares Investment in equity shares Advance given and outstanding Investment Purchase of equity shares Share application money Advance given and outstanding Investment-Purchase of equity shares Share application money Advance towards sale of shares Advance given and outstanding Investment Purchase of equity shares Advance given and outstanding Investment Purchase of equity shares Advance given and outstanding Investment Purchase of equity shares Advance given and outstanding Investment Purchase of equity shares Advance given and outstanding Investment Purchase of equity shares Advance given and outstanding Investment Purchase of equity shares Advance given and outstanding Investment Purchase of equity shares Advance given and outstanding Investment Purchase of equity shares # Advance given and outstanding Investment Purchase of equity shares Advance given and outstanding Investment Purchase of equity shares Advance given and outstanding Investment Purchase of equity shares Advance given and outstanding Investment Purchase of equity shares Advances given and outstanding Investment Purchase of equity shares
NE Crafts Apparel and Furnishings Private Limited NE Education Private Limited NE Green Power Private Limited NE Housing Company Private Limited** NE Medicare Private Ltd** NE Milkrush Private Limited NE Processed Foods Private Limited** NE Rural BPO Company Private Limited
NE Rural Supply Chain Private Limited** NE Rural Tourism Private Limited NE Aqua Private Limited IKP Center for Advancement in Agricultural Practices Grameen Capital India Limited
51
* ***
The remuneration payable to trustees is recoverable from Beneficiary. Provision has been made during the year for the entire share application money paid to the subsidiary, as it is considered doubtful. Provision for the entire investments in the subsidiary has been made during the previous year. Represents Advances received on March 31, 2011 towards consideration for transfer of shares of Pudhuaaru Financial Services Pvt. Ltd, Dhanei Kshetriya Gramin Services and Sahastradhara Kshetriya Gramin Services held by Trust, as at the balance sheet date. The shares are yet to be transferred. Provision for the entire investments in this subsidiary has been made during the year. Leases Operating leases: The Trust has not entered into any non-cancellable operating leases. The Trust has taken premises on cancellable operating leases and lease payments on such operating leases amounting to INR 8.61 Million (Previous year INR 2.06 million) have been charged to profit and loss account. Finance leases: The Trust has not taken any finance lease.
# ^
@ 3.7
3.8
A) As of March 31, 2011, the value of estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances paid) is INR NIL (Previous year INR 30 million) B) Contingent liabilities: Contested claims not provided for: Amount in INR Particulars As of March 31, 2011 As of March 31, 2010
Disputed claim against the Trust lodged by under litigation (to the extent quantifiable)
NIL
46,130,000
Note: The Trust has won the case in the Supreme Court of the State of New York, and is of the opinion that the above demand is not sustainable and expects to succeed in any further appeal by the Plaintiff. 3.9 During the year, IFMR Trust had carried out various pilot projects and incubated entities in line with the mission of the Trust for access to finance by every individual and enterprise. The initial incubation expenses and other support costs incidental to these companies to the extent of INR 22.05 million (Previous Year INR 28.69 million) have been incurred and absorbed by IFMR Trust.
3.10
The Trust has reviewed its deferred tax assets and liabilities as of March 31, 2011. The timing differences relate to carried forward losses, employee benefits and provision for doubtful advances, which has resulted in deferred tax asset of INR 49.60 million. However in the absence of virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax assets can be realised, the said deferred tax asset has not been recognised.
52
3.11
Trust has entered into a share purchase agreement with the promoters of Pamara Micro Finance Private Limited during 2009 - 2010 (now known as Pudhuaaru Financial Services Private Limited) for acquiring the shares of this Company. As per the agreement, an amount of INR 0.15 million has been retained by the Trust and shown under Schedule 6 Current liabilities, which would become payable on completion of certain secretarial matters in a manner that would not attract any legal consequences to the buyers or their successors. Previous year figures have been regrouped/reclassified wherever necessary.
3.12
For and on behalf of IFMR Trust
Bindu Ananth President Place: Chennai Date: 01.06.2011
K.R. Chandra Vice PresidentFinance
53
IITM Research Park | Phase 1, 10th Flo o r | N o . 1 K a n a g a m Vi l l a g e ( B e h i n d Ti d e l Pa r k ) Ta ramani | Chennai - 600113 | www.ifmr.co . i n | Ph : + 9 1 4 4 6 6 6 8 7 0 0 0 | F a x : + 9 1 4 4 6 6 6 8 7 0 1 0

IFMR Trust Annual Report Final

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

IFMR Trust Annual Report Final

Uploaded by

Copyright:

Available Formats

Annual Report

From the Chairperson

From the President

Our Investee Companies

People and Values

From the Chairperson

Dominated by government owned DIs

IFMR Trust Annual Report 2010 - 2011

Emergence of specialised NDIs

IFMR Trust Annual Report 2010 - 2011

From the Chairperson

IFMR Trust Annual Report 2010 - 2011

IFMR Trust Annual Report 2010 - 2011

From the Chairperson

IFMR Trust Annual Report 2010 - 2011

From the President

IFMR Trust Annual Report 2010 - 2011

IFMR Trust Annual Report 2010 - 2011

As of March 31, 2011, more than

IFMR Trust Annual Report 2010 - 2011

From the President

IFMR Trust Annual Report 2010 - 2011

IFMR Trust Annual Report 2010 - 2011

From the President

IFMR Trust Annual Report 2010 - 2011

IFMR Trust Annual Report 2010 - 2011

Our Investee Companies

INR 951mn 313

INR 6045mn 945

2010 Loans to Originate

IFMR Trust Annual Report 2010 - 2011

Geographic Distribution of Portfolio

IFMR Trust Annual Report 2010 - 2011

Our Investee Companies

Investor Classes 2009

IFMR Trust Annual Report 2010 - 2011

Liability and Investment Products

IFMR Trust Annual Report 2010 - 2011

Our Investee Companies

KGFS under management

IFMR Trust Annual Report 2010 - 2011

IFMR Trust Annual Report 2010 - 2011

Our Investee Companies

IFMR Trust Annual Report 2010 - 2011

Agricultural Terminal Markets AgriNE

Rural Energy RENE

Rural Tourism RTNE

IFMR Trust Annual Report 2010 - 2011

People and Values

IFMR Trust Annual Report 2010 - 2011

IFMR Trust Annual Report 2010 - 2011

People and Values

IFMR Trust Annual Report 2010 - 2011

IFMR Trust Annual Report 2010 - 2011

People and Values

IFMR Trust Annual Report 2010 - 2011

IFMR Trust Executive Group

IFMR Trust Annual Report 2010 - 2011

People and Values

IFMR Trust Annual Report 2010 - 2011

IFMR Trust Annual Report 2010 - 2011

IFMR Trust Annual Report 2010 - 2011

228,346,612 1,635,000 229,981,612