After getting a new lease of life in the form of debt recast, India's oldest micro-lender, Bhartiya Samruddhi Finance (BSFL), is exploring business opportunities outside its home market for survival.
Hyderabad-based BSFL, part of BASIX Group promoted by social entrepreneur Vijay Mahajan, is looking to strengthen operations in Maharashtra, Madhya Pradesh, Odisha, Bihar and Chhattisgarh. This is in the wake of its entire loan portfolio in Andhra Pradesh having turned bad after the crisis in the microfinance sector.
"Given the state of finances, we do not have an ambitious expansion plan. The agenda is to get our operations back on track," a senior BSFL official said. "We are looking to strengthen our business in non-Andhra Pradesh markets where the loan recovery rate continues to stay high."
| SAVING THE SAVIOURS Microfinance debt restructuring | |
| Company | Amount (Rs cr) |
| In 2011 | |
| Spandana Sphoorty | 2,854 |
| Share Microfin | 2,160 |
| Asmitha Microfin | 1,234 |
| Trident Microfin | 126 |
| Future Financial Services | 99 |
| In 2012 | |
| Bhartiya Samruddhi Finance | 650 |
| SWAWS Credit Corporation | 90 |
| Source: Companies | |
The country's microfinance companies have seen a sharp deterioration in profitability since October 2010, when Andhra Pradesh curbed micro-lending activities of private players. BSFL had approached lenders to restructure Rs 650 crore of debts.
Banks have agreed to convert around Rs 500 crore loans into compulsorily convertible preference shares. BSFL has also been given a two-year holiday on repayment of the remaining Rs 150 crore of debts. The micro-lender will have to refund this money over 60 months beginning April 2014, and pay interest at the rate of 12 per cent.
The lenders have not asked the promoters for any personal guarantee, BSFL's holding company Bhartiya Samruddhi Investments and Consulting Services has given corporate guarantee on the restructured loans.
In addition, the promoters would infuse Rs 25 crore as fresh equity capital.
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Unlike SKS Microfinance, which plans to shift its corporate headquarters to Mumbai from Hyderabad, BSFL has no immediate plans to change its base. However, the company plans to increase the size of its branches in Maharashtra, Madhya Pradesh and Odisha by consolidating a few offices.
"It does not make sense for us to shift our base because it involves additional expenses," the official said. "Our basic infrastructure, the administration and information technology teams are in Hyderabad. We will continue to be based in Andhra Pradesh but do business elsewhere. That is the plan."
BSFL's net worth has eroded now to Rs 150-200 crore from close to Rs 900 crore in September 2011. Banks have agreed to not offer fresh loans to the firm until its financial position improves.
According to rating agency CRISIL, BSFL's total assets under management were Rs 900 crore as on September 30, 2011, compared with Rs 1,250 crore as on March 31, 2011. The company reported a net loss of Rs 130 crore for the six months ended September 30, 2011, against profit after tax of Rs 30.2 crore for the six months ended September 30, 2010.