clfi3~RatingsProfessional Risk Opinion

PRAYAS(Organization for Sustainable Development)

MFI Grading Report

Prayas

Year of incorporation 1997

Year of commencement of microfinance2006

operationsLegal status Society

Lending modelJoint Liability Group(JLG)

Managing Director Mr. Bhadresh Rawal

Geographical areas of operation2 States (Gujarat &Madhya Pradesh)

Branches (As on December 31, 2015) 19Employees (As on December 31, 2015) 122

MFI Grading

MFl1

MFI2+

MFI2

MFI3+

MFI3

MFI4+

MFI4

MFI5

CAREhas assignedgrading of 'MFI 3' (MFI Three) to NFL.Grading is assigned on an eight-point

scale with MFI 1 being the highest and MFI 5 being the lowest. There is no individual definition

for each grading. CARE'sMFI grading is a measure of the overall performance of the MFI on the

following broad range of parameters.

Credit Analysis and Research ltdAhmedabad

March 2016

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TOSS FRAMEWORKTransparency

'1 Above Average

0 Registered as a society under Society Registration Act, 1860 and the Trust Registration Act, 1976.legal status is a constraint for mobilizing equity from private equity players or microfinance-specific funds.

0 Experienced board with 7 Board members including one Independent Director0 Registered as a society. legai form is less subjected to regulatory norms and reporting0 Credit policies are well established, documented and communicated0 Transparency in lending process is adequate0 Transparency in usage of funds is adequate0 Overall disclosures are fairly adequate0 Has set-up separate internal audit team, also appointed an external auditor and internal audit is

conducted on quarterly basisOperational Setup

I Above Average

0 Created separate departments and hierarchy with clearly demarcated roles and responsibilities0 Training systems are moderate; Training is given by senior staff0 Adequate loan appraisal & monitoring systems at the current level of operations0 Adequate system for tracking over-dues0 MIS is fairly adequate for current level of operations0 Riskmanagement systems are reasonable0 Attrition rate is high

Scale of OperationsT Small

0 As on December 31, 2015 it covers 19,612 active borrowers0 Small size MFls in terms of gross loan portfolio0 As on December 31, 2015, it has total asset under management RS.16.80 crore with managed

portfolio of RS.5.38crore. Gujarat accounts for 85% while MP accounts for 15% of own portfolioas on Dec. 31, 2015.

0 Operates in 5 districts of Gujarat and 4 districts of Madhya Pradesh as on December 31, 20150 It has adequate track record in microfinance activity

SustainabilityI Average

0 legai form allows acceptance of donation0 Concentrated resource base0 Capital adequacy ratio at a comfortable level of 32.83% as on March 31, 20150 Good asset quality with low portfolio at risk (PAR)0 Presence of second line of leadership0 Has presence in areas with moderate penetration of MFis0 Average earning profile0 OS5is at moderate level0 Operating expense ratio is moderate0 The sector faces socio political risks, regulatory uncertainty but has huge unmet potential

demandIndustry outlook: Post the AP crisis and regulatory intervention by RBI, the microfinance sectorhas seen growth in loan portfolio on account of improving funding profile, control in operatingexpenses, improving margins and moderate leverage levels. Current focus of the microfinancesector is mainly on micro-credit with other products still evolving. Going forward, MFls are likelyto expand their client base and reach out to more underserved areas of the country. Prayas haspresence in areas with medium penetration of other MFls.

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TABLE OF CONTENT

BRIEF PROFILEOF THE ORGANIZATION

TRANSPARENCY

OPERATIONAL SETU!'

SCALEOF OPERATIONS

SUSTAINABILITY

ANNEXURES

Annexure 1: Profile of board membersAnnexure 2: Profile of senior managementAnnexure 3: Details on human resourcesAnnexure 4: Organizational StructureAnnexure S: Operational outreachAnnexure 6: Information of commercial sources of fundsAnnexure 7: Aging schedule of loan portfolioAnnexure 8: Financial StatementsAnnexure 9: Information on loan productsAnnexure 10: Projected financial statementsAnnexure 11: Compliance with RBI's guidelines for NBFC-MFIAnnexure 12: MFI Grading SymbolsAnnexure 13: List of Abbreviationsr

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6

12

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GRADING RATIONALE

Brief Profile of the organization

PRAYAS is a non-profit making, voluntary organization registered as a society under the

Society Registration Act, 1860 and the Trust Registration Act, 1976. PRAYAS was

incorporated in September 1997 with a focus to improve the quality of life of socio

economically deprived and backward community in rural as well as urban areas of the

country. It is currently based in Gandhinagar, capital of Gujarat and operates In total 9

districts in Gujarat and Madhya Pradesh.

Prayas Jan Vikas Bhandol (PJVB), the microfinance arm of PRAYAS, is focused towards micro-

credit business and follows the Joint Liability Group (JLG) model for risk mitigation. The

business of PRAYAS is targeted towards under-privileged women in the groups of 5. Each

centre has typically 3-5 groups. As on December 31, 2015, it had total 19,612 active

borrowers with a total AUM of RS.16.80 crore.

TRANSPARENCY

Governance • PRAYASwas incorporated in November 1997 as a society

under the Society Registration Act, 1860 and the Trust

Registration Act, 1976. The advantage of this legal form is

that it allows them to raise capital through public grants

and charitable trusts. PRAYAS started its microfinance

program under PJVB from April 2006.

• PRAYASwas founded by Mr. Bhadresh K. Rawal (Director)

in November 1997. He was then, supported by well-

known consultants like Binoybhai Acharya (Unnati), Prof.

Anil Bhatt (11M) and Tusharbhai Shah (Director, IRMA) in

his efforts.

• PRAYAS is governed by a 7 member board. Currently

there is one Independent director on the board. Out of

which 6 board members have more than 10 years of

experience in their respective areas of specialization.

Detailed profile of the Board members is mentioned in

Annexure 1.

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Internal Controls

Policies

• The board meetings are conducted on a quarterly basis to

monitor the activities of the organization for effective

monitoring and to increase transparency. However,

PRAYASneeds to form sub-committees relating to audit,

remuneration and credit risk for effective monitoring and

increasing transparency.

• Audit activities are carried out by a separate Internal

Audit team of 5 members which directly reports to the

Manager - Internal Audit (MIA).

• Internal audit team is led by MIA. Internal audit

executives (IAE) reports to MIA and MIA reports to

Director.

• At branch level, audit is done by IAE and at head office

(HO), audit is done by MIA. HD audit is conducted on a

quarterly basis.

• Branch level audit is done in surprise manner on

quarterly basis. Employees are assigned on rotation basis

for audit so that same auditor does not audit the same

branch consecutively.

Internal audit of PRAYASfor the current level of operations

is adequate.

• Clearly defined and documented credit and HRpolicies.

Transparency in lending • Informs lending policies to the borrowers through its

utilization of funds

process

Transparency in

three day training program.

the • Submits utilization report of disbursement to the

concerned lenders as per their requirement.

Overall disclosures • Information is shared with High mark which is a credit

bureau having data of all the microfinance companies.

• Displays information on products and services on its

website.

Public domain disclosure of information about PRAYAS is

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___________ 1 adequate.

OPERATIONALSETUP

Organizational

Structure

• PRAYASis promoted by Mr. Bhadresh K. Rawal (Director) who has

more than 17 years of experience in the microfinance and social

development activities.

• Other board members viz. Dr. Dinesh Awasthy, Ms. Achala

Savyasaachi, Mr. Ramkrishna Mistry, Mr. Rajesh Singh & Ms. Monika

Agarwal have over 10 years of experience. Mr. Rahul Bist is the

founding member of M21consulting and has 6 years of experience in

the microfinance sector.

lineSecond

• PRAYASis headed by Director who is supported by Chief Operations

Officer (COO), Chief Finance Officer (CFO) and MIA. COO leads the

Operations team, CFO leads the Finance operations and MIA leads

Audit Team.

PRAVAS has created separated departments (e.g. Audit, Finance,

Operations) but there are overlapping roles in case of HR & Training

department.

Level of The Area Manager (AM) is supported by Branch Managers (BMs) who are

decentralization of further supported by Cluster Coordinators (CCs) to carry out the field

branches level operations. AM/BM reports to COO and COO reports to Director.

PRAYAS has well defined reporting structure at various levels for

effective monitoring of the operations to ensure that any defaults or

mismanagement can be dealt immediately.

of PRAYAShas separate departments with clear roles and responsibility

leadership

Human

lead by fairly experienced team. However, PRAYASis heavily dependent

on its promoters Mr. Bhadresh K. Rawal for the strategic initiatives and

long term sustainability of the trust.

Brief profile of the senior management is provided in the Annexure 2.

resources • Total staff strength of PRAYAS,including loan officers, was 122 as on

management: Dec 31, 2015. Detail of human resources is provided in the Annexure

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Operational

3.• The persons recruited for the level of cluster coordinator are mostly

under graduates.

• Recruitment is done by PRAYAS through an advertisement in the

newspaper based on the vacancy of specific post along with the

nature of job. The recruitment process is centralized.

• Recruitment procedure contains three stages (written test, public

speaking test in vernacular language / English knowledge test and an

interview).

• New recruits undergo induction training for 7 days. Training includes

complete process overview, understanding operational procedures

and sharing of field experience by senior staff.

• A clear salary grade has been established with other allowances

provided to the employees. PRAYAShas planned incentive structures

for various grades which is based on no. of active loan clients served,

loan outstanding, PARand IA Audit score

• Overall attrition rate of PRAYASfor past three years ended was low

with around 7% during FY15, however the same has worsened in

9MFY16 to 35%.

The human resource policies at PRAYAS with respect to selection,

remuneration and other benefits are well documented. PRAYAS also

conducts training programs which ensures that the staff is well

equipped to handle the operations in efficient and effective way.

However, with increase in its outreach, PRAYAS needs to create

separate departments for HR and Training with clearly demarcated

roles and responsibilities.

• PRAYAShas adopted Joint liability Group (JLG)model in the rural and

methodology urban areas.

• Loan is provided only to women in the age group of 18 to 55, who are

a part of a 'center'. Each center consists of 3 to 5 groups and each

group consists of 5-20 members.

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H ]

Appraisal process

• Each group come together at a centre for monthly meetings. The

member assumes the responsibility of approving loans and

disbursement, ensuring repayment and appropriate utilization of

loan towards their quality life.

• A group is formed after submission of relevant documents and

verifying with High mark whether the applicant already has a loan

from PRAYASor any other Institution which she has not informed.

• After being organized in a center, 3 days of Continuous Group

Training (CGT) is provided to newly formed group to train them on

the objective, rules, regulations, procedures and products of the

credit programme.

• During the 2nd and 3'd day of CGT loan application is filled up along

with the mandatory documents.

• After completion of CGT,Group Recognition Test (GRT)is done by CC

or BM. It is done to check the eligibility of the group and its members

and the quality of client training during CGT.

Appraisal process for JLGmodel:• Each staff member is given a small manual printed in Hindi and

English for better understanding of various processes including

appraisal process.

• Adequate focus is given to KYCpolicy and mandatory guidelines of

borrower's identity card before a lending decision.

• CC calculates the cash inflow and outflow of the household to

estimate the cash surplus and send the details to HO for making a

loan decision. HO has defined criteria that monthly installment of

loan does not exceed 30% of monthly income of the borrower.

• It usually takes around 1S days' time from the filling up of loan

application form to disbursement of loans.

PRAYAShas in place adequate decentralized appraisal system with the

loan appraisal and sanctioning at the branch level by the Branch

Manager which helps in reducing the time taken for loan disbursement.

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Disbursement

process

Disbursement process for JlG model:

• Presence of all the members of the group is compulsory for the

disbursement process.

• One day prior to the disbursement, HO transfers the amount to the

Branch account.

• On the day of disbursement, BM or CC visits the bank for cash

withdrawal equal to the disbursement amount.

• Group members visit the branch office and the BM collects the

processing fees and insurance premium and issues the receipt for

the same to the members.

• Such branch visits and open forums conducted by PRAYASallows for

customer interaction with BM and other senior-staff.

• After disbursement, it is mandatory for CCsto perform lUC for all

borrowers and record the same by filling UTCregister.

PRAYAS has in place proper disbursement policies. Disbursement is

done at the branch level with cash being provided directly to JlG

borrowers by the BM, reducing the risk of mismanagement of cash at

the field level.

loan collection loan collection for JlG model:

process • CCsare advised to interact with clients during center meetings and

avoid going to member's house or place of work.

• Collection of the installment takes place at the center meeting.

Subsequent to pledge, CCnotes the attendance of each member and

collects the installment from the center leader.

• Each group leader collects the installment from the group-members

and passesit on to cc. CCafter checking the same, pass it on to BM.• CCafter checking the collection of each group and verifying the total

collection with the total demand for the day, issues the consolidated

receipt for the centre and updates the loan Cards of the respective

members.

• After the collection process of all centers, CChands over the cash to

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Overdue

BM. BM after collecting the cash from all CC's, prepares a

consolidated cash receipt voucher, pass the collection entries in the

MIS and deposits the collection amount in the bank.

• BM then generates daily report and sends it to HO via email.

Accounts copy of collection receipt is maintained at branch level.

Overall, PRAYAS's loan collection process is adequate at the current

level of operations. Integrated MIS system helps in faster access of

information for monitoring at the branch/HO level.

• If delinquency arises in a center, CC is not allowed to collect the

management payment of the rest of the members until all the members or other

process members are ready to pay on behalf of the delinquent member.

• In case center members do not agree to pay on behalf of delinquent

member, BM steps in and makes efforts for recovery.

• In case of non recovery of loan by evening by the BM, Area Manager

and COO steps in at the subsequent stages and make efforts for

recovery.

• Follow up is done on regular basis on all overdue loans by CC, BM

and AM to recover the payment. Reports are made to state the

reason of delinquency and the action plan.

• An end-to-end computerized collection and overdue management

system helps to generate reports for early indication of delinquency.

Overall, PRAYAS'soverdue monitoring system is good.

Management • PRAYASuses MIS-BIJALI of Force Ten Technology Private Limited.

Information The software is managed by a local IT services company on a fixed

Systems annual fee.

• The branches are connected to the head office through internet and

data transfer happens through File Transfer Protocol (FTP).

• Various MIS reports for analysis and decision making is prepared at

the end of every month such as branch wise collection efficiency

report, portfolio at risk (PAR) report, product wise disbursement,

branch and product wise principal outstanding report etc.

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• Back-up of the accounts data is taken on daily basis while MIS

backup is done on weekly basis.

MIS and integrated accounting system of PRAYASis fairly adequate at

the current level of operations. Further, integration with the HO helps

to dynamically update and monitor data at branch level.

Cash management • PRAYAShas reasonable cash management system in place at all

systems

Insurance

branches. Accounts department makes the electronic fund transfer

to respective branch bank account and on the disbursement day, BM

withdraws the required funds through cheque. Signatory for the

cheque is CEO/COOand their delegates in their absence.

• Accounts department keeps a check on the deposit of processing

fees and insurance premium collected in the concerned bank

account as communicated by BM.

• After the collection amount is handed over to BM, BM updates the

collection details in the system and cash is deposited in HO bank

account on the collection day itself.

• At any point, the branch should not have cash in excess of Rs.SO,OOO.

If it is in excess, then BM intimates the same to AM and CFO.Cash is

kept locked in a vault at the branch.

• Disbursement Funds and collection Funds are not mixed at the

branch level.

• Any non deposition of collection funds on any day due to delayed

collection is brought to the notice of COO and cash verification of

such cash lying at the branch is done at frequent intervals. Collection

is done in bank working hours to avoid such situations.

• PRAYAShas a credit life insurance policy with P&B Metlife India

Insurance Co. Ltd. and Kotak Mahindra Old Mutual Life Insurance Ltd.

for risk mitigation to cover the loan in the event of the death of the

borrower.

• It also has an insurance policy with The New India Assurance Co. Ltd.

for covering cash in transit and cash in safe.

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1 ' D

Thus, PRAYAS has a risk mitigation strategy in place to cover the loan in

the event of the death of the borrower.

SCALEOF OPERATIONS

PRAYAS was incorporated in November 1997 and started its MFI operations under PJVB in

April 2006. Thus, PRAYAS has very long track record of operations in the microfinance

sector. PRAYAS is currently operating in Gujarat and Madhya Pradesh covering 9 districts as

on December 31, 201S.

Details on the operational outreach are provided in the Annexure 5.

Key Factors As on December 31, 2015

Client base (Number) • Total JLG individual members on record at 19,612 .

• Active individual borrowers at 19,612 .

Assets under management • Loan disbursed during FY15 was RS.2.41 crore .

• Outstanding own portfolio stood at RS.ll.42 crore .

• Outstanding managed portfolio stood at RS.5.38 crore .

Geographical diversification • Covering 5 districts of Gujarat and 4 districts of Madhya

Pradesh.

Total income • Reported total income of RS.2.74 crore during FY15.

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~ 14 " 9

SUSTAINABILITY(Rs. Cr)

Particulars FY14 (Aud.) FY15 (Aud.) HlFY16 (Prov.)

Total interest income 2.22 1.71 0.93

Total income 2.69 2.74 1.55

Total operating expo 1.24 1.55 1.01

Financial Cost 0.78 0.57 0.36

Depreciation 0.07 0.09 0.00

Provisions & write off 0.16 0.08 0.00

Profit/(Loss) after tax 0.44 0.45 0.18

Loan outstanding 7.40 7.19 10.86

Total AUM 13.47 15.97 10.86

Tangible Net-worth 2.34 2.89 2.97

Key ratios (%)Portfolio Yield 22.00 18.62 23.06

Financial Cost ratio 6.39 3.90 5.36

Op. expense ratio 10.20 10.51 15.01

Loan LossProvision ratio (AUM) 0.84 0.52 0.06

Return on total assets 4.66 4.98 3.02

055 119.33 119.75 112.79

Av. cost of Borrowings 10.89 9.26 9.09

Operating Cost Ratio 15.53 21.20 22.31

Overall Gearing 2.69 2.19 3.26

Interest Coverage (times) 1.56 1.79 1.49

Capital Adequacy Ratio 20.53 32.83

PAR> 30 days 0.24 0.33

PAR> 90 days 0.23 0.30

Profitability

Net Surplus of PRAYAS has increased at a CAGR of 5.80% for last three years. In FY15,

PRAYAS registered a profit of RS.0.45 crore compared to RS.0.43 crore in FY14. Also, it has

estimated a profit of RS.0.67 crore in FY16. PRAYAS needs to control its operationol cost with

increosing business volumes to maintain operational cost at a reasonable level. The portfolio

yield on portfolio of PRAYAS in FY15 stood at 19% mainly on account of good asset quality.

Operating expenses (excluding finance cost, provisions and write-off) as % of average asset

under management is 10.51% in FY15 compared to 10.20% in FY14 because of increase in

ad~trative expenses.

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Currently ass level of PRAYAS is at 119.75% indicating that PRAYA5 needs to control

operating expenses and increase its scale of operations to achieve better operational self

sufficiency.

Fund mobilization

Currently, Prayas has access to funds from three banks- IDBI Bank, State Bank of India, SIDBI

and financial institutions namely Ananya Finance for Inclusive Growth Pvt. ltd., IGS-Basix,

Sewa Energy, Gruh Finance, Habitat, Milaap, and MAS Financial services limited which

shows its improved ability to raise funds from market. Total outstanding amount of debt of

Prayas as on September 30, 2015 stood Rs. 9.70 crore. Details on the commercial sources of

funds are provided in the Annexure 6.

Asset quality

As on March 31, 2015, portfolio at risk (PAR) greater than 30 days and PAR greater than 90

days stood at 0.33% and 0.30% respectively whereas as on December 31, 2015, PAR greater

than 30 days and PAR greater than 90 days stood at 0.23% & 0.23% respectively. Details on

the asset quality of Prayas are provided in the Annexure 7.

PRAYAShas been able ta maintain a gaad asset quality aver the last three years, shawing its

ability ta callect the repayments on time, hawever sustenance of good asset quality with the

growing operations and AUM is yet to be demonstrated which will remain a crucialfactor for

future growth and profitability of PRAYAS.

For the purpose of provisioning, PRAYAS follows the following provisioning policy:

Overdue period Unit Provision

On time portfolio % 2%

For overdue 1 to 30 days % 2%

For overdue 31 to 60 days % 25%

For overdue 61 to 90 days % 25%

For overdue 91 to 180 days % 25%

For overdue 181 to 360 days % 50%

For overdue above 360 days % 100%

Asset-liability and equity composition

As on March 31, 2015, Prayas had about 14.18% funds in fixed assets and liquid investments

and 9.21% in other current assets ( cash in hand and bank forms 3.58% of the total assets),

thereby leaving its loan portfolio at 76.61%. Thus there is high utilization of resources with

around 77% of its total assets deployed in the loans.

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CIN l67190MH1993PlC071691

On the liability side, Prayas mainly relies on the external debt and equity infusion from the

promoter. It had a net worth of Rs.2.89 crore as on March 31, 2015 and is expected to

increase based on internal accruals and equity infusion from the promoters. Prayas's Capital

Adequacy Ratio (CAR)is comfortable at 32.83% as on March 31, 2015. The detaiied financial

performance of Prayas is provided in Annexure 8.

Operational Sustainability

Second line of leadership

Industry

Competition

Outlook

PRAYAShas separate departments with clear roles and

responsibiiity led by fairly experienced team. However,

PRAYAS is heaviiy dependent on its promoters Mr.

Bhadresh K. Rawal for the strategic initiatives and long

term sustainabiiity of the company.

& Post the AP crisis and regulatory intervention by RBI, the

microfinance sector has seen strong growth in loan

portfolio on account of improving funding profile, control

over operating expenses, improving margins and

moderate leverage levels.

RBIhas revised the lending norms for the MFI sector, post

Andhra Pradesh (AP) crisis in 2010 and Malegam

Committee Report on NBFC-MFI in 2011. The sector has

evolved with the advent of credit bureaus in the sector

and subsequent control over asset quality. MFI sector saw

30+ days past due (OPO)of around 0.25% as on March 31,

2015. As on the same date, aggregate gross loan

outstanding for the sector was Rs.40,138 crore, registering

61% Y-o-Y growth from Rs. 24,862 crore as on March 31,

2014. (Source: MFIN) The stabiiization of the regulatory

regime has led to a renewed interest from both domestic

and foreign funds in the sector. In the recent past, the

sector has witnessed strong capital inflows.

Also post upward revision in loan ticket-size (from Rs.

35,000 to Rs. 60,000 for 1st cycle and from Rs. 50,000 to

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Loan Products

Rs. 100,000 for subsequent cycle), household income

(from Rs. 60,000 to Rs. 100,000 for rural region and from

Rs.120,000 to Rs.160,000 for urban & semi-urban region)

and borrowing limit for individual borrower (from Rs.

50,000 to Rs. 100,000) by RBIwould aid in the growth of

the loan portfolio of MFls as it widens the base of

borrowers and significantly increases the addressable

market size. Furthermore, resources are not seen as a

major constraint given the significant capital infusion in

recent times. If MFls manage to control the asset quality

of their portfolio while adhering to new guidelines, the

profitability of the sector is expected to improve with the

benefits of operating leverage. Credit view will continue to

factor in risks associated with unsecured lending, socio-

political intervention, geographic concentration and

operational risks related to cash based transaction.

Prayas has presence in areas with medium penetration of

other MFls and hence Prayas is facing moderate

competition in the areas where it is currently operating.

PRAYA5offers loan for various purposes. In FY15, the

company has disbursed 39.57% for services, 28.34% for

consumption, 13.98% for trade, 7.80% for production and

remaining for agriculture and animal husbandry. Detailed

loan products are provided in Annexure 9.

Access to funds and ability Currently, Prayas has access to funds from three banks-

to raise funds lOBI Bank, State Bank of India, SIDBI and financial

institutions namely Ananya Finance for Inclusive Growth

Pvt. ltd., IGS-Basix,Sewa Energy, Gruh Finance, Habitat,

Milaap, and MAS Financial services Limited which shows

its improved ability to raise funds from market. Total

outstanding amount of debt of Prayas as on September

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(IN L67190MH1993PLC071691

30, 2015 stood Rs. 9.70 crore.

Vision In the coming years, it strives to become one of the

country's best managed microfinance companies in terms

of scale, quality and transparency. It has plans to extend

its operation by introducing new products and tapping

new markets in future.

Projections

Particulars Unit FY16 FY17 FY18

Tangible Net-worth Rs.Crore 3.52 4.19 5.04

Total income Rs.Crore 4.00 4.20 4.44

Total operating expo Rs.Crore 1.85 1.98 2.08

Financial Cost Rs.Crore 1.15 1.20 1.25

Depreciation Rs.Crore 0.07 0.07 0.06

Provisions & write off Rs.Crore 0.26 0.28 0.30

Profit/(loss) after tax Rs.Crore 0.67 0.67 0.75

Portfolio outstanding Rs.Crore 10.64 11.64 12.81

Total AUM Rs.Crore 18.64 19.64 21.81

Key ratios (%)

Portfolio Yield % 23.11 21.94 21.42

Financial Cost ratio % 6.64 10.77 10.22

Operating Expense Ratio % 20.75 17.77 17.01

loan Loss Provision ratio % 1.50 1.46 1.45

Return on total assets % 5.86 4.80 5.01

OSS % 120.12 118.98 120.33

Av. cost of Borrowings % 14.43 12.09 12.29

Operating Cost Ratio % 10.69 10.34 10.04

Efforts to increase outreach and coverage

Projections are provided by PRAYA5. For the analysis, projections for the period FV16 to

FV18 are considered. PRAYA5 has worked its projections assuming an CAGR of 21% in

disbursements in projected three years. Increasing the scale of operations to cater to huge

unmet potential demand is the reason for assumption of 21% growth rate. PRAYA5 plans to

grow by reaching to RS.12.81 crore outstanding own portfolio by the end FV18. Achievement

of future targets mainly depends on the ability of PRAYA5 to raise funds from the market

and equity infusion to meet the demand. Detail projected financial performance of Prayas is

provided in Annexure 10.

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CIN-L67190MH 1993PLC071691

ANNEXURES

Annexure 1: Profile of board membersTotal Exp. Total

Name Qualification Brief Profile DesignationIn years of

Microfinan experience sector ce

He is the former Director ofEntrepreneurship Development

Dr. DineshPHD

of India. He has teaching Chair 3 40Awasthy experience of more than three Person

decades in prominent edu.institutes like EDI, 11MLetc.He is the founder of PRAYAS.Having worked with KRIBH, hehas over 8 years of experience

Mr. B.Sc.(Agri) &in MFI sector. He has worked

Bhadresh K. for PRAYASin its initial phases Director 8 17

RawalMBA(HR)

and helped set up theorganization. He is activeiyinvoived in activities organizedby Dada Bhagwan Foundation.He is the founding member of

Mr. RahulM21Consulting and has worked

MBA with PRAYAS since 2008. He Trustee 6 8Bist has 6 ofover years

Microfinance experience.He is presently working as a

Mr. Senior Resource Person inRamkrishna PG JANVIKAS. Apart from that he Trustee 4 16

Mistry has experience as a faculty inED!.

Mr. Rajesh - 14Singh

MBA Trustee 8

She is the development worker

Ms. Achalafor the past one and half

SavyasaachiPG decade and presentiy Trustee 13 19

associated with Sa-Dhanorganization.She has more than a decade of

Ms MonikaPG

functional experience in Trustee 10 12Agarwal livelihoods, education, gender

and financial inclusion.

Annexure 2: Profile of senior management

18

Name Qualification Area of Operation Total years of experience

Amit Sutariya PGDMN Operational Manager 9 years

Chirag Patel B.Com DIC Chief Finance Officer 15 years

Harish Tiwari MA Area Manager 12 years

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(IN-Lb7190MH1993Pl (071691

Annexure 3: Details on Human Resources

Unit FYl1 FY12 FY13 FY14 FY1S 9MFY16

Loan Officers (LO) Number 23 23 34 42 43 90

Total employees Number 38 35 49 62 64 122

Employee turnover % 22.22 0.00 0.00 25.00 7.94 35.48

Employee' oroductivityLoan per LO Rs.Crore 0.18 0.32 0.33 0.32 0.38 0.19

Borrowers per LO Number 357 456 436 398 400 21B

Members per LO Number 503 710 601 434 400 218

Branch productivityIndividual borrowers per branch No. B20 954 1058 1195 1013 1032

Loan outstanding per branch Rs.Crore 0.42 0.66 0.80 0.96 0.95 0.88

Annexure 4: Organizational Structure

I BOARO OFTRUSTEE. PRAYAS II DIRECTOR I

DEVELOPMENT WINGS OTHER

MICROFINANCE SOOAl

CORETEAM (H.O.)Operations ManagerAnance Manager CORETEAM (H.O.) ADVOCACY

Area Manager Program/Project ManagerMISM.mager Finance OfficerHRManagerInternal Audit Mana er

UNITTEAMUNIT TEAM

Program CoordinatorUnit Manager Project OfficerArea Manager Community Organizer

CBO'S

Finance OfficerCluster coordinator

Field SUperwiserA/e Assistant

Annexure S: Operational outreach

Unit FY12 FY13 FY14 FY1S 9MFY16

Number of states No. 2 2 2 2 2

Number of districts No. 5 5 6 7 9

Number of villages No. 17 18 20 17 24

Branches No. 11 14 14 17 19

Number of active SHG/JLG No. 16340 20421 18234 17219 19612

individual membersTotal SHG/JLGborrowers No. 10492 14812 16734 17219 19612

Disbursement - Own RS.lakh 104.9B 144.26 125.34 126.11 136.11

Disbursement - Managed RS.lakh 0.00 38.74 48.4 115.22 53.53

Total Disbursement during year RS.lakh 104.98 183.00 276.58 241.33 189.64

Loan outstanding - Own RS.lakh 725.29 898.38 740.20 719.27 1142.20

Loan outstanding - Managed RS.lakh 0.00 231.48 606.55 877.91 53B.04

Total Outstanding Loan portfolio RS.lakh 725.29 1124.52 1346.75 1597.18 1680.24

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Annexure 6: Information of commercial sources of funds as on December 31, 201S(Rs.Crore)

Name of the lending institution. Amount Sanctioned Amount Disbursed

SBI I 2.00 2.00

lOBI 1.25 1.25

SIDBI 2.00 2.00

MAS FSL 1.50 1.50

Milap 2.94 2.94

Ananya 1.50 1.50

Gruh Finance 0.50 0.50

Basix IGS 0.50 0.50

Habitat 0.32 0.32

Sewa Energy 0.07 0.07

In January 2016, Prayas has got sanctian af RS.3 crare term loan from SIOBI.

Annexure 7: Ageing schedule of loan portfolio(Rs.Crore)

As on 31~ March 2013-14 2014-15

Total loan outstanding that areNo. of Value of No. of Value of

loans Portfolio loans Portfolio

On time 16604 13.43 17073 15.91

Late (At least one payment)1-30 days 23 0.002 18 0.006

31-60 days 16 0.002 14 0.002

61-90 days 5 0.001 7 0.002

91-180 days 86 0.030 107 0.049

181-365 days Nil Nil Nil Nil

> 365 days Nil Nil Nil Nil

Renegotiated/Rescheduled portfolio1-30 days 0 0 0 0

> 30 days 0 0 0 0

Total portfolio 16734 13.47 17219 15.97

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Annexure 8: Financial Statements

Income & Expenditure Statement Rs. Crore

Year ended March 31, FY12 FY13 FY14 FY15

Income Aud. Aud. Aud. Aud.

Interest income on own portfolio 1.49 1.90 2.22 1.71

Other Interest Income 0.02 0.02 0.00 0.07

Interest Income from operations 1.51 1.92 2.22 1.78

Other income 0.17 0.23 0.46 0.96

Total income 1.68 2.15 2.69 2.74

Financial costs 0.49 0.69 0.78 0.57

Net interest income 1.02 1.23 1.44 1.14

Operating expensesPersonnel 0.28 0.55 0.76 0.99

Administrative 0.30 0.41 0.49 0.56

Total operating expenses 0.58 0.96 1.24 1.55

Write offs and provisions 0.21 0.19 0.16 0.08

Depreciation 0.02 0.04 0.07 0.09

PBT 0.38 0.27 0.44 0.45

Tax 0.00 0.00 0.00 0.00

PAT 0.38 0.27 0.44 0.45

Balance Sheet Rs. Crore

As on March 31, FY12 FY13 FY14 FY15

liabilities Aud. Aud. Aud. Aud.

Share capitalPaid up capital 0.13 0.27 0.44 0.44

Reserves and surplus 0.97 1.50 1.90 2.45

Tangible networth 1.10 1.77 2.34 2.89

Term liabilitiesSecured Loans 5.49 7.12 5.47 5.09

Unsecured Loans 0.92 0.93 0.80 1.05

Total Debt 6.42 8.05 6.27 6.14

Current liabilities and provisions 0.03 0.06 0.16 0.36

Total liabilities 7.54 9.88 8.78 9.39

AssetsNet fixed assets 0.16 0.29 0.37 0.39

Investments 0.15 0.24 0.69 0.94

Current AssetsCash in hand & at bank 0.02 0.29 0.06 0.34

Total portfolio 7.11 10.94 13.47 15.97

Less: Managed portfolio 0.00 2.31 6.07 8.78

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IN 9

Portfolio outstanding 7.11 8.63 7.40 7.19

Other current assets 0.10 0.43 0.26 0.53

Tota I assets 7.54 9.88 8.78 9.39

Annexure 9: Information on loan products

JLGMonthly Water & Managed

Particulars (Samruddhi) Sanitation SHGMonthly Housing Portfolio'

Rs.5,000- Rs.10,000RS.10,000- RS.50,000

Rs.10,000-

Loan size 15,000 25,000 30,000

Loan Term 1 Yr. 1 Yr. 1 Yr. 3 Yr. 1 Yr.

Interest rate 26% p.a. 21% p.a. 26% p.a. 8%p.a. 26% p.a.

Loan Processing 1% 1% 1% 1% 1%feesRepayment Monthly Monthly Monthly Monthly Monthly

mode installment Installment installment installment installment

'For Yes Bank and MAS Financial Services Limited

Annexure 10: Projected financial statement

Income & Expenditure Statement Rs.Crore

Year ended March 31, FY16 FY17 FY18

IncomeInterest income on own portfolio 3.25 3.40 3.60

Other Interest Income 0.00 0.00 0.00

Interest Income from operations 3.25 3.40 3.60

Other income 0.75 0.80 0.84

Total income 4.00 4.20 4.44

Financial costs 1.15 1.20 1.25

Net interest income 2.10 2.20 2.35

Operating expensesPersonnel 1.10 1.15 1.20

Administrative 0.75 0.83 0.88

Total operating expenses 1.85 1.98 2.08

Write offs and provisions 0.26 0.28 0.30

Depreciation 0.07 0.07 0.06

PBT 0.67 0.67 0.75

Tax 0.00 0.00 0.00

PAT 0.67 0.67 0.75

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Balance Sheet Rs. Crore

As on March 31, FY16 FYi7 FY18

liabilitiesShare capital

Paid up capital 1.65 1.65 1.75

Reserves and surplus 1.87 2.54 3.29

Tangible net worth 3.S2 4.19 5.04

Term liabilitiesSecured Loans 6.50 6.70 6.90

Unsecured Loans 0.80 0.85 0.90

Total Debt 7.30 7.55 7.80

Current liabilities and provisions 2.66 2.67 2.68

Total liabilities 13.48 14.41 15.52

AssetsNet fixed assets 0.54 0.47 0.41

Investments 0.80 0.80 0.80

Current AssetsCash in hand & at bank 0.35 0.35 0.35

Total portfolio 18.64 19.64 21.81

Less:Managed portfolio 8.00 8.00 9.00

Portfolio outstanding 10.64 11.64 12.81

Other current assets 1.15 1.15 1.15

Total assets 13.48 14.41 1S.S2

Annexure 11: PRAYAS's position with RBI's guidelines for MFls (Based on the information

provided by the PRAYAS)

RBINorms PRAYAS'position

• Qualifying assets to constitute not less The qualifying assets

NBFC- MFls than 85% of its total assets (excluding cash constitute 96% of total assets

and bank balances) as on December 31,2015

• At least 50% of loans for the income 100% of loans are given for

generation activitiesincome generating activities

Income of • Rural: <.Rs.1,00,OOO PRAYAS studies about the

Borrower's Family • Non-Rural: <.Rs.1,60,000 history of member and alsomaintains records of the samein the system for compliancewith the income criteria

Ticket Size • <. Rs.60,OOO- 1st cycle The maximum loan that can

• <. RS.1,00,000- Subsequent cycle be given to borrowers isRs.15,000 for 3rd cycle

Indebtedness • <. RS.1,00,000 Total indebtedness of themember is checked with HighMark (Credit Bureau)

Tenure • If loan amount> RS.30,000,then >. 24 Loan size is up to Rs. 15,000

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N j

months with tenure of 1 year

Collateral • Without collateral Loans are given withoutcollateral

Repayment Model • Weekly, fortnightly and monthly Monthly repayment model

Interest Rate • Margin cap -12% above cost of PRAYAS maintains margin

borrowings below 12%.

Processing Fees • <= 1%of loan amount PRAYAS collects processingfees as 1% of the loan amount

Insurance • Actual cost of Insurance can be recovered PRAYAS collects insurance

from borrower and spouse charges from the borrowers as

• Administrative charges can be recovered as per IRDAguidelines .

per IRDAguidelinesPenalty • No penalty for delayed payment There is no penalty for

delayed payment

Security Deposits • No security deposit/ margin are to be No security deposit/margin

taken. from the borrowers is taken

Annexure 12: MFI Grading Symbols"

Grading Symbol"MFl1 HighestMFI2+MFI2MFI3+MFI3MFI4+MFI4MFI S Lowest"There is no individual definition for each grading

Annexure 13: List of AbbreviationsAbbreviation Full FormIAE Internal audit executiveslAM Internal Audit ManagerAUM Asset Under ManagementAM Area ManagerBM Branch ManagerCAR Capital Adequacy RatioCARE Credit Analysis and Research Limited

CM Center ManagerCGT Continuous Group TrainingCDS Center-wise Demand Sheet

CEO Chief Executive Officer

CFO Chief Financial OfficerCTO Chief Technology Officer

COO Chief Operating Officer

FI Financial institutionGRT Group Recognition Test

HO Head Office

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I 9

JLG Joint Liability Group

MFI Microfinance Institution

MIS Management Information System

NBFC Non-Banking Financial Company

OSS Operational Self Sufficiency

PAR Portfolio at Risk

DISCLAIMERCARE's microfinance (MFI) grading is a onetime assessment and the grading is not kept under periodic surveillance. CARE'sanalysis draws heavily from the information provided by the microfinance institution as well as information obtained fromsources believed by CARE to be accurate and reliable. However, CARE does not guarantee the accuracy, adequacy orcompleteness of any information and is not responsible for any errors or omissions or for the results obtained from the useof such information. It does not imply that CAREperforms an audit function to detect fraud. In case of NGO MFls, gradings

apply only to their microfinance programs.CARE's MFI grading is not a recommendation to buy, sell or hold any financial instrument issued by the MFI or to make10ans/ donations/ grants to the MFI. It is not an assessment of the debt servicing ability of the MFI. The grading assigned byCAREcannot be used by the MFI in any form for mobilizing deposits/savings/thrift from its members or general public.CARE's MFI grading also does not indicate compliance/violation of various statutory requirements. CAREshall not be liablefor any losses incurred by users from any use of the microfinance grading.

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liN 671 OMH 9 ~Pll 716