Dear Fellow Shareholders
As we prepare this year's annual letter to shareholders the entire world is fightingone of the greatest health threats faced by the generation one that exceedingly impactsthe Indian economy and all of its citizens. PAISALO's thoughts and prayers remains withthe frontline workers communities and individuals and medical workers most deeply hit bythe COVID-19 global crisis.
Throughout our history PAISALO has built its reputation of being there for borrowersand businesses in the most critical times. This unparallel crisis is no different;PAISALO's actions during this crisis are essential in keeping the Indian economy going andwill be remembered for years to come.
I usually cover a review of PAISALO's performance in this letter and under themanagement discussion and analysis section we cover the broader macro issues facing ourCompany and the critical public policy issues affecting our country the same shall beavailable in sections ahead but right now as we and the country deal with the escalatingeffects of this pandemic I want the focus of this annual letter to be on what we as anNBFC can do to remain strong valiant and well-positioned to support our colleaguesclients and communities.
Looking back on the last almost three decades starting from a small office in1992 PAISALO has faced survived and grown despite some unprecedented unique andunknown challenges as we will with this current pandemic but despite all that theCompany has faced it did not stop us from accomplishing some extraordinary and amazingthings. I am thankful and proud of our 1590 employees and business associates around thecountry. I also want to thank Mr. Harish Sigh Director Operations Mr. Anurag Sinha COO;our Board of Directors and all our Key Management People for the leadership they haveshown under these difficult circumstances faced by each and every citizen of our country.
We entered this crisis in a position of strength with continuous growing Revenue andProfit After Tax (PAT). We earned INR 540 million in PAT on revenue of INR 3374 millionreflecting strong intrinsic performance in our business. We have delivered consistentpositive results since inception and we are confident that we will continue to do so inthe future though our earnings may be down in 2020. Our lending business grew whilePAISALO continued to make increasing investments in people and technology. In total weextended credit of INR 14975 million for businesses individuals and women borrowers allwhile maintaining credit discipline ethics and governance. The performance of ourbusiness and our balance sheet can be found in the reports ahead following this letter.
PAISALO was listed on Delhi. Kanpur and Ahmedabad Stock Exchange in 1996The stock isowned by DIIs FIIs Institutional Funds and directly by individual investors the stockas a fact still has some original shareholders holding the stock since 1996. Ourmanagement team goes to work every day recognizing and understanding the responsibilitythat we have in order to perform better and better for our shareholders. While we don'trun PAISALO worrying about the stock price in the short run in the long run our stockprice is a barometer of progress that we have made over the years. This progress signifiesour investment in building our capabilities our people and our technology. Theseinvestments drive the potential promise and possibilities to our Company and position itto continuously grow and provide returns for decades to come. Over the last 10 yearsending our stock has significant return of 59.07 per cent CAGR but it dropped in thelast couple months of FY 2019-2020. While that's still better than many others itshowcases the volatility of returns.
Within this letter I discuss the following:
1. Dealing with this crisis
2. Employee care
3. Our efforts to lift up our borrowers
4. Consistent transparency towards shareholders
5. Safely get back to work
6. Coming together
DEALING WITH THIS CRISIS
I have often spoken about principles like - the need for talented and motivated people;a strong balance sheet that allows us to invest in good times and in bad times; clearcomprehensive curated and consolidated financial risk and operating that allows us tomake quick accurate and risk managed decisions; a devotion to our borrowers; andcontinuous investment in technology to better prepare and serve our employees andborrowers.
Every Company is a living breathing organism made up of people technology knowledgeand relationships and is constructed around a vision and mission. Every Company mustalways and already be a well-governed and well-functioning always prepared to mobilize theefforts and resources and survive another day for the benefit of all stakeholders.
We are always there for our employees and borrowers. It is in the toughest of timesthat we need to use our capital and liquidity to help borrowers also simultaneouslymaintaining credit and economic risks. COVID-19 is one of those times wherein ourinstinct historical learning and future outlook is being applied. Below are some of thethings we are doing to help our Company and our borrowers.
Extending help to our borrowers women borrowers SME's MSME's.
The untimely and threating economic repercussions from this crisis demonstrates andestablishes the critical and crucial need to keep the Indian financial system functioning;we recognize that our NBFC is an important part of the Indian economy.
During this crisis we have been utilizing and implementing alternative safe secureand sterile work arrangements. PAISALO now has enabled 1590 employees and businessassociates to work from home including operations and call centre. We are constantlyensuring they continue to operate with proper and innovative technological tools so theycan serve borrowers safely; we have the capacity to support significantly more demand ifnecessary. Over the past few weeks we have had nearly 5000 virtual sessions.
Therefore we incorporate plans for fortitude perseverance and persistence ineverything we do. And while we had not anticipated the effects of a global pandemic allof this preparation has paid off. It is absolutely necessary critical and essential thatwe are always up and running to understand analize and the better prepared for each ofour borrowers. PAISALO's branches before this pandemic collectively and commutativelyhad over 300000 customer visits each month; and during the last few weeks we have beenable to talk to all our borrowers and understand the problems they are facing as well asanalyse each borrower. We have been also able to individually work with every borrowerfacing COVID-19-related hardships across the country.
We have been helping our borrowers who tell us about their financial struggles as aresult of the crisis and are offering relief measures such as:
Providing a moratorium period for all loans
Removing minimum payment requirements.
Not reporting of payment deferrals such as late payments to credit bureaus
And lastly continuing to responsibly lend to qualified women borrowers SME'sand MSME's.
of our 129 branches 1590 employees and business associates have continued to takeappointments and proactively reach out to customers - helping them - often lettingcustomers stay home by providing Door Step Sourcing and Servicing all the whilemaintaining Safe Distance and taking all necessary Non-Pharmaceutical Intervention. Inaddition a vast majority of our 129 branches 1590 employees and business associates areequipped with all updated technology and are still functioning to provide needed credit toour borrowers. We have mobilized quickly and built new tools - digital and analog - toallow borrowers to request credit.
Some borrowers have been much more vulnerable exposed and impacted than others inparticular micro and small businesses that do not have enough liquidity/ cash buffer towithstand sudden sustained and startling decline of income. PAISALO's field research andanalysis during the last few weeks revealed that 80-85% of micro and small businesseshave significantly less liquidity explaining why these businesses are being heavilydisrupted and will continue to feel the effects for a while in the medium term ahead -even as more liquidity in the form of debt from the recent government stimulus programreaches them.
To support businesses during this current crisis we are doing the following:
Servicing borrowers with additional credit
Continuing extending credit to micro small and medium businesseswhich wehave been offering judiciously.
Continuing in the ordinary course of business to sustain borrowers andcommunities
Recognizing the extension of new credit mentioned above means that we are exposingourselves to crores of rupees of additional credit risk as we help both women borrowersand business customers through these difficult times. We are in continual contact with ourregulator about our actions and efforts.
We applaud and appreciate the speed with which the Honourable Prime Minister ShriNarendra Modi led Indian Government and the Reserve Bank of India as well as Securitiesand Exchange Board of India put together a stimulus package and other funding benefits tohelp individuals and businesses across the country.
It's amazing how quickly we have implemented work-from-home and other measures. Ourteam serves our borrowers; builds services and innovates on the technology; helps makestrategic decisions and implement them and help manage the risks. It is inarguable thathaving such a team is what ensures our future prosperity. Times like these bolster andsupport that our employees are an important asset - they are fundamental to the success ofour Company.
We have also taken various steps to protect secure and support our employees and theirfamilies. For example:
We continue to pay employees who are at home
All members of our team are there to support our employees through thisdifficult time
All branch employees are being paid even if their branch is temporarily closed.
For those who must go to work on-site we are strengthening and bolsteringpersonal and office hygiene. We have modified business operations changed seatingarrangements and closed branches to nonessential visitors.
These are just some of the measures that have been put in place.
EFFORTS TO LIFT UP OUR BORROWERS
Our stakeholders know that we make extraordinary efforts to lift up help andfinancially assist our borrowers and the communities they service. For example - at thenational level we provide feedback to help and formulate policies that are good for theeconomy. These policies directly and indirectly affect aid and attribute a great dealtowards infrastructure finance and employment.
Funding will be deployed over time with particular focus on the most vulnerableborrowers and businesses including:
Additional credit to women borrowers
Assistance to micro and small businesses exposed to economic hardships acrossour branch network
Credit to micro and small businesses in low-income communities.
Focus on designing additional lending products to promote the financial healthliteracy and development of lower-income individuals.
In FY 2020 we lent a total of INR 14975 million in debt. While many NBFC's wereseeking more liquidity to serve amidst still on-going COVID-19 crisis we were able tohelp fund women borrowers MSMEs and SMEs in additional fund availability over thelockdown period. This is a win-win for our borrowers and the communities in which theyoperate.
CONSISTENT TRANSPARENCY TOWARDS OUR SHAREHOLDERS
We do not know how this crisis will end how long it will last economic damage it willdo or how fast or how many human lives will be lost. We have always been serious aboutstress testing and run an a number of tests every year. But our NBFC cannot be immune tothe repercussions and immediate effects of this kind of global pandemic stress.
However to put it in context here is how our shareholders can think broadly about areasonable range of outcomes.
Our FY 2020 Revenue Profit Before Tax (PBT) and PAT were INR 3374 million INR 739million and INR 540 million respectively and CAR stood at 43.06% - a strong stream thatgives us space to absorb and accommodate the loss of revenues and the higher credit coststhat might follow a crisis.
Additionally we have run a more adverse stress scenario test that assumes a moredeeper contraction of gross domestic product and with India unemployment to furtherincrease. Even under this test the Company would still end the year with reasonableliquidity and continuously tread towards raising equity or debt from banks andinstitutions. This scenario produced under the above additional stress environment test isquite severe serious and subversive and we hope unlikely.
It is also important to be aware that in both our sample stress test and in ourextremely adverse additional stress environment we will be lending - currently or plan todo so - an additional percentage for our borrowers needs. While still continuing tomaintaining our resources and liquidity at reasonable levels. Additionally I would like topoint out that as we get closer to the extremely adverse additional stress environmentwe will limit additional exposures on borrowers. While we will judiciously help ourcustomers we must take action steps and introduce processes to protect ourselves fromongoing and future credit risk and other risks.
We applaud and support the recent actions the Honourable Prime Minister led governmentRBI and SEBI have taken to try to mitigate the economic impact of COVID-19. The RBI'sactions and continuous work towards reduction on the financial stress in the system wouldbolster the Indian economy.
Right to equality right to freedom right against exploitation right to cultural andeducational rights freedom of speech and promise of opportunity: These gifts have led tothe world's biggest democratic and dynamic economy - one that nurtures supports promotesand produces businesses education and environment for innovation.
Of course India has always had its flaws. My hope is that India starts to fix theseproblems. Fixing them would create better economic outcomes for everyone with policiesthat aim to maximize economic growth as well as protect and foster economic growth that ismore resistant which would strengthen India's role in the world. We need to demand moreof ourselves and our leaders. Business and government collaborating together in fosteringnurturing and supportive environment can conquer any of our biggest challenges.
I would like to express my gratitude and appreciation for the employees of PAISALO. Ihope our shareholders gain an appreciation for the tremendous and mighty capabilities ofour people and how they have helped borrowers across the country.
I would also like to express my heartfelt gratitude towards Reserve Bank of IndiaMinistry of Finance Ministry of Co-operate affairs Income Tax Department Goods andService Tax Department Securities and Exchange Board of India Bank of Baroda Bank ofIndia Bank of Maharashtra Central Bank of India IDBI Bank Punjab National Bank SouthIndian Bank State Bank of India UCO Bank Union Bank of India Uttar Pradesh GovernmentGujarat Government Delhi Government Rajasthan Government Maharashtra GovernmentHaryana Government Himachal Pradesh Government Uttarakhand Government Bihar Governmentand Punjab Government.
I have a deep abiding and unshakable faith in the India and its extraordinarycapabilities. Our challenges are significant as a powerful developing and emergingnation. Let us all do what we can to further strengthen foster and ensure an exceptionalflourishing nation.
We as a nation have in the past faced times of distress misfortune and hardship withdetermination bravery and perseverance. I hope you are as proud of this great nation aswe are. We have the resources and capability to emerge from this crisis as a strongercountry.