1 / 40

MF Education Program @ Goa, India MFI-Transformation: Why, How and The Impact ORGANIZED BY SA-DHAN

MF Education Program @ Goa, India MFI-Transformation: Why, How and The Impact ORGANIZED BY SA-DHAN March 24-26, 2010. Topic: Transformation & Double Bottom Line. Presenter: Chandra Shekhar Ghosh Senior Ashoka Fellow Chairman & Managing Director Bandhan. TRANSFORMATION WHY?

garry
Télécharger la présentation

MF Education Program @ Goa, India MFI-Transformation: Why, How and The Impact ORGANIZED BY SA-DHAN

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. MF Education Program @ Goa, India MFI-Transformation: Why, How and The Impact ORGANIZED BY SA-DHAN March 24-26, 2010 Topic: Transformation & Double Bottom Line Presenter: Chandra Shekhar Ghosh Senior Ashoka Fellow Chairman & Managing Director Bandhan

  2. TRANSFORMATION WHY? Why does an MFI want to transform to an NBFC?

  3. WHY TRANSFORMATION? • To widen/broaden microfinance services to the unreached poor • To maintain Capital Adequacy Ratio • To minimize regulatory risks • To achieve confidence / comfort of lenders

  4. TRANSFORMATION WHAT? What is the MFI going to transfer?

  5. TRANSFORMATION OF WHAT? Surplus Bank Loans

  6. TRANSFORMATION HOW? How is the MFI going to transfer?

  7. HOW TO TRANSFER ? • The above can be transferred in either of the following two ways: • After full payment of existing loans in MFI, issue new loans to clients in NBFC • Loan portfolio + borrowers of all branches to be transferred in one go

  8. TRANSFER OF Bank Loans There are basically three options to transfer the Bank Loans. • With permission from the bank (appropriate for outstanding of huge amount) • Pre payment of existing loan in MFI followed by sanction of fresh loan in NBFC (may be adopted where outstanding amount is small) • Enter into back-to-back agreement

  9. TRANSFER OF Surplus The MFI should carefully choose the mode of transfer of surplus. As such, it depends on certain factors: • Amount to be transferred • Present legal status of MFI

  10. TRANSFORMATION WHAT NOT? What should an MFI not transfer? MIND!!!

  11. TRANSFORMATION STEPS What are the various steps of transformation?

  12. STEPS INVOLVED IN TRANSFORMATION • Approval from the board of MFI • Depute experienced Consultant • Form a Committee internally to work on the transformation • Select appropriate methodology after analysis of available options • Seek legal opinion (in written) from reputed legal firm • Always take a second legal opinion • Board approval for mode of transformation • Share the issue in details with the management, proper orientation must be given • Finalize the date of transformation

  13. STEPS…CONTD • Begin implementation – documents, printing materials , bank a/c opening • Preparation & execution of MoU • Formally apply to lenders for permission • Sign the Business Transfer Agreement (BTA) • Prepare B/S before & after transformation • Submit financials (after transformation) to lenders • Enter into new agreement with the lenders • Charge creation at ROC • Submit reports regularly to regulatory authorities

  14. TRANSFORMATION CHALLENGES What are the challenges an MFI faces during transformation process?

  15. CHALLENGES FACED

  16. TRANSFORMATION LEARNINGS What have been the major learnings?

  17. LEARNINGS • Step-by-step documentation is a must • Always take legal opinion before taking any major step • Don’t forget to seek a second opinion • Always have proper planning (set time frame) to execute the steps • News to be shared externally only after final execution (with relevant supporting documents)

  18. LEARNINGS…CONTD • The entire process should be carried on in such a manner that it doesn’t affect the normal day-to-day activities • Ensure that all MFI bank accounts have been closed • Get the auditors / outsiders to check whether the execution at the field has been done correctly • Statutory auditor to remain the same throughout the process, preferably even after the transformation (for 1 year at least) • Appoint a spokesperson to talk on the transformation plan

  19. TRANSFORMATION IS POSSIBLE It is a long and tedious process but can be completed with the hard work of the team

  20. EQUITY WHY? What were the reasons for getting external equity?

  21. REASONS FOR EQUITY

  22. INITIAL APPREHENSIONS What, why, when, how….?!

  23. APPREHENSIONS Since it was a first round of equity for Bandhan, we had our own pre - conceived notions, worries and questions. • Worry of private equity players • Hold on to the organization’s mission • Whether the organization will be able to get desired valuation • Great concern about push for huge return • Building competence of the team

  24. CHOICE OF INVESTORS Who & why?

  25. INSTITUTIONAL Vs PRIVATE INSTITUTIONAL • Strategic • Long term • Creates value • Less interruption in day-to-day management • More transparent PRIVATE • Faster • Higher valuation • Higher return • More professional approach • Very tactful

  26. MAKING THE RIGHT CHOICE From Day 1, the following strategy was set.

  27. PREPARATIONS DONE What all? Raising equity involves a huge process

  28. STEP-BY-STEP PROCESS • Preparation of Strategic Business Plan (SBP) for 3-5 years • Analysis of equity requirement from the SBP • Discussion of the same at the Board for necessary suggestion and final approval • Selection of right Arranger (if need be) • Develop an internal team (operationally & financially sound) to work exclusively on this • Keep the recent financial report readily available • Prepare a good presentation & Information Memorandum (IM) to be made to potential investors

  29. PROCESS…..CONTD. • Collect market information (including investor details) • Prepare set of documents viz. financials, trend analysis, performance analysis, ratio analysis, MOA, projection • Post Non-Disclosure Agreement (NDA), information sharing • Road show - meeting potential investors • Prepare documents for due diligence • Organize site visit • Start negotiation • Obtain valuation from the investor • Final negotiation on term sheet

  30. PROCESS….CONTD • Board approval • Execution of documents – after necessary legal vetting • Increase in authorized capital, if required • Final infusion and allotment

  31. CHALLENGES FACED

  32. NEGOTIATION Major point of negotiation / disagreement always remains the valuation.

  33. POINTS OF NEGOTATION

  34. NEGOTIATION TIPS • Remember that everything is negotiable • Aim your aspirations high • Never accept the first offer • Put what you have agreed on in writing • Be cooperative and friendly, Avoid abrasiveness, which often breaks down negotiations • Information is power – get as much as possible

  35. COMMON QUESTIONS Generally the investors will have lots of questions on the following.

  36. EXPERIENCE During the process, we learnt each day. Each meeting / dealing was a new experience. However, after all the struggle, post investment experience can be defined as follows. • An ideal investment in the MF space • Appropriate choice of investor • Example set for all the other players in the sector • A very good and learning experience, worth the time invested

  37. SUGGESTIONS

  38. FUTURE PLANS

  39. Bandhan Ownership Pattern

  40. THANK YOU FOR YOUR ATTENTION For more information on Bandhan, Log on to www.bandhanmf.com

More Related