Midland Micro Finance Limited Unlisted Shares

Annual Report Summary

The following is a comprehensive summary of the Midland Microfin Limited (MML) Annual Report for 2020-2021, meticulously capturing all crucial information, key arguments, supporting data, methodologies, findings, conclusions, and actionable insights.

Company Overview:

Midland Microfin Limited (MML), established in January 2011, is the first Punjab-based Microfinance Institution (MFI) with its Head Office in Jalandhar, Punjab. It operates as a Non-Deposit taking Systemically Important (NDSI) Company, registered as an 'NBFC - MFI' with the Reserve Bank of India (RBI). MML works towards the financial and social empowerment of women by extending small business loans. MML's vision is to be a world-class, role model, techno-savvy international Microfinance Institution providing support to progressive poor at low cost. As of March 31, 2021, MML had expanded to 217 branches across 8 states and 1 union territory. The company achieved an asset size of ₹1099.81 crores as of March 31st, 2021, and has been certified as a "Great Place To Work".

Vision, Mission, and Values:

• Vision: To be a world-class, techno-savvy microfinance institution providing support to progressive poor at a low cost.
• Mission: Encourage micro-enterprise as a source of sustainable livelihood, emphasizing financial services for women with the help of technology. Work for the financial and social empowerment of women and provide easy access to financial services for low-income entrepreneurs.
• Values: Courage, Respect, Responsibility, Commitment, and Achievement.

Managing Director's Note:

The Managing Director, Amardeep Singh Samra, highlighted the milestone of MML turning 10 years old. He acknowledged the difficulties presented by the COVID-19 pandemic but emphasized the company's resilience and adaptability. MML prioritized employee health and wellbeing while continuing to support customers' business operations and growth. He noted that the company swiftly returned to a sharp growth trajectory after initial disruptions, ending the year strongly with an asset size of ₹1099.81 crores as on March 31, 2021. The Managing Director thanked the Board and core team for their insightful guidance and expressed the aim to continue empowering millions of poor families through a tech-savvy microfinance institution.

Directors' Report:

• COVID-19 Impact: The Directors' Report acknowledged the severe impact of the COVID-19 pandemic on the global and Indian economy, and microfinance sector. It noted the spread of infections, deaths, lockdowns, and disruptions to economic activity. The second wave of COVID-19 affected smaller cities, towns, and rural areas more severely. Microfinance Institutions faced challenges in managing financial distress, customer retention, and staff wellbeing. The company responded by extending moratoriums to borrowers and adapting operations to comply with COVID norms.
• Financial Performance:
  • Total Gross Income increased by 4.45% to ₹1,923.45 Million.
  • Profit Before Tax (PBT) decreased by 24.20% to ₹190.10 Million.
  • Profit After Tax (PAT) decreased by 21.91% to ₹146.26 Million due to higher ECL provisions.
  • Net Worth increased by 49.09% to ₹1,768.10 Million due to a Rights Issue.
  • Non-fund based income decreased to ₹4.84 Million.
  • Earnings Per Share decreased to ₹4.06.
  • Capital to Risk Weighted Assets Ratio (CRAR) stood at 33.96%.
• Operational Highlights: MML expanded its presence in Gujarat, scaling its network to 217 branches. Senior management focused on cost reduction and operational efficiency.
• Lending Operations: Loan disbursals were ₹6,888.21 Million, a 33.42% decrease due to the pandemic. Cumulative disbursement stood at ₹37,582.60 Million.
• RBI Guidelines: MML introduced schemes for moratoriums on term loans and refunding/adjusting interest on interest charged during the moratorium period, in compliance with RBI guidelines.
• Recovery & Stressed Assets: Gross NPA stood at 1.69%. Recovery actions led to recovery of ₹16.74 from NPAs. Overdue loans to total loans due stood at 4.22%.
• Resource Mobilisation: Total borrowings stood at ₹8,931.14 Million. The company drew ₹60.67 Million through External Commercial Borrowings and received consolidated foreign direct investment of ₹155.98 Millions. Funds amounting to ₹793.00 Million were mobilized through Secured Redeemable Non-Convertible Debentures (SRNCD) and ₹275.20 Million through Unsecured Redeemable Non-Convertible Debentures (URNCD). The company also took a term loan facility amounting to ₹3,829.50 Million from domestic banks/financial institutions.
• Share Capital: The Authorized Share Capital stood at ₹75,00,00,000 and the Issued, Subscribed and Paid-up Share Capital stood at ₹55,11,52,060. A rights issue successfully raised ₹450.03 Million.
• Dividend: The Board recommended a dividend of 6% per equity share.
• Credit Rating: MML maintains strong credit ratings from CARE, ACUTE, and BRICKWORK.
• Risk Management: The Board established an ALM Committee (ALCO) for evaluating, monitoring and reviewing liquidity and interest rate risks.
• Regulatory Compliance: MML complied with all relevant RBI guidelines and other applicable laws. Timely disclosures were made as required under SEBI regulations.
• Internal Controls: Adequate internal financial controls are in place and operating effectively.
• Corporate Social Responsibility (CSR): The Company's CSR mandate focuses on serving, uplifting, and empowering communities at the bottom of the income pyramid. During the financial year, the company spent ₹14,46,838 on CSR activities.
• Directors and Committees: The Board comprised six Directors. Committees included Audit Committee, Nomination and Remuneration Committee, Stakeholders' Relationship Committee, Corporate Social Responsibility Committee, Risk Management Committee, Asset Liability Management Committee, IT Strategy Committee, Core Committee, Board Management Committee, and Head Office Executive Committee.
• Human Resources: The company considers its employees as its most valuable assets. As of March 31, 2021, the Company had 2165 permanent employees.
• Auditor's Report: The auditor's report does not contain any qualifications.

Management Discussion and Analysis Report:

• Outlook: Global prospects remain highly uncertain, but global growth is projected at 6 percent in 2021 and 4.4 percent in 2022. The deadly Covid-19 second wave had mostly affected India's big cities in 2020-21. The second wave has firmly gripped many smaller cities, towns and rural areas.
• Indian Economy: India has been among the world's fastest-growing economies. The pandemic and localized lockdowns have impacted the Indian economy, but the impact is expected to be less devastating than the previous year.
• Steps Taken by the Company: Implemented IT solutions, branch categorization, manpower categorization, mergers of 7 branches. Saral Loan and Solar Products Introduced
• Risk Management and Concerns: Focuses on credit, liquidity and interest rate risks. Mitigates by the use of the committee.
• Excellent financial performance: Increase in Gross Income, the total income reported was Rs. 1,923.44 Million, PBT (Profit before tax) Rs. 190.10 million and PAT (Profit after tax) Rs. 146.26 Million.

Additional Disclosures:

• Details of remuneration to directors and key managerial personnel are provided.
• Various financial ratios and details are provided in the notes to financial statements.
• The company has complied with all the social performance guidelines that are laid down.

Client Success Stories:

The report includes several client success stories, highlighting how MML's loans have helped women start or expand businesses, improve their financial condition, and support their families.

10th Establishment Day and Chairman's Club:

Celebration of "10th Foundation Day" and rewards to employees in Chairman's Club acknowledged company's employees.