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Autoinvest Leasing and Finance

(I) Private Limited

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Analytical Contacts

Mr. Ramraj Pai Director

rpai@crisil.com +91 22 3342 3036

Mr. T Raj Sekhar Sr. Manager

trajsekhar@crisil.com +91 44 66563136

Microfinance Institution Gradings

Date Assigned October 12, 2010

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DISCLAIMER

CRISIL's microfinance institution (MFI) grading reflects CRISIL’s current opinion on the ability of an

MFI to conduct its operations in a scalable and sustainable manner. In the case of NGO-MFIs and

entities with multiple businesses, CRISIL’s MFI Gradings apply only to their microfinance

programmes. The MFI Grading is a one-time exercise and the Grading will not be kept under

surveillance. However, the MFI Gradings are revised as and when circumstances so warrant.

CRISIL recommends that the user of the Grading seeks a review of the Grading if the graded

institution/microfinance programme experiences significant changes/events during this period

which could impact the graded institution/its grading.

CRISIL MFI Gradings are based on the information provided by the Institution, or obtained by

CRISIL from sources it considers reliable. CRISIL does not guarantee the completeness or accuracy

of the information on which the MFI Grading is based. CRISIL MFI Grading is not a

recommendation to purchase, sell or hold any financial instrument issued by the graded MFI, or to

make loans and donations / grants to the institution. The MFI Grading does not constitute an audit

of the graded MFI by CRISIL.

The MFI Grading Report and the information contained therein are the intellectual property of

CRISIL. The MFI Grading Report should not be reproduced or distributed or communicated directly

or indirectly in any form to any other person or published or copied in whole or in part, for any

purpose or by any means without the prior written permission of CRISIL. The MFI Grading should

not be used for mobilising deposits/savings/thrift/insurance funds/other funds (including equity)

from their members/clients or general public and should not be used in its external

communications, promotional materials or member/client passbooks. CRISIL is not responsible for

any errors and especially states that it has no financial liability, whatsoever, to the subscribers/

users/transmitters/distributors of its MFI Gradings. For the latest information on any outstanding

CRISIL MFI Gradings, please contact CRISIL RATING DESK at CRISILratingdesk@crisil.com or at

(+91-22)-3342 3047/3064.

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MFI GRADING

MFI GRADING HISTORY

None

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CRISIL’s microfinance institution (MFI) grading is a current opinion on the

ability of an MFI to conduct its operations in a scalable and sustainable

manner. The grading is assigned on an eight-point scale, with ‘mfR1’ being

the highest, and ‘mfR8’ the lowest. The MFI grading is a measure of the

overall performance of an MFI on a broad range of parameters under

CRISIL’s MICROS framework. It includes a traditional creditworthiness

analysis using the CRAMEL approach, modified to be applicable to the

microfinance sector. The acronym MICROS stands for Management,

Institutional arrangement, Capital adequacy and asset quality, Resources

and asset-liability management, Operational effectiveness, and Scalability

and sustainability.

MFI Grading Scale: mfR1 - highest; mfR8 – lowest

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FACT SHEET

Name of the MFI : Autoinvest Leasing and Finance (I) Private Limited (Vistaar Livelihood Finance )

Year of Incorporation : September 1991

Year of commencement of microfinance programme

: June 2010

Legal status : Non deposit taking non banking financial company

Chief Executive/Functionary : Mr. Brahmanand Hegde, Managing Director

Contact details : Mr. Brahmanand Hegde Managing Director Autoinvest Leasing and Finance (I) Private Limited No.9, 3rd Cross 37th Main, KAS Officers Colony BTM 2nd Stage Bengaluru - 560076 Tel: +91-80-40463218 Email-id: brahmanand.hegde@vistaarlfi.com Website: www. vistaarlfi.com

Lenders : Ananya Finance for Inclusive Growth, Development Credit Bank, HDFC Bank Ltd

Statutory Auditors : Walker Chandiok & Co., Chartered Accountants (Grant Thorton), New Delhi

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ABOUT THE MFI Lending model : Group based lending model

Products : • Joint Liability loan with loan size ranging from Rs.8,000–Rs.25,000 per member. The MFI currently extends 50 week loans at an interest rate of 27 per cent on reducing basis.

Borrower base : 2690 borrowers as on August 31, 2010

Employees : 147 (95 credit officers) as on August 31, 2010

Number of branches : 9 as on August 31, 2010

Loan outstanding : Rs.31.9 million as on August 31, 2010

Loans disbursed : Rs.33.6 million during the 2 months ending August 31, 2010.

Operational areas : Nine districts (Eight districts in Tamil Nadu and One district in Karnataka) as of August 31, 2010

OUTREACH SUMMARY

Particular Aug-10 No. of groups 538

No. of members 2690

No. of borrowers 2690

No. of branches 9

No. of districts covered 9

Women borrowers 100%

Disbursements (Rs.million) 33.6

Loan outstanding (Rs.million) 31.9

PRODUCTIVITY AND EFFICIENCY INDICATORS

As on/For the period ending, Aug-10 Members/branch (No.) 299

Borrowers/ branch (No.) 299

Loan outstanding/branch (Rs.million) 3.5

Loan outstanding/ credit officer (Rs.million) 0.3

Loan outstanding/ borrower (Rs.) 11859

Members / credit officer (No.) 28

Borrowers / credit officer (No.) 28

Groups / credit officer (No.) 6

Borrowers/members (%) 100

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Social Indicators and Transparency Indicators

As on August 31, 2010 Average loan outstanding/per capita GNI (2009 figure)* (in %) 32.6 Women staff/total staff (in %) 0.7 Women borrowers/total borrowers (in %) 100 Effective IRR (including interest rates, processing fees, security deposit & any other fees charged by the organisation)? (in %) 30.2 Are interest rate (on declining basis) communicated to clients in writing? Yes Are processing charges communicated to clients in writing? Yes Is an official receipt provided by the MFI to clients after repayment collections? Yes Is access to loan of other MFIs one of the parameters to select/screen clients? Yes Is access to loan of other MFIs/residual income one of the factors to appraise repayment paying capacity of clients? Yes Does the MFI appraise the client's income/poverty/asset level and use it to target low income clients? Yes Does the MFI capture and analyse reasons for client drop out rate? Yes Is any head office designated contact details provided to clients as part of grievance redressal mechanism offered to clients? Yes

*Per capita GNI is based on current prices. Source: CCER computations based on Central Statistical Organisation (CSO) data

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GRADING RATIONALE

The microfinance institution (MFI) grading assigned to Autoinvest Leasing and Finance (I)

Private Limited (Vistaar) reflects the MFI’s:

� Experienced board and senior management team

� Commitment to implementation of strong processes and systems

� Adequate capitalisation

The above-mentioned grading strengths are partially offset by Vistaar’s:

� Short operating track record

� Asset quality and credit risks untested through a full business cycle

� Modest expected earnings profile over next two years

PROFILE

Autoinvest Leasing and Finance (I) Private Limited is a non-deposit-taking non-banking

financial company (NBFC-ND) registered as a loan company with the Reserve Bank of

India (RBI). The company was incorporated in September 1991. The present promoters

acquired this company in March 2010 and have applied for the name change to Vistaar

Livelihood Finance. The company started its microfinance operations on June 17 2010, and

has since expanded to nine branches—eight in Tamil Nadu and one in Karnataka. As on

August 31, 2010, the company had 2690 borrowers and loans outstanding of Rs.32 million.

Mr. Brahmanand Hegde, former director – microfinance, Fullerton India Credit Company

Ltd (FICC) and Mr. Ramakrishna Nishtala, former head – microfinance, FICC are the core

promoters of the company. Mr. G S Sundararajan, managing director, Shriram Capital Ltd,

and former chief executive officer and managing director of FICC, is also a significant

shareholder. The three promoters together hold 55 per cent of the company’s stake. The

other shareholders include Elevar Equity (22.5 per cent stake), the equity fund manager of

Unitus Capital and SVB India Capital Partners, a venture fund (22.5 per cent).

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Vistaar’s mission is to make a significant and sustainable impact on the lives of under-

served entrepreneurs, across rural and urban India, by enhancing the economic output of

their livelihoods. The company’s vision is to provide customised financial services and

other value-added enablers, focused on customers’ livelihoods, in a transparent and

innovative manner.

Loan Methodology and Product Offerings

*To be introduced shortly **Tie-up with Kotak Mahindra Old Mutual Life Insurance Ltd.

Vistaar’s lending model is similar to the Grameen Bank model. Vistaar offers loans to

women organised into joint liability groups (JLGs). Currently, the company offers only one

loan product, which is differentiated by the loan amount (refer to Table 1). In the near future,

the MFI aims to offer larger-ticket customised loan products with repayment flexibility.

Such loans will be focussed on livelihood activities such as dairy, power loom, handloom,

home-based industries, and handicrafts.

Table 1: Loan Products Parameters Weekly Fortnightly* Monthly* Loan amount offered (Min. to Max.) Rs.8,000- Rs.25,000 Rs.10,000-Rs.40,000 Rs.10,000-Rs,40,000

Tenor (Min. to Max.) 50 weeks 12-24 months 12-24 months

Interest rate

27 per cent (reducing basis)

29 per cent (reducing basis)

29 per cent (reducing basis)

Documentation/ Enrolment Fees Rs.350

350 for loans up to Rs.15,000;

Rs.450 upwards for larger loans

Rs.350 for loans up to Rs.15,000;

Rs.450 upwards for larger loans

Insurance Fees (for customer and spouse) ** Rs.200

Rs.200 for loans up to Rs.15,000;Rs.300

upwards for larger loans of tenure

greater than 1 year.

Rs.200 for loans up to Rs.15,000;

Rs.300 upwards for larger loans of tenure

greater than 1 year.

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MANAGEMENT Short operating track record

• The grading is constrained by Vistaar’s short operating

track record in microfinance; Vistaar has only about 3

months of experience in microfinance.

Differentiating factors provide a definite edge over other start-ups

• The company has the advantage of qualified promoters

with vast experienced in rural business and microfinance.

The MFI has several differentiating factors to its credit, in

terms of process and product innovations. CRISIL believes

that if these innovations are successful, Vistaar will acquire

capabilities to expand to new regions, widen its product

range and tie-up for third-party distribution of products

and services.

Adequate technological architecture; scope for broadening the software utilisation

• Vistaar has an internet-based loan tracking software (based

on .Net platform). The software is integrated with

biometric devices; such devices are currently being used for

recording collection and attendance details of borrowers.

Data entry and processing is handled by the administrative

team at the branch level. The software solution will support

Vistaar’s growth plans in the next three years.

• However, CRISIL believes that the scope of utilisation of

the existing technology can be broadened to include several

more aspects of the company’s microfinance operations,

namely automatic data consolidation of the branch level

audit reporting and cash flow management, and enable

finer customer authentication at the time of collections.

Elaborate human resource (HR) initiatives

• Vistaar’s HR initiatives are elaborate and aimed at ensuring

low attrition. All the key positions have been filled. The

company had 147 employees as on August 31, 2010. It

follows an elaborate selection and recruitment process, and

has recently started tapping neighbouring catchments for

hiring field staff, in addition to the conventional hiring

methods such as campus interviews, walk-ins, and branch

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manager references. The chosen candidates are provided

first-hand experience of the company’s operations before

they join. This is to prevent early attrition of field staff

during the first few months of joining the company.

Furthermore, Vistaar has taken steps to ensure periodical

refresher training and to reinforce adequate discipline at

the branch level.

Very high cash balance • Vistaar has an unusually high branch-level cash balance

policy compared to most other MFIs. As per the mandated

norm, the cash balance maintained at the branch level

ranges from Rs.50,000 to Rs.900,000. CRISIL believes that

high cash balance at branches exposes the company to

significant operating risks, with the branch staff residing at

the branch premises and having constant access to the vault

and its keys. High cash balance also results in a high cash

float. In order to mitigate the risk of cash holding, the

company has put in place a dual key arrangement at the

branch; however, the effectiveness of the same needs to be

seen.

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INSTITUTIONAL ARRANGEMENT Strong board and senior management team

• Vistaar is governed by a five-member board. The board

comprises of experienced and recognised personnel from

the financial sector. The board includes two nominee

directors representing the investors, Elevar Equity

Mauritius and ICP Holdings. In CRISIL’s opinion, Vistaar’s

board composition and shareholder base should provide

the company with sound corporate governance and

transparency. Similarly, Vistaar has a competent senior

management team, experienced in microfinance and retail

finance. Majority of the officials of the key management

team, including the promoters, are from FICC, a leading

NBFC, and have worked together in the past.

• The company’s management has indicated its commitment

to transparency at all levels, including communication of

interest rates and fees charged to customers. Accordingly,

all the loan terms and conditions are provided to the

customer in a detailed manner at the time of loan

disbursement.

• The management is equally focussed on enhancing the

efficiency of processes and systems alongside the

organisational growth. In keeping with this, Vistaar has

laid out a strategic road map to grow to 300 branches

within the next three years by effectively utilising its

technological and human infrastructure.

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CAPITAL ADEQUACY AND ASSET QUALITY Adequate capitalisation • As on August 31, 2010, Vistaar is capitalised at Rs.153

million, one of the highest for a start-up MFI in India. The

company’s net worth was at Rs.127 million as on the same

date. The company expects to disburse a total of Rs.400

million during 2010-11. Vistaar is adequately capitalised for

the level of business it expects to undertake for the rest of

2010-11 (refers to financial year, April 1 to March 31). As on

August 31, 2010, two microfinance investment vehicles

held 45 per cent of the stake in Vistaar.

• The company expects to maintain gearing at 4.5 to 5.5 times

and capital adequacy of above 15 per cent over the long

term. Given the management’s standing and experience,

CRISIL expects Vistaar to raise timely capital to fund its

medium-term growth plans.

Loan portfolio yet to season • Vistaar has healthy asset quality with 100 per cent of its

loan portfolio being current as on August 2010; the on-time

repayment rate has been consistently high since the start of

operations in June 2010. However, with only a few months

of operations, the loan portfolio is yet to season and the

true asset quality will be evident only when Vistaar

completes one loan cycle. Similarly, the efficacy of the

detailed borrower appraisal and other credit and

operational risk management (current and proposed)

measures, undertaken for large-ticket loans, needs to be

seen over a period of time.

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RESOURCES AND ASSET LIABILITY MANAGEMENT Adequate resource profile • Given the experience of Vistaar’s management team,

CRISIL believes that the MFI will manage liquidity and

raise resources on time to fund its expansion plans.

Currently, the company’s disbursements are being funded

out of the initial capital raised; the mobilised resource is yet

to be utilised towards on-lending. The company’s

confidence in its on-time resource-raising capabilities is

reflected in its on-going branch expansion and product

diversification plans.

• Vistaar plans to raise funds through borrowings with

tenure of upto two years from a mix of lenders such as

private banks, public banks, apex MFIs, and NBFC, over

the medium term. Presently, it has sanction of Rs.30 million

from HDFC Bank, Rs.20 million from Development Credit

Bank, and Rs.20 million from Ananya Finance for Inclusive

Growth and is in discussions with other lenders to meet its

fund requirement over the medium term.

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OPERATIONAL EFFECTIVENESS Profitability expected to remain negative over medium term

• Vistaar’s projections indicate that given its high start-up

costs and the time taken for branches to reach optimal

capacities, the company will not register profits in 2010-11

and 2011-12. However, with tight monitoring of

productivity and efficiency levels, the company believes

that it will be able to achieve break-even earlier than

projected. Nevertheless, CRISIL does not expect any

significant improvement in Vistaar’s operating expense

over the medium term without a corresponding

improvement in the company’s field-level productivity.

• Vistaar started lending in June 2010, and reported an

income of Rs.2.6 million and loss of Rs.23.6 million for the

period between April 01, 2010 and August 31, 2010,

factoring the pre-operative expenses.

• As per the company’s projections, the spread on lending is

expected to remain low in the next two years. Additionally,

with high operating expense level of beyond 15 per cent of

average funds deployed, Vistaar’s net profitability margin

is expected to be negative during 2010-11 and 2011-12.

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SCALABILITY AND SUSTAINABILITY Ability to scale up and sustain operations

• Vistaar’s management’s strategy is to provide easy access

to cost-effective credit in a transparent manner to low-

income, mass market borrowers who do not have access to

banking channels. At the same time, it also intends to

achieve acceptable returns on investment so that it can

attract capital and human resource to serve the chosen

target segments better. CRISIL believes that the entry of

professionally managed companies into microfinance will

immensely benefit the sector, and companies such as

Vistaar, which attract talent and have adequate funding

resources, have greater ability to scale up and sustain

operations.

• Vistaar plans to focus on a few districts in Tamil Nadu and

Karnataka during 2010-11 and during Q12011-12. The

company plans to diversify its portfolio to Maharashtra

and Gujarat from Q2 2011-12. CRISIL believes that, as the

company gains experience, the ease of replication in other

states should increase. Similarly, investment in information

technology at an early stage should support improved

service and turnaround capacity and facilitate greater

economies of scale.

Processes and control systems in initial phase, and their efficacy is yet to be demonstrated

• The promoters’ experience has helped them put in place a

competent senior management team and well-defined

processes and policies with detailed manuals at the very

start of the microfinance operations. However, CRISIL

believes that the efficacy of Vistaar’s processes and control

systems is yet to be adequately demonstrated, in the light

of its growing and diversifying portfolio, over a period of

time.

Need for timely capital infusion to support proposed growth in the medium term

• Vistaar’s net profitability margin is expected to remain

negative over the medium term, given the high business

costs associated with a start-up and the company’s growth

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strategy. As a result, it will be some time till Vistaar creates

strong organic capital generation. Therefore, there will be a

need for timely capital infusion in the next three years to

support the company’s growth plans and enable it to

maintain adequate capital adequacy.

Grading sensitivity factors • Positive grading actions at the time of subsequent

assessments will depend on whether Vistaar achieves

strong asset quality, fund and geographic diversification,

improves earnings, and demonstrates adherence to the

processes and policies that have been laid down. On the

other hand, negative grading action will occur if the high

loan growth is not matched by capital increases and if there

are high delinquencies.

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FINANCIAL INDICATORS

Income and expenditure statement Rs. million

For the period ended, Mar-13 Mar-12 Mar-11 Aug-10

Management Projections Unaudited

Fund based income Interest income from loans 853.2 197.2 26.7 0.4

Income from investments /bank deposits - - - 1.0

Total fund based income 853.2 197.2 26.7 1.4

Interest and finance charges On borrowings 358.8 79 12.6 0.0

Finance charges 30.3 18 4.5 0.2

Total interest and finance charges 389.1 97.0 17.1 0.2

Gross spread 464.1 100.2 9.6 1.3

Total fee based income 215.50 65.00 13.90 1.19

Total income 1068.7 262.2 40.6 2.6 Gross surplus 679.6 165.2 23.5 2.4

Expenses Personnel expenses 282.5 115.2 50.4 14.8

Administrative expenses 208.7 84.4 34.5 10.4

Total expenses 491.2 199.6 84.9 25.2 Write-offs and provisions 81.1 18.9 2.6 0.3

Depreciation 37.2 13.1 3.5 0.5

Profit/(loss) before tax 70.1 -66.4 -67.5 -23.6 Tax - - - -

Profit/Loss after tax 70.1 -66.4 -67.5 -23.6

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Balance sheet Rs. million

Balance sheet as on Mar-13 Mar-12 Mar-11 Aug-10

Management Projections Unaudited

Liabilities

Share capital 1252.8 652.8 152.8 133.3

Share application money - - - 20.1

Reserves and surplus -66.6 -136.7 -70.3 -26.7

Net worth 1186.2 516.1 82.5 126.8 Borrowings 4902.7 1578.2 373.6 0.0

Total long term borrowings 4902.7 1578.2 373.6 0.0 Provision for bad debts 51.9 13.3 2.4 0.3

Other liabilities 4.3

Total current liabilities 51.9 13.3 2.4 4.7

Total liabilities 6140.8 2107.6 458.5 131.4

Assets Loans and advances 5356.8 1646.4 337.3 31.9

Investments 0.0 0.0 0.0 75.5

Cash & bank balances 646.1 393.9 107.0 11.9

Other assets & advances 0.0 0.0 0.0 3.3

Total current assets 646.1 393.9 107.0 15.2

Total funds deployed 6003.0 2040.3 444.3 122.5 Net fixed assets 137.9 67.3 14.3 8.9

Total assets 6140.8 2107.6 458.5 131.4

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Ratios

In per cent

As on /For the year ended March 31, 2013P 2012P 2011P

Yield Fund based yield (A) 21.22 15.87 9.42

Portfolio yield 24.37 19.88 14.46

Fee based income /Avg. funds deployed 5.36 5.23 4.90

Total income / Avg. funds deployed 26.57 21.11 14.33

Cost of borrowing

Interest paid/Avg. borrowings (B) 12.01 9.94 9.15

Interest spread Spreads on lending (A) – (B) 9.21 5.93 0.27

Overheads Operating expense ratio 12.21 16.07 29.96

Personnel expense ratio 7.02 9.27 17.78

Administrative expense ratio 5.19 6.79 12.17

Profitability Return on net worth 8.24 -22.18 -64.52

Return on funds deployed 1.74 -5.34 -23.82

Operational self sufficiency 107.02 79.79 37.56

Asset quality Provisioning / Avg. loan outstanding 1.48 1.35 1.32

Capitalisation

Total debt/net worth (times) 4.13 3.06 4.53

Capital adequacy 21.59 30.12 23.46

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1 Annexures

1.1 Loan purpose-wise outstanding as on August 11, 2010 ................................................21 1.2 Human resource summary ..............................................................................................21 1.3 Asset quality .....................................................................................................................21

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1.1 Loan purpose-wise outstanding as on August 11, 2010

Rs.million

Purpose Amt ( % Dairy 1.1 7.67

Powerloom 0.6 4.52

Handloom 0.3 2.09

Artisan 0.3 1.92

Fruits / Veg / Flower / Coconut 0.8 5.85

Hotel / Tea / Snacks 0.4 2.70

Kirana / Other Shop 1.5 10.78

Tailoring 0.8 5.53

Home Based Enterprise 0.8 5.46

Farm based 3.6 26.14

Other Livestock 0.8 5.77

Others 3.0 21.58

Total 13.8 100

1.2 Human resource summary

Particular Aug-10 No. of total employees 147

No. of employees added during the year 174

No. of total employees left during the year 18

No. of branch employees 126

No. of credit officers 95

1.3 Asset quality

Rs.million

As on, Aug-10 Total outstanding balance associated with loans that are PAR % of PAR On time 31.9 100

Late (at least one payment) 0.0 0.00

1-30 days 0.0 0.00

31-60 days 0.0 0.00

61-90 days 0.0 0.00

91-180 days 0.0 0.00

181-365 days 0.0 0.00

Above 365 days 0.0 0.00

Total portfolio 31.9 100

Portfolio at risk (> 30 days delinquent)% 0.00

Portfolio at risk (> 90 days delinquent)% 0.00