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ஆசிர்வாத் மைக்ரோபைனான்ஸ் லிமிடெட்          Asirvad Micro Finance Limited          आशीर्वाद माइक्रोफिनॅन्स लिमिटेड         ആശിർവാദ് മൈക്രോഫിനാൻസ് ലിമിറ്റഡ്          ಆಶೀರ್ವಾದ್ ಮೈಕ್ರೋಫೈನಾನ್ಸ್ ಲಿಮಿಟೆಡ್          ਅਸਿਰਵਾਦ ਮਿਕਰੋਫਈਨਂਸੇ ਲਿਮਿਟੇਡ          ଆଶୀର୍ବାଦ ମଇକ୍ରୋଫାଇନାନ୍ସ ଲିଃ          আশির্বাদ মাইক্রো ফাইনান্স লিমিটেড

Message from Chairman

Dear Shareowners

It is my pleasure to present to you our 15th Annual Report for the year ended March 31, 2022.

You will recall that the year began on a very sombre note with the appalling second wave of COVID-19 overwhelming our healthcare infrastructure and disrupting economic activity across the country. Notwithstanding the many macro and industry-specific challenges that ensued, we have ended the year with substantial growth and improving collection efficiency. With the turbulence behind us, we now look forward with optimism to the days ahead. I have no doubt that the future holds tremendous promise for our Company, especially in the light of RBI’s new harmonised regulations for the microfinance sector announced in March 2022, which is acknowledged as a milestone for the sector.

Economic Outlook

As is well known, the world economy had suffered a severe slowdown in FY 2020- 21 following the onset of the COVID-19 pandemic. The Indian economy, in particular, faced its worst setback since Independence as the strict nationwide and state-level lockdowns those were enforced to stem the advance of the pandemic disrupted economic activities across the spectrum. India’s GDP contracted sharply during the year, registering a decline of 6.6 percent. While hopes of a smart recovery in FY 2021-22 were high to begin with, it was soon tempered by the onset of the second wave in April 2021 and the third wave in January 2022. However, with the benefit of the experience gained from the first wave, the response was more finely calibrated, and blanket lockdowns were avoided. The RussiaUkraine war that began in February 2022 added to the uncertainties with prices soaring in the global commodity and energy markets. Notwithstanding the difficulties, India’s GDP for FY 2021- 22 registered a healthy growth of 8.7 percent, making it one of the fastest growing economies in the world. While the base effect did play a part, as seen in the first quarter of the year which registered an unprecedented GDP growth of 20.1 percent, the sustained trend of record GST collections and robust growth in higher value-added exports pointed to a sharp rebound in the formal sector of the economy.

At the same time, with persisting disruptions in the global supply chain, a severe global shortage of semi-conductors, and a sharp rise in energy and commodity prices in the fourth quarter, GDP growth showed a steadily weakening trend, falling to 8.4 percent in the second (September) quarter and then to 5.4 percent in the December quarter. In the final, fourth quarter (March) of the year, GDP growth            slowed further to 4.1 percent, in line with global trends where major Western economies appear to be heading into recession.

 India’s agricultural farm sector recorded a growth of 3 percent as compared to 3.3 percent in FY 2020-21. Importantly, sectoral growth in the fourth quarter was a healthy 4.1 percent which holds promise of a better year ahead for agriculture provided the monsoon holds good as predicted.

Microfinance Sector

The microfinance business model gives people at the bottom of the pyramid access to financial services provided by the formal sector and is therefore critical to the country’s efforts to further financial inclusion. It is then heartening to learn that despite all the troubles of the year, the Gross Loan Portfolio (GLP) of the microfinance industry grew by 10 percent in FY 2021-22 to nearly ` 2.9 Lakh Crores, up from ` 2.6 Lakh Crores in the preceding year. The average ticket size for NBFC-MFIs increased from ` 35,266 to ` 38,647 during the year.

However, it was in the fourth quarter that the sector showed signs of sustained recovery. According to a report by Sa- Dhan, a self-regulatory organisation of the industry, there was over 13 percent portfolio growth over the previous quarter, indicating that activity levels in microfinance is gradually returning to pre-pandemic levels. Non-banking financial companies (NBFC-MFIs) registered a growth of 19 percent with their GLP crossing ` 94,000 Crores while their disbursements in the quarter jumped to ` 30,216 Crores compared to ` 27,364 Crores in the fourth quarter of FY 2020-21. The Portfolio at Risk (PAR) for loans overdue by more than 30 days also improved significantly in the fourth quarter along with collection efficiency, indicating that a return to normalcy for MFI borrowers is on the cards.

Industry Poised for Growth

Having weathered the storms of the past two years, the NBFC-MFI business model stands vindicated once again. The Reserve Bank of India has reiterated its confidence in the sector with the introduction, in March 2022, of harmonised regulations for microfinance as an asset class. The new regulations give greater flexibility to NBFC-MFIs in managing their risks and increasing their reach and this is likely to spur further investment in the sector. The uniform applicability of the regulations and the removal of the NIM cap are major positives for the industry, while the implementation of the total loan repayment to income ratio benefits borrowers. India’s microfinance sector is now better placed to fulfil its goal of extending credit to the unbanked sections.

Performance of the Company

It is heartening that despite India’s uneven economic recovery where the informal sector continues to lag behind, your Company was able to post significant growth in business volumes. In any macro-economic crisis, the MFI sector is usually hit the hardest, but your Company was able to control credit costs through focussed efforts on collections.

Asirvad’s AUM growth during the year outpaced the industry growth, increasing by over 17 percent to cross the ` 7,000 Crores milestone, while posting a net profit of ` 13.4 Crores. Your Company’s operating income increased by 29 percent, up from ` 1,053 Crores in FY 2020-21 to ` 1,355.7 Crores in FY 2021-22. We now serve 2.57 million customers, up from 2.41 million recorded in the preceding year.

A Word in Gratitude

Finally, let me thank all our shareholders, our banking partners, the Reserve Bank of India being our regulators, and all other stakeholders for the support extended over the years. I take this opportunity to thank Mr. B.N. RaveendraBabu, Managing Director, and the entire team at Asirvad, for admirably steering the ship through choppy waters. I would also like to place on record my gratitude to Mr. S.V. Raja Vaidyanathan, the founder of the Company and its Managing Director till June 30, 2021, for his many and valuable contributions to the Company. Thanks to their efforts, we are now well-positioned to consolidate and grow