The Chennai-based Equitas group, known more for its microfinance than other businesses, has come in for high praise from the ratings and analysis agency, CRISIL.
Giving the group ‘CRISIL GVC Level 2’ (for ‘Governance and Value Creation’), which indicates “very high capability with regard to corporate governance and value creation for all its stakeholders”, the agency has praised Equitas for its “high level of transparency in operations, good quality of board and fairness in dealings with all its stakeholders.”
For instance, Equitas was the first microfinance institution to declare interest rates in its passbooks and on its Web site, CRISIL said. The group has voluntarily adopted several best practices applicable to listed companies, it said. The agency has also noted favourably Equitas’ “strong audit and internal control mechanism” and “strong commitment to CSR initiatives.”
As much as 62 per cent of the board of Equitas comprises independent directors, a significant increase over 30 per cent two years ago. Equitas Housing Finance is the only subsidiary where independent directors do not constitute the majority. “However, this is expected to change soon,” CRISIL says.
The agency has described the management as “proficient, well-qualified and highly experienced,” and has noted that the ‘expertise’ was what led the group to diversify into vehicle financing.
However CRISIL points out the Equitas group's dependence on the promoter, P. N. Vasudevan who “nurtured and developed the philosophy, culture and values” of the group. “The Equitas group is yet to demonstrate its ability to institutionalise its values,” CRISIL says.
The Equitas group comprises the holding company, Equitas, and Equitas’ three wholly-owned subsidiaries — one each for microfinance (Singhivi Investment and Finance Private Ltd [SIFPL]), vehicle finance (Equitas Finance Private Ltd [EFPL]) and housing finance (Equitas Housing Finance Private Ltd [EHFPL]). The group also has a trust, Equitas Development Initiatives Trust (EDIT), involved in corporate social responsibility (CSR) initiatives. Equitas is the non-operating holding company of the group.
The microfinance business is run by SIFPL. The company had 265 branches with about 1.19 million borrowers and a portfolio outstanding (assets under management) of Rs 720 crore as on March 31, 2012. It reported a profit after tax of Rs 18 crore on a total income Rs 191 crore for 2011-12.