Sarala Women Welfare Society (Kolkata, India)

Pangea Team Members: Renata Motta, Michael Trivino, Ramsey Troughton

Scope of Project

The Sarala Women’s Welfare Society is 3-year old, rapidly growing, India-based non-profit MFI with an outstanding microfinance portfolio of approximately 300 million rupees (US$6 million equivalent).  Sarala primary operates in the suburbs of Kolkata, in the state of West Bengal, and lends to about 70,000 individual women that meet together on a weekly basis to make loan payments.  Sarala distinguishes its presence in the region by offering health services to its members and their families.

In order to foster further expansion, the organization is seeking to covert its legal status from a not-for-profit organization into a Non-Banking Finance Company (NBFC) in order to expand its financing sources and access equity capital.  The NBFC structure has an equity requirement of 15% of the capital structure, which is over double the organization’s current equity percentage.

For inviting investment into the NBFC structure, the consulting team will conduct a valuation and capitalization analysis, which will determine the optimal capital structure and a short-term and long-term financing plan.  The team will work with Sarala to update its 5-year growth plan and financial projections to assist with this process.   This valuation will be crucial when it comes to negotiating equity investments in order to minimize the ownership dilution to the organization.  In terms of marketing, the team will develop a PowerPoint presentation that will be distributed to investment funds that target the microfinance space.  The consulting team will also advise the Sarala co-CEOS on which funds to prioritize negotiations with.

Status to Date

The consulting team has analyzed the institutional investment funds and foundations that make microfinance investments and have prioritized a detailed prospect spreadsheet.  The client has had contact with about half of these organizations, though in many cases it was 1-2 years ago, prior to Sarala establishing a profitable financial record.

The team has nearly completed a model that includes detailed financial projections as well as valuations of the organization using metrics recommended for the microfinance industry.  The model has also helped us to understand the financing needs of the company in order to maintain the current growth trajectory. The team has also begun work on a new investor marketing presentation that will highlight the success and social impact of the company to date and its future growth plans.

Next steps
Michael and Ramsey will travel to Kolkata, West Bengal on December 28th, where they will conduct on-site meetings with the co-ceo’s and other officers of the corporation.  There, they plan to visit several branches in order to better understand the dynamics of their microfinance operations. This will also be an opportunity to gather photos for use in the investor presentation and other marketing mediums.