Business context and reporting period
The supplied filing is Hexindai Inc.’s Form 20-F annual report for the fiscal year ended March 31, 2020—not a standalone 2019 Q4 report. The filing identifies the issuer as Hexindai Inc. (NASDAQ: HX); it does not identify Akso Health Group. Financial figures below are in U.S. dollars unless stated otherwise.
Hexindai operated a China-focused consumer lending marketplace and microlending business. It stopped offering new loans for online investor subscription in November 2019 amid tighter regulation, and stopped originating new microlending loans after Wusu Company changed its business scope in September 2019. It launched the Xiaobai Maimai social-commerce platform in May 2020, after the reporting period.
Financial and operating highlights
| Metric | FY ended March 31, 2020 | Prior comparable period |
|---|---|---|
| Net revenue | $11.4 million | $61.3 million |
| Operating income (loss) | ($68.5 million) | $5.1 million |
| Net income (loss) | ($71.2 million) | $5.5 million |
| Net cash from operating activities | ($55.9 million) | ($1.7 million) |
| Cash and cash equivalents, period-end | $10.9 million | $57.4 million |
| Total assets / liabilities, period-end | $78.4 million / $30.3 million | $173.3 million / $46.8 million |
Gross revenue before business taxes and investor cash incentives was $19.0 million. Major sources were post-origination services ($7.1 million), loan facilitation ($3.7 million), recommendation services ($3.8 million) and interest income ($4.5 million). Taxes and investor incentives reduced reported net revenue to $11.4 million.
Operating costs and expenses totaled $80.0 million, including a $29.2 million full impairment of the Phoenix Intelligent Credit investment, a $14.2 million provision for uncollectible loans, and $2.5 million of finance cost. The filing’s MD&A gives general and administrative expense as $25.5 million, while the audited statements report $26.5 million; investors should verify the discrepancy.
Operating cash flow was negative $55.9 million; investing activities provided $12.8 million, and financing activities used $4.0 million. Cash declined by $46.4 million during the year. The company reported $20.0 million of note payable, a three-year senior unsecured note due March 2022 bearing 12% annual interest, payable semiannually. It reported working capital of negative $46.6 million excluding amounts due from related parties, although the balance sheet’s current-asset and current-liability totals imply positive working capital; the filing text does not clearly reconcile these figures.
Material changes versus the prior comparable period
- Net revenue fell 81.4%, and the company moved from net income to a substantial net loss.
- Marketplace credit-loan volume fell 92.0%, from RMB3,788.2 million to RMB303.5 million. Borrowers declined from 84,891 to 31,002; active investors declined from 118,247 to 27,234.
- Loan facilitation revenue fell 94.5%. Recommendation revenue rose to $3.8 million, while interest income increased to $4.5 million.
- Cash incentives declined to $7.4 million from $20.5 million, reflecting reduced investor acquisition activity and the suspension of new investor subscriptions.
- More-than-90-day delinquency rose to 10.539% of outstanding principal and interest from 3.778%. The FY2020 vintage M3+ net charge-off rate was 3.36% as of March 31, 2020, but the filing notes that recent loans had limited time to season.
- Employees declined to 182 from 552, which the company attributed primarily to winding down the P2P business.
Outlook, risks and unusual items
- Outlook and liquidity: No numerical earnings or revenue guidance is provided. Management said its cash, expected cash flows and financing resources should cover working-capital needs for the next 12 months. The financial statements nevertheless describe significant uncertainty from regulatory changes and COVID-19 and warn of material potential effects on fiscal 2021 results, cash flows and liquidity.
- Regulatory and business-model risk: The company had not completed required marketplace record-filing and was applying for an online microlending license. It could not assure approval. It also disclosed uncertainty about whether its loan-funding, guarantee, payment-processing and VIE arrangements comply with PRC requirements.
- Vendor deposit: The company paid approximately $30.9 million to a vendor for a business-development arrangement that it later terminated. At March 31, 2020, $31.8 million was recorded as a receivable, including interest. A termination agreement dated April 8, 2020 set repayment terms, with the remaining balance payable over two years at 2% interest and backed by a PRC guarantee company. The vendor had refunded about $16.9 million by August 13, 2020.
- Credit exposure: Net loans receivable were $31.2 million after a $15.0 million allowance, compared with $76.4 million net a year earlier. The filing reports rising delinquencies and acknowledges uncertainty in estimating borrower losses.
- New e-commerce venture: Xiaobai Maimai was launched after year-end; success depends on user acquisition, suppliers, product authenticity, delivery and regulatory compliance. The filing reported approximately 160,000 active consumer accounts as of July 31, 2020.
- Other investor considerations: The company uses a VIE structure and relies substantially on a related-party offline referral network. A 2019 short-seller allegation prompted an internal investigation that found no conclusive proof of fraud; two law firms investigated, but no securities lawsuit had been filed as of the report date. The auditor changed from Deloitte to Wei, Wei & Co. in December 2019; the filing reports no disagreements or reportable events.
Important facts for investors to verify
- Confirm the issuer identity and period: the supplied document is Hexindai Inc.’s FY2020 Form 20-F, not an Akso Health Group filing or a 2019 Q4 report.
- Reconcile the filing’s conflicting general and administrative expense figures and its stated working-capital deficit with the audited balance-sheet totals.
- Track collection of the vendor receivable, the guarantee’s enforceability and any remaining repayment amounts.
- Verify progress and regulatory outcomes for the microlending license, marketplace filing, payment arrangements and VIE structure.
- Assess loan-portfolio performance, allowance adequacy, delinquency trends and the collectability of remaining loans.
- Monitor cash burn, the 12% note due in 2022, and whether management’s stated 12-month liquidity assessment remains supportable.