Mumbai: SKS Microfinance , India’s largest and only listed microfinance lender, said on Monday it posted a 38% drop in net profit for October-December to Rs 34.15 crore on total income of Rs 385 crore.
The firm, which lends to poor borrowers, mostly women, has raised it provisions and write-offs in the quarter to Rs 100 crore from Rs 11.61 crore a year ago, it said.
The provision includes Rs 58.74 crore relating to the Andhra Pradesh (AP) portfolio and Rs 26.98 crore in accordance with guidelines for the microfinance sector provided by a panel appointed by India’s central bank.
“The company continues to assess the adequacy of provision on the AP portfolio due to the continued evolving environment, with no precedence, following the enactment of AP(MFI) Act and the resultant impact on the field operations in AP.”
There is a suit pending before the Andhra Pradesh High Court challenging the state’s microfinance law, it added.
The fast-growing Indian microfinance sector suffered a setback in October in 2010 when Andhra Pradesh, which had the largest microfinance market in the country, approved legislation to regulate the industry following complaints about high interest rates, aggressive recovery practices and overextended borrowers.
The RBI formed a panel in late October 2010 in response to the Andhra Pradesh rules, which severely curtailed microfinance activities in the state, curbed collections and hurt new business.
Shares of SKS, which is based in Hyderabad, the capital of the southern state of Andhra Pradesh, have fallen about 30% since October when the state’s new microfinance rules came into effect.
On Monday, shares closed down 1.03% at Rs 684.10 in the BSE.