BackSKS Microfinance shares surge on expectations of better earnings
The company's shares closed at `195.85 each, up 7.23%, on BSE after touching an intraday high of `202.15, up 10.68%
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Mumbai: Shares in India’s only listed micro lender, SKS Microfinance Ltd, surged on Monday on the back of hopes of an improved performance in the quarter ended 31 December.
The company will announce its results on 24 January.
SKS shares closed at ₹ 195.85 each, up 7.23%, on BSE after touching an intraday high of ₹ 202.15, up 10.68%. Sensex, the benchmark equity index, closed 0.67% higher at 21,205.05 points. So far this fiscal, SKS shares have gained 61.83%, much higher than the Sensex’s 12.54% rise.
“The numbers are up on expectation of better Q3 numbers," said Santosh Singh, analyst with Mumbai-based brokerage, Espirito Santo Securities Ltd. For the quarter ended September, SKS had posted a profit of ₹ 16.34 crore as it benefited from higher demand for loans outside its home base of Andhra Pradesh.
In the same period last year, the company had reported a loss of ₹ 262 crore.
Analysts said SKS is on course for a slow and painful recovery from a crisis that beset the industry in 2010 following a controversial state law after a series of suicides among microfinance borrowers.
Among other things, the law banned micro lenders from collecting deposits daily and made government approval mandatory for every second loan. The restrictions led to a significant decline in the business of microfinance institutions (MFIs) based in Andhra Pradesh after their loan repayment rates fell below 10%.
MFIs lend small loans to low-income borrowers at interest rates of 24-36% and source money from commercial banks to do business.
The crisis affected most of the MFIs operating in the state, including SKS. About ₹ 6,000 crore of loans given by MFIs in Andhra Pradesh are yet to be repaid.
“From here on we think that much of the return will depend on SKS’s ability to ramp up the business and increase profitability. We think SKS is well placed to more than double profits on a y-o-y (year-on-year) basis in fiscal 2015 given little competition, operating leverage and the company’s existing infrastructure," Singh and Nidhesh Jain of Espirito Santo said in a 9 January report.
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