SKS to slash 1,200 jobs, shut 78 branches in AP
SKS to slash 1,200 jobs, shut 78 branches in AP
Hyderabad: SKS Microfinance Ltd, India’s only listed micro-lender, said on Thursday that it will reduce staff in Andhra Pradesh by one-third and close a large number of branches in the state.
Of the 3,400 people it employs in the southern state, the services of 1,200 will be terminated and 78 branches out of 180 will be shut.
“Closing down branches and reducing headcount are extremely painful decisions for us, but these have become urgent in view of the present financial situation," managing director and chief executive officer M.R. Rao said in a statement.
The company on Wednesday said it has decided to shift its registered office to Mumbai from Hyderabad, thus starting a process of moving its headquarters to India’s financial capital.
“There is no business in Andhra Pradesh, there is very little chance that the money will be recovered," said Shadab Rizvi, an analyst tracking microfinance at the investment banking division of Mumbai-based securities house Darashaw and Co. Pvt. Ltd. “SKS hasn’t had much success in reducing the operating cost; the downsizing of operations in Andhra Pradesh will help to certain extent."
Employee expenses constitute about two-thirds of SKS’s total operational cost. SKS said in a presentation that it wants to reduce operating costs by 20% in this quarter.
SKS was able to reduce 39% of its branches to 1,461 from 2,379 and employees by 29% to 16,194 in fiscal 2012.
The microfinance business in Andhra Pradesh virtually came to standstill after the state government in October 2010 passed a law to regulate alleged coercive loan recovery practices and usurious interest rates.
SKS was the worst-hit by the law and recovery rates in Andhra Pradesh plunged to 10% from 95% and the micro-lender incurred a loss of ₹ 1,360 crore in the year ended 31 March.
For the March quarter, the firm reported a net loss of ₹ 330 crore.
Out of its ₹ 1,491 crore loan portfolio in Andhra Pradesh, SKS had to write off ₹ 1,120 crore. It now has an exposure of ₹ 236 crore from Andhra Pradesh.
SKS’s loan portfolio, excluding Andhra Pradesh, is ₹ 1,320 crore.
“The operations in 17 other states have been subsidizing the Andhra Pradesh operations for a good 18 months since the AP MFI (microfinance institution) ordinance was passed," Rao said.
“SKS strategy is to exit Andhra Pradesh, and gradually shed the tag as Andhra-based MFI," Rizvi said.
Shares of SKS gained 0.1% to ₹ 88.75 on BSE, while the benchmark Sensex declined by 0.36%.
viswanath.p@livemint.com
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