SKS Microfinance Q4 net profit up 50%
Net profit rose to Rs.40.5 crore in the quarter from Rs.27 crore in the year-earlier period
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Hyderabad: SKS Microfinance Ltd, India’s only publicly traded microlender, said on Monday that fiscal fourth-quarter profit rose 50% as it benefited from higher demand for loans outside its home base of Andhra Pradesh and neighbouring Telangana.
Net profit rose to Rs.40.5 crore in the quarter ended 31 March from Rs.27 crore in the year-earlier period. The profit was notched up on a 43% increase in revenue to Rs.197.6 crore from a year earlier.
SKS said it was able to reduce overall cost of borrowing by 110 basis points to 11.8% in the fourth quarter on a sequential basis. A basis point is one-hundredth of a percentage point.
The microlender swung to a profit in the third quarter of the year ended March 2013 after reporting losses for seven straight quarters.
SKS Microfinance and other microfinance institutions (MFIs) were hurt by a crisis sparked by an October 2010 law put in place by Andhra Pradesh, which was then the biggest market for loans made to low-income earners. The law sought to rein in lending by MFIs, following reports that coercive loan recovery practices were driving over-extended borrowers in the southern state to commit suicide.
SKS’s loan portfolio grew 47% to Rs.4,171 crore as of 31 March from the previous year, excluding Andhra Pradesh and Telangana.
The microlender disbursed Rs.2,494 crore of in the fourth quarter, compared with Rs.1,580 crore in the year-ago period—an increase of 58%.
SKS Microfinance said it raised total debt of Rs.5,020 crore in the last fiscal year, in addition to Rs.398 crore equity raised in May 2014.
The lender said it has an incremental debt requirement of Rs.7,000 crore in the current financial year, and plans to expand its loan portfolio to Rs.6,000 crore. The company said it is targeting profit after tax of Rs.235 crore in the year to next 31 March.
SKS said it still has an unavailed deferred tax benefit of Rs.489 crore that will offset tax on future income.
SKS had a net worth of Rs.1,046 crore and a capital adequacy (an indicator of financial strength expressed as the ration of capital to risk-weighted assets) of 31.7% as on 31 March. Cash and bank balances stood at Rs.1,437 crore.
“The overall macro environment and regulatory outlook remains positive for the MFI sector,” said Anurag Agrawal, director and chief executive officer, investment banking, at social sector advisory firm Intellecap.
“MFIs were able to bring down costs by borrowing through debt instruments like non-convertible debentures which are 100-200 basis points cheaper than bank term loans,” Agrawal said.
Shares of SKS dropped 1.26% to Rs.463.60 on BSE, while the exchange’s benchmark Sensex gained 1.77% to 27,490.59 points. The company reported earnings after the end of trading on Monday.
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