SKS Microfinance stock plunge faces regulatory probe

SKS Microfinance stock plunge faces regulatory probe

New Delhi: A steep plunge of 20% in SKS Microfinance shares, hours ahead of its fourth quarter results on Friday, has come under the regulatory lens for possible breach of insider trading norms or hammering by a bear cartel.

The plunge was coupled with about 10-fold surge in the stock’s trading volumes, prompting the bourses and market regulator Sebi to conduct the probe, sources close to the development said.

When contacted, a company spokesperson told PTI that SKS Microfinance has not received any communication in this regard from either Sebi or the stock exchanges.

However, sources said the surge in trading volumes and a heavy fall in shares — on a day when the company announced a loss after the market hours — is being viewed as an unusual event to the market surveillance authorities and therefore they have begun a preliminary probe.

The matter is being probed for possible breach of insider trading rules or hammering by a bear cartel, sources added.

The fall coincided with a strong upward trend in the market, when the BSE Sensex rose over 300 points, and happened a couple of days after RBI said that bank loans to micro finance lenders would fall under the priority sector lending.

The RBI decision was welcomed as a boost for the micro finance sector by SKS, the country’s only listed company from this space.

SKS Microfinance shares opened weak on Friday, 6 May, and hit the lowest permissible level for the day — which was also the lowest price in its history at 330.65.

The stock ended the day at 331.30 at BSE, down 19.83% from its previous close of 413.25. It had opened at 410, and the intra-day high was 411.75.

The stock plunged 19.99% at NSE to 330.75.

During the day, over 12.5 lakh shares were traded at BSE, as against about 93,000 on 5 May. At NSE, more than 21 lakh SKS shares were traded, up from 2.6 lakh on the previous day.

During the day, marketmen attributed the fall to price target cut for the stock by JP Morgan by more than half from 550 to 200 due to weakening business model.

Later in the evening, the company announced results for the fourth quarter ended 31 March, which were uploaded on the websites of BSE and NSE at 6.26 pm and 6.35 pm respectively — which was well after the market closing.

The company reported a net loss of 70 crore on lower income from operations and high credit costs. SKS had a net profit of 63 crore in the year-ago period.

Its net profit declined 36 per cent to 111.63 crore for the year ended 31 March, 2011.