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Hyderabad/Mumbai: SKS Microfinance Ltd, India’s only listed micro lender, ended a seven-quarter loss-making streak on Thursday by posting a small profit for the three months ended 31 December, helped by higher loan demand in markets outside of Andhra Pradesh and significant cost cuts.

Net profit was 1.15 crore in the quarter, compared with a loss of 428 crore in the year-ago period, the microfinance institution (MFI) said.

The profit came despite a 2.3% decline in total income from operations to 85.05 crore from 87.07 crore.

“We are definitely past the crisis phase in Andhra Pradesh. We have fully provided for all losses in the state and believe that the worst is over for us as far as the Andhra Pradesh crisis is concerned," chief financial officer Dilli Raj said.

He expressed optimism that the MFI would stage a full recovery in the next fiscal, which begins on 1 April.

SKS and other MFIs are trying to recover from the industry-wide crisis sparked by an October 2010 law put in place by Andhra Pradesh, the biggest market for loans made to low-income earners.

The law sought to rein in lending by MFIs, responding to reports that coercive loan recovery practices were driving over-extended borrowers in the southern state to commit suicide.

The law made government approval mandatory for every second loan given to the same borrower, extended the loan recovery period, and barred micro lenders’ representatives from approaching the doorstep of their customers.

Since the crisis, SKS has written off loans totalling 1,362 crore and pared its staff in the state to 1,200 from around 7,000 prior to the crisis.

SKS has also scaled down the number of branches in Andhra Pradesh to 120 from 550.

Loan disbursements rose 14% on a sequential basis to 784 crore in the December quarter from 690 crore in the three months ended September.

The micro lender’s non-Andhra Pradesh portfolio was 1,496 crore, as of 31 December, up 9% on a sequential basis. The company said the collection efficiency in 17 states, excluding Andhra Pradesh, was robust at 99.8%.

The company had cash and bank balances of 304 crore. In addition, the unavailed deferred tax benefit stands at 556 crore and will be available to offset tax on future income.

SKS reduced its portfolio in Andhra Pradesh to nil in the quarter ended September from a high of 1,491 crore at the start of the microfinance crisis.

“With no bearing of Andhra Pradesh portfolio on its books and 556 crore unavailed deferred tax benefit, things are looking quite positive for SKS," said Shadab Rizvi, an analyst tracking microfinance at the investment banking division of Mumbai-based securities house Darashaw and Co. Pvt. Ltd.

“The full recovery in terms of return on capital employed could take some more time," Rizvi said.

Shares of SKS dropped by 4.73% to close at 164.20 on BSE on Thursday, while the benchmark Sensex declined by 0.51% to 19,923.78 points.

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