SKS Microfinance shares fall 10% on Sept quarter loss

SKS Microfinance shares fall 10% on Sept quarter loss

Mumbai: Shares in SKS Microfinance, India’s largest and only listed microfinance company, fell 10% in morning trade on Tuesday, after the company’s net slumped weighed by huge loan writeoffs.

Income from operations saw a sharp fall by 66.5% to Rs114 crore. The company saw a huge jump in provisions and writeoffs to Rs353 crore as against Rs173 million in the year ago quarter.

At 12:26 pm, SKS shares recouped some losses and were trading 5.6% down at Rs197.45 as compared to the benchmark index which was down 0.3%.

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Also Read | SKS Microfinance posts 385 cr loss in September quarter

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Shares in the firm, currently valued by the market at $313 million, slumped 70% so far in 2011, while the benchmark fell 15% during the same period.

The firm faces challenges in raising debt from the banks and managing losses from the Andhra Pradesh loan book, Kotak Securities said in its report.

The loan book continued to decline at Rs2,650 crore in September after factoring in loan writeoffs as compared to Rs3,450 crore in June and Rs4,110 crore in March 2011, it said.

“We expect some improvement in traction towards the end of this year as the bank’s demand for priority sector increases, we are modeling about Rs600-700 crore of loan growth over the next two quarters," it said.

A regulatory backlash against aggressive lending and collection practices had crippled microfinance sector with crackdown in Andhra Pradesh last year hurting the loan growth.

On 2 November, the board had approved raising up to Rs900 crore ($183 million) from share sale to institutional investors and increasing authorized share capital from Rs950 million to Rs135 crore.

SKS, backed by investor George Soros, among others, went public last August in a successful initial public offering that raised $358 million.