SKS microfinance news | sks microfinance share falls 20%

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sks microfinance news | sks microfinance share falls 20%

MUMBAI: Shares in SKS Microfinance, India’s largest and only publicly traded lender to the poor in India, dropped 20 percent on Thursday after the microfinance company warned that an ordinance enacted on October 15 by Andhra Pradesh government on collections could have an impact on its profitability.

“As said in our earlier notification, if this is not redressed satisfactorily, the resultant reduction in collections in AP (Andhra Pradesh) is likely to have a material impact on the company’s revenues, profitability and asset quality of the AP portfolio,” it said in a statement to the stock exchanges.

By 10:10 a.m. (0440 GMT), shares in SKS Microfinance were down 17.6 percent at Rs 658.60, after having earlier fallen as much as 20 percent.

A spokesman for SKS Microfinance, said collections in states other than Andhra Pradesh are normal, banks continue to lend it funds, and he was “shocked” by the market’s selldown in its shares.

India’s microfinance industry, which surged to prominence when George Soros-backed SKS raised $358 million in an IPO, faces a regulatory clampdown that could erode profits and hurt growth.

Last month, the Andhra Pradesh government through an ordinance imposed a limit on rates that the industry can charge customers and also curbed aggressive recovery practices following several suicides by borrowers in the state.

The state contributes 28 per cent of the current loan portfolio of the company.

SKS is in talks with the Andhra Pradesh government and regulators like the Reserve Bank of India and Ministry of Finance for “rectifying onerous aspects of the Ordinance and its implementation,” SKS said.

Microfinance firms typically give loans to small businesses that have no access to banks and charge an effective rate of 28-32 per cent a year, about double the rate on bank loans.

Apart from Soros, SKS is also backed by investors like Sequoia, Kismet Capital, Unitus, venture capitalist Vinod Khosla and Infosys Technologies founder N.R. Narayana Murthy.

Source: Economictimes