BackSKS Microfinance posts Rs49.32 crore profit in Q1
SKS is India's only publicly traded microlender that benefited from higher demand for loans outside its home base of Andhra Pradesh
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Hyderabad: SKS Microfinance Ltd said fiscal first-quarter profit rose nearly 10-fold as India’s only publicly traded microlender benefited from higher demand for loans outside its home base of Andhra Pradesh.
Net profit rose to ₹ 49.32 crore in the quarter ended June from ₹ 4.96 crore in the year earlier, the company said on Thursday.
The profit was notched up on a 29.3% increase in total income from operations to ₹ 151.82 crore from ₹ 117.43 crore a year earlier.
“The sector fundamentals got better because of stable regulatory framework, less competition intensity, reinstatement of priority sector lending status and institutionalisation of credit bureaus," S. Dilli Raj, president of SKS, said in a phone interview.
SKS swung to a profit in the fiscal third quarter of 2012-13 after reporting losses for seven consecutive quarters.
SKS announced a reduction of interest rate charged from borrowers by 100 basis points from 24.55% to 23.55% with effect from 1 October. A basis point is one-hundredth of a percentage point
“The announcement is consistent with the company’s policy announced in December 2011 of passing on the cost advantages accruing from economies of scale, operational efficiency and reduction in the cost of borrowing to its borrowers," Raj said.
The company said it was able to reduce cost of borrowing by 1 percentage point to 12.6% in the quarter ended June.
Raj said the ₹ 400 crore capital it raised in May through a qualified institutional placement (QIP) and a profitable 2014 fiscal year helped boost the company’s credit ratings, reducing its borrowing costs.
“I think it’s an interesting move," said Anurag Agrawal, chief executive officer (investment banking) at social sector advisory firm Intellecap.
From the end-customer point of view, it’s good news given the sensitivity involved in the sector that deals with poor and marginalized, Agrawal said.
“Now the ball is in the court of other large MFIs (microfinance institutions) like Bandhan Financial Services Pvt. Ltd, Equitas Micro Finance Pvt. Ltd, Ujjivan Financial Services Pvt. Ltd and Janalakshmi Financial Services Pvt. Ltd to cut interest rates," Agrawal said.
Typically, large MFIs lend at a 26% interest rate.
The microlender’s loan portfolio, excluding the states of Andhra Pradesh and Telangana, grew 39% to ₹ 2,783 crore compared with ₹ 2,003 crore in the same period previous year.
SKS said it plans to grow its loan portfolio outstanding by 40% to ₹ 4,000 crore by the end of this financial year. The company said it set a profit target of ₹ 150 crore.
SKS has an unavailed deferred tax benefit of ₹ 542 crore available to offset tax on future taxable income.
Loan disbursements grew 40% to ₹ 1,160 crore in the first quarter from ₹ 830 crore in the previous year.
Net interest income grew 41% to ₹ 89 crore from ₹ 63 crore.
As of 30 June, SKS had a net worth of ₹ 891 crore and a capital adequacy of 39.6%. Cash and cash equivalents stood at ₹ 488 crore.
SKS returned to profitability in the year ended March registering a profit ₹ 69.9 crore after two consecutive years of losses due to an 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 following reports that coercive loan recovery practices were driving over-extended borrowers in the southern state to commit suicide.
Since the crisis erupted, 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 Microfinance has also scaled down the number of branches in Andhra Pradesh to 120 from 550.
SKS is among the largest microfinance companies in India with a presence across 16 states covering 1,00,000 villages. The states include Andhra Pradesh, Telangana, Karnataka, Maharashtra, Odisha, Madhya Pradesh, Bihar, Uttar Pradesh, Rajasthan, Uttaranchal, Haryana, West Bengal, Jharkhand, Chhattisgarh, Kerala and Punjab.
Shares of SKS rose 0.69% to close at ₹ 276.45 on BSE on Thursday, while the benchmark Sensex rose 0.48% to end at 26,271.85 points.
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