Shares in SKS Microfinance , India's largest and only listed microfinance company, fell 10 per cent in morning trade on Tuesday, after the company's net slumped weighed by huge loan writeoffs.
The firm posted a net loss of Rs 3.84 billion in July-Sept, compared with a net profit of Rs 0.81 billion during the same quarter a year ago.
Income from operations saw a sharp fall by 66.5 per cent to Rs 1.14 billion. The company saw a huge jump in provisions and writeoffs to Rs 3.53 billion as against Rs 173 million in the year ago quarter.
At 12:26 p.m., SKS shares recouped some losses and were trading 5.6 per cent down at Rs 197.45 as compared to the benchmark index which was down 0.3 per cent.
Shares in the firm, currently valued by the market at $313 million, slumped 70 per cent so far in 2011, while the benchmark fell 15 per cent 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 Rs 26.5 billion in September after factoring in loan writeoffs as compared to RS 34.5 billion in June and Rs 41.1 billion 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 Rs 6-7 billion 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 November 2, the board had approved raising up to Rs 9 billion ($183 million) from share sale to institutional investors and increasing authorized share capital from Rs 950 million to Rs 1.35 billion.
SKS, backed by investor George Soros, among others, went public last August in a successful initial public offering that raised $358 million.