SKS Microfinance Ltd scrip hit the upper circuit filter, shooting up almost 10 per cent on Monday, after it completed the largest securitisation by any microfinance company in the current financial year ending March 2012, with rated pool assignment transaction worth Rs 243 crore.

This comes as a big boost for the ailing microfinance industry, which has been looking to regain investor confidence in terms of fund quality. The rated pool assignment transaction has been rated CARE A1+SO, the highest safety rating by the rating agency CARE. The rating also underlines the strength of the short-term loan that SKS has securitised with a financial institution. The company, however, declined to name the bank involved in the securitisation.

S Dilli Raj, chief financial officer (CFO) of SKS, said, “SKS delivered all its promises to the credit-granting community through the painful transition phase post the AP MFI Act. Now, it is time to reap the fruits of consolidation.”

The rated pool comprises receivables from 3,22,312 women borrowers and it has been collected from 18 states where SKS operates. The loan pool does not have any participation from the state of Andhra Pradesh, once the hub of microfinance industry in the country, which faced the wrath of allegedly unfair recovery practices from lenders who charged exorbitant interest rates on loans.

The average loan amount for this rated pool assignment is Rs 11,131 and all the branches, party to this transaction, have less than 1 per cent participation.

SKS had earlier completed six securitisation transactions post the Andhra Pradesh Microfinance Institutions Act, which has put tight clamps on the micro-lenders in the state. According to SKS, all its rated papers have shown collection efficiency of more than 98 per cent and credit enhancement has not been utilised in any of these structures.

Private equity-backed SKS had been deep in losses as its operations in the main market were affected by the AP MFI Act. In Q3 FY12, SKS posted a net loss of Rs 427.78 crore, as compared to the loss of Rs 384.54 crore in the previous quarter ended September 2011.

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