Public listed microlender SKS Microfinance recorded a dramatic change in its bottomline as it swung into a net profit for the third quarter ended December 31, 2012 with a sharp fall in provisioning. The firm reported net profit of Rs 1.15 crore as against net loss of Rs 428 crore in the year ago period and loss of Rs 262 crore in the previous quarter ended September 2012.
While income from operations showed a modest decline, the gains came from sharp fall in provisions and write-offs, which was down to just Rs 28 lakh as against Rs 358.6 crore in Q3 FY12.
The microlender also saw 15 per cent decline in its interest expenses during the quarter.
The company’s share price last traded at Rs 164.2 a unit, down 4.7 per cent on the BSE in a weak Mumbai market on Thursday.
SKS Microfinance saw growth momentum in states other than Andhra Pradesh with its core interest income in those states increasing by 16 per cent to Rs 79 crore in Q3 from Rs 68 crore in Q2 of FY13 (Rs 82 crore in Q3 of FY12). The company’s loan disbursements rose 14 per cent from Rs 690 crore in Q2 FY13 to Rs 784 crore in Q3 FY13 as its non-AP portfolio grew by 9 per cent from Rs 1,372 crore in Q2 FY13 to Rs 1,496 crore in Q3 FY13.
“As for Andhra Pradesh, the portfolio in the southern state has been reduced to nil in Q2 FY13 from a high of Rs 1,491 crore at the start of AP microfinance crisis in October 2010,” the company said
It said that draw-downs have registered 40 per cent growth from Rs 405 crore in Q2 FY13 to Rs 566 crore in Q3 FY13.
"Fully providing for the Andhra Pradesh exposure, optimisation of cost structure, delivering promises, coming out of the supply-side shock, portfolio protection and recapitalisation are the building blocks of SKS Microfinance Ltd's turnaround strategy,” said S Dilli Raj, CFO at SKS Microfinance.
“By returning to profitability, we have successfully emerged out of the Andhra Pradesh microfinance crisis. With a capital adequacy of 39 per cent and sufficient liquidity, we are well equipped to reap the fruits of sector consolidation, advantageous change in the competitive landscape, a favourable regulatory climate and, of course, enhanced business prospects," he added.
SKS Microfinance Limited had a networth of Rs 388 crore and a capital adequacy of 38.5 per cent (26.2 per cent without RBI dispensation on AP provisioning) as of December 31, 2012. In addition, the unavailed deferred tax benefit stands at Rs 556 crore and will be available to offset tax on future taxable income. The company has cash and bank balances of Rs 304 crore.
The company has also undertaken branch consolidation from 2,403 in Q3 FY11 to 1,298 in Q3 FY13 and headcount rationalisation from 25,735 in Q3 FY11 to 11,195 in Q3 FY13.
(Edited by Prem Udayabhanu)