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SKS Q3 Loss At Rs 428Cr, Norway's Sovereign Wealth Fund Buys 1% Stake

20 January, 2012

India’s largest microfinance firm SKS Microfinance Ltd slipped deeper into losses during the quarter ended December 31, 2011, with the net loss bulging to Rs 427.78 crore, 11 per cent more than what it clocked in Q2 FY12 and as compared to the net profit of Rs 34.16 crore in the same quarter last year.

Income from operations slumped to just Rs 81.78 crore, down 77.5 per cent over the quarter ended December 31, 2010, and down over 28 per cent compared to the previous quarter ended September 30, 2011. Other operating income also crumbled 90 per cent over Q3 FY11 and over three/fourth sequentially.

The biggest hit to the bottomline has come from higher provisions and write-offs, pegged at Rs 358.6 crore for the quarter. Although the firm managed to bring down its personnel cost during the quarter, other operating expenses besides provisions added to the bottomline pressure.

SKS shares last traded at Rs 93.55, up 0.7 per cent on Thursday on the BSE in a strong Mumbai market. The results were announced after trading stopped for the day. The company currently has a market cap of just Rs 676 crore, having lost more than 90 per cent of its value after hitting a peak soon after listing in late 2010.

Two months ago, founder Vikram Akula stepped down as executive chairman and CEO of SKS Microfinance and is now said to be involved in a new mobile banking venture.

Last month, the company said it had capped its return on assets (RoA) for the microfinance business at 3 per cent and could be launching a wholly owned subsidiary for its non-microfinance business. Capping the RoA at 3 per cent would restrict the firm’s ability to generate margin from the microfinance business. In the year before it got listed, the firm’s RoA was estimated at around 5 per cent which shrank significantly last fiscal.

The company has recently forayed into some more profitable businesses, such as gold loans, as part of its non-MFI business. It is also looking to separate those segments from its core area of microfinance. Besides gold loans, these also include areas like lending to kirana store owners and providing loans for mobile handset purchase.

SKS is also in the process of raising up to Rs 900 crore in multiple tranches for funding growth plans outside the state of Andhra Pradesh, the country’s largest microfinance market and a key region that sparked regulatory troubles for the company.

The company is hoping that its existing investors will back the fundraising plan as proposed, under an institutional placement of shares. Investors in SKS include Catamaran Management Services, Sandstone Investment Partners, Kismet Microfinance, SIDBI, George Soros, Tree Line Asia and veteran venture capitalist Vinod Khosla.

New Investor?

Meanwhile, SKS Microfinance appears to have a new investor joining the company’s list of backers. The Norwegian sovereign wealth fund – Government Pension Fund Global – figures among the list of prominent shareholders of the company. As per the latest disclosure, the sovereign wealth fund held 1.03 per cent in the microfinance firm as of December 31, 2011.

However, Government Pension Fund Global did not figure among the company’s shareholders till the quarter ended September 30, 2011. This means it has either raised its small holding during the last quarter or bought the entire stake through open market operations during the past three months. But this may not mean much for the company as the bulk of investments by Government Pension Fund Global in India have been through secondary market purchases.


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SKS Q3 Loss At Rs 428Cr, Norway's Sovereign Wealth Fund Buys 1% Stake

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