SKS Microfinance turns corner, eyes 15% RoE next fiscal
Battered lender for poor SKS Microfinance, which has turned corner during December 2012 quarter, hopes to post a return on equity (RoE) of 15% during next fiscal.
The stressed microfinance firm reported a net profit of Rs 1.2 crore for the December 2012 quarter, after incurring losses for seven consecutive quarters, thanks to a series of recovery measures, said chief financial officer Dilli Raj.
SKS, whose investors include Silicon Valley venture capitalist Vinod Khosla and Infosys founder NR Narayana Murthy, had plunged into deep crisis after the Andhra Pradesh government promulgated law in October 2010 that restricted lending and recovery. The firm has written off its entire loan portfolio of nearly Rs 1,400 crore in AP over the last several quarters.
"Providing fully for the losses of our Andhra Pradesh, optimising the costs, coming out of supply side shocks, reduction in cost of borrowings and raising fresh capital have helped us to turnaround during December 2012 quarter," said Dilli Raj.
SKS continuously incurred losses for seven quarters largely owing to provisions of Rs 1,392 crore towards its exposure to its AP portfolio till September 2012 quarter. The operational costs have come down from Rs 51 crore in Q3 of FY2011 to Rs 16 crore in Q3 of FY2013. The headcount has come down to 11,200 from 25,700 and the cost of personnel dropped to Rs 37 crore from Rs 89 crore during this period.
As against Rs 943 crore of loans from the banks and financial institutions during 2011, the micro lender could draw Rs 2,150 crore of institutional funds during last calendar year. Dilli Raj said the cost of borrowings fell to 13.5% from 16% during Q3 of FY2011. Adding to the recovery, the company could also mobilise Rs 263 crore of equity funds during July last year.
Saying that the company expects a 'very modest' profitability during the current quarter, he told ET that the company hopes to "achieve a RoE of 15-18% during FY2014, which could result in a profit of some Rs 60 crore on a networth of around Rs 400 crore."
The company saw its loan disbursements growing by 14% at Rs 784 crore in December quarter from Rs 690 crore in September quarter. Its non-AP portfolio grew by 9% at Rs 1,496 crore from Rs 1,372 crore during this period. While the portfolio in AP reduced to a nil in September quarter, the company saw its collection efficiency in 17 non-AP states at 99.8% in latest quarter.
On Thursday, the SKS stock lost 4.73% at Rs 164.20 on BSE the day the exchange's benchmark Sensex lost 102 points at 19,923 points. The company announced its financial results for December 2012 quarter after the market hours.