SKS Microfinance gains on RBI measures to ease liquidity crunch for MFIs

SKS Microfinance rose 2.73% at Rs 668.50 at 15:04 IST on BSE after the central bank said banks can classify restructured loans to microfinance companies as a special regulatory asset, a move that will ease liquidity constraints in the sector.

Meanwhile, the BSE Sensex was down 168.66 points, or 0.88%, to 18,923.39.

On BSE, 1.60 lakh shares were traded in the counter as against an average daily volume of 3.58 lakh shares in the past one quarter.



The stock hit a high of Rs 690.60 and a low of Rs 650 so far during the day. The stock had hit a record high of Rs 1490.70 on 28 September 2010 and a record low of Rs 559 on 21 December 2010.

Shares of Hyderabad-based SKS Microfinance debuted on 16 August 2010 at Rs 1,036 on BSE, a 5.18% premium over the initial public offer (IPO) price of Rs 985. On that day, the stock ended at Rs 1,088.58, a 10.52% premium over the IPO price.

The stock had outperformed the market over the past one month till 18 January 2011, falling 1.68% compared with the Sensex's 3.89% decline. The scrip had, however, underperformed the market in past one quarter, falling 39.72% as against 5.34% decline in the Sensex.

The mid-cap microfinance lender has an equity capital of Rs 72.19 crore. Face value per share is Rs 10.

The relaxation is purely a temporary measure and would be applicable to bank loans to microfinance institutions (MFIs) restructured by banks up to 31 March 2011.

The Reserve Bank of India (RBI) has asked banks to extend the regulatory asset classification benefit to standard restructured MFI accounts, even if they were not fully secured. The central bank also noted that the current problems in the microfinance sector are mainly due to environmental factors, and not due to credit weakness.

Shares of SKS Microfinance had tumbled last year after the Andhra Pradesh (AP) state assembly approved a legislation to regulate the microfinance sector by ratifying an earlier ordinance that curbed operations by the lenders to the poor. The ordinance took effect in October 2010 after the state government imposed heavy-handed regulations on lenders to the lowest strata of society in response to complaints over high interest rates and aggressive loan recovery practices. The ordinance severely curtailed the activities of micro-finance lenders in the AP state, which had been their largest single market in India.

SKS Microfinance's net profit soared 115.7% to Rs 80.55 crore on 75.5% increase in operating income to Rs 347.69 crore in Q2 September 2010 over Q2 September 2009.