SKS to raise FII investment limit to 74%, stock up 5%

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SKS to raise FII investment limit to 74%, stock up 5%

SKS Microfinance , India's only listed microlender fighting a cash crunch, said on Wednesday its shareholders approved raising the investment limit of foreign institutional investors in the company to 74% from 24%.

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Moneycontrol Bureau

Shares of SKS Microfinance shot up nearly 5% to Rs 98.40 after its shareholders approved raising the investment limit of foreign institutional investors in the company from 24% to 74%. However, this intra-day rise in the stock price is no trigger for the company's long term prospect.

"SKS shares hit upper or lower circuit almost 20 times in the last 30 trading sessions," Arun Kejriwal, founder of research firm KRISH told moneycontrol.com.

"The company's basic business model does not stand firm as long as they are distributing loans without collaterals. It is always easy to disburse loans without collaterals. The company is now entering into new business segment, which is non-micro lending in nature. Hence, we have to wait and study it before we take a fresh call on the scrip."

India's only listed micro finance institution (MFI) recently decided to set up a subsidiary for its non- microfinance business. It is reportedly expected to generate revenue of Rs 45 crore in 2012-13.

The company is planning to extend loans for purchase of 5,55,000 mobile handsets. In gold loan space too, the company will continue its service in 50 branches in FY12, according to S Dilli Raj, the CFO of the company.

"In FY13, the company is expected to have an outstanding portfolio of Rs 3,000 crore (current level Rs 1,850 crore), other assets of Rs 545 crore and post a revenue and PAT of Rs 900 crore and Rs 50 crore," he was quoted saying to media persons recently.

During the July-Sep quarter, SKS incurred a net loss of Rs 384.5 crore on the back of higher provisions and write-offs against bad loans. Its income dropped 66.4% to Rs 123 crore.

The Andhra-based beleaguered micro lender had a tough time in the recent past. Its operations virtually came to a standstill when the state government of Andhra enacted a legislation that regulates MFIs in the wake of rising number of suicide cases. In the last three months, shares tanked more than 68%.

saikat.das@network18online.com