S Dilli Raj, chief financial officer of SKS Microfinance says the ratings would help to reduce the risk weights assigned to banks‘ exposure on SKS Microfinance Limited from the present 100 percent to 50 percent in the case of long-term facilities and 30 percent for short-term facilities.
SKS Microfinance shares rallied 12.6 percent intraday Wednesday as the company announced that a leading rating agency has assigned A rating for its long-term and A1 for its short-term bank facilities for an aggregate sum of Rs 2,000 crore.
However, the company did not disclose the name of the rating agency citing "non-disclosure agreement".
According to the rating agency, instruments with ‘A’ rating are considered to have adequate degree of safety regarding timely servicing of financial obligations and carry low credit risk. Instruments with ‘A1’ rating are considered to have very strong degree of safety regarding timely payment of financial obligations and carry lowest credit risk, the company says in its filing to BSE.
S Dilli Raj, chief financial officer of SKS Microfinance says the ratings would help to reduce the risk weights assigned to banks’ exposure on SKS Microfinance Limited from the present 100 percent to 50 percent in the case of long-term facilities and 30 percent for short-term facilities.
SKS Microfinance's borrowings are Rs 1,675 crore, as of August 31, 2013.
Meanwhile, the ratings are significant in view of the fact that the company has sustained and completed its turnaround in Q1-FY14 with three consecutive quarters of profit, the company says.
It had posted a profit of Rs 4.97 crore on revenues of Rs 102.81 crore for the quarter ended June 2013 as against loss of Rs 38.84 crore on revenues of Rs 59.01 crore in a year ago period.
During the Andhra Pradesh crisis, the company had repaid Rs 5,800 crore to the banking system without any rescheduling or deferral or haircut. As of June 30, 2013, the company had a capital adequacy ratio of 30 percent and cash 7 bank balance of Rs 310 crore. Collection efficiency of the non-Andhra Pradesh portfolio is at 99.8 percent in Q1-FY14.
At 10:50 hours IST, the stock was trading at Rs 135.25, up 9.29 percent from previous close on the Bombay Stock Exchange.