SENSEX NIFTY
Jul 07, 2011, 10.54 AM IST | Source: CNBC-TV18

Contrarian call on SKS Microfinance could be risky: Udayan

The Reserve Bank of India will regulate the microfinance sector. CNBC-TV18's managing editor Udayan Mukherjee says, it is a good news for SKS Microfinance. But Valuations probably do not leave that much room for upside here.

The Reserve Bank of India will regulate the microfinance sector. CNBC-TV18's managing editor Udayan Mukherjee says, it is a good news for SKS Microfinance . “I think the Reserve Bank of India will probably set things to rest on deciding the ceiling and the tenure of the loans etc.” 

SKS Microfinance, he says, has fallen from a very lofty valuation level. “There seems to be far more comfort in the financial space in some of bluechip names like Axis Bank, ICICI Bank, Yes Bank rather than go into a contrarian call in SKS. SKS could bounce Rs 10-15-20. But valuations probably do not leave that much room for upside here.”

Houseviews: Brokerages call on SKS Microfinance

Below is the transcript of his comments on CNBC-TV18. Also watch the accompanying video.

I think the news overnight on RBI being appointed the regulator for the MFI sector is a good news for SKS because RBI is the calmest headed rational regulator that you might find. I think the Reserve Bank of India will probably set things to rest on deciding the ceiling and the tenure of the loans etc. It is certainly going to be a whole lot better than the Andhra Pradesh government being on a spree deciding or clamping down on some of these microfinance companies. So, it is a relief for the MFIs. SKS should benefit from that.

Do you buy it at around Rs 350? It is tough to say that because the problem with SKS is that it has fallen a lot, but it has fallen from a very lofty valuation level. Even at the current level of two-and-a-half times book, you ask yourself given the uncertainties of this sector, would you rather be with an SKS now or would you rather be with some of the private sector banks who are trading at two-and-a-half times book. And you can find Axis Bank, ICICI Bank, Yes Bank trading in that ballpark two-and-a-half times times book kind of a price. So, there seems to be far more comfort in the financial space in some of these bluechip names rather than go into a contrarian call in SKS. Sure SKS could bounce Rs 10-15-20. But it is still quite challenging for them. Valuations probably do not leave that much room for upside here.

Set email alert for

ADS BY GOOGLE

video of the day

Rupee weakness modest, see yields at 7.60% in Q1: Deutsche

Explore Moneycontrol

Copyright © e-Eighteen.com Ltd. All rights reserved. Reproduction of news articles, photos, videos or any other content in whole or in part in any form or medium without express written permission of moneycontrol.com is prohibited.