Moneycontrol Bureau
Shares of SKS Microfinance tanked 16 percent intraday on Friday as it could not manage to get small bank licence from Reserve Bank of India. On Wednesday, the central bank has granted an in-principle nod to 10 applicants for small finance banks.
The sell spell is trigged by downgrades by few brokerages. Morgan Stanley has downgraded the stock to equalweight from overweight and slashed target price to Rs 480 from Rs 550 per share. It also warns that gradual intensifying competition may result in de-rating while near-term earnings outlook for company is unchanged. Edelweiss has downgraded SKS Micro to hold with a reduced target price of Rs 428 per share. The brokerage says without banking license SKS's competitive advantage in medium term gets severely compromised and access to growth capital could be difficult and premium valuations will most likely shrink.
"Investors may continue to second guess RBI’s reluctance to giving its license. SKS’s model may need some tweaking. Also, the company is susceptive to evolving strategies of its now licensed competitors," Edelweiss says in a note.Religare also retains sell rating and cuts target price to Rs 320 from Rs 400 per share and lowered FY16-17 earnings by 5-8 percent.
However, saying 'not much lost' Antique maintains a buy rating with an unchanged target price at Rs 560 per share. It believes that any knee jerk reaction could be used as opportunity to accumulate, though there may be some valuation correction. "Given the heterogeneity of the microfinance space, it is too early to say if small banks would be clear winners. SKS is one of the strongest players in the industry and may continue to hold its turf, " it adds. Antique doesn't rule out SKS obtaining a license after a few years.
At 10:49 hrs SKS Microfinance was quoting at Rs 389.50, down Rs 60.80, or 13.50 percent on the BSE. Posted by Nasrin SultanaFollow @NasrinzStory
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