Why is Credit Suisse bullish on SKS Micro despite big fall?

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Even though SKS Microfinance slumped 16 percent on Friday as it did not get small bank license, Credit Suisse has upgraded it to outperform from neutral. The brokerage says not getting bank licence is not the end of story but stock price fall provides only good opportunity to enter.

On the contrary, Credit Suisse feels that bank conversion for SKS would have led to a high 36 percent dilution (USD 260 million issue) which would have been an immediate negative on the stock. “Any potential benefits (funding costs, scalability of funding) will not be visible immediately, in our view (likely over years later),” it says in a note.

Meanwhile, Antique is also positive on the stock with most analysts de-rating it.

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.

Here are the negative ratings. 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.

The stock ended at Rs 380.65, down Rs 69.65, or 15.47 percent on the BSE. Posted by Nasrin SultanaFollow @NasrinzStory