Shares of SKS Microfinance, India’s only listed microfinance institution, tumbled to an all-time low on Monday, December 20, as uncertainty surrounding the country’s microfinance sector remained high. Since its initial public offering (IPO) in July, the shares of SKS Microfinance have dropped more than nine percent to a low of INR 599, while the S&P CNX Nifty Index, an index that represents large companies on the National Stock Exchange (NSE) of India, increased by 0.1 percent during the same period [1]. When SKS Microfinance first listed on NSE, share prices rose as investors expected a rising demand for credit in India. However, scrutiny surrounding the country’s microfinance sector in October, aggravated by a standstill in debt repayment in the Indian state of Andhra Pradesh, sent SKS Microfinance stocks to what might be described as a downward spiral. Share prices fell by 4.6 percent after the Andhra Pradesh state assembly approved tighter regulations on the microfinance sector and again when Citigroup downgraded the company from “hold” to “sell” and cut its earnings estimate to reflect lower lending rates and higher funding costs [2]. As of March 31, 2010, SKS Microfinance reported to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, total assets of USD 897 million, a gross loan portfolio of USD 653 million, return on assets of 4.96 percent, return on equity of 21.56 percent and 5.79 million active borrowers.
By Julie Moksim, Research Associate
About SKS Microfinance: SKS Microfinance is a microfinance institution (MFI), launched in 1998, that delivers microfinance products through a group-lending model to impoverished women in India. It is a for-profit, non-banking finance company, which converted to a public limited company in May 2009 and launched an initial public offering on July 28, 2010. Equity investors include Quantum Hedge Fund, Sequoia Capital, Vinod Khosla, Small Industries Development Bank of India, Bajaj Allianz, Yatish Trading, Kismet Capital, Sandstone Capital, Silicon Valley Bank and Unitus. As of March 31, 2010, SKS Microfinance reported to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, total assets of USD 897 million, a gross loan portfolio of USD 653 million, return on assets of 4.96 percent, return on equity of 21.56 percent and 5.79 million active borrowers.
[1] Reuters: “Shares in SKS Microfinance Tumble to All-Time Low”, by Ami Shah and Arjun Kashyap, December 20, 2010, http://in.reuters.com/article/idINIndia-53680520101220
[2] Reuters: “Citi Cuts SKS Microfinance to Sell from Hold; Shares Down”, by Ami Shah and Sowmya Kamath, December 16, 2010, http://in.reuters.com/article/idINIndia-53601320101216?loomia_ow=t0:s0:a54:g12:r3:c0.507115:b40429898:z3
MicroCapital’s Microfinance Universe Profile: SKS Microfinance
https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS+Microfinance
MicroCapital.org Article, November 26, 2010: SKS Microfinance of India Under Investigation by Insurance Regulatory and Development Authority (IRDA) for Violating Norms in Insurance Practices, https://www.microcapital.org/microcapital-brief-sks-microfinance-of-india-under-investigation-by-insurance-regulatory-and-development-authority-irda-for-violating-norms-in-insurance-practices/
MicroCapital.org Article, November 15, 2010: India’s Microfinance Industry on Brink of “Collapse” Due to Credit Freeze in State of Andhra Pradesh, https://www.microcapital.org/microcapital-brief-indias-microfinance-industry-on-brink-of-collapse-due-to-credit-freeze-in-state-of-andhra-pradesh/
MicroCapital.org Article, July 29, 2010: SKS Microfinance Launches India’s First Initial Public Offering (IPO) by a Microfinance Institution,?https://www.microcapital.org/microcapital-brief-sks-microfinance-launches-india%E2%80%99s-first-initial-public-offering-ipo-by-a-microfinance-institution/
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