SKS Microfinance shares up 15% despite Q1 loss

Shares in SKS Microfinance, the only listed microfinance company in India, jumped over 15 per cent in a buoyant market today. At 11.25 a.m., the stock traded 11 per cent higher at Rs 99.95, off the day's high of Rs 104.20 on the BSE.The stock got a boost after the Reserve Bank of India relaxed its 26 per cent interest rate cap on MFIs on Friday. Individual loan rate can now exceed 26 per cent though average loan rate should not exceed average borrowing cost plus margin, the RBI said.Margins will remain within the prescribed cap at 10 per cent for large micro-lenders, the RBI said. For other microfinance companies, the margin cap has been fixed at 12 per cent.In a breather to MFIs, the RBI also relaxed provisioning norms for Andhra Pradesh portfolio. The provisioning on account of bad loans incurred by MFIs in AP will be included as part of net worth, the RBI said.The Andhra Pradesh government had cracked down on the MFI sector in October 2010, which resulted in a drop off in loan collections and a drying up of funding for micro-lenders. SKS Micro's business in Andhra Pradesh, which was a microfinance hub earlier, was also hit. The company's loan portfolio in Andhra Pradesh shrunk to Rs 236 crore in the March quarter from Rs 1,311 crore a year ago as it was forced to write off some credit.SKS Micro's loss in the January-March quarter more than quadrupled to Rs 330 crore, reflecting the sliding fortunes of the country's beleaguered microfinance sector. It has been posting losses for the last six quarters. However, the company reported an 82 per cent year-on-year decline in losses for the June quarter. SKS Microfinance reported a loss of Rs 39 crore against a loss of Rs 219 crore last year.SKS Micro had earlier seen a successful initial public offering in 2010 in which it raised $358 million (over Rs 1,500 crore).The EBI has also said that registered non-banking financial companies (NBFCs) intending to convert to non-banking financial company-micro finance institutions (NBFC-MFI) will have to maintain net owned funds at Rs 3 crore by March 31, 2013 and Rs 5 crore by end-March 2014. If they fail to have adequate funds, their lending to the microfinance sector will be restricted to 10 percent of total assets.In December last year, NBFC-MFI was created as a new category of NBFCs, governed by a regulatory framework.Registered NBFCs that want to convert to NBFC-MFI must seek registration by October 31, the RBI said in a modification to the earlier guidelines.

SKS Microfinance shares up 15% despite Q1 loss

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