SKS Microfinance is on the upmove after receiving QIP funding and stabilisation of regulatory risks. However, its culturally and politically sensitive business model is still a concern for investment in the MFI sector
The share price of SKS Microfinance has increased by about 50% since last July. However, its target market (of poor women) is culturally and politically sensitive and this may be the main risk to investments in the microfinance company, says a brokerage.
In a report, Espirito Santo Investment Bank Research, said, “SKS’s share price has run up more than 50% since the QIP (qualified institutional placement) in July, as clarity has emerged on the availability of capital. We estimate loan book growth in excess of 30% for the next three years and with collection efficiency improving on the non-Andhra portfolio, we expect the company to start showing profits from third or fourth quarter of this year.”
After the Andhra crisis there were questions raised about SKS Microfinance’s survival. However over the last six months the company has not only left the Andhra crisis behind it, but also raised Rs263 crore in capital which should be enough to take care of its capital requirement for the next couple of years.
“The recent capital raising of Rs263 crore through a QIP placing in July, puts SKS among the few microfinance institutions (MFIs) in India with the capacity to expand its loan book. Hence SKS now has a fairly clear run over the next couple of years to pick and choose for its loan book and grow it at a faster pace than its peers. We expect more than 30% loan book compounded annual growth rate (CAGR) for the next three years,” said Espirito Santo.
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