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SKS to set up arm for non-microfinance biz

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SKS Microfinance Limited, the only listed microfinance institution (MFI) in the country, has decided to set up a step down subsidiary for its non- microfinance business, a segment it expects to generate a revenue of Rs 45 crore in 2012-13.

Over a period time, the non-MFI business is expected to comprise 10 per cent of the company’s portfolio and contribute 20 per cent to its revenue and 30 per cent to its profits, according to SKS chief financial officer, S Dilli Raj.

Raj told mediapersons here on Wednesday that SKS, which had incurred a net loss Rs 384.54 crore, was expected to post a profit after tax (PAT) of Rs 50 crore in FY 2013.

“In FY13, the company is expected to have an outstanding portfolio of Rs 3,000 crore (current level Rs 1,850 crore), other assets of Rs 545 crore and post a revenue and PAT of Rs 900 crore and Rs 50 crore,” he said adding that 5 per cent of the revenue would be from the non-MFI business.

SKS, which has decided to cap the return on asset (RoA) for the MFI business at 3 per cent, is confident of raising Rs 500 crore by issue of fresh equity through the qualified institutional placement route by March 2012. The company's RoA in the second quarter of the current financial year was negative, while it stood at 4 per cent in 2010.

“Pursuing the gross sell route, we plan to service 15,000 sangam stores (at present 4,000) and extend loans for purchase of 550,000 mobile handsets this year (Rs 2.8 lakh loans advanced so far). In the gold loan space, SKS Microfinance will continue with 50 branches this fiscal,” company’s managing director and chief executive officer, MR Rao, said.

Rao said pilot projects launched by the company proved that kirana, mobile and gold secured lending initiatives would yield “superior margins.”

Meanwhile, the beleaguered SKS, whose operations in Andhra Pradesh came to a standstill following the enactment of a legislation by the state government regulating the MFI sector, has decided to ensure that no state in future will contribute more than 10 per cent to its portfolio.

At present, Raj said, only two states West Bengal and Karnataka apart from AP have crossed this threshold. Prior to the crisis that hit the MFI sector, AP accounted for 25 per cent of its portfolio. Now, the company has a gross exposure of Rs 822 crore in Andhra Pradesh.

SKS had also embarked on an image building exercise and is planning to invest Rs 15 crore in the next three years to align its customer grievance redressal and client protection practices with globally recognised benchmarks. Besides, it has decided to appoint a social sector veteran as ombudsman by this month-end for ensuring client-protection.

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