SKS Microfinance may raise Rs 3,000 cr next fiscal

Recent rate cut by RBI expected to show its effect on borrowing rates April onwards

SKS Microfinance, India's only listed micro lender, may raise Rs 3,000 crore during the next fiscal to meet its lending requirements, a senior official of the company said.

S Dilli Raj, chief financial officer, SKS said the recent rate cut by the RBI is expected to show its effect on the borrowing rates April onwards.

"Basically in terms of FY'14 we are talking about Rs 3,000 crore incremental debt raising and a disbursement of Rs 5,000 crore which will result in a portfolio outstanding of Rs 3,000 crore by the year end," Dilli Raj told PTI.

"One third of Rs 3,000 crore will be through securitisation and the remaining will be term loan and other instruments," he added.

SKS, which had to make Rs 1,350 crore as provisioning towards bad loans of Andhra Pradesh for the past few quarters, reported profit of Rs 1.2 crore for Q3FY13, compared to loss of Rs 428 crore for Q3FY12.

The company has earned a profit after seven consecutive quarters of losses on account of provisioning and rise in advances.

During the October-December quarter, total income of the company fell to Rs 85 crore from Rs 83.82 crore in the same period a year ago.

For the nine months ended December 2012, SKS incurred a net loss of Rs 299.84 crore compared to Rs 1,031 crore in the same period of the previous fiscal.

The micro lender had raised Rs 981 crore through securitisation in the current fiscal and another Rs 1,500 crore through various modes.

Replying to RBI's recent rate cut, Dilli Raj said the transmission of the interest rate reduction will be felt once banks' prime lending rates are reduced.

The RBI, last week, cut its short-term lending rate by 0.25% to to 7.5%, making it the second consecutive cut in as many months. "62% of our borrowings are floating rate contracts. As and when the anchor and PLR rates are reduced that would reduce our cost of borrowings," he said.

The average cost of borrowing for SKS in Q3 of the current fiscal stood at 13.2% and it was reduced by one% in the current quarter, he said.

SKS currently charges 24.55% from its borrowers besides one% processing fee.

He, however, said their operational cost is very high due to small ticket size and delivery cost.

The company started giving gold loans on pilot basis in 50 branches and awaiting the results.

"We will run it as a pilot for next another six months and see the results and take a decision whether to amplify it or not," Dilli Raj said.

According to him, SKS gets 90% of its income from micro lending.