SKS Microfinance net profit shoots up to Rs 21 crore

It had posted just Rs 1.15 crore net profit in the same quarter previous year

SKS Microfinance Limited, the only listed microfinance entity in the country, reported a net profit of Rs 21.42 crore for the quarter ended December, 2013, as compared with just Rs 1.15 crore in the corresponding period of the last financial year.

The company’s third quarter performance — its fifth consecutive quarter of profit since its turnaround — marks a departure from the troubled past.

Sequentially, net profit for the quarter under review grew 31 per cent.

The impressive profitability numbers came on the back of a 54.83 per cent jump in total income for the quarter at Rs 139.66 crore, as compared with Rs 90.20 crore in the year-ago period.

The growth in net profit was far higher as compared with the growth in income, as there was no tax liability during this period. The third quarter also passed off without requiring to make any fresh provisions and write offs and instead the company had shown a reversal of Rs 1.67 crore under this head. Expenditure grew only 12 per cent to Rs 60.69 crore from Rs 53.92 crore in the year-ago period.

M R Rao, the company’s managing director and chief executive officer,said: “The growth momentum has returned, and disbursements have gained traction with a 43 per cent quarter-on-quarter growth and 79 per cent year-on-year growth.” According to Rao, the company's efficiency initiatives have been yielding results with reduction in opex (operational expenditure) as a percentage of credit assets.It also expects to increase the portfolio outstanding by 15 per cent quarter-on-quarter even though there were no plans to increase branches or headcount in the fourth quarter. SKS fell into a deep crisis in 2010, after its predominantly Andhra Pradesh-centred operations suffered when the state government clamped down on microfinance operations completely, affecting the loan recovery and fresh lending activities.

As a result, it had to write off almost all the outstanding loans in the state while slowly growing its operations outside the southern state.

The company had a net deferred tax asset amounting to Rs 567.01 crore as on December 31, 2013. The same will be available to offset tax on future taxable income. “Economic value of the unavailed deferred tax provision of Rs 567 crore has also started showing up on the profit and loss statement,” said S Dill Raj, chief financial officer of SKS Microfinance.