SKS Microfinance stock plunge faces probe

A steep plunge of 20% in SKS Microfinance shares, hours ahead of its fourth quarter results on Friday, has come under the regulatory lens for possible breach of insider trading norms or hammering by a bear cartel.

The plunge was coupled with about 10-fold surge in the stock's trading volumes, prompting the bourses and market regulator Sebi to conduct the probe, sources close to the development said.

When contacted, a company spokesperson told PTI that SKS Microfinance has not received any communication in this regard from either Sebi or the stock exchanges.

However, sources said the surge in trading volumes and a heavy fall in shares -- on a day when the company announced a loss after the market hours -- is being viewed as an unusual event to the market surveillance authorities and therefore they have begun a preliminary probe.

The matter is being probed for possible breach of insider trading rules or hammering by a bear cartel, sources added.

The fall coincided with a strong upward trend in the market, when the BSE Sensex rose over 300 points, and happened a couple of days after RBI said that bank loans to micro finance lenders would fall under the priority sector lending.

The RBI decision was welcomed as a boost for the micro finance sector by SKS, the country's only listed company from this space.

SKS Microfinance shares opened weak on Friday, May 6, and hit the lowest permissible level for the day -- which was also the lowest price in its history at Rs 330.65.

The stock ended the day at Rs 331.30 at BSE, down 19.83% from its previous close of Rs 413.25. It had opened at Rs 410, and the intra-day high was Rs 411.75.

The stock plunged 19.99% at NSE to Rs 330.75.

During the day, over 12.5 lakh shares were traded at BSE, as against about 93,000 on May 5. At NSE, more than 21 lakh SKS shares were traded, up from 2.6 lakh on the previous day.

During the day, marketmen attributed the fall to price target cut for the stock by JP Morgan by more than half from Rs 550 to Rs 200 due to weakening business model.

Later in the evening, the company announced results for the fourth quarter ended March 31, which were uploaded on the websites of BSE and NSE at 6.26 pm and 6.35 pm respectively -- which was well after the market closing.

The company reported a net loss of Rs 70 crore on lower income from operations and high credit costs. SKS had a net profit of Rs 63 crore in the year-ago period.

Its net profit declined 36% to Rs 111.63 crore for the year ended March 31, 2011.