SKS' woes mount, reports Rs 385-cr loss in Q2

SKS Microfinance’s net loss mounted to Rs 385 crore in the quarter ended September 30, as shrinking income, rising expenses and higher provisions dragged India’s largest micro-lender’s earnings. It had registered a profit of Rs 80 crore during the same period last year.

In the first three months of this financial year, SKS’ net loss was at Rs 219 crore, lower than the July-September quarter. The second-quarter earnings indicated business activities continued to remain weak, despite initiatives taken by micro-lenders and the sector regulator, the Reserve Bank of India.

SKS’ second-quarter total income narrowed 25 per cent sequentially and 66 per cent annually to Rs 123 crore. Expenses nearly tripled from a year ago and surged 55 per cent sequentially to Rs 461 crore on account of higher provisions.

The microfinance institution’s earnings have been shrinking since October 2010 when the Andhra Pradesh government imposed restriction on micro-lending activities in the state. The state government banned weekly collection of loan dues by microfinance companies.

The top management of SKS was immediately not available for comments.

Provisions and write-offs were at Rs 353 crore, up 92 per cent sequentially, reflecting continued deterioration in the asset quality of India’s only listed MFI. This was despite the company adopting a more liberal method for asset classification and provision calculation on loans in Andhra Pradesh. SKS had made provisions of Rs 17 crore a year ago.

The loan book nearly halved year-on-year to Rs 2,532 crore as of September-end, due to reduced micro-lending activities in Andhra Pradesh.

Earlier this month, the SKS board had approved raising of Rs 900 crore through qualified institutional placement. However, analysts said with investors losing confidence in the microfinance sector and sharp fall in its stock price, SKS will find difficulty in raising the fund.