Notional loss due to Andhra ordinance: SKS

SKS Microfinance today said it was unable to recover loans from borrowers due to stringent norms imposed by the Andhra Pradesh government, though dismissing the resultant Rs 60 crore loss as "notional".

Company officials clarified that no real loss was suffered and the notional loss was only on account of extending the loan repayment period by one week to 51 weeks.

The statement comes in the face of an Andhra Pradesh government ordinance and a subsequent court judgement barring against any coercion to recover loans.

SKS Microfinance is the subject of an intense Sebi investigation to address concerns of investors over the summary dismissal of its CEO, Suresh Gurumani, within weeks of completing a successful IPO to raise Rs 1,600 crore.

The share prices of SKS Microfinance came under pressure and even slid below the issue price of Rs 985 during intra-day trade before closing at Rs 1,005.10, still 4.6 per cent lower than the previous close.

However, it was business as usual in the state for the microfinance company today, SKS Microfinance spokesperson Atul Takle said.

Admitting that SKS Microfinance could not recover loans from its borrowers for a week, which on average amounted to Rs 58-60 crore, Takle said the loss is just notional and the ordinance did not have any adverse impact on its business.

"Our single day collection is around Rs 12 crore from Andhra Pradesh. On a weekly basis, the collection loss would work out to Rs 58-60 crore. It is only a notional loss," Takle said.

He said the company has extended the loan repayment period for borrowers to 51 weeks from the earlier tenor of 50 weeks, as business ground to a halt following the ordinance brought out by the state government to regulate the microfinance business.

In temporary relief for microfinance companies, the Andhra Pradesh High Court on Friday allowed them to continue with their activities. The court also directed microfinance institutions (MFIs) to register their activities with the district authorities, as mandated by the ordinance issued by the state government last week.

The court was hearing a petition by Microfinance Institutions Network (MFIN), a body of MFIs, challenging the ordinance. The country's largest MFI, SKS Microfinance, had separately challenged the ordinance.

In a filing to the Bombay Stock Exchange, SKS Microfinance said the AP High Court has directed that pending registration under the impugned ordinance, MFIs will be free to carry on with their business, with due adherence to certain provisions of the ordinance.