SKS Micro to focus on gold loans, mobile phone financing

Expecting pressure on company financials in the near term, SKS Microfinance today said it will start focusing on non-core activities like gold loans and mobile phone financing in places other than Andhra Pradesh, Executive Chairman of the company Vikram Akula said today.

The company suffered a net loss of Rs 69.77 crore in Q4 (FY11) largely due to the situation in Andhra Pradesh where its loan collection has plunged .

It expects the pressure on financials would continue over the next couple of quarters.

SKS has outstanding loans of Rs 1,285 crore in Andhra Pradesh alone and it is not able to extend fresh loans.

According to AP Micro Finance Institutions (Regulation of Money Lending) Act- 2011, every loan application has to be approved by the State Government officials.

SKS filed 73,163 loan applications after the new rules were introduced last October of which only 1648 applications were approved by the Government as eligible for loan.

"We have been struck a blow by external forces. Now we are reinventing our company and microfinance. That’s what we are going to focus in this year. Reinvention of microfinance will focus on consolidations of existing customer base, diversifying product offerings and continuing to build consensus to resolve issues in Andhra Pradesh," Akula told reporters here.

As per Reserve Bank norms, revenues from non-core areas of a microfinance company should not cross 15%.

SKS has plans to start a subsidiary once that limit crosses, said Dilli Raj, CFO, SKS microfinance.

"Today our book is Rs 4,111 crore and roughly we can go up to Rs 600 crore (for non-core business).So in FY12 we don’t think we will cross that limit. In FY13, based on the business models we will cross that and look at the step-down subsidiary," Dilli Raj said.