As SKS heals itself, FIIs offer a balm

This day, last year, shares of India's only-listed micro-finance firm Andhra-based SKS Microfinance hit an all-time low of Rs 54 in two years of debut on the stock exchanges. The erosion was 95 per cent against the issue price of Rs 985.

Since then the counter has recovered and handsomely, too. The share is currently trading at more than double that price at Rs 121. Thanks to the change in the business model and recent positive quarterly results.

So, what can we expect? Is it likely the company might re-gain its past growth?

According to experts, with the recent turnround, it may turn out well if things continue to improve from here.

U R Bhat, managing director, Dalton Capital Advisors, said, "SKS Microfinance has adopted a sensible and workable market-driven model. I believe in India, where banks are unable to reach the back of beyond, microfinance firms with the right approach can address poverty alleviation."

Ambareesh Baliga, managing partner (global wealth management), Edelweiss Financial Services, echoed the view. "My advice to investors would be to buy the counter at every dip."

SKS was back in the black in the December quarter of FY13, with a marginal net profit of Rs 1.15 crore. Last it was in December quarter of 2010 that the company was in profits, before it faced trouble in the following years due to interference of Andhra Pradesh.

Baliga said, "There were two issues: Net performing assets and funding. The company has tweaked its business model which will help its operations. SKS will steadily sort issues"

Though the domestic investors are still reluctant to buy SKS' turnround story, foreign investors have been quick to increase their holdings in the counter. Since the stock hit its all-time lows, foreign institutional investors have been buying its shares.

U R Bhat, managing director, Dalton Capital Advisors, said, "Foreign investors have increased holding in the company as they probably feel it is following a good market-driven solution. If such models can be successful in Bangladesh, they should succeed in India, too."

On 16 August, 2010, SKS Microfinance had debuted on bourses. On its listing day, the counter had closed at a premium of 10 per cent over its issue price before gaining a high of 18 per cent in the intra-day session. The issue had attracted lot of attention from market participants and they were bullish on the counter.

And the expectations paid off as within one-and-a-half-month of listing, the counter hit its all time high of Rs 1,490.70 on 28 September, 2010 before sliding. Last, the counter closed above Rs 1,000 mark was on 2 November, 2010 after which the free fall began and shares could never reach those levels thereon.