SKS Microfinance gains 4% on UBS upgrade

UBS initiate coverage on SKS Microfinance with 'Buy' rating and price target of Rs 500.

Shares in SKS Microfinance has rallied 4% to Rs 363 on the National Stock Exchange (NSE) after UBS initiate coverage on the stock with ‘Buy’ rating and price target of Rs 500.

According to the brokerage, due to its strong growth potential and high return on equity (ROE), SKS Microfinance is one of our preferred non banking finance company (NBFC) picks.

NBFC-micro finance institutions (MFIs) are now regulated by the Reserve Bank of India, and new regulations restrict leverage and lending rates. MFIs are also more geographically diversified than before the Andhra Pradesh crisis. We think regulations on small finance banks could pave the way for MFIs to become small banks, which we believe would improve their liability profile and reduce regulatory risks, without adversely impacting medium-term profitability, broking firm said in a report.

The stock opened at Rs 355 and touched a high of Rs 366 on NSE. The counter has seen a huge trading activity with a combined 1.27 million shares changed hands till 1028 hours, as against an average around one million shares that were traded daily in past two weeks on NSE and BSE.