SKS Microfinance slumps on failure to obtain small finance bank licence

The micro-finance major failed to obtain small finance bank licence from the RBI

Shares of SKS Microfinance were down over 12% at Rs 394 on the Bombay Stock Exchange after the micro-finance major remained unsuccessful in obtaining small bank license.

It may be recalled that the Reserve Bank of India on Wednesday granted in-principle license for small finance banks to 10 companies.

In a surprise move, which was contrary to our as well as street expectation RBI issued in-principle approval to ten applicants for small finance bank (SFB). Out of which eight were microfinance companies and SKSMF was not one of them, Emkay Global Financial Services said in a note post the RBI announcement.

"We have downgraded our rating to HOLD with a target price of Rs440 (2.9x Sept-FY17 BV), as we remove our bull case scenario (probability of 15%) of the company receiving the small bank license and reduce our long term growth expectation," the note added.

The stock opened at Rs 405 and touched a low of Rs 377. At 10:40AM, over 7.6 million shares were traded on both the stock exchanges.