SKS Microfinance gains after announcing strong Q2 results

SKS Microfinance rose 2.46% to Rs 460 at 10:15 IST on BSE after net profit rose 37.19% to Rs 77.85 crore on 61.31% rise in total income to Rs 324.28 crore in Q2 September 2015 over Q2 September 2014.

The company announced results after market hours yesterday, 19 October 2015.

Meanwhile, the BSE Sensex was up 12.12 points, or 0.06%, to 27,380.03.

On BSE, so far 2.94 lakh shares were traded in the counter, compared with an average volume of 3.21 lakh shares in the past one quarter.

The stock hit a high of Rs 472.30 and a low of Rs 458 so far during the day. The stock hit a 52-week high of Rs 589.50 on 31 July 2015. The stock hit a 52-week low of Rs 278.65 on 16 October 2014.

The stock had outperformed the market over the past one month till 19 October 2015, surging 17.94% compared with Sensex's 4.37% rise. The scrip, however, underperformed the market in past one quarter, declining 14.56% as against Sensex's 3.86% fall.

The mid-cap company has an equity capital of Rs 126.80 crore. Face value per share is Rs 10.

SKS Microfinance announced that its gross loan portfolio excluding the states of Andhra Pradesh and Telangana registered a 14% rise to Rs 5462 crore in Q2 September 2015 over Q1 June 2015 and an 80% growth to Rs 5462 crore in Q2 September 2015 over Q2 September 2014.

The company has increased its profit guidance from Rs 235 crore to Rs 290 crore for the year ending 31 March 2016 (FY 2016).

Loan disbursements increased by 57% to Rs 2665 crore in Q2 September 2015 over Q2 September 2014. SKS Microfinance had incremental drawdowns of Rs 1569 crore in Q2 September 2015 compared with Rs 1100 crore in Q2 September 2014 including commercial paper of Rs 200 crore rated as 'A1+' by a leading rating agency. The company also originated Rs 237 crore worth of loans under managed portfolio in Q2 September 2015.

The quarter marks two significant achievements. SKS Microfinance's gross loan portfolio has surpassed the past peak of Rs 5434 crore in Q2 FY 2011, thanks to the company's consistent annual growth of around 50%. Also, the company registered a 5.3% quarter-on-quarter drop in cost to income to 47% in Q2 September 2015 from 52.3% in Q1 June 2015.

SKS Microfinance's marginal cost of borrowings stood at 11.2% while its weighted average cost of borrowings (historical) was 12.1% at Q2 September 2015.

The un-availed deferred tax benefit of Rs 425 crore will be available to offset tax on future taxable income. Also, a minimum alternate tax (MAT) benefit of Rs 23 crore in Q2 September 2015 has conservatively not been availed as P&L credit, despite supporting accounting standards. The total MAT credit of Rs 41 crore as of 30 September 2015 is also available to offset actual tax liability in future.

As of 30 September 2015, SKS Microfinance had a net worth of Rs 1203 crore and a capital adequacy of 24.6%. Cash and cash equivalents stood at Rs 834 crore. With effect from 1 October 2015, SKS Microfinance has been charging an interest rate of 20.75%, considered the lowest rate among global Micro Finance Institutions, on its unsecured micro loans post three interest rate reductions totalling 3.8% since October 2014. SKS Microfinance has also completed its Smart TAB project, enabling the company's loan officers to carry out all their activities on tablets.

SKS Microfinance is among the largest microfinance companies in India. The company's mission is to provide financial services to the economically weaker sections.

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