SKS Microfinance Limited reported a net profit of Rs 1.2 crore in the quarter ended December 2012, reversing the trend of seven consecutive quarters of losses. The company incurred a loss of Rs 428 crore in the corresponding quarter previous year.
Total income during the quarter under consideration stood at Rs 85 crore, a decline of 2.2% compared with an income of Rs 87 crore posted in the same period in 2011-12. The company had provided Rs 358.66 crore in the third quarter of previous year towards write offs.
SKS, the only listed microfinance institution in the country, plunged into a crisis following promulgation of The Andhra Pradesh Micro Finance Institution (Regulation of Money Lending) Ordinance 2010, which was later enacted into a legislation. Last quarter, the company reduced its AP portfolio to nil from a high of Rs 1,491 crore at the start of the crisis in October 2010.
"Fully providing for the Andhra Pradesh exposure, optimisation of cost structure, delivering promises, coming out of the supply-side shock, portfolio protection and recapitalisation are the building blocks of SKS Microfinance Limited's turnaround strategy,” said SKS chief financial officer, S Dilli Raj.
“By returning to profitability, we have successfully emerged out of the Andhra Pradesh microfinance crisis. With a capital adequacy of 39% and sufficient liquidity, we are well-equipped to reap the fruits of sector consolidation, advantageous change in the competitive landscape, a favourable regulatory climate and, of course, the enhanced business prospects," he stated in a press release.
SKS is stated to be having a networth of Rs 388 crore and a capital adequacy of 38.5% (26.2% without RBI dispensation on AP provisioning) as of December 31, 2012. In addition, the unavailed deferred tax benefit stands at Rs 556 crore and will be available to offset tax on future taxable income. The company has cash and bank balances of Rs 304 crore.
The company’s significant cost optimisation initiatives too aided a faster-than-expected turnaround with branch consolidation from 2,403 in Q3-FY11 to 1,298 in Q3-FY13 and headcount rationalisation from 25,735 in Q3-FY11 in 11,195 in Q3-FY13.
