SKS Micro up 11% on norm relaxation, narrower loss

Shares of SKS Microfinance rose more than 11 percent to Rs 100.20, on better sentiment after the Reserve Bank of India relaxed norms governing microfinance institutions and the company narrowed its net loss.

The RBI on Friday relaxed provisioning for Andhra Pradesh loan portfolio of these companies and also removed the cap on interest rates they can charge on loans.

The relaxation on Andhra provisioning would ensure that microfinance companies would be able to maintain healthy capital adequacy, as their net worth would not be eroded, the Business Standard reported .

The minimum capital adequacy ratio of microfinance companies is 15 percent.

[caption id=“attachment_406503” align=“alignleft” width=“380”] The RBI has said the rate of interest on individual loans may exceed 26 percent. Reuters[/caption]

The RBI has said the rate of interest on individual loans may exceed 26 percent.

However, it has stipulated that the maximum variance permitted for individual loans between the minimum and maximum interest rates cannot exceed 4 percent.

The company reported a net loss of Rs 38.8 cr versus loss of Rs 218.7 cr in the year ago quarter. Its total income from operations was at Rs 74.5 cr versus Rs 160.6 crore, according to CNBC-TV18.

In an interaction on CNBC TV18, Dilli Raj, CFO, SKS Microfinance, said he expected the company to return to profit by October-December.

“We have consolidated the branches and rationalised the headcount and all asset quality indicators have reverted back to the pre-AP crisis. So we could have some one off cost in Q2 and we should be in black by Q3,” he said.