Will SKS Microfinance recover? Is it a good long term buy now?

Will SKS Microfinance recover from missing out on the small bank and payments bank license? Is it a good long term buy now?

I can't believe RBI would put the largest MFI at a disadvantage, its borrowers wont get the benefit of low cost of funds.

How do you forsee this being played out?

 

I read a research report which says that the grant of banking licence to SKS' competitors while denying it to SKS tilts the balance against SKS because it's funding remains expensive. The larger issue is the sustainability of the business model itself. The business is prone to interference from political parties and the government due to the nature of the target audience. So why would one want to mess around with SKS when there are other bank and nbfc stocks available?

 

SKS Microfinance Fails to Get Small Bank License, Stock Sinks 20%

https://profit.ndtv.com/news/market...get-small-bank-license-stock-sinks-20-1218934

New small Finance banks Licenses approved by RBI

Ujjivan Financial Services Pvt. Ltd, Janalakshmi Financial Services Pvt. Ltd and Equitas Holdings Ltd are among the 10 entities. The others are Au Financiers (India) Ltd, Capital Local Area Bank Ltd, Disha Microfin Pvt. Ltd, ESAF Microfinance and Investments Pvt. Ltd, RGVN (North East) Microfinance Ltd, Suryoday Micro Finance Pvt. Ltd, and Utkarsh Micro Finance Pvt. Ltd.

Larger financial services firms such as Dewan Housing Finance Ltd, IIFL Holdings Ltd, SKS Microfinance Ltd and UAE Exchange and Financial Services Ltd did not qualify for the licences. No publicly traded entities have been included in the list.

https://www.livemint.com/Industry/1...nts-small-banks-licence-to-10-applicants.html

https://www.rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=33164

 

The question is - What were the reasons why SKS didn't get the small bank and payments bank license? Will they eventually get it?

Microfinance as a sector itself has high NPAs ... thats why the interest rates are so high. Point is this is not new. Whether another AP can happen is a question ... hopefully regulators are there.

Do you have a link the religare report?

 

Dear jarmoney , Don't get panic ....are you holding this stock ?

This is from Religare Securities online website .... please read this ....

SKS Microfinance falls over 2% after Morgan Stanley cuts stake

hares of SKS Microfinance fell over 2 per cent in early trade on Bombay Stock Exchange (BSE) after Morgan Stanley Asia sold 692680 shares in a block deal on Wednesday at 458.65 rupees a share. Morgan Stanley Asia held 5.27 per cent stake in the company as on March quarter according to exchange data.

Following the development shares of company dipped as much as 2.13 per cent in intra-day trade to Rs. 432.60 apiece on the BSE.

In a similar trend shares of the company dropped as much as 2.25 per cent to Rs 432.20 a piece on National Stock Exchange.

Meanwhile the broader benchmark BSE Sensex was trading at 26765.31 up 47.94 points or 0.18 per cent at 11:20 hours.

Source : https://www.religareonline.com/Mark...cuts stake/456275/05-07-2015/CompanyNews/5982

 

This is another classic story for debate
ie define long term story
sks micro has been doing wonderfully well over the past 2 years

but see everyone is in haste to correct their recommendation or to give footnote after the license issued by rbi.
This points out to the simple fact ( if ego factor eliminated ) that stocks if have given gud returns over a short to medium period ( short for me is 3 m onths and medium is well over 6 months to 9 months... i donot porlong it to justify myself)

we have seen nestle .. so no stocks can be spared nor nothing like chip red or blue

discount sales is going to happen every 6 months and one can get two way profit by selling at high ie reasonably at gud profit and parking the cash and waiting for a similar situation like what is happening now.. Now it is yuan devaluation.. later it will be something else..

i have failed with the above theory and successfully correcting my past mistakes.
This lesson i learnt this month
a stock which gave me profit of 170% ( ricoh just example ) just holding it .. for what..
can another 170% be sustained in another 1 yr.. No .. then why not sold it
reason is GREED..
had i sold at that high price which i felt reasonable i could have made the same purchase at half the price now.

if anyone is hearing this i stand blessed
i share my experience since 1985
another successful step i took was booking loss at stocks which are not moving for 3-4 months and switching to moving ones rather than waiting for this laggard to move
people will say have patience.. but why patience..
discount sale is there every 6-9 months

 

iam debating on value investing though unrelated but related.

luk at the fall of Mothersun sumi. one of the best stocks i like for decades and which has handsomely rewarded shareholders.

this again underline the school of thoughts of "long term investment."

like s naren said "buy panic and sell mania"
of course we all know buy cheap and sell sheep

 

Thanks all. Thanks Meenakshi for the share.
I think PE multiples might compress in the short term, but if they continue their growth for a couple years before other MFIs catch up, this price might seem like a bargain. I did buy some at 380.

Nevertheless, if Im a promoter, I will try again to quell the RBI objections or give up and diversify into other sectors (housing finance etc).

Either way, it appears that there is a 2 year runway from SKS needs to figure its act.