Share price of SKS Microfinance plunged over 15 per cent on Friday after the company failed to get the small bank licence from the Reserve Bank of India. (Photo: PTI)
Share price of SKS Microfinance plunged over 15 per cent on Friday after the company failed to get the small bank licence from the Reserve Bank of India (RBI). The central bank on Wednesday awarded in-principle small-bank licences to 10 players, eight of them were microfinance lenders (MFIs).
At 11.32 am, SKS Microfinance was trading 12.62 per cent down at Rs 393.45. The scrip opened at Rs 405.30 and had touched a high and low of Rs 406 and 376.65, in trade so far.
Brokerage houses downgraded SKS Microfinance stocks after the RBI announcement on small-bank licences. Morgan Stanley downgraded stocks to “equal-weight” from “overweight” and said, “MFI with a licence will be more competitive while SKS, without a bank licence, will likely struggle.”
SKS, the second largest MFI after Bandhan (which recently converted to a bank) is the only large MFI among the top 10 players, conspicuously out of the list, according to Kotak Institutional Equities.
According to Religare Institutional Research, SKS Microfinance was not given a small bank licence, which was due to the company’s track record, particularly the 2010 Andhra Pradesh crisis, could have worked against it coupled with preference may have been given to promoters with non-profit motives (Janalakshmi, ESAF and RGVN) and Other MFIs may have scored higher in terms of ownership structure, as well as on RBI’s external and internal parameters. The brokerage house is suggesting invetsors to avoid SKS Microfinance even if the stock corrects 5-20 per cent from current levels.
“We pare our FY16/FY17 earnings by 5-8 per cent to build in lower growth and margin pressure, and cut our September 2016 target price to Rs 320 (from Rs 400) as the stock could lose some of its valuation premium which was due to high growth and capital raising expectations,” Religare Institutional Research said in a report.
Around 13.25 lakh shares exchanged hands on BSE so far, compared with an average volume of 2.44 lakh shares in the past two weeks.
In the past one year, the share price of SKS microfinance jumped 47.93 per cent to Rs 450.30 on September 16. On the other hand, Sensex declined around 2 per cent during the same period.
For the quarter ended June 2015, the company posted net profit of Rs 61.16 crore, up 24 per cent, against Rs 49.32 crore in the corresponding quarter a year ago.
(With inputs from Reuters)
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