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Stocks of SKS Microfinance shot up over 10 per cent on Wednesday following a positive report by global financial services firm UBS on the country’s only listed micro-lending company.
Hits 52-week high On the NSE, the stock moved up 11.15 per cent to ₹388.25, hitting a 52-week high of ₹389.20 during the session. On the BSE, SKS shares moved up by ₹37.55 (or 10.76 per cent) to ₹386.50. Trading volumes multiplied over seven times to ₹64.50 crore.
Over 17 lakh shares of SKS were traded on the BSE against a two-week daily average of 2.33 lakh. But only 10 per cent of those 1.17 crore shares (or 1.86 lakh) were presented for delivery, implying that most traders exited their positions before the session closed.
The UBS report, that analysts believe drove the company’s valuations up, expects a 32 per cent cumulative annual growth rate of SKS’s assets under management from 2015-17. It also projects a rise in earnings per share by 66 per cent over the same period.
NBFC norm revision In November, the RBI revised regulatory norms for non-banking finance companies (NBFCs), which includes micro-lending firms such as SKS. The central bank raised capital adequacy requirements for NBFCs, forcing them to shore up their balance sheets and increase equity in phases over the next two years.
UBS believes that this requirement, coupled with SKS’s well-established pan-India client base, will place the lending company firmly on the long-term growth path.
SKS also halved its staff strength from over 16,000 employees in March 2012 to close to 9,000 now, brining down costs as well.
Positive takeaways Saday Sinha, Vice-President, Equity Research, Kotak Securities, says SKS has quite a few positive takeaways for it now, explaining the 38 per cent rise in its stock since July.
“SKS has cleaned up its loan book, and it has almost completely written off its AP portfolio (which suffered massive credit losses),” Sinha said.
“Over the past two quarters, the company has also been trying to be more investor-friendly. Besides, the RBI regulations have also brought more clarity to the sector and risks, per se, are now much lower than before,” he added. “SKS is now speaking of diversifying its activities further; all these have been factored in the share price over the last few months.”
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