SKS Microfinance Ltd has posted its first full year of profit after its business took a beating due to the microfinance crisis in Andhra Pradesh.

The journey to recovery started in the December quarter of 2012 when it showed gains after suffering losses for seven consecutive quarters. Since then, the profits have been sustained.

SKS has reported ₹70 crore profit for the year ended March 31. In the previous financial year, SKS incurred a loss of ₹30 crore.

What helped was full provisioning for the micro loans extended in Andhra Pradesh, massive reduction in operating expenses, portfolio protection and re-capitalisation, among others.

SKS brought down its AP portfolio to zero in September 2012, exactly two years after the crisis began. It has also been optimising costs since then, which continued well up to March 31 this year.

There was a significant reduction in total expenses, at ₹260 crore (₹570 crore) on account of overall reduction in expenses, provisions and write-offs.

This has been done by trimming employee strength by 17 per cent in the last year. The total number of employees fell from 10,809 to 8,932.

Expansion outside state

Outside Andhra Pradesh, however, SKS has been cautiously expanding . At the field level, the number of loan officers had gone up by 63 per cent along with a 27 per cent increase in the number of branches.

As a result, the gross loan portfolio in non-AP states expanded by 41 per cent at ₹2,837 crore. This expansion has helped the company deliver according to the guidance provided earlier.

While the guidance for non-AP disbursement was ₹4,500 crore to ₹4,800 crore, it achieved ₹4,788 crore.

As for net profit, it beat the guidance figure of ₹55-₹60 crore.

Increasing confidence by banks was reflected in the ₹1,817 crore securitisation deals done during the last year; a cash pile of ₹671 crore and an unavailed deferred tax benefit of ₹558 crore, which is available to offset tax on future taxable income.

The industry environment too has improved. About 95 per cent of microfinance institutions are now using credit bureau reports for disbursements.

According to industry estimates, there has been no contagion (of the AP crisis) to other states as no other state had followed a similar regulatory intervention such as the AP Microfinance (Regulation of Moneylending) Act.

Loan repayments are reported to be over 99 per cent in all states except Andhra Pradesh and the return on assets has been estimated at 3-4 per cent.

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