SKS Microfinance Ltd's scrip on Friday surged 10 per cent to close at Rs 534.60 on the Bombay Stock Exchange (BSE) on Friday.

The stock, which opened for trading at Rs 476, gained Rs 47.60 and also reached upper circuit limit.

On Thursday, SKS scrip had touched the lower circuit limit after a rally for over a week.

“This behaviour of scrip displays some kind of volatility triggered possibly by doubts about the long term prospects of the company,'' an analyst from a reputed broking firm told Business Line on Friday.

The Hyderabad-based company's scrip, which got battered since the promulgation of AP MFI Act by Andhra Pradesh in October 2010, staged a “come back” after the announcement of draft MFI bill by Govt of India on July 6.

After opening for trade at Rs 333.50 on July 7, it closed at Rs 528. 85 on July 13, on the BSE.

However, on Thursday, the stock again fell to Rs 476 only to go up on Friday.

After initial “positive” reaction to the draft MFI bill, investors are now focusing on “actual risks” SKS is facing now, point out analysts.

A look into the loan book position of SKS as on March 31 points to this.

The AP portfolio (about Rs 1,000 crore) was classified as “sub-standard” assets according to its annual report 2010-11.

The classification was because of a “reassessment” of estimates on AP portfolio due to continued evolving environment following the enactment of AP MFI Act and the resultant impact on filed operations, SKS said.

If the recoveries could not be done in a particular period of time, the portfolio would have to be converted into `loss assets' as per RBI norms.

“As indicated by SKS after its fourth quarter results, the coming quarters may witness more provisions or lag impact of overdues,” the analyst said.

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