The stock of SKS Microfinance touched a new low on the BSE on Tuesday even as the RBI announced its policy for microfinance institutions.

After opening for trade at Rs 443.80, the stock of the Hyderabad-based company declined 3.06 per cent to end at Rs 430.20.

The sub-Rs 500 journey of the stock began on April 27 when it closed at Rs 490.30 on the BSE.

“Obviously the cap on interest rate and interest margin announced by the RBI at 26 per cent and 12 per cent respectively did not go well with the investors, as it would hit the profit margins of the company not only in Andhra Pradesh but in all the 19 states where the company operates,” said an analyst with a city-based broking firm.

There was also an expectation in the market that the ensuring board meeting of the company might quantify the loss in Andhra Pradesh market, which accounted for 25 per cent of the business, fuelling the stock sale, he added.

The only-listed MFI is facing almost complete halt of fresh disbursal of loans and collections in the State since October 2010 as the State Government brought in an Act to regulate MFIs activities.

Among major shareholders of SKS are Narayana Murthy-promoted Catamaran Management Services Pvt Ltd, a venture capital fund, and investment guru Mr George Soros' Quantum Fund.

The profit margin is expected to fall because the interest rate SKS had charged in other States till the row over collections broke out in Andhra Pradesh in October was much higher than 26 per cent, according to the company's statements at some media interactions earlier.

Optimisation of staff — as over 600 employees are virtually without work in Andhra Pradesh — and realignment of business strategies, among others, will be the other challenges for the company.

Related Topics
comment COMMENT NOW