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After falling to get RBI’s in-principle nod for becoming a small financing bank, SKS Microfinance stock has been rallying in trade. Lots of commentary has been coming in and the latest is that SKS Microfinance has cut rates. Bloomberg TV India, spoke to Dilli Raj, President of SKS Microfinance.
I want to start by talking about the rate cut. Could you run us through that?
We have got a reduction in our cost of borrowing from the banking community, post our turn-around and recapitalisation.
We have passed on the benefit to the customer at 20.75 per cent. It is the lowest rate in India and probably the lowest among MFIs globally.
It is a big slash down from 22-odd-per cent to 20 per cent. What is the impact on the bottom line, if any?
No, not at all, because as I said, the way the operating profit margin operates is that we have already got the benefit from our credit granters on our cost of borrowing and that is what we are passing on to customers.
The other news point is that you weren’t one of the companies that managed to secure the small finance bank licence. How much is it going to impact your future plans?
It is not going to have any business impact. It is just a missed opportunity but not a setback. Our cost of borrowing is 3-3.5 per cent lower than most of the other firms and if you look at the lending rate at 20.75, it is lower by 3-3.5 per cent compared to some of them. Second, look at the size and cost structure. If you look at something like ₹4,800 crore, it is larger than any one of them. Most importantly, if you look at the cost, which I have already mentioned about in the cost of borrowing, our cost to income is 52 per cent.
Brokerages are remaining extremely bullish on your stock. What kind of a growth can we anticipate for the current fiscal?
We are already guided for a 50 per cent growth in the loan book, closer to what we achieved last year. If you look at FY15, we analysed that the growth rate was 47 per cent, increasing from ₹2,837 crore to ₹4,170 crore. So we are sticking to that guidance of 50 per cent annual growth.
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