Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SKS Microfinance (SKSM)
Banks/Financial Institutions
Making hard decisions. SKS reported net loss of Rs3.8 bn for 2QFY12 primarily on
the back of large loan write-offs (Rs3.5 bn) even as its overall loan book continued to
shrink. We see the following challenges for SKS: (1) Raising bank loans/debt in order to
grow the business in other parts of India and (2) managing large losses from the
Andhra Pradesh loan book; the MFI Bill is not yet tabled in the Parliament. We would
await clarity on any or all of the above to reinstate our rating recommendation.
Large NPLs pull down earnings
SKS reported net loss of Rs3.8 bn for 2QFY12. The company reported credit cost (AP loan writeoff)
of Rs3.5 bn. In 1QFY12, following RBI’s norms for NBFCs, the company recognized the entire
AP loan book (Rs11 bn) as NPL and made a provision of Rs1.1 bn (at 10%). As per the regulations,
SKS will need to make provision for the balance in the next year. The company has made a writeoff
of Rs3.5 bn during the quarter, thus bringing down the net AP loan book to about Rs8 bn. SKS
has unrecognized net deferred tax assets (on account of provisions) of Rs2.2 bn – this can be used
against profits in future; thus, net of this buffer, the net AP exposure is about Rs6 bn.
Loan book continues to shrink, costs remain high
SKS’s disbursements declined qoq to about Rs8 bn from Rs9 bn in 1QFY12 and Rs7.8 bn in
4QFY11. The loan book continues to decline - SKS reported a loan book of Rs26.5 bn in
September 2011 (Rs30 bn pre-write-offs) as compared to Rs34.5 bn in June 2011 and Rs41.1 bn
in March 2011. We expect some improvement in traction towards the end of this year as the
bank’s demand for priority sector increases – we are modeling about Rs6-7 bn of loan growth over
the next two quarters; we are revising our estimate to Rs31 bn in March 2012E and Rs37 bn in
March 2013E. According to the management, private sector banks have shown more interest in
lending/buying loan pools over the past few months. SKS has proposed to raise equity capital of
up to Rs9 bn, which if executed will considerably boost the confidence of bankers. The traction
from bank loans will clearly provide significant (positive or negative) sensitivity to our estimates.
The current quarterly run rate of Rs0.8 bn (NII+ other income) is not sufficient to recover the
quarterly expenses of Rs1 bn. The management expects expenses to decline in the next few
quarters as the company has increased control over expenses.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SKS Microfinance (SKSM)
Banks/Financial Institutions
Making hard decisions. SKS reported net loss of Rs3.8 bn for 2QFY12 primarily on
the back of large loan write-offs (Rs3.5 bn) even as its overall loan book continued to
shrink. We see the following challenges for SKS: (1) Raising bank loans/debt in order to
grow the business in other parts of India and (2) managing large losses from the
Andhra Pradesh loan book; the MFI Bill is not yet tabled in the Parliament. We would
await clarity on any or all of the above to reinstate our rating recommendation.
Large NPLs pull down earnings
SKS reported net loss of Rs3.8 bn for 2QFY12. The company reported credit cost (AP loan writeoff)
of Rs3.5 bn. In 1QFY12, following RBI’s norms for NBFCs, the company recognized the entire
AP loan book (Rs11 bn) as NPL and made a provision of Rs1.1 bn (at 10%). As per the regulations,
SKS will need to make provision for the balance in the next year. The company has made a writeoff
of Rs3.5 bn during the quarter, thus bringing down the net AP loan book to about Rs8 bn. SKS
has unrecognized net deferred tax assets (on account of provisions) of Rs2.2 bn – this can be used
against profits in future; thus, net of this buffer, the net AP exposure is about Rs6 bn.
Loan book continues to shrink, costs remain high
SKS’s disbursements declined qoq to about Rs8 bn from Rs9 bn in 1QFY12 and Rs7.8 bn in
4QFY11. The loan book continues to decline - SKS reported a loan book of Rs26.5 bn in
September 2011 (Rs30 bn pre-write-offs) as compared to Rs34.5 bn in June 2011 and Rs41.1 bn
in March 2011. We expect some improvement in traction towards the end of this year as the
bank’s demand for priority sector increases – we are modeling about Rs6-7 bn of loan growth over
the next two quarters; we are revising our estimate to Rs31 bn in March 2012E and Rs37 bn in
March 2013E. According to the management, private sector banks have shown more interest in
lending/buying loan pools over the past few months. SKS has proposed to raise equity capital of
up to Rs9 bn, which if executed will considerably boost the confidence of bankers. The traction
from bank loans will clearly provide significant (positive or negative) sensitivity to our estimates.
The current quarterly run rate of Rs0.8 bn (NII+ other income) is not sufficient to recover the
quarterly expenses of Rs1 bn. The management expects expenses to decline in the next few
quarters as the company has increased control over expenses.
No comments:
Post a Comment