SKS Microfinance likely to write off Rs 300 cr more

SKS Microfinance Ltd is likely to write off about Rs 300 crore in the next two quarters due to the Andhra Pradesh Microfinance Act.

“The residual exposure at risk on Andhra Pradesh works out to Rs 337 crore after adjusting deferred tax assets and accounting for tax-breaks at future write-offs,” the company informed investors on Wednesday.

The Hyderabad-based microfinance institution had already written off Rs 326 crore during the second quarter ended September 30, 2011.

“We expect SKS to write off this exposure at risk either in one go or in a phased manner before the end of current financial year,” said an analyst with a broking firm.

From October last year to end of September this year, the only-listed microfinance company had written off Rs 485 crore.

In less than six months after its over-subscribed initial public offer, SKS was hit by the AP Microfinance (Regulation of Moneylending) Act put in place by the State Government in October last year after a row over the alleged harassment of borrowers by field staff.

Act effect

The Act prohibited multiple lending and also made Government approval mandatory for sanctioning of fresh loans.

This led to an almost complete halt of recoveries and fresh disbursals of loans since the last one year in the State.

The collection of loans in Andhra Pradesh is at 10.7 per cent compared to over 90 per cent in other States.

The key indicators in financial and operational aspects of the company show the adverse impact on the only listed microfinance institution.

The gross loan portfolio and number of loans disbursed declined by over a half while the number of employees and branches were also brought down significantly during the 12 months.

The company's scrip declined 8.64 per cent to end at Rs 175.55 on the Bombay Stock Exchange on Wednesday.