SKS faces collection problems in West Bengal, Gujarat

SKS Microfinance Ltd, which has been hit by the Andhra Pradesh microfinance crisis, is now facing collection-related problems in parts of West Bengal and Gujarat.

“Due to local and process-related issues the collections in some districts in West Bengal and Gujarat have dropped to about 86 per cent,” Mr M. R. Rao, Managing Director and Chief Executive Officer of SKS, told newspersons here on Wednesday.

Earlier, these States had over 92 per cent collections.

West Bengal is the third largest market for the Hyderabad-based company which operates in 18 States.

On the exact reasons for the problem, he said issues involving commission agents were among them.

The problem is now seen in five districts of West Bengal and three in Gujarat.

“We have been dealing with these kinds of issues from time to time,” he said.

SKS has 8.71 lakh and 2 lakh clients in West Bengal and Gujarat, respectively, of a total client-base of about 62 lakh. Of this, 19.25 lakh clients are in Andhra Pradesh alone.

WRITE-OFFs in AP

The company is likely to adopt a phased-approach in writing off the Andhra Pradesh portfolio which has been classified as non-performing, in line with the Reserve Bank of India norms.

“We still have time to write-off the residual risk exposure of about Rs 337 crore. We will exercise flexibility,” Mr Dilli Raj, Chief Financial Officer, SKS said.

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

The only-listed MFI in the country, which posted a loss of Rs 385 crore in the second quarter ended September 30, 2011, is hoping to be profitable by the end of financial year 2013.

This would be done by expanding the non-Andhra Pradesh portfolio and increasing the revenue from non-microfinance business such as gold loan, funding to grocery stores, mobile-phone finance and sale of insurance, he added.

A separate subsidiary for gold loans is likely to be formed next financial year. It also plans to put an upper cap of 3 per cent on the return on assets after operations turn profitable.

SKS hopes to raise at least Rs 400-500 crore as part of its proposed Qualified Institutional Placement before end of March next year.

The company's scrip on Wednesday gained 4.97 per cent on Bombay Stock Exchange to end at Rs 112.95.

nagsridhu@thehindu.co.in