After taking a massive beating on the stocks markets in the past few days following lacklustre earnings, SKS Microfinance, India?s only listed micro-finance institution (MFI), saw its scrip recover 10% on Tuesday. However, for Vikram Akula, founder and chairman of SKS, problems continue to persist in Andhra Pradesh, one of its largest markets. In an interview with FE?s BV Mahalakshmi, Akula said he plans to tackle the issue in Andhra and has already started a consensus-building exercise with the state government to rebuild the microfinance market in the state. SKS will raise around R4,000-5,000 crore in FY12 as part of its three-pronged strategy to reinvent itself, according to Akula.
SKS shares slid about 20% last Friday after analysts predicted a gloomy outlook for the sector and cut the target price on the stock. How do you plan to reposition the company?
Yes, there are challenges in the sector which are external in nature. We want to reinvent our means to stay in business. The reinvention includes consolidating our existing customer base, acquiring new customers, diversifying our product portfolio and resolving the situation in general. In the process, we will be investing R4,000 crore to R5,000 crore in FY12 for our core lending purposes. While 30% of it would come from securitisation, the rest would be through term loans by banks. We are currently banking with 40-odd banks, and the bankers have stepped up our confidence levels in this regard.
With the notification of Malegam Committee recommendations bringing in regulatory clarity and funding certainty, we see a lot of potential for the sector. We expect some near-term pain for a quarter or two but we also see consolidation in this sector. The interest rate cap of 26% and the margin cap of 12% means only large efficient MFIs that have already reached certain economies of scale will be the ones that will continue to operate.
What is the status of settlement between you and the sacked CEO Suresh Gurumani? It has been reported that you have come to a settlement with him and as per the settlement terms, Gurumani will receive 2,25,000 shares at R300 a share though he was entitled to receive 6,75,000 shares as CEO. When is he stepping down as a board member?
The Gurumani issue is behind us. As on date, he is still on the board and we have no financial obligations. We do not want to comment anything further.
After the sudden 20% fall in the share prices, have you received any letter from Sebi?
We have not heard anything so far from Sebi or the stock exchanges on any probe. However, we are open and would welcome any enquiry by the regulator to investigate the circumstances leading to the fall in the share price. Since we were in the silent period, we could not react to the brokerage house which termed us negative much before the completion of the board meeting.
What are your growth strategies for the year? How do you plan to reinvent the company?
We are looking at a three-pronged strategy to reinvent microfinance through consolidation of the customer base and continue efforts to seek the Andhra Pradesh government?s support in resolving the current situation in the state.
We plan to focus on gold loans, kirana sangham stores and mobile phone financing. In a way, the credit goes to the state government for bringing in reforms. We will be investing R150 crore for setting up 400-odd branches for gold loan disbursement which are rather secured loans. We are looking at setting up a step-down subsidiary later for this segment.