Maintain ‘outperform’ on SKS Microfin

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Published: April 8, 2016 6:12:40 AM

SKS management was at our AIC, represented by CFO Ashish Damani and Deputy CFO Pratap R. Management expressed confidence of sustaining 50% loan growth over a 2-3 year time frame, compared to 93% growth currently.

SKS management was at our AIC, represented by CFO Ashish Damani and Deputy CFO Pratap R. Management expressed confidence of sustaining 50% loan growth over a 2-3 year time frame, compared to 93% growth currently. New customer addition and rising ticket sizes would be the key drivers of growth. While employee additions could track borrower growth, branch growth could be subdued.

Cross-sell products are tracking well with 8-9% earnings contribution and new products could get added soon to the existing portfolio of mobile phones, solar lamps and sewing machines. Quarterly reporting of PSL achievements for banks could lead to demand spread out throughout the year for SKS as against demand being bunched up in 4Q. Overall, management is confident of continued fall in funding costs. We stay positive on SKS given its growth/eps visibility is amongst the highest in the sector. Maintain ‘outperform’.

SKS management indicated comfort with the stated target of 50% loan growth for longer term (current loan growth rate is 93%). Drivers of growth wil be customer base (20%), larger ticket sizes (10-15% inflation) and higher share of longer tenure loans.

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