Oct 4: Shares of SKS Microfinance slumped after the company said its board has approved terminating the appointment of a top executive. In a statement to the Bombay Stock Exchange, the company said it has withdrawn all powers and authorities granted to Suresh Gurumani, managing director and chief executive officer with immediate effect.
The company did not give any specific reason for the action taken. According to SKS DRHP, Gurmani had a five-year contract from April 1, 2009 to expire on March 31, 2014. A chartered accountant, Gurmani joined SKS as the CEO in November 2008 (SKS founder Vikram Akula moved to the role of Chairman after Gurmani took over).
Gurumani would be immediately replaced by M R Rao as the chief of SKS. SKS has named the current deputy CEO M R Rao as the MD and CEO for three years. Further, Ashish Lakhanpal has resigned as a director to comply with the prescribed ratio for independent and non-independent directors, the filing added. Mr. Ashish represented Kismet Capital, LLC, which recently sold a 4.5% stake in the IPO for $48 million and still holds a 7.8% stake in SKS after the issue.
Shares in the company reacted to this unforeseen news and were down 6% at Rs 1,274 at 2:13 pm in Mumbai, after falling nearly 9% in a firm Mumbai market.
Sep 16 news from company showed that SKS is cutting down the wings of Gurumani and giving M R Rao more power and preparing ground for more interventions by Mr Akula (so some trouble had been brewing for some time)..read this: "The board of SKS Microfinance, a newly publicly-listed microfinance institution in India, recently announced its nomination of Mr Vikram Akula to serve as the company's Executive Chairman. Mr Akula, the founder of SKS Microfinance, currently serves as its Non-executive Chairman. The board expects Mr Akula's appointment to begin in November 2010. The board also appointed the company's current Chief Operating Officer, Mr M R Rao, to begin serving his new position as Deputy Chief Executive Officer immediately. SKS Microfinance's Managing Director and CEO, Mr Suresh Gurumani, will maintain his current positions."
It seems to me there was some internal tussle and difference of opinion that led to this. No one knows what it is about. It can be anything, ranging from unethical practices, misappropriation of funds or just something simple like disagreement over the future path for the company.
In absence of information, it is better to wait and watch. I had purchased SKS at 1100, so I sold off today; I can re-enter SKS if it comes down to 1210-1230. I am still optimistic about the future growth of the company, but I am also cautious about the 27-30% rate of interest it charges to the poor people; the state goverments and the Centre/RBI can ask it to reduce the interest rate in future, which will reduce the profitability of the company because it cannot reduce its admin and field personnel costs too much, as it has to use the door-to-door selling and interaction model.
| PREVIOUS UPDATES: Sep 28: 15 days later..SKS Micro touched 1491.5, up almost 36% in just over a month, after my call. Hold SKS Microfinance for the next target of 1548. Sep 13: It touched 1358 today. Those who bought at my recommended buy price of 1100 could see a notional profit of 23% in just over a month. Hold your entire holdings for further up move in future. It should reach 1380 in a month's time. Aug 31: It touched 1301 today, as I had said. I hope some of you had picked this up, more can be picked up on dips to 1220-1230. This script has potential to generate a lot of cash over the next 2 years. Aug 18: I had written to the group: "Just as I mentioned, SKS Microfinance listed around 1100, closed at 1088 and then touched 1188 yesterday, 2 days after listing. I had also advised 'Try to pick it up on dips after listing'. So if someone had picked it up on listing day in the range of 1090-1100, you may have made some nice short term profit in 1 day. Fresh pickup is recommended only at 1120 or below. Should reach 1250 shortly" Aug 3: I had written to the group: "Powerfulpicks advice: Try to pick it up on dips after listing. Probable listing date is Aug 16th. Mark this date on your calendar. This stock has the potential to double in 2 years."
About SKS Microfinance: SKS Microfinance is India's largest and the world's fastest-growing microfinance organization. It aims to empower the poor by providing them collateral-free loans for income-generation. SKS extends these loans to only women who use it to scale up their enterprises and get themselves and their families out of poverty. Started in 1998 as an NGO, SKS transformed into an NBFC in 2005 and is regulated by the RBI. Since transformation, SKS has been successful in creating a for-profit model of microfinance using commercial funds that is scalable. Delivering services at the doorsteps of its members and following clear-cut processes, SKS has been able to ensure a repayment rate of over 99 % on its loans. Borrowers take loans for a range of income-generating activities, including livestock, agriculture, trade (such as vegetable vending), production (from basket weaving to pottery) and new age business (photography to beauty parlours). SKS also provides members with interest-free loans for emergencies as well as life insurance and loan cover insurance to borrowers. In addition to rapid expansion, SKS leads the industry in technology innovation and transparency. It is one of the first MFIs in the world to have a fully automated MIS that streamlines operations and helps reduce transaction costs. It is setting up an ERP system that will ensure quick data transfers, data mining, data recovery facilities which will improve operational efficiencies and response times. It also has set global standards for transparency, having twice received recognition in CGAP's worldwide microfinance transparency competition. It has a large team of internal auditors who monitor branch level activities on a monthly basis. Since microfinance is not suitable for the destitute in society who need not just access to finance but livelihood training, social and health inputs, SKS has a unique Ultra Poor program for this section of society. Under the program, the beneficiaries receive training to run an income-generating enterprise, financial education and an asset. Over an 18-month period these beneficiaries are trained to become self-sufficient and graduate into regular microfinance. The first phase of the Ultra Poor program was conducted in Medak district of Andhra Pradesh where nearly 500 women were covered. In all, 426 women have successfully graduated from this program. In the next phase, the Ultra Poor Program is being planned in some of the poorest districts of Orissa and Jharkhand. SKS was ranked as the Number 1 MFI in India and number 2 in the world by MIX Market, world's leading business information provider for MFI industry. Business Week, an international magazine has rated SKS as one of the most influential companies. SKS has received numerous awards including the CGAP Pro-Poor Innovation Award, the ABN-Ambro/Planet Finance Process Excellence Award, Citibank Information Integrity Award, the Digital Partners SEL Award, and the Grameen Foundation USA Excellence Award. SKS is the only MFI in India to receive the MIX Transparency Certification. SKS was selected by Unitus as the most promising microfinance organization in India. SKS Microfinance has a high capital adequacy ratio (of 28.3 per cent which may further improve to excess of 40 per cent post-offer) and strong risk-management systems which address two concerns MFI are facing today — access to capital and maintenance of asset quality. The net non-performing asset ratio as of March 31, 2010, was 0.16 per cent. SKS' conservative provisioning on standard assets and high NPA provisioning reduces the inherently high credit risks in this business, to some extent. A CRISIL report on MFIs in September 2009 estimated an addressable market of Rs 1,20,000 crore for microfinance. A report put out by Sa-Dhan, an association of MFIs, suggests that total credit disbursed by way of microfinance was Rs 35,000 crore in 2009. These data show the potential this sector holds and why strong growth may continue over the next 3-4 years. The newly launched housing and housing repair products from SKS holds a lot of promise for generating additional income. |
No comments:
Post a Comment