Investment idea SKS Microfinance
-
Upload
chintan-chheda -
Category
Business
-
view
69 -
download
2
Transcript of Investment idea SKS Microfinance
Snapshot
Market Cap(Rs. In Cr) Rs. 5899
Book Value 67.89
EPS 13.80
P/E 33.86 TTM
Industry P/E 33.59
Industry Finance
Listed BSE & NSE
Bloomberg Code SKSM:IN
Retuers Code SKSM.NS
Beta 1.72
Financial Snapshot
Rs. in Cr. Mar-14 Mar-13 Mar-12 Mar-11 Mar-10
INCOME :
Operating Income 544.6 351.92 471.6 1,261.73 954.96
Interest and Financial Charges 214.22 142.72 200.46 349.53 288.41
Operating and Administrative Expenses 256.69 500.55 1,585.57 732.97 389.8
Profit After Tax 69.85 -297.14 -1,360.60 111.63 173.95
Earning Per Share (Rs.) 6.45 0 0 15.44 26.96
Management Structure
Name Designation
P H Ravi Kumar Chairman (Non-Executive)
Tarun Khanna Director
Geoffrey Tanner Woolley Director
Sumir Chadha Director
Punita Kumar Sinha Additional Director
M R Rao Managing Director & CEO
P Krishnamurthy Nominee (SIDBI)
Rajendra Patil Company Secretary
S Balachandran Additional Director
Paresh D Patel Director
MANAGEMENT
M R Rao, Managing Director & CEO
Dilli Raj, President
BOARD
Share Holder with Significant Holding
No. Name of the Shareholder
Number Percentage
1 Kismet Microfinance 56,34,809 4.47
2 Westbridge Ventures II LLC (formerly Sequoia Capital India II , LLC) 34,90,422 2.77
3 Kumaon Investment Holdings (FII sub Account with HSBC Bank (Maurities) Ltd) 25,60,292 2.03
Total 1,16,85,523 9.27
Journey Started in 1997
SKS was formed as an NGO in December 1997
and started Operation in 1998
In 1998 Operation Began in Tumnoor Village in
Medak District of Andhra Pradesh
In 2000 Pioneers SmartCard Pliot Project level. It
wins the CGPA Pro-Poor Innovation award as well
as a $50,000 prize.
Journey
• In 2001 SKS bags the Digital Partners SEL Award
and a soft Loan of $52,000. The Grameen Foundation
matched the Award. Money is used in Technology
Development.
• 2002 it receives First ever loan of Rs. 5 Lakhs from
Friends of Women's World Banking, India
Towards IPO
2005 SKS incorporated as NBFC. SKS moves
from being Non for Profit Organisation to
becoming a for profit Organization.
2007 Was awarded the Excellence in
Information Integrity.
IPO
In 2008 SKS is listed as the Worlds most Influential
Emerging Company.
In 2009 ranked as number one MFI in the country.
In 2010 SKS becomes the first MFI in South Asia to
launch an IPO
Microfinance Then and Now
THEN
To most, microfinance means providing poor families with very small loans (microcredit) to help them engage in productive activities to grow their tiny businesses.
NOW
Microfinance has come to include a broader range of services (credit, savings, insurance and others) as it has been realised that the poor
AFFORDABLE LOANS
Microfinance started with the recognition that poor people had the capability to lift themselves out of poverty if they had access to affordable loans.
High repayment rates
in the industry have
changed the
perception that the
poor are not credit
worthy.
Growth at the Beginning 2005 to 2008
SKS witnessed a robust compounded growth rate
of (CAGR) 205% in its member base.
CAGR of 217% in its Disbursements.
CAGR 237% of Loan Outstanding.
PRODUCTS
Proprietary
Income Generation Loans (IGL) – Aarambh
Mid-Term Loan (MTL) – Vriddhi
Long Term Loan (LTL)
Housing Loans
Scalable Model
SKS tends to implement its growth model without
adding significant number of new branches.
Fresh addition of Head count will be in Sangam
Managers (Loan Officers)
Annual Rate rate of 1500 loan officers.
Cross Selling of Various Products
SKS Leverages its Network to Distribute financial
and Non Financial products of other institutions to its
members at lower cost.
While the focus remain on the core business of
providing micro credit, it continues to diversify into
other business involving fees based services.
Exploring Multiple Funding Avenues
After the crisis, scheduled commercial banks limited their funding to the MFI sector.
Gradually, the market stabilised, there was clarity on the regulatory front, fair‐pricing practices were adopted, and credit bureaus were established.
Securitisation regained its ground with improved business fundamentals
By this year end dependence on Securitization Funding to be remain High upto 45%.
Technology to Provide Operating
Leverage
SKS has completed all branch connectivity with
daily MIS flow to Head Office.
SKS other technology initiatives are refactoring of
its in‐house lending system for effective monitoring
and control, enabling loan officers with hand‐held
devices to improve productivity.
Risk Management Tools
The establishment of credit bureaus enables the
lender to check the credit history.
Wider geographical spread of portfolio another
effective way to manage political risk.
Credit Monitoring
SKS has advantage over other banks because of its
strong Joint Liability Group.
Under the Joint Liability Group its lends only to
woman borrowers.
Learning from Crisis
Post Andhra Pradesh crisis it does not have more
than 15% exposure in any state.
Diversified Portfolio in 15 States.
It has also put a disbursement cap on basis of per
district per branch.
INDUSTRY ATTRACTIVNESS
Microfinance could be $50bn financing
Opportunity
Microfinance highly under penerated
Penetration Limited in other regions
MFI grew faster over FY08-11
Assessesment
Risks
Political intervention could significantly impact
growth and asset quality.
Reliance on bank borrowing.
Market share taken by SHG
Microfinance Act regulations
Competitive Strenghts
High Entry Barrier
A strong brand, client base and pan-India
distribution network
Experienced management team
Better access to Capital Markets
Scope
There are approx 175 Banks in India with over
76000 Branches and over 12000 NBFC’s.
Out of all the Small Enterprises in India only 5%
have access to the capital they require.
Opportunity
In fact a report released by Intellecap for the
International Finance Corporation (IFC), part of the
World Bank Group, estimates that the debt gap for
micro & small enterprises in India is about $198
billion, growing at 11% per year
M-Banking and Microfinance
With the advent of M-banking within the
Microfinance we can expect the entire change in the
landscape.
All the leading banks have tied up with leading tele
communications company for mbanking.
Sector Growth at 50% and above
The sector is growing at the pace of 50% and
above higher than mobile phone industry.
SKS Microfinance been ahead in the technology
would have an added advantage.
Loan Size
Global average Loan size is $522 were as in India
it is $144.
Huge opportunities with Untapped Market and
Untapped Customer.
Loan Portfolio
The gross loan portfolio of India's microfinance
sector accounts for more than 7 percent of the
sector's worldwide loan portfolio size.
As much as 30 percent of the world's microfinance
borrowers are in India.
Sustainability of Microfinance
The demand for microfinance services – savings, credit
and insurance – is apparently insatiable in India.
The total outreach of the existing specialized
microfinance service providers is quite limited.
MFIs are usually established to fulfil a mission – of
reaching credit and financial services to the poor who
are otherwise unreached by mainstream FIs.
Key Ratio Improvement
Key Ratios Mar-14 Mar-13 Mar-12 Mar-11 Mar-10
PBIDTM (%) 52.89 -41.97 -235.71 42.26 59.33
PBITM (%) 52.14 -43.8 -237.83 40.99 58.02
PBDTM (%) 13.57 -82.45 -278.16 14.73 29.24
CPM (%) 13.57 -82.45 -285.96 10.07 19.46
APATM (%) 12.82 -84.28 -288.08 8.79 18.15
ROCE (%) 9.9 0 0 13.51 17.25
RONW (%) 6.52 0 0 8.15 21.56
Technical Observation
The stocks have been doing Higher Tops and Higher
Bottoms and the same Trend is expected in continue.
It is touching its 52 week high with a price of Rs.575
Conclusion
Andhra Pradesh Crisis has brought the management
to a more cautious and diversified position.
Opportunity to recreate the Initial Growth
Huge Untapped Market and Highly Under
Penetrated.
Disclosure & Disclaimer
This document has been prepared by Advisors and is meant for sole use by the recipient and not for circulation.
. It should not be considered to be taken as an offer to sell or a solicitation to buy any security.
The information contained herein is from sources believed reliable.
We do not represent that it is accurate or complete and it should not be relied upon as such.
We may have from time to time positions or options on, and buy and sell securities referred to herein.
We may from time to time solicit from, or perform investment banking, or other services for, any company mentioned in this document.
The subject company may have been our client during twelve months preceding the date of distribution of the Research report.
Research analyst has not served as an officer, director or employee of the subject company.
Disclosure & Disclaimer
Research entity has not been engaged in market making activity for the subject company.
We have not received any compensation/benefits from the subject company or third party in connection with the Research Report.
Investors may note that markets are volatile in the short-term and their investments might experience high volatility including possibility of going negative.
The risks generally come from having an unsuitable asset allocation which would ideally vary from client to client. Having more exposure to equity than the risk appetite warrants, would expose to more volatility/risks. We only suggest clients on their equity portfolio.
Investing in small and mid caps stocks have high impact costs due to low liquidity. This might affect the ability to quickly take action on our recommendation at stated price