Showing posts with label SKS MICRO FUNDS RAISING PLANS: DIGGING A BIGGER HOLE TO COVER AN SMALL ONE. Show all posts
Showing posts with label SKS MICRO FUNDS RAISING PLANS: DIGGING A BIGGER HOLE TO COVER AN SMALL ONE. Show all posts

Saturday, November 5, 2011

SKS MICRO FUNDS RAISING PLANS: DIGGING A BIGGER HOLE TO COVER AN SMALL ONE


There are visible holes in SKS Micro balance sheet. Post A P regulation the recoveries in Andhra Pradesh have dropped substantially. The business out look is gloomy. There are regulatory hurdles. RBI has capped the lending rate and margins. Added to this is the lack of corporate governance and credibility. Last year the IPO was sold at an irrational premium of Rs 975. The company has limited operational history and no track record of dividend payments. IPO investors’ wealth has eroded by almost 80% within a year. Now the company is planning a QIP issue amounting to Rs 900Cr. The shares currently are trading around Rs 210. The company has to further dilute 15-20% of the equity, in this regard.

SKS IS NOW PLAIN VANILLA NBFC

The saga of super profit and astronomical growth rate are history. It is like just another NBFC with an average business prospects and profitability. The early mover advantage – la exploitation is no more there. There is regulation, education of borrowers and competition. Unlike other NBFCs Micro Finance NBFC’s loan assets are not backed by any tangible securities, making it vulnerable to vagaries of nature, economic environment and government policies. The initiatives of the government for financial inclusion by banks will make business environment challenging for MFIs in the coming days. Banks now are hesitant to take exposure to the sector. This has made funds rising at competitive rates difficult for MFIs.

PE INVESTORS HAVE ALREADY SUFFERED HUGE LOSSES

The PE investors including Sandstone, Kismet, Bajaj Allianz, ICP Holdings, Catamaran, Quantum and Tree Line Master Fund controls are around 25% of SKS Micro’s paid up capital. The first five picked at Rs 300 per share and the last two picked up at Rs 636 per share. Apart from opportunity cost, all these investors have suffered huge losses.

The present fund rising exercise is akin to an effort towards widening a small hole, to make it a bigger hole.

One does not know whom the SKS Micro is going to make 'bakra' this time.

SKS is trying to fix a burst bubble with more hot air.