Will face Rs 337 cr risk in case of zero recovery in AP: SKS Microfinance
In the event of nil collections in AP, the restructured capital adequacy ratio would drop to 35 per cent from the present 47 per cent, SKS said in a statement.
By PTI | Updated:
HYDERABAD: SKS Microfinance, which is facing rough weather after the promulgation of Andhra Pradesh government's Microfinance Act last year, on Friday said it would be left with a net residual risk of Rs 337 crore in case of zero recovery of loans in the state .
In the event of nil collections in AP, the restructured capital adequacy ratio would drop to 35 per cent from the present 47 per cent, SKS said in a statement.
The company had to write off some outstanding loans in the state and brought them down from Rs 1,500 crore to Rs 822 crore in the financials.
"There is a cushioning of Deferred Tax of Rs 220 crore, and if that is factored in the total outstanding comes down further," SKS CFO Dilli Raj said in the statement.
"If we write off the total loan outstanding in AP, we get a tax benefit on write-off of Rs 270 crore and, in the unlikely worst case scenario of zero recovery of loans in AP, we would only be left with a net residual risk of Rs 337 crore," Raj added.
He said they can safely put the fear of spread of the AP contagion behind.
"Our confidence is on account of three reasons: collection efficiency in non-AP states is 96-97 per cent; seven states with strong MFI operations are part of the panel that drafted the Central MFI Bill which is likely to be tabled in Parliament in the Winter Session; and no other state has enacted a law similar to Andhra Pradesh," Raj added.
SKS said a couple of existing investors have evinced interest in the proposed Qualified Institutional Placement. The non-Andhra Pradesh outstanding has reduced by USD 2 billion for the sector, and the regulatory clarity is driving buoyancy in the long term, according to Raj.
The company has started the QIP process by sending postal ballot to shareholders, and hopes to have all approvals in place by December first week.
Raj said the potential investors fall into five different buckets: existing investors, Socially Relevant Investors, Microfinance Investment Vehicles in the developed world, Private Equity players and public market participants.
"These include Catamaran Management Services, WestBridge, Sequoia Capital India, Sandstone Investment Partners, Kismet Microfinance and Mr Vinod Khosla, founding CEO of Sun Microsystems, formerly a partner at Kleiner, Perkins, Caufield & Byers, and partner at Khosla Ventures. They have not sold a single share in the Company," SKS said.
In the event of nil collections in AP, the restructured capital adequacy ratio would drop to 35 per cent from the present 47 per cent, SKS said in a statement.
The company had to write off some outstanding loans in the state and brought them down from Rs 1,500 crore to Rs 822 crore in the financials.
"There is a cushioning of Deferred Tax of Rs 220 crore, and if that is factored in the total outstanding comes down further," SKS CFO Dilli Raj said in the statement.
"If we write off the total loan outstanding in AP, we get a tax benefit on write-off of Rs 270 crore and, in the unlikely worst case scenario of zero recovery of loans in AP, we would only be left with a net residual risk of Rs 337 crore," Raj added.
He said they can safely put the fear of spread of the AP contagion behind.
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"Our confidence is on account of three reasons: collection efficiency in non-AP states is 96-97 per cent; seven states with strong MFI operations are part of the panel that drafted the Central MFI Bill which is likely to be tabled in Parliament in the Winter Session; and no other state has enacted a law similar to Andhra Pradesh," Raj added.
SKS said a couple of existing investors have evinced interest in the proposed Qualified Institutional Placement. The non-Andhra Pradesh outstanding has reduced by USD 2 billion for the sector, and the regulatory clarity is driving buoyancy in the long term, according to Raj.
The company has started the QIP process by sending postal ballot to shareholders, and hopes to have all approvals in place by December first week.
Raj said the potential investors fall into five different buckets: existing investors, Socially Relevant Investors, Microfinance Investment Vehicles in the developed world, Private Equity players and public market participants.
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"These include Catamaran Management Services, WestBridge, Sequoia Capital India, Sandstone Investment Partners, Kismet Microfinance and Mr Vinod Khosla, founding CEO of Sun Microsystems, formerly a partner at Kleiner, Perkins, Caufield & Byers, and partner at Khosla Ventures. They have not sold a single share in the Company," SKS said.
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