Avoid SKS Microfinance for now: Fayeza Hafizee

Fayeza Hafizee, Vice President, Institutional SalesIntime Spectrum Securities Ltd., in a chat with ET Now talks about microfinance and banking space.

What is your call on SKS Microfinance and all the banks that have exposure to such companies?

I will take the banks first. There is a bit of book profits on negative news currently that is happening in the market. I do not think that the exposure is as significant as the falls that have been seen in lot of the banking stocks but this is on the back of the fact that a lot of these stocks have given you returns of anywhere from 70% to 100% over the last one year. So I am guessing that if people had to book profits over, there was nervousness and these would be it just because there is a little bit of negative news flow in the banking sector. Coming to SKS in particular, the entire microfinance industry is going into a major restructuring. The understanding of how the whole business was done itself is changing and I would want to wait and see what new regulations they have to grapple with and how are these companies going to manage their very small borrower base wherein cost of servicing each loan is very significant and till that happens, I really would not think it is very imperative for any investor to be in this sector. If you have not already invested, I would place an avoid for now. let’s wait and see how this goes. It is possible that these are really low rates but I would not take the risk at this point in time.