SKS Microfinance Stock drops by Rs 80 on concerns of rising defaults

SKS Microfinance’s stock has dropped by about 7% in early morning trade and is currently trading down by Rs 80 at Rs 1056. On friday the stock had dropped by around Rs 90  and closed at Rs 1135.90.Today it opened at Rs 1133 before taking a nosedive on the back of heavy selling.

The stock made a low of Rs 1035 before recovering slightly and is trading in the Rs 1050 level at 11:00 AM. SKS Microfinance’s stock has been under heavy selling pressure of late and has dropped by more than 30% in the last 3 weeks.

Market analysts attribute the drop in share price to erosion of investor confidence in the stock following the boardroom drama surrounding the ouster of it’s CEO along with the unfolding microfinance crisis in Andhra Pradesh.share price sks india

There are also wild rumours circulating that authorities in the state of Andhra Pradesh have halted payments on an estimated US$ 2.1billion in microloans given by MFI’s in the state. IMBN cannot confirm this development but will provide you with details as soon as they become available.

As the provisions of the Andhra Pradesh Microfinance Institutions (regulation of money lending) Ordinance-2010 became more clear over the weekend, it has emerged that microfinance companies are required to suspend all collections until they have registered with local authorities in every village where they operate. However, state authorities have yet to establish any protocols or procedures for registering microfinance institutions, which industry executives fear could take weeks.

“The operations of the microfinance institutions have come to a grinding halt,” said Alok Prasad, chief executive of MFIN, a group of 44 profit-oriented microfinance companies to the Financial Times. “They cannot lend, and they cannot collect repayment. They are dead in the water.”

He warned that the abrupt suspension of operations was likely to create a wave of bad loans by small borrowers.

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