SKS Microfinance sells loan-book chunk for Rs243 crore

SKS Microfinance, widely perceived to be under the weather, has managed to sell a large portion of its loan book to a bank for Rs243 crore.

SKS officials refused to name the bank citing a non-disclosure agreement.

They conceded, however, that the microlender was able to sell the loan book portion after securing A1+ (SO) rating from CARE, indicating highest safety and lowest risk. This is the largest rated pool assignment by any microfinance institution in the country this fiscal, they said.

The deal will help SKS take Rs243 crore off its balance sheet in one fell swoop. The funds are expected to help it expand further in the market by way of fresh lending.

The bank, in turn, will gain by recording the loans as part of its priority sector lending obligations.

SKS has been working on various options to keep liquidity intact and continue to grow in all the 19 states it has a presence in.
However, it has had little luck in Andhra Pradesh —- recoveries in the state have fallen to as low as 5% and the overall loan book has shrunk over 60% from Rs5,000 crore in September 2010 to Rs1,800 crore by December 2011.

Some disruption has also been seen in some non-AP markets, though company officials believe these are largely procedural issues and not quite as acute.

SKS’s outstanding loan portfolio now stands at Rs1,810 crore and accumulated losses at over Rs1,000 crore.

The company has also been working on securitising its loan book as part of a risk mitigation strategy, in addition to improving liquidity. While the loan book in AP has almost emerged bad, it is now focusing on securitising the loans in non-AP markets.
SKS had sold a loan book of  Rs700 crore prior to this deal.

Company officials claim there is more money coming as bank funding revives. “Last week, we received a Rs100 crore loan from Sidbi and a few more are in the offing. The rated pool assignments and securitisation deals will continue for some more tranches of fundraising,” said a source.