Industry slams SKS for poor handling of CEOs ouster
A day after the board of SKS Microfinance clarified on the sacking of their former MD and CEO, industry players feel that it could have been handled in a better way. CNBC-TV18’s Gopika Gopakumar gives a low down.
This is not the first time the microfinance industry has come under wide scrutiny. After accusations about charging higher interest rates, the industry now has to face charges of lack of corporate governance.
This is after Vikram Akula and the board of SKS Microfinance sacked their MD and CEO, barely two months after the company's mega listing.
The industry is divided on how much this issue will hurt the sector. Some players like Vijay Mahajan of BASIX strongly feel that the negative publicity due to acrimonious exit of Suresh Gurmani puts the industry in bad light
But the industry body of micorfinance institutions has a different take.
Alok Prasad, CEO, MFIN, said, “From an industry stand point SKS is an important player. And it is not unusual where large corporates have certain reality or a situation at the top management level that there can be differences or disagreements on some matters and as a consequence there is a management change of some kind. Therefore in many ways, I would regard as a sign of a large clearing being done, getting to a certain stage of evolution.”
“To my mind this is not something which one has to regard as being very unusual or something which is necessarily a matter of great concern,” he added.
Industry players also say they are yet to see the second phase of growth which according to Akula was one of the reasons behind Gurumani's exit. The industry says the second phase of growth will happen only when MFIs start lending in truly interior places like north east.
SKS in damage control mode: Explains Gurumani's ouster
Following weeks of media speculation about the termination of former MD and CEO, SKS Microfinance clarifies the reasons for the termination, reports CNBC-TV18’s Gopika Gopakumar.
After days of negative publicity following the termination of the former MD and CEO, Vikram Akula got into damage control mode on Tuesday. Akula went by a well-written script which tried hard to justify the acrimonious exit of Suresh Gurmani. He and his board members clarified that it was interpersonal conflicts between Gurumani and other senior officials that led to Gurmani's termination.
Akula also said that Suresh Gurumani lacked enough understanding of the microfinance sector.
“We have been piloting a lot of projects which relate to secured products like housing loan, lending against gold etc. In order to lend to the customers, one needs a good understanding of customers, how they behave and how they think. That's where the board felt that in the light of growth looking at those products someone like MR Rao with four years of experience and combined with me would be the right team to lead,” he clarified.
But questions persist: Wasn't the board aware of the simmering tension between Akula and Gurmani before the company's mega listing in August? No, said a board member. The decision to terminate Gurmani came up only after the IPO and after Akula was elevated as chairman.
Sumir Chadha, MD, Sequoia Capital, said, “CEO terminations happen all the time—CEOs don't last forever. It doesn’t mean that the board has done a poor job. I think the job of the board is that we are taking care of our constituents—the poor women borrowers, employees and shareholders.”
This may not be the last one hears of this affair. Gurumani is determined to take SKS to court to extract a handsome severance package. Even if he succeeds, that monetary blow will be minor for SKS, compared to the corporate governance blow it has suffered on account of this boardroom battle.
SKS Micro adds 5 lakh new members, 237 branches in Q1
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In a surprise move, SKS Microfinance terminated its Chief Executive Officer & MD - Suresh Gurumani, with immediate effect. Chief Operating Officer MR Rao has been named as the new CEO for three years. Promoter Vikram Akula is back to playing an executive hands-on role at the company. Sources close to the development say differences with the CEO led to his termination. The stock took a beating at the exchange on the back of the news and slid close to 6%.
In the company's first earnings conference call since listing, the MD designate said, "We have had an excellent first quarter at the unit level backed by an excellent operating performance. In terms of growth drivers we added 237 branches, 50% for the target year as a whole. Headcount increased by 2159 and 98.5% of the addition to the headcount was at the field level."
Member base increased from 6.78 million as of March 2010 to 7.28 million as of June 2010, he said, a net accretion of about 500,000 members. Borrower base increased from 5.7 million to 6.23 million members.
Q1 return on asset at 6.4%: SKS Microfinance
SKS Microfinance has announced its results for the quarter ended June 2010. It has reported profit after tax (PAT) of Rs 67 crore, a growth of 265% (YoY).
Its net sales rose 92% to Rs 284 crore versus Rs 148 crore.
In an interview with CNBC-TV18, Dili Raj, CFO, SKS Microfinance, spoke about the results and his outlook for the company.
Here is the verbatim transcript of his interview with CNBC-TV18's Latha Venkatesh and Reema Tendulkar. Also watch the accompanying video.
Q: Can you take us through what has been an net interest income (NII) and your net interest margin (NIM) performance compared to a year ago?
A: In terms of operational highlights, we have been able to add up 237 branches and member base is at 7.28 million, revenue growth of 80% and bottomline growth of 265%.
NIM is actually not very relevant to our business because as you know this is a credit extension model. The operating cost overwhelms the funding cost. So, I would request and recommend that we go with return on asset that would be more appropriate metric.
In terms of ROA, we are at 6.4% for the quarter compared to 4.9% for the whole of last year. If we wait to normalize for the assigned loans, the off balance sheet, the ROA for the whole of last year was 3.7% that has also increased to 5%.
Q: I admit that NIMs is perhaps not rightist measure, but your investors are savvy enough to make that distinction, we would still like to know what your numbers are.
A: I will give you yield metrics also, for the year the interest yield was 25.2%, financial cost has reduced to 6.6% for the quarter. So, you are talking of an operating cost of 11.4%. Loan rate has reduced to 1.1% from 1.5%. So, in terms of NIM, you could still say that it is 25% minus 12.5%, NIM is in the region of 12.5%.
Q: SKS has been on a rapid growth trajectory could you tell us what the disbursements have been this quarter?
A: For this quarter, I think the incremental disbursement was in the region of Rs 2,283 crore.
Q: Compares with what the quarter ago or a year ago?
A: Year ago it was Rs 1,263 crore. One is talking about a year-on-year growth of 81%.
Q: The is the reason why I asked you what NIMs was, a month ago or maybe three-gour weeks ago the government has written to a lot of state owned banks stating that they be sensitive to the kind of interest rate charged by the parties to whom they lend and 24% was the cap that they were recommending to the state owned banks themselves in terms of the interest at which they lend to the final borrower. We understand that the Reserve Bank also is getting in touch with microfinance institutions and advising them or persuading them to cap their lending at 24%. What is your top level lending at this point in time and have you received such a request?
A: In terms of separating facts and fiction, we have not received any such letter from Reserve Bank of India or for that matter even any communication from any public sector banks. But let me respond to the core issue. The first and foremost thing is why we have started talking about operating cost is no discussion on interest rate on micro finance is complete unless or otherwise you focus on funding cost, operating cost and also the risk margin.
If at all there is one lesson, we should learn from the subprime privates, that is not pricing the risk correctly. That is the issue. So, our request is that let us put all the three variables on the table, if ever we have a debate on the interest rate issue.
The business model is such that you want to deliver those door step services to your members in the rural areas, you do not want them to be dragged into your branches because that translate into travel cost and most importantly could interrupt their wage day. So, the answer to that is that you got a delivery model where your bottom may be structured, today as we speak the head count is 26,000. So, that poses constrain on the operating cost.
You referred to the public sector banks communication, it is very clear that MOF is writing to them in the capacity as a stakeholder rather than regulator. So, the fine line I am drawing here is that it is not a regulatory communiqué but it is a stakeholder communiqué.
Also, public sector banks would look at this, any kind of cap like this would shut out of shut the door on smaller MOFs. For large microfinance like us where we always look for efficiency reduced the predict cost and we have been passing on the benefit to the customers in the past, it is not really a major issue.
Q: What is the top level interest rate that you offer? If it were capped at 24% for whatever reasons and under whatever circumstances, what may be the impact on parameters like ROA and NIMs?
A: There are dual rates, 26% in certain states where we have seen they have reached a critical mass and 30% in other states. So, the national average would be 27.3%. So, if we were to argue that it is 24% reduce to 24%, 3.3% reduction that would be a pre-tax, the post-tax number could be around 2%. That would mean reduction in ROA, but that is the position as of now. I guess any of these model revisions would give sufficient transition period. So, down the line two-three years we do not see.
Q: How has been the asset quality, any loan loss provision that you had to take in this quarter? You spoke about the ROA being the parameter from 6.4% that you did this quarter, can we scale it higher by the end of the year?
A: First on your loan loss. Loan loss for the quarter reduced to 1.1% from 1.5% for the whole year. We had some good news on the gross and net non-performing assets (NPA). As such our gross NPA is 0.33%, at the end of FY10 was probably the lowest in the country, but this quarter it has further reduced to 0.23%.
SKS Microfinance Q1 PAT up 265% at Rs 67 cr
SKS Microfinance has announced its results for the quarter ended June 2010. It has reported profit after tax (PAT) of Rs 67 crore, a growth of 265% (YoY).
Net sales rose 92% to Rs 284 crore versus Rs 148 crore.
Gross income rose 82% to Rs 314 crore and networth stood at Rs 1,016 crore as on June 30, 2010.
Capital adequacy ratio was at 25% as on June 30, 2010. Incremental loan disbursements stood at Rs 2,283 crore, a growth of 81% (YoY).
Gross loan portfolio stood at Rs 4,578 crore as on June 30, 2010.
DEAR SHAREHOLDERS
(I am not talking to non shareholders of SKS here)
Where is the problem...?
Why are you panicking...?
Has all sanity left Chittorgarh..?
Are other experts who are also my friends dead....?
Cant they help boarders here..?
Anyways
Read above and sleep well
As of today i hold 1250 SKS shares (1000 shares originally from Grey)
Did not sell a single share
Next time filter my posts
If dont know how to then go and learn it
Else dont ask same question 1000 times...Ok..!!
Anybody wants to sell SKS Micro shares who still holding
Plz sell
SKS doesnt want shareholders like you who do not see above facts
And if frustated due to temproray losses
Anyways let me talk to my other intelligent freinds here
GEM bhai start adding now
1135 1065 985 750 (Worst case is 750...impossible to catch this price ......if lucky plz catch)
Exit points 1183 1225 1287 1346 1435
This is for GEM whoz IQ is 100 out of 100
Not for any one other boarder who is a short term trader ....OK
Regards
Setu
Zerodha (Trading Account)
RHP
IPO Guru (1100+ Posts, 3300+ Likes)
