Fund flows to the microfinance sector have improved in recent months because of more regulatory clarity and stable operating environment. In particular, lenders have shown preference for large and well-managed microfinance institutions (MFIs) operating outside Andhra Pradesh, said a report by rating agency Crisil.

Equity capital

These MFIs have raised reasonable equity capital over the past few months. Because of their adequate resource profile and capital position, large MFIs based outside Andhra Pradesh are likely to resume their growth plans. However, the growth will be at a slower pace than before the Andhra Pradesh crisis, said the report.

The profitability of these MFIs is likely to improve moderately, driven by resumption of growth, economies of scale and healthy asset quality, said Crisil. Crisil has upgraded its rating of Equitas Micro Finance India and its wholly-owned subsidiary, Singhivi Investment & Finance, to ‘BBB/Stable' from ‘ BBB-/Positive'.

Crisil has also upgraded the rating of Ujjivan Financial Services to ‘ BBB/Stable' from ‘BBB-/Stable', and revised its outlook on Janalakshmi Financial Services to ‘Positive' while reaffirming its rating at ‘BB+'.

Equitas, Ujjivan, and Janalakshmi have raised funds aggregating Rs 1,300 crore through diversified sources (banks, non-convertible debentures, and securitisation) post the Andhra Pradesh crisis in October 2010. In addition, they have raised equity capital of Rs 180 crore in 2011-12.Mr Ramraj Pai, Director, Crisil Ratings, said these MFIs are well positioned to meet their revised business plans. Consequently, their combined assets under management are expected to nearly double to Rs 3,000 crore by March 2013.”

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