An effective turnaround strategy marked by cost-optimisation, cautious credit growth and steady market conditions have helped SKS Microfinance to post strong results in the financial year ended March 31, 2015.
The SKS Microfinance scrip gained 3.88 per cent on Tuesday on the BSE to close at ₹481.60.
According to the results announced on Monday, its net profit more than doubled to ₹188 crore in FY15 compared to ₹70 crore in the year-ago period.
The turnaround strategy, which has been adopted by the company after it was hit by a crisis in 2010, has apparently been delivering results for the company. After a massive cost-cutting drive which resulted in consolidation of branches and reduction in the number of employees, the company is now back on its feet.
The number of branches has gone up to 1,268 as of March 31, 2015, a 1 per cent increase. While the increase might seem marginal, it points out to the beginning of expansion again.
There has also been an increase in recruitment with the total number of employees ballooning to 9,698, a 9 per cent rise.
This was after severe cost-structure optimisation measures. The number of branches and headcount had decreased by 48 per cent and 65 per cent respectively, between the third quarter of FY11 and end of FY14. This had led to a 52 per cent reduction in personnel cost from ₹89 crore to ₹43 crore in the same period.
The turnaround is also visible in the market share. In October 2010, SKS had a 14 per cent market share in the total portfolio of ₹28,300 crore, which dropped to 8 per cent of ₹14,600 crore in June 2012. However, by the end of last year, it again reached 10 per cent of ₹31,450 crore.
The optimism was also reflected by the ₹5,020 crore drawdowns in FY15, which registered a 43 per cent growth.
The favourable market conditions have also helped the only-listed MFI in the country and are also expected to drive further growth in the short- to medium-term.
Improvements ahead
According to analysts, the growth momentum is expected to continue with the likely revival of the economy and general focus on inclusive growth. The institutional infrastructure has improved with 95 per cent of MFIs now using credit bureau reports for disbursements.
All these helped SKS beat the guidance for the last two financial years. For FY16, it has given a net profit guidance of ₹235 crore.