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SKS Microfinance Fails to Get Small Bank License, Stock Sinks 20%

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SKS Microfinance Fails to Get Small Bank License, Stock Sinks 20%

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SKS Microfinance shares fell as much as 20 per cent on Friday as it failed to bag the Small Bank license from the Reserve Bank of India.

The Reserve Bank of India on Wednesday granted small finance bank licenses to 10 entities, out of which eight are microfinance institutions. SKS is the only large microfinance player, which failed to get a small bank license.

SKS Microfinance had also failed to get a payments bank license, which RBI granted in August.

SKS Microfinance seems to have lost its plot because the big story in microfinance was last mile connectivity, says market analyst Ambareesh Baliga.

"This is not the only large company in microfinance space...there are other mid to large sized companies in unlisted space. SKS Microfinance has lost their niche to a large extend," Mr Baliga said.

Domestic brokerage Religare Securities has cut its target price on SKS Microfinance to Rs 320 from Rs 400 earlier, citing multiple concerns. Religare said with eight microfinance companies getting small bank license, when they will be converted into banks, around 60 per cent of the microfinance credit will shift to banks including Bandhan and the competition will intensify in the sector.

Religare maintains sell rating on SKS Microfinance.

SKS Microfinance shares closed 15.55 per cent lower at Rs 380.65 apiece compared to 1.05 per cent gain in the Nifty.

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