SKS Microfinance plummets 20 percent after rating downgrade

May 6th, 2011 - 5:53 pm ICT by IANS  

Mumbai, May 6 (IANS) SKS Microfinance, the largest micro-finance institution in the country, fell almost 20 percent after investment banking major JP Morgan cut its target price for the scrip to almost half.

At the Bombay Stock Exchange, the SKS scrip closed Friday with a loss of 19.83 percent at Rs.331.30. It had touched its lower circuit filter at Rs.330.65, less than 30 minutes before closing bell.

The share started its free fall Friday after reports came in that JP Morgan had cut its share target price on the stock to Rs.200 from the earlier Rs.550, based on weakening of the company’s business model.

Post a successful listing last year, SKS has been mired in controversy. In October, SKS sacked its chief executive Suresh Gurumani resulting in a 9 percent fall in share prices as investors feared mis-management of funds at the company.

Also, a legislation from the Andhra Pradesh state government which sought to regulate micro-finance institutions’ due collection practices and bring down interest charged on loans, also hit the company’s margins.

It voluntarily brought down the interest to 24.5 percent from over 26 percent it was charging earlier.

JP Morgan viewed the business negatively as it said that over 600 employees were virtually without work in Andhra Pradesh and the company would have to take a re-look at their strategy.

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