@Vivek_6954 …thanks for sharing this good video. It helps us to learn more the financial sector
"SKS Microfinance Limited, hereby intimates that it has come to its knowledge that its President, Mr. S Dilli Raj, has been arrested by the Enforcement Directorate in respect of an on-going investigation in a complaint filed by IDBI Bank Ltd. against First Leasing Company of India. ( First Leasing ).The said investigation does not in any way relate to the present Company, Bharat Financial Inclusion Limited."
https://nseindia.com/corporates/corpInfo/equities/AnnouncementDetail.jsp?symbol=BHARATFIN&desc=Updates&tstamp=010820162006&
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SKS qip can get delayed because of this event
Wonder if this is positive for Satin and Arman trying to do their QIP’s?
No effect on Satin n Arman imho. The integrity of their management and the quality of their business will drive their QIPs
Disc: Invested in both arman n satin.
Vaibhav I was wondering if supply of QIP gets reduced (SKS not coming), Satin and Arman may benefit from same demand for MFI equity but lower supply 
, ie, higher prices
oh ok. I had thought you could have meant this(satin, arman benefiting out of sks situation) also , but couldn’t be sure abt what you meant. sorry.
If the valuation of SKS comes down, it may affect the valuations of other MFIs as well, which won’t be good considering the upcoming QIP.
Yes Akhil, that is true. Unless the discounts to SKS narrow.
I was surprised SKS defended the employee instead of washing their hands off a sub judice case.
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This employee who is the CFO of the company helped it to turnaround from the brink of extinction. So, I don’t think it’d be wise to wash hands off of him without giving him a chance to show his point of view.
Caesars wife needs to be above suspicion. You can’t be giving out clean chits to an employee, no matter who he is, if he is under such a big cloud on ethical charges of fraud/misreporting. Ho can SKS presume judgement when the matter is in courts? At best you can temperorily suspend him instead of sacking. If the courts absolve him he can resume. This is basic corp governance ethics. We even expect this from our politicions, should have a higher bar for managers
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Yes, suspending him would be the right thing to do.
A tsunami of debt is building up in Tamil Nadu – and no one knows where it is headed - http://scroll.in/article/810138/a-tsunami-of-debt-is-building-up-in-tamil-nadu-and-no-one-knows-where-it-is-headed
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Hello everyone, I have a very basic question, I have recently read a lot of reports talking about low current levels of credit costs and how they are unsustainable. I wanted to understand how are they calculating this cost ? Can someone help me with the same?
Thanks a lot Manish for this superb article. What a piece of journalism, reporting and storytelling! It has mention of Muthoot Finance and Equitas and cites MD of Equitas submitting that “he doesn’t know the total indebtedness of his borrowers”.
In light of the growth of MFIs, very good article and an eye opener as to what went wrong with MFIs in 2010. The story seems quite familiar with sub-prime crises. It also highlights intended and unintended consequences of credit led boom.
http://economictimes.indiatimes.com/industry/banking/finance/microfinance-whats-wrong-with-it/articleshow/6904778.cms?curpg=1
As they say, History may not repeat itself, but rhymes nevertheless.
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Agree. Very informative article. Looks like MFI lending is becoming a circular/pyramid kind of business. Market seems to be completely ignoring the fact that lending is a very risky and leveraged business. Earlier only HDFC group got PE valuation and other financial services stocks were valued more on PB. But looks like all MFI stocks are being valued based on PE that too very stretched PEs.
Assuming that one faction is same as the other 90% is not correct. There is no way a MFI can get the indebtness figure of every borrower. Even a bank can’t get it. A bank won’t know if you have taken x amount of loan already from a relative. Rural India needs capital and MFI’s makes it available at lesser prices than other options available to them. MFI’s will do great if our economy starts creating jobs. MFI’s form 10% of my portfolio combined.
Is Tamil Nadu heading for a sub-prime crisis?
Equitas features in this story. This story indicates that the loan boom in Tamil nadu will end badly.
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Gathered from various research reports, the total FY16 loan book/AUM for all NBFC MFIs is ~53000 crore.
The average % of stressed assets/Gross NPA reported (FY16) by the top and largest (loan book) MFIs is not even 1% (~530 crore).
Assuming these NPAs were to suddenly spiral out of control at 15-20% -
am I to believe that total NPAs of 7500-10,000 crore would lead to a sub prime crisis? Big ramifications in the MFI industry is comprarable with a sub prime crisis?
The Gross NPAs of major public and private sector banks is more than 1 lakh crore at this very moment in time and even that hasn’t been enough to cause any major crisis apart from the stock price deterioration of those respective companies. None of them are bankrupt even after 5-15% NPAs.
And in the same very sector, banks like HDFC/Indusind/Kotak/Yes are outperforming the others by a mile.
Who is to say there won’t be some MFIs who have/are building this competitive advantage which will last through any crisis?
Disc - Have revealed my allegiances in the respective threads
Hey Gurjota,
I am one of the guy who doesn’t understand the microfinance sector very well. It pinches a little that I did not study the sector earlier to develop deeper understanding. I had to give up on trying to ride this wave.
You got to accept the fact that majority of the people would be late comers when the bull starts playing out and would try to understand the sector within a day or two. Surprisingly, they would also form a very strong opinion (whether negative or positive) about the sector in that small time span. I still don’t understand this phenomenon but I have seen this happening too often now.
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