SKS Surges by Daily Limit on Microfinance Rule Change Report

SKS Microfinance Ltd. (SKSM) headed for a record advance after the Mint reported Indian microfinance companies will be freed from provincial government laws and regulated by the nation’s central bank.

The stock surged by the daily 20 percent limit to 411.8 rupees in Mumbai, the steepest advance since its trading debut in August 2010, and was the best performer on the Bombay Stock Exchange Mid-Cap Index. The shares have plunged 47 percent this year before today.

Indian microfinance institutions will be kept outside the purview of state government legislation and the Reserve Bank of India will be given more powers to control the sector, the Mint reported, citing a draft bill released by the finance ministry.

The proposed bill needs cabinet and parliament approvals before it is signed into law, the newspaper said.

The change is positive for SKS given “severe operational restrictions” under the Andhra Pradesh state laws that seek to regulate money lending, JPMorgan wrote in a note to clients today. The brokerage still kept its “underweight” rating on the stock, citing “fundamental flaws” in the company’s business and “expensive valuations.”

Hyderabad-based SKS considers the draft legislation as a positive that will help ensure orderly growth of the sector, Chief Financial Officer Dilli Raj said on Bloomberg-UTV.

To contact the reporter on this story: Ameya Karve in Mumbai akarve@bloomberg.net.

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.