28 January 2016
3QFY16 Results Update | Sector:
Financials
BSE SENSEX
24,470
Bloomberg
Equity Shares (m)
M.Cap. (INR b) / (USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
S&P CNX
7,425
SKSM IN
126.3
67.6/1.0
590 / 369
16/5/40
863
97.3
CMP: INR535
TP: INR619 (16%)
SKS Microfinance
Buy
Firing on all cylinders; scorching performance continues
SKSM 3QFY16 PAT was up 94% YoY to INR795m (in line with est.), driven by strong
operating performance. Stellar AUM growth of 93% YoY, stable asset quality,
increase in average incremental ticket size to above INR15,000 improving
operating leverage and marginal cost of funds at sub 10% were the key highlights
for the quarter.
AUM during the quarter grew at a scorching pace of 93% YoY and 13% QoQ, driven
by customer additions and traction in long-term loans. Ticket size increase was
also led by RBI’s regulation allowing MFIs to lend higher amount to existing
borrowers. Long-tenure loans (typically of two years) now constitute 32% of the
total loan book v/s ~28% in the last quarter. Disbursements during the quarter
were at INR29.8b (up 93% YoY and 12% QoQ).
Marginal cost of borrowings (both on and off balance sheet) now stands at 10% v/s
11.9% in FY15 on the back of reduction in base rates by banks during the quarter,
further helped by MUDRA loan of INR1b—which SKS availed at 10% during the
quarter. Strong PAT performance was driven by operating leverage as costs were
kept under control—evident from C/I ratio, which remained below 50% (at 47%)
for the second consecutive quarter. Asset quality improved as absolute GNPA
declined to INR63m v/s INR75m in the last quarter. %GNPA stood at 0.1% (stable
YoY) and NNPA at 0.1%.
Valuation and view:
Large unmet demand, low competitive intensity, supportive
regulations, strong balance sheet and best-in-class operating metrics have put
SKSM on a high growth path. SKSM currently trades at 3.8x FY17E and 3.0x FY18E
BV. While the valuations appear high, we believe they are justified—given the high
medium-term growth visibility, strong profitability and superior asset quality.
Current valuations should sustain and could improve, given the strong profitability
(42% PAT CAGR over FY15-18), healthy asset quality and capitalization. We
increase our FY17/FY18 estimates marginally by 1.4%/2.6% to account for higher
growth. Maintain
Buy
with a target price of INR619 (3.5x FY18E BV).
Financials & Valuation (INR Billion)
Y/E March
NII
PPP
PAT
EPS (INR)
BV/Sh. (INR)
RoA on AUM
(%)
2016E 2017E 2018E
5,774 7,629 10,445
4,440 5,912 8,071
3,103 4,329 5,786
24.6
5.1
25.8
21.8
5.0
34.3
5.2
27.5
15.6
3.8
45.8
5.5
28.8
11.7
3.0
107.4 141.7 176.8
RoE (%)
P/E (x)
Valuations
P/BV (x)
Sunesh Khanna
(Sunesh.Khanna@MotilalOswal.com); +91 22 3982 5521
Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com) /
Harshvardhan Agrawal
(Harshvardhan.Agrawal@MotilalOswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on
www.motilaloswal.com/Institutional-Equities,
Bloomberg, Thomson Reuters, Factset and S&P Capital.

SKS Microfinance
Exhibit 1: Quarterly performance and reason for deviations
Particulars
Net Income
Operating Expenses
PPOP
Provisions
Profit before Tax
Tax Provisions
Net Profit
Int Exp/ operating inc (%)
Other Income / Total Income (%)
Cost to Income Ratio (%)
Tax Rate (%)
3QFY16E
2,068
989
1,080
100
980
170
810
42.9
11.1
47.8
17.4
3QFY16A
2,107
989
1,118
87
1,031
236
795
47.3
8.7
46.9
22.9
v/s Est.
2
0
4
-13
5
39
-2
Comments
Net income largely in-line
Strong AUM growth led to higher PPoP
Tax rate 23%
AUM growth and fee income led to stellar
performance
Source: Company, MOSL
AUM growing at stellar pace of 93% YoY
AUM during the quarter grew at a scorching pace of 93% YoY and 13% QoQ was
driven by customer additions as well as traction in long term loans. SKSM added
337,000 new active borrowers during the quarter which is a multi-year high.
RBI during the quarter allowed MFIs to lend higher amount to existing
borrowers, this helped the company to increase its average ticket size for exiting
borrowers and the same spiked to INR15,692/borrower v/s
INR13,405/borrower in the last quarter. Addition of new clients and increase in
ticket size lead to strong growth in disbursement during the quarter at INR29.8b
up 93% YoY and 12% QoQ.
Long tenure loans (typical tenure of 2 years) now constitute 32% of the total
loan book v/s ~28% in the last quarter (as ~65% of the fresh disbursement
during the quarter were towards long term loan), however, income generating
loan still continue to contribute over 41% of the total loan book (v/s ~43% in the
last quarter).
Cost of borrowing now at 10%; asset quality remains stable
Marginal cost of borrowings (both on and off balance sheet) now stands at 10%
v/s 11.9% in FY15. This is on back reduction in base rates by the most major
banks following 50bps rate cut by the RBI towards the end of September. During
the quarter, SKSM availed INR1b loan from MUDRA at 10% for onward lending.
This also helped the company lower its borrowing costs.
Strong PAT performance was also driven by operating leverage as costs were
kept under control, evident from C/I ratio which remained below 50% at 47% for
the second consecutive quarter.
Asset quality continued to remain impeccable as %GNPA were at 0.1% (stable
YoY and 0.2% last quarter) and NNPA at 0.1%. In absolute terms, GNPA declined
to INR63m v/s INR75m in the last quarter.
Other highlights:
a) Market share gain continues for SKS with disbursement
share standing at 19% in 2QFY15 and overall market share at 13%. b) MAT is
now applicable on the company resulting in tax rate of 23%; un-availed DTA
benefits stand at INR3.89b. c) RoE/RoA for 3QFY16 stands at 25.5%/4.5%; CAR at
23.9% with leverage of 3.6x.
28 January 2016
2

SKS Microfinance
Valuation and view
The AP-crisis had resulted in a sharp decline in AUM and concurrent increase in
GNPA for the MFI industry, leading to huge losses for the participants. However,
timely RBI intervention led to stable and uniform regulations across the country.
This de-risked the sector and provided a new lease of life to MFI companies,
especially SKSM (SKSM had the largest AP portfolio at the time of crisis).
The government has clarified that RBI would continue to be the sole regulator of
the MFI sector and MUDRA, earlier envisaged as the regulator of MFIs, would
now only provide refinancing. The regulatory clarity and continuity bodes well
for the overall sector.
SKSM has since witnessed an impressive turnaround, led by strong performance
across operating parameters. The stock has also been re-rated in the last two
years. We expect SKSM to continue to grow at a healthy pace, driven by vast
geographic presence, experienced management and efficient operating metrics.
We believe SKSM will be a prime beneficiary of underlying growth in the
industry.
With most of its peers busy turning themselves into SFBs, we expect 43% CAGR
in SKSM’s AUM over the next 2-3 years. SKSM would be the fastest growing
company in our Financials coverage – our 3-year PAT CAGR estimate for SKSM is
42%.
Low competitive intensity, supportive regulations, strong balance sheet, and
best-in class operating metrics have put SKSM on a high growth path. Currently,
SKSM quotes at 3.8x FY17E and 3.0x FY18E BV. While these valuations appear
high, we note that SKSM has traded at much higher multiples before the Andhra
Pradesh crisis. We believe current valuations are justified, given high medium-
term growth visibility, strong profitability, and superior asset quality. Current
valuations should sustain and could improve, given strong profitability (42% PAT
CAGR over FY15-18), and healthy asset quality and capitalization. We marginally
increase our FY17/FY18 estimates by 1.4%/2.6% to account for higher growth.
Maintain Buy with target price of INR619 (3.5x FY18E BV).
Exhibit 2: We marginally increase our estimates to account for higher AUM growth
INR B
FY16
NII
5.5
Other Income
2.7
Net Income
8.2
Operating Expenses 3.9
Operating Profits
4.3
Provisions
0.4
PBT
3.9
Tax
0.8
PAT
3.1
Loans
45
Borrowings
47
Spreads (%)
14.40
RoAA (%)
5.5
RoAE (%)
25.8
Old Est
FY17
7.6
3.2
10.8
5.0
5.8
0.4
5.4
1.1
4.3
62
66
13.20
5.6
27.2
FY18
10.3
3.7
14.0
6.2
7.9
0.7
7.1
1.5
5.6
84
89
12.80
5.5
28.2
Revised Est.
FY16
FY17
FY18
5.8
7.6
10.4
2.6
3.3
3.8
8.4
10.9
14.3
3.9
5.0
6.2
4.4
5.9
8.1
0.4
0.4
0.7
4.0
5.5
7.3
0.9
1.2
1.5
3.1
4.3
5.8
50
63
86
56
69
93
13.80 13.00 13.00
5.1
5.2
5.5
25.8
27.5
28.8
% Change
FY16
FY17
FY18
4.6
0.2
1.2
1.8
0.2
3.4
2.9
12.7
0.3
11.7
19.2
0.9
0.2
1.5
1.4
1.4
1.4
1.5
4.8
1.5
0.2
2.5
2.6
2.6
2.6
2.0
5.3
Source: Company, MOSL
28 January 2016
3

SKS Microfinance
Analysts’ meet highlights
SKSM likely to grow at 70-80%:
Potential in MFI industry still very large with unmet credit demand of INR1.5-
3tn.
SKSM hinted that growth is likely to remain at 70-80%; 50-60% coming from
new client additions and 18-20% from increase in ticket size.
SKSM intends to grow to faster pace primarily because it wants to acquire more
clients before SFBs start operations.
Further, threats from SHGs have largely subsided for SKSM as nearly 60% of
SHGs are operational in AP and TN, areas where SKS has very minimal
operations (some operations in AP and none in TN)
Increased ticket size, raises concerns of over leveraging
SKSM is taking utmost care in ensuring that MFI borrowers are not over-
leveraged and is strictly following the JLG principles and performing credit
bureau checks.
Further, as a prudent measure, it provides long term loans, which are loans
above INR30,000 for upto two year tenure, only to customers who have
completed two loan cycles with the company.
With interest rates below 20%, political risks likely mitigated
SKS reduced its interest rates to 19.75% in Dec-15. With this it has become the
most efficient MFI in the world with sub 20% interest rate.
The company is of the opinion that political risks associated with MFIs are
largely mitigated by lending below 20%; as their exists many products such as
personal loans by banks which charges more than 20%
Operating efficiency to kick in with optimal utilization of existing infrastructure
Operating leverage is likely to kick in FY17, as the company has now touched
4.2mn customers v/s 5.2mn before the crisis. It is only now that the company’s
existing infrastructure would be optimally utilized and thus cost efficiencies
would kick in.
Asset Quality to remain stable
Asset quality likely to remain stable. The company being an NBFC is not required
to make floating provisions, thus have not made any
Cross sell to add 1% to RoA
Increased focus on cross sell is likely to add 1% to RoA
28 January 2016
4

SKS Microfinance
Exhibit 3: Quarterly Snapshot
FY14
FY15
FY16
Variation (%)
1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15 1QFY16 2QFY16 3QFY16 QoQ YoY
Profit and Loss (INR m)
Income from operations
Other operating income
Total operating income
Other Income
Total Income
Interest expenses
Net income
Total Opex
Employees
Depreciation and Amrt
Others
Operating profits
Provisions and write offs
Profit before tax
Taxes
Profit after tax
Asset quality (Overall)
Gross NPA
Net NPA
GNPA (%)
NNPA (%)
AUM related
Overall AUM
On balance sheet
1,028
146
1,174
52
1,226
469
758
599
420
10
169
159
109
50
0
50
1,143
157
1,300
52
1,352
548
804
602
390
11
201
202
38
163
0
163
1,148
185
1,333
63
1,397
575
821
624
414
10
200
198
-17
214
0
214
1,169
214
1,383
91
1,474
550
923
637
431
10
196
286
15
271
0
271
1,272
246
1,518
171
1,690
478
1,211
737
539
12
186
475
-19
493
0
493
1,658
243
1,901
109
2,010
671
1,339
780
548
11
220
560
-8
568
0
568
1,635
209
1,844
225
2,069
787
1,282
852
631
11
209
430
20
411
0
411
1,767
209
1,976
286
2,262
854
1,408
836
600
11
225
571
107
464
59
405
2,173
236
2,409
418
2,826
1,008
1,819
952
709
10
233
867
72
795
183
611
2,664
249
2,913
330
3,243
1,169
2,073
974
699
18
257
1,099
88
1,012
233
779
2,805
268
3,073
362
3,434
1,327
2,107
989
715
27
246
1,118
87
1,031
236
795
5
8
5
10
6
14
2
1
2
47
-4
2
-1
2
1
2
72
28
67
61
66
69
64
16
13
137
18
160
341
151
NA
94
51
45
0.30
0.30
38
32
0.20
0.20
10
80
0.06
0.04
19
16
0.10
0.10
40
34
0.20
0.20
30
19
0.10
0.10
26
18
0.10
0.10
24
13
0.10
0.05
46
22
0.10
0.16
75
39
0.20
0.10
63
30
0.10
0.10
-16
-23
142
67
23,450 23,480 23,640 28,370 27,830 30,430 31,950 41,710 47,970 54,620 61,770
16,110 17,030 17,830 15,230 20,410 27,930 27,250 29,110 38,520 47,530 50,350
13
6
93
85
Other details
CAR
Branches
Centers (Sangam)
Loan officers
30.2
31
0
0
40
33
35
32
27
25
24
1,255 1,254 1,256 1,255 1,268 1,268 1,268 1,268 1,268 1,268 1,300
213,114 212,895 221,584 228,188 226,856 228,494 229,172 227,125 220,485 216,723 227,214
6,429 5,647 5,350 5,259 5,124 5,094 5,104 5,286 5,656 6,066 6,415
Source: Company, MOSL
28 January 2016
5

SKS Microfinance
Story in charts
Exhibit 4: GLP grew at stellar 93% YoY
SKS GLP (INR bn)
YoY Growth (%)
Exhibit 5: Client additions were also strong at 17%
SKS Clients (mn)
YoY Growth (%)
72
49
37
28
41
19
30
35
47
79
93
22
24
28
26
27
22
16
17
12
3.6
10
3.7
7
3.8
4.2
23.5 23.5 23.6 28.4 27.8 30.4 32.0 41.7 48.0 54.6 61.8
2.7
2.8
3.0
3.3
3.3
3.6
3.5
Source: Company, MOSL
Source: Company, MOSL
Exhibit 6: Ticket size spiked following RBI regulation
SKS Avg Tkt Size (INR)
YoY Growth (%)
Exhibit 7: Cost of borrowing declined to 11.3%
Cost of borrowing (%)
26
6
(5)
10
1
14
11
29
(4)
(2)
14
Source: Company, MOSL
Source: Company, MOSL
Exhibit 8: Operating efficiency kicking in; C/I ratio at <50%
Cost/Income Ratio (%)
Exhibit 9: Asset quality remains range bound
0.3
0.3
0.2
0.2
0.04
0.06
0.1
0.1
GNPA (%)
NNPA (%)
79
75
76
69
61
58
66
59
0.2
0.2
0.1
0.1
0.1
0.1
0.05
0.16
0.1
0.1
0.2
52
47
47
0.1
0.1 0.1
Source: Company, MOSL
Source: Company, MOSL
28 January 2016
6

SKS Microfinance
Exhibit 10: Financials: Valuation Metrics
66
Rating
CMP
Mcap
EPS (INR)
P/E (x)
BV (INR)
P/BV (x)
RoA (%)
RoE (%)
FY16
15.0
19.2
17.0
13.9
21.0
15.8
10.8
9.5
12.4
10.3
12.7
10.1
2.7
10.5
9.8
13.2
10.3
10.2
12.9
12.2
4.2
8.0
21.9
21.2
16.9
23.6
27.8
20.7
17.6
17.2
15.0
11.8
18.8
16.1
27.2
FY17
15.8
19.8
17.6
14.8
21.9
17.3
10.8
10.7
13.5
11.4
14.3
11.2
5.4
11.8
11.7
14.2
12.6
11.8
13.4
13.6
4.9
11.6
22.0
20.2
18.6
25.7
33.2
21.3
16.0
14.6
16.5
13.5
19.7
18.6
28.2
(INR) (USDb) FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17 FY16 FY17
ICICIBC*
Buy
233
20.5 24.8 29.7 6.3
4.9
149 170 1.06
0.85 1.54 1.58
HDFCB
Buy
1,033
39.2 58.9 70.9 17.5 14.6 330 385 3.13
2.68 1.88 1.86
AXSB
Buy
407
14.6 40.0 47.7 10.2
8.5
250 290 1.62
1.40 1.68 1.68
KMB*
Neutral
666
18.4 24.7 31.3 27.0 21.3 206 237 3.22
2.81 1.38 1.54
YES
Buy
674
4.3
74.5 92.3 9.0
7.3
385 458 1.75
1.47 1.70 1.71
IIB
Buy
908
8.1
49.8 62.8 18.2 14.5 336 390 2.70
2.33 1.98 2.01
DCBB
Under Review
76
0.3
6.9
7.7 10.9
9.8
68
75
1.12
1.00 0.93 0.85
FB
Neutral
46
1.2
4.7
5.7
9.8
8.1
52
56
0.90
0.83 0.83 0.87
JKBK
Neutral
69
0.5
18.0 21.6 3.8
3.2
152 168 0.46
0.41 1.02 1.07
SIB
Buy
18
0.4
3.1
3.7
6.0
5.0
31
34
0.60
0.55 0.58 0.61
Private Aggregate
107.5
14.2 11.8
2.17
1.90
SBIN (cons)*
Buy
185
21.8 31.0 38.7 5.6
4.5
254 286 0.68
0.60 0.78 0.84
PNB
Under Review
91
2.7
22.8 27.7 4.0
3.3
235 259 0.39
0.35 0.64 0.69
BOI
Neutral
99
1.2
9.3 19.5 10.7
5.1
350 366 0.28
0.27 0.10 0.19
BOB
Buy
130
4.6
19.3 23.7 6.7
5.5
191 209 0.68
0.62 0.55 0.60
CBK
Under Review
192
1.5
57.3 74.6 3.3
2.6
610 667 0.31
0.29 0.46 0.52
UNBK
Buy
125
1.3
43.1 51.8 2.9
2.4
344 386 0.36
0.32 0.66 0.69
OBC
Under Review
112
0.5
50.0 66.9 2.2
1.7
505 556 0.22
0.20 0.56 0.66
INBK
Buy
91
0.7
29.5 37.1 3.1
2.4
300 328 0.30
0.28 0.62 0.69
CRPBK
Neutral
40
0.1
18.7 21.6 2.1
1.8
152 169 0.26
0.23 0.57 0.59
ANDB
Buy
53
0.5
22.8 27.9 2.3
1.9
196 216 0.27
0.24 0.62 0.65
IDBI
Neutral
60
1.7
5.6
6.9 10.7
8.7
137 142 0.44
0.42 0.28 0.31
DBNK
Neutral
36
0.3
10.0 15.6 3.6
2.3
128 141 0.28
0.26 0.38 0.53
Public Aggregate
36.8
5.8
4.6
0.55
0.50
HDFC*
Buy
1,148
27.4
39
44
18.2 14.2 186 212 3.76
2.92 2.41 2.40
LICHF
Buy
474
3.6
42
47
11.3 10.0 216 254 2.20
1.87 1.54 1.45
DEWH
Buy
183
0.8
32
40
5.7
4.6
203 234 0.90
0.78 1.25 1.30
IHFL
Buy
699
4.5
68
82
10.3
8.5
302 336 2.31
2.08 3.85 3.69
GRHF
Buy
257
1.4
8
11
31.0 24.4
28
35
9.10
7.33 1.98 2.26
REPCO
Buy
640
0.6
35
43
18.5 15.0 182 219 3.52
2.92 2.28 2.14
RECL
Under Review
188
2.8
57
59
3.3
3.2
345 391 0.54
0.48 2.45 2.17
POWF
Under Review
167
3.3
52
50
3.2
3.4
323 358 0.52
0.47 2.63 2.17
SHTF
Buy
752
2.6
73
92
10.3
8.2
515 587 1.46
1.28 2.29 2.57
MMFS
Buy
196
1.7
13
17
14.7 11.6 118 130 1.66
1.51 1.94 2.24
BAF
Buy
5,771
4.7
276 340 20.9 17.0 1,582 1,867 3.65
3.09 2.92 2.79
MUTH
Buy
185
1.1
24
31
7.8
6.0
155 175 1.19
1.06 2.85 3.12
SKSM
Buy
535
1.0
34
45
15.8 12.0 141 175 3.79
3.05 5.59 5.54
NBFC Aggregate
56.6
12.3 11.2
2.01
1.79
*Multiples adj. for value of key ventures/Investments; For ICICI Bank and HDFC Ltd BV is adjusted for investments in subsidiaries
28 January 2016
7

SKS Microfinance
Financials and valuations
INCOME STATEMENT
Y/E MARCH
Interest Income on books Port.
Interest Expense
Net Financing income
Change (%)
Income from assignment of loans
Net Income (Incl Secur)
Change (%)
Other operating income
Other Income
Net Income
Change (%)
Operating Expenses
Change (%)
Operating Profits
Change (%)
Total Provisions
% to operating income
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Proposed Dividend
BALANCE SHEET
Y/E MARCH
Equity Share Capital
Reserves & Surplus
Networth
Borrowings
Change (%)
Other liabilities
Change (%)
Total Liabilities
Loans
Change (%)
Investments
Net Fixed Assets
Other assets
Total Assets
2012
3,589
2,001
1,587
-76.7
346
1,933
-75.9
422
366
2,722
-70.4
4,224
-17.6
-1,503
-136.9
11,735
-781.0
-13,237
369
-2.8
-13,606
-1,318.9
0
2013
2,200
1,427
773
-51.3
580
1,353
-30.0
542
204
2,098
-22.9
2,626
-37.8
-527
-64.9
2,444
-463.7
-2,971
0
0.0
-2,971
-78.2
0
2014
3,930
2,142
1,788
131.4
557
2,345
73.4
702
258
3,306
57.6
2,462
-6.2
844
-260.1
146
17.3
699
0
0.0
699
-123.5
0
2015
5,665
2,790
2,874
60.7
668
3,542
51.0
907
791
5,240
58.5
3,204
30.1
2,036
141.2
100
4.9
1,936
59
3.0
1,877
168.7
0
2016E
9,587
4,970
4,617
60.6
1,158
5,774
63.0
1,054
1,541
8,369
59.7
3,929
22.6
4,440
118.1
410
9.2
4,030
927
23.0
3,103
65.4
0
(INR Million)
2017E
2018E
12,983
16,860
6,555
8,114
6,429
8,746
39.2
36.0
1,200
1,700
7,629
10,445
32.1
36.9
1,529
1,964
1,741
1,841
10,899
14,250
30.2
30.8
4,986
6,180
26.9
23.9
5,912
8,071
33.1
36.5
433
746
7.3
9.2
5,479
7,324
1,151
1,538
21.0
21.0
4,329
5,786
39.5
33.7
0
1,157
2012
724
3,623
4,347
10,213
-54.3
2,245
-27.5
16,805
9,496
-74.0
2
206
7,101
16,805
2013
1,082
2,822
3,904
16,186
58.5
5,024
123.8
25,115
15,654
64.8
2
113
9,346
25,115
2014
1,082
3,510
4,592
15,313
-5.4
5,067
0.9
24,972
17,528
12.0
2
112
7,330
24,972
2015
1,263
9,202
10,465
32,800
114.2
3,722
-26.5
46,987
29,584
68.8
2
102
17,299
46,987
2016E
1,263
12,305
13,568
55,955
70.6
4,094
10.0
73,617
49,800
68.3
0
93
23,724
73,617
2017E
1,263
16,633
17,896
68,898
23.1
4,504
10.0
91,298
63,386
27.3
0
85
27,827
91,298
2018E
1,263
21,065
22,328
93,377
35.5
4,954
10.0
120,659
85,907
35.5
0
77
34,675
120,659
28 January 2016
8

SKS Microfinance
Financials and valuations
RATIOS
Y/E MARCH
Spreads Analysis (%)
Avg. Yield - on Financing portfolio
Avg. Cost of funds
Interest Spread on Financing portfolio
Net Interest Margin (incl Securitization)
Net Interest Margin (Excl Securitization)
Profitability Ratios (%)
RoE
RoA
Op. Exps./Net Income
Empl. Cost/Op. Exps.
Asset-Liability Profile (%)
Net NPAs to Adv.
Debt/Equity (x)
Average leverage
CAR
Valuations
Book Value (INR)
Price-BV (x)
EPS (INR)
EPS Growth (%)
Price-Earnings (x)
E: MOSL Estimates
2012
16.9
12.3
4.6
6.7
7.5
2013
22.0
10.8
11.2
6.7
7.7
2014
29.2
13.6
15.6
8.6
13.3
2015
26.4
12.8
13.6
9.7
13.4
2016E
25.0
11.2
13.8
10.5
12.0
2017E
23.5
10.5
13.0
9.6
11.6
2018E
23.0
10.0
13.0
9.7
11.9
-122.8
-45.3
155.2
61.8
-72.0
-14.2
125.1
65.8
16.4
2.8
74.5
67.2
24.9
5.2
61.1
72.4
25.8
5.1
46.9
73.8
27.5
5.2
45.8
75.6
28.8
5.5
43.4
76.2
32.1
2.3
1.5
35.4
2012
60.1
8.9
-188.0
-1,318.3
-2.8
0.4
4.1
3.2
33.9
2013
36.1
14.8
-27.5
-85.4
-19.5
0.1
3.3
3.7
27.2
2014
42.4
12.6
6.5
-123.5
82.9
0.1
3.1
3.2
31.7
2015
82.9
6.5
14.9
130.2
36.0
0.0
4.1
3.7
27.2
2016E
107.4
5.0
24.6
65.4
21.8
0.0
3.8
4.0
25.7
2017E
141.7
3.8
34.3
39.5
15.6
0.0
4.2
4.0
23.6
2018E
176.8
3.0
45.8
33.7
11.7
28 January 2016
9

SKS Microfinance
Corporate profile
Company description
SKS Microfinance (SKSM) is the largest
microfinance company in India in terms of gross
loan portfolio. Its core business is providing small
value loans and other basic financial services to its
customers, who are predominantly located in rural
areas. The company extends loans to them mainly
for use in small businesses or for other income
generating activities and not for personal
consumption. As of 3QFY16, SKSM had an overall
AUM of over INR60, with active customer base of
4.2m spread across 1,268 branches.
Exhibit 11: Sensex rebased
Exhibit 12: Shareholding pattern (%)
Dec-15
Promoter
DII
FII
Others
2.7
17.1
59.5
20.7
Sep-15
6.3
16.7
47.8
29.2
Dec-14
9.3
15.0
48.2
27.5
Exhibit 13: Top holders
Holder Name
IDFC Premier Equity Fund
Amansa Holdings Pvt Ltd
Sandstone Investment Partners I
Vinod Khosla
Tree Line Asia Master Fund (Singapore) Pte Ltd
%
Holding
5.3
4.3
4.1
3.3
3.0
Note: FII Includes depository receipts
Exhibit 14: Top management
Name
P H Ravi Kumar
M R Rao
Designation
Chairman (Non-Executive)
Managing Director & CEO
Exhibit 15: Directors
Name
Sumir Chadha
Tarun Khanna*
Paresh D Patel
Geoffrey Tanner Woolley*
P Krishnamurthy*
*Independent
Name
S Balachandran*
Punita Kumar Sinha*
Exhibit 16: Auditors
Name
S R Batliboi & Co LLP
Type
Statutory
Exhibit 17: MOSL forecast v/s consensus
EPS
(INR)
FY16
FY17
FY18
MOSL
forecast
24.6
34.3
45.8
Consensus
forecast
-
-
-
Variation
(%)
-
-
-
28 January 2016
10

SKS Microfinance
NOTES
28 January 2016
11

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SKS Microfinance
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