Shares in SKS Microfinance, India's largest and only listed microfinance company, fell 10 per cent in morning trade on Tuesday, after the company's net slumped weighed by huge loan writeoffs.
The firm posted a net loss of 3.84 billion rupees in July-Sept, compared with a net profit of 0.81 billion rupees during the same quarter a year ago.
Income from operations saw a sharp fall by 66.5 per cent to 1.14 billion rupees. The company saw a huge jump in provisions and writeoffs to 3.53 billion rupees as against 173 million rupees in the year ago quarter.
At 12:26 pm, SKS shares recouped some losses and were trading 5.6 per cent down at 197.45 rupees as compared to the benchmark index which was down 0.3 per cent.
Shares in the firm, currently valued by the market at $313 million, slumped 70 per cent so far in 2011, while the benchmark fell 15 per cent during the same period.
The firm faces challenges in raising debt from the banks and managing losses from the Andhra Pradesh loan book, Kotak Securities said in its report.
The loan book continued to decline at 26.5 billion rupees in September after factoring in loan writeoffs as compared to 34.5 billion rupees in June and 41.1 billion rupees in March 2011, it said.
"We expect some improvement in traction towards the end of this year as the bank's demand for priority sector increases, we are modelling about 6-7 billion rupees of loan growth over the next two quarters," it said.
A regulatory backlash against aggressive lending and collection practices had crippled microfinance sector with crackdown in Andhra Pradesh last year hurting the loan growth.
On November 2, the board had approved raising up to 9 billion rupees ($183 million) from share sale to institutional investors and increasing authorized share capital from 950 million rupees to 1.35 billion rupees.
SKS, backed by investor George Soros, among others, went public last August in a successful initial public offering that raised $358 million.