SKS Microfinance, the country's largest microfinance company, shares fell by 20% touching the new low on Thursday after the company said that its revenues and profits are likely to be hit by the new ordinance promulgated by Andhra Pradesh government which is aimed to regulate microfinance institutions.
"The collections are lower than normal on account of transition from weekly to monthly collection cycle and the related change in MIS (management information systems), passbook, and member communication," said the company in statement to Bombay Stock Exchange.
"As said in our earlier notification, if this is not redressed satisfactorily, the resultant reduction in collections in Andhra Pradesh (AP) is likely to have a material impact on the company's revenues, profitability and asset quality of the AP portfolio," the company added in its statement.
The shares of the company touched a day's high at Rs 819 in early hours of trade but witnessed free fall after the company released the projections on earnings and closed down at Rs 640.7 on BSE.
Last month, the company had reduced interest rates in AP to 24.55% from over 26% after the state government promulgated an ordinance to control microfinance institutions (MFIs) on October.
In a similar related development, JPMorgan lowered its profit forecasts for SKS Microfinance by 25-35 % for the next three financial years and cut its target price to R700 a share from Rs 1,000.