SKS Microfinance: Microfinance Bill fears unfounded

DateTipwala RecoTime FrameCMPTargetSell Decision
30Sep2014Buy SKS Microfinance3 MonthsRs. 299Rs. 330 – 350Time frame or Target

SKS Microfinance has corrected by ~15% from its recent highs of Rs. 348 per share on fears that the new Microfinance Bill would allow individual state governments to regulate the microfinance companies. Also, there is some apprehension about the Prime Minister’s Jan-Dhan Yojana competing with the microfinance lending activity.

Our view is that the Microfinance Bill will be modified to allow the state governments to regulate the NGO-MFIs which form a small proportion of the MFI universe. The NBFC-MFIs like SKS Microfinance are anyways being regulated by the RBI and it makes no sense for the states to regulate them. Also, we believe that SKS Microfinance will post its best ever profits in the coming quarters. The recent correction provides a good entry point.

We recommend accumulating SKS Microfinance at the current price of Rs. 299 from a three months perspective.

We had similarly suggested a trading idea on SKS Microfinance before. Here is the report.

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