Crisis-hit SKS Microfinance will slash 1,200 jobs and shut down 78 branches in Andhra Pradesh where micro lending is going through a tough patch. The country's only listed MFI,SKS at present has a headcount of 3,400 in Andhra Pradesh,once considered the micro finance capital. SKS Microfinance Managing Director M R Rao said the "painful" decision was taken considering the situation prevailing in Andhra Pradesh for the micro finance sector in the past 18 months. "We have incurred a loss of Rs 1,360 crore during the year ending March 2012," he said. "We are offering two months notice period as salary and 15 days of salary for every year service completed. It will take at least a week for us to know how many employees will take this offer",Rao said. Once the company knows how many employees are accepting this offer,only then can it say how much are the costs and the future savings in terms of operational costs,he added. The company had to write off Rs 1,120 crore in the last fiscal after Andhra Pradesh government came out with a stringent laws to regulate micro lending. This followed a spate of suicides of borrowers allegedly due to coercive recovery practices by micro finance institutions' (MFI) agents. The state government had come out with AP Microfinance Ordinance in October,2010,and subsequently made it into an Act. The Act crippled the activities of all MFIs including SKS. Barely a few months before the crisis hit the sector,SKS became the first micro finance firm to go public in South Asia and raised over Rs 1,650 crore. The company was founded by Vikram Akula,who in November 2011 resigned from the board in wake of the huge losses suffered by the Hyderabad-based firm. Mutual Funds Check for top funds Company INFO More on SKS Microfinance Stocks More on SKS Microfinance However,some of the employees reportedly staged a protest in front of the SKS office,demanding a meeting with top company officials. When contacted,a SKS spokesperson said: "A group of 30 to 40 employees wanted to meet the HR officials and we let them meet." Explaining the rationale behind the job cuts,Rao said in view of the present financial situation,it is imperative that the AP operations remain cash neutral in the interest of fairness to all stakeholders. Bank funding is restricted to operations in 17 other states,he added. SKS reiterated that it is not closing down its Andhra Pradesh operations. "We are only rationalising the Andhra Pradesh workforce,and will continue to work closely with the Andhra Pradesh Government and the Central Government to bring back normalcy to the business. "We are hopeful of an early solution. We will be happy to welcome our staff back into the fold as and when the situation improves," Rao said in a statement. The company said it is not facing any liquidity or solvency issues. SKS has a healthy cash and bank balance of Rs 669 crore with a net worth of Rs 435 crore and strong capital adequacy of 35.4 per cent as of March 31,2012,the statement said. Replying to a query,Rao said in view of the reduced operations in AP,the registered office has been shifted to Mumbai. "We have shifted the registered office to Mumbai. There is no advantage to the company. We are national company. Now in AP,virtually there are no operations and the portfolio has come down to Rs 236 crore. So,we thought lets shift the registered office to Mumbai where most of the financial institutions are located," Rao said. Shares of SKS closed 0.06 per cent up today at Rs 88.75 apiece on the Bombay Stock Exchange.
