SKS Micro sees sector consolidation: CFO

India8217;s once-thriving microfinance sector has been reeling since Andhra Pradesh,a southern state that was its largest market,clamped down on business practices such as high interest rates and aggressive loan recovery practices last October.

Loans as low as 2,000 rupees 44 at interest rates that have topped 30 per cent are used by India8217;s poor for ventures such as buying livestock or opening a tea stall.

Some spend the cash on consumer goods or to send their children to school.

Analysts expect SKS8217; collection rate from Andhra Pradesh to dip to as low as 10 per cent this fiscal year,and have said write-downs of bad loans could squeeze liquidity for the company.

SKS,India8217;s biggest and only listed microlender,swung to a big fourth-quarter net loss last week,weighed down by provisions and write-offs of Rs 1.0 6 billion in the quarter.

India8217;s central bank last week set an interest rate cap of 26 per cent on micro loans,2 percentage points higher than recommended by a panel,and announced moves that were broadly perceived as being friendly toward the ailing sector.

8220;The interest rate cap of 26 per cent and the margin cap of 12 per cent means only large,efficient MFIs that have already reached certain economies of scale will be the ones that will continue to operate,8221; SKS founder Vikram Akula said at the briefing in Hyderabad,the capital of Andhra Pradesh.

He added that the RBI8217;s rules would make it difficult for smaller players to survive.

George Soros-backed SKS,which surged to prominence when it raised 358 million in an initial public offering in August,on Friday posted a net loss of Rs 697.7 million in the fourth quarter,compared with a profit of 628.9 million rupees a year earlier.

Credit Suisse on Monday downgraded the stock to 8220;underperform8221; from 8221; out perform ,8221; saying it expected 90 per cent of the Andhra Pradesh book to turn to non-performing loans this year.

JPMorgan on Friday cut its price target on the stock,citing a weakening business model and concerns about liquidity.

The stock8217;s prolonged slump has knocked off 80 per cent of the market value from the stock8217;s peak of Rs 1,491.50 in September.

SKS shares gained 10 per cent on Tuesday,but have plunged 34 per cent in the previous two trading sessions to touch their all-time low.

The shares slid 20 per cent on Friday after analysts forecast a gloomy outlook for the sector. They extended losses by as much as 19 per cent on Monday,the first trading day after the microlender posted quarterly results.