Re: Abridged summary of BIM_Finance@googlegroups.com - 1 Message in 1 Topic

[Vijayaraghavan SV]

To me the whole set of financial statements is questionable. SKS is a Financial Services Company and fund based financial services company at that. Prof. Murugadas should be able to comment on what would be the operating expenses ratios of a typical fund based financial services company - Interest cost to Gross Income, Employee Cost to Gross Income and other Operating costs to Gross Income. From my understanding of such business, Interest cost to Gross Income would range from 60%-70%, Employee cost from 5% to 8% and Operating cost to Gross Income about 3% to 5%. In other words, what is the spread in 'Banking Industry' - the difference between what the bank charges out to its borrowers to what it pays its lenders. It ranges from 5% to 8%. And that is all it could earn. The Bank is squeezed on both sides and hence the profitability is all about efficiency in operations and possibly increasing its fee based business. Prof. Murugadass - what is your take on this?

Of course, Micro Finance Institutions (MFIs) do not suffer the 'customer competitive force' (Porter's 5 model). It can charge whatever it can on its customers and, therefore in some way is different from the way  banks operate. MFIs also have to employ significantly more number of employees than a traditional bank.

However, i am not willing to buy the argument that "Financial Expenses" are 23% of Gross Total Income for SKS Finance (which means that SKS is over charging its customers - no wonder that today's paper carries a newstory where Akula is willing to reduce the interest rate by 2%. A more reasonable reduction has to be multiple times of 2%).  Neither am I willing to accept that Employee costs are 26% of Gross Income (It sounds that SKS is more like a Mini-IBM Consulting rather than a Finance Company!). Looks like the company is having one employee for each borrower!

There is something fishy about the company's financials - on many counts. Notwithstanding that the company's books are audited by EnY, notwithstanding that it has Katamaran as one of its investors and is otherwise funded by other investors, etc (Remember that Satyam was audited by PwC, a listed company and a Golden Peacock Award Winner for 2008 for Corporate Governance), watch out for this counter.. More interesting news could tumble down!

Vijayaraghavan SV

On Sat, Oct 16, 2010 at 1:40 AM, <BIM_Finan...@googlegroups.com> wrote:

  Today's Topic Summary

Group: http://groups.google.com/group/BIM_Finance/topics

• Regulating the MFIs [1 Update]

 Topic: Regulating the MFIs

DC <deep...@gmail.com> Oct 14 11:18PM -0700 ^
 
i Guys,
 
Since to see a debate about the way MFIs works. Attached an interview
of Vikram Akula (Founder of SKS) as a file rather than copying and
pasting it here.
 
Before concluding anything more

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Vijayaraghavan SV