CRISIL Research has assigned a CRISIL IER fundamental grade of 4/5 to SKS Microfinance (SKS). The grade indicates that the company's fundamentals are 'superior' relative to other listed equity securities in India. Our fair value of the stock is Rs 310 a share.
At the current market price of Rs 270 a share, our valuation grade is 4/5 indicating that the market price has upside from the current levels. The grades are not a recommendation to buy, sell or hold the graded instrument, or a comment on the graded instrument's future market price or its suitability for a particular investor.
The assigned fundamental grade reflects the improved growth prospects of the microfinance industry post the Reserve Bank of India's (RBI's) intervention, significant entry barriers for new players, healthy growth opportunity for SKS and the company's strong management.
The grade draws support from the RBI's intent to regulate the microfinance sector and NBFC-MFIs (MFIs regulated by the RBI as NBFCs) and introduction of its regulations, which have helped the industry to recover post the Andhra Pradesh (AP) crisis.
