MUMBAI: Shares in India's SKS Microfinance plunged nearly 20 percent to a record low on Friday after analysts downgraded the firm, forecasting steep losses.
Shares in SKS, the country's largest microfinance company, closed down 19.83 percent or 81.95 rupees at 331.3 rupees ($7.40) after investment house JP Morgan slashed its target for its share price to 200 rupees from 550 rupees.
SKS listed the shares on the Bombay Stock Exchange last August at 1,159 rupees.
India's microfinance firms have been reeling since southern Andhra Pradesh state -- the hub of the country's microfinance industry -- cracked down on lenders to stop what they said was "exploitation" of poor borrowers.
The state claimed many operators charged exorbitant rates of interest equivalent to the loansharks that the microfinanciers had initially aimed to put out of business.
JP Morgan analysts said in a report published on Friday that SKS could see "deep earnings cuts".
"We now forecast a large loss of seven billion rupees ($157 million) in the fiscal year ending March 2012," Seshadri Sen and Adarsh Parasrampuria said in the report.
"This could shrink equity by 40 percent," the analysts said, adding that they feared SKS could need more capital.
SKS was set to announce fourth quarter and full year earnings late Friday.
SKS, based in Andhra Pradesh capital Hyderabad, conducts 27 percent of its business in the state.
The company had last year warned that a new state law designed to curb high interest and heavy-handed debt collection could have a "high" impact on its earnings.
"We think the Andhra Pradesh portfolio is seeing more losses," the JP Morgan analysts said.
At Friday's level, SKS shares had fallen 77 percent from an all-time high of 1,490.7 hit last September after it became the first Indian microfinancier to list on the Bombay Stock Exchange.
Concern about the sector's financial health has led commercial banks to withhold funding from some microlenders, who disperse small loans mainly to the rural poor who do not have access to mainstream banking.
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