SKS Microfinance to ready new strategic plan in 6 months

Puranam Hayagreeva Ravikumar, 60, the new non executive chairman-Interim of SKS Microfinance, worked earlier with ICICI Bank and has in all 37 years of experience in financial service behind him. He spoke to E Kumar Sharma a day after taking charge. Edited excerpts:

What is the plan to revive SKS Microfinance now?
We are moving to financial inclusion of which microfinance will be an important sub-segment. Look at it like, say, HDFC Bank, which has retail banking, corporate banking, treasury and other services. Or, take ICICI, from which I have come. It has ICICI Life, general insurance, securities and the bank. It is a structure where there are different vehicles but the brand is the same.
 
Will the focus be rural?
We have not yet migrated to urban customers. So, initially, it will be rural or non-urban, low income people, those below the poverty line.

So, you are talking of a change in the business model as far as SKS is concerned where it will not be just a microfinance company but a multi-product entity addressing the rural financial needs?
Absolutely.
 
By when do you expect to have the new structure in place?
We will arrive at a strategic business plan in four to six months and will see its rollout in the next financial year. This is because we need to look at different aspects. First, identify the low hanging fruits (segments to get into other than microfinance). We also need to look at the regulatory structure and how we can comply with it. For instance, what should be the legal structure? Can it be within the microfinance company framework or will we need to create a holding company? Also, what is the capital to be raised? Studying of all these aspects will take us four to six months. 
 
Are there plans for more equity infusion?
Once we have the plan in place, we will know the extent of capital to be raised and then we need to look at all the aspects including the shareholding pattern.
 
What do you expect will happen to your Andhra Pradesh loans?
We have some recoveries of about 10 to 11 per cent. That is what I understand from my colleagues. But, clearly, we need to find a solution to that in the next 18 months (the problem of poor recoveries). We have no solution for this existing portfolio and finding one will be our goal. We will be making provision for it completely.
 
That means a hit of close to Rs 1,000 crore?
You could say about Rs 800 crore. But we will not give it up. While we will make the provision, we will find a way of recovery.
 
So, the next two quarter results or so will not be good?
I think the investors and the markets understand that and have already factored that in.
 
Do you have a plan in place to build a team that can handle different businesses? Right now, your team is equipped to handle only microcredit?
It is an important area. Part of our study now is to look at the skill gaps and where we need to fill them.
 
What about Vikram Akula? He has no role now in the company right?
Till March, he will continue to help us because all said and done he founded and grew the company.
 
One year from now, how do you see SKS?
I am not going to paint a very rosy picture. The balance sheet of SKS Microfinance, as it stands today, will start looking healthy and the rollout of some of the elements of financial inclusion (the new business plan) would have began in a year's time.
 
There are many factors external to SKS (like the Andhra Pradesh crisis) which have impacted SKS. But where do you think things went wrong internally?
I don't know where we went wrong. Probably, I think, we underestimated the negative reaction and probably did not handle it well.
 
Can you explain?
I mean, in India, the value system is such that if you are working in customer segments like that of SKS Microfinance, you expect people to be not paid well. They are expected to draw only moderate salaries. Now, if I want the best people I cannot pay them moderate salaries and that is the reality. It is the same with the view on our making profits. Now, how do I handle this value perception?
 
So, the issue was the signal the company was sending out?
We did not handle it well and it was one of the reasons why there was a negative reaction.
 
Greed is good. That was the mantra, isn't it?
It translated into such an interpretation but we should have handled the communication better. I do not know if we will succeed in this now but we will try.
 
But Vikram Akula was a good communicator for the company.
This is not withstanding the fact that Vikram is an excellent communicator.
 
Many in the sector feel SKS did not act as a leader. Like say Infosys did in its initial years in the IT sector. SKS could have engaged with the government and with the self-help groups and focused on increasing transparency and on how to guide the sector to focus on capacity building. It was a chance at leadership that was lost.
That chance is still there. We will make more effort to engage with the government, other sector participants and other models like the self-help groups (SHGs).