Investigations are in progress and services of employees involved in the fraud have been terminated and the company is in the process of taking legal action, according to the company's latest annual report.
"We (auditors) have been informed that during the year there were instances of cash embezzlements in the company aggregating Rs 1,27,62,403; loans given to non-existent borrowers on the basis of fictitious documentation created by the employees of the company aggregating Rs 83,32,870 and misappropriation of cash by an external party, amounting to Rs 4,55,000," company auditors S R Batliboi and Co said in their comments.
Responding to the auditors' comments, SKS said cash embezzlement is 0.04 per cent of disbursement during the year and to mitigate this risk to a large extent the management has put in place several preventive control measures.
SKS' action plan includes procuring indemnity bond from every field staff, with personal guarantee of a third person, besides ensuring that every bank transaction (deposit/ withdrawal) to be executed by a minimum of two employees, comprising a bank signatory and a confirmed staff, the company has informed.
The net impact of frauds comes to around 0.06 percent (vis-a-vis 0.51 percent over last year) of the total amount disbursed by the company during FY13.
"Company is working towards further reducing this percentage by making process improvements, obtaining adequate insurance cover and by increasing engagements and opportunities for direct contact with members," the only listed micro-lender said.
During the year under review, it has recovered an amount of Rs 1.4 crore against a fraud amount written off in previous years, SKS said.
To prevent risk of loans to non-existent borrowers/ fictitious borrowers, SKS said it ensures that all loans disbursed pass through a checker control system, wherein loans processed by a 'sangam manager' are first approved by a branch manager or an assistant branch manager.
During FY 2012, some of the employees of SKS had swindled Rs 15.8 crore of company's money by way of fraudulent methods.
The auditors of the firm had then reported that they were informed that cash embezzlement by employees stood at 2.5 crore and loans given to non-existent borrowers were Rs 13.3 crore.
SKS Microfin stock price
On December 13, 2013, SKS Microfinance closed at Rs 170.20, down Rs 6.45, or 3.65 percent. The 52-week high of the share was Rs 198.90 and the 52-week low was Rs 95.60.
The company's trailing 12-month (TTM) EPS was at Rs 2.33 per share as per the quarter ended September 2013. The stock's price-to-earnings (P/E) ratio was 73.05. The latest book value of the company is Rs 36.08 per share. At current value, the price-to-book value of the company is 4.72.
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