In what will be a first-of-its-kind public offering, SKS Microfinance, the country’s largest provider of financial services to the poor, will make its debut on the bourses by the end of FY10. Though this MFI, founded by ex-Mckinsey consultant Vikram Akula, is yet to file its DRHP, the issue size is expected to be around Rs 1,000-1,200 crore. “The offering will give investors their first taste of the world’s biggest markets for micro lending. The SKS model is a highly profitable and scaleable model and it is expected to grow from strength to strength in the coming years,” says an investment banker familiar with the deal.
Private Equity investors expect to hit a jackpot when SKS lists.
According to Ramesh Sahani, partner, Trinity Capital, which had invested in SKS in its early years, from the very beginning, the business model of SKS was unique. “They categorized their customers into the poor and very poor and lent to them accordingly, stressing on the group model for borrowing. The ticket size of the loan was also very small and could be anything between Rs 500 and Rs 5,000, depending on the customer profile,” says Sahani. When Akula envisioned SKS as a self-help society, 30,000 people from the beneficiary community came together as founder members. Today, they are represented by the Mutual Benefit Trust (MBT) and Akula himself. As SKS sought more and more private capital, the holding of MBT got diluted from 40 per cent in 2005 to just 15 per cent now. SKS received several rounds of private equity investments between March 2007 and
SKS received several rounds of private equity investments between March 2007 and November 2008. This was also the time when the firm grew at a pace of 200 per cent, that was unheard of in the micro finance space earlier November 2008. This was also the time when SKS grew at a pace of 200 per cent, that was unheard of in the micro finance space earlier. Sequoia Capital was the first traditional venture capital firm to bet on microfinance firm by investing Rs 50 crore in SKS in 2007, while the US-based Sandstone Capital became the largest venture capital investor in an MFI leading a Rs 340 crore round in November 2008.
Kismet Capital, another US venture fund, holds the second largest shareholding in SKS. Sandstone, currently, has the fourth-largest shareholding at 12.5 per cent, followed closely by Vinod Khosla, the first private investor in the MFI. Recently, SKS announced a Rs 45 crore strategic investment from general and life insurance firm Bajaj Allianz Life Insurance. With the IPO plans in progress, the MFI plans to reach out to 1.5 crore customers by 2012 and five crore, eventually. The company is also in the process of coming out with a basic health insurance product that assures 24-hour hospitalisation to a family of four in far-flung rural areas.
Though the proceeds of the IPO are meant to accelerate the pace of the growth for the MFI, which has a cash intensive process of growth, there are skeptics who say that profitability and poverty alleviation cannot go hand in hand. Also the heady pace of growth that the MFI had witnessed is not sustainable given the high rate of interest (24-36 per cent) doled out on loans. Further political pressure in the Andhra Pradesh and Tamil Nadu, the stronghold of SKS is also being viewed as a threat.
In fact a competing MFI CEO points out, “With SKS expected to command a high valuation, large investors such as Sandstone will make a killing of anything between Rs 500 crore and Rs 600 crore. The promoter must be under pressure at this point of time from investors and, thus, the hurry to make a public offering.” More – Oulook Money
SKS microfinance forays into Punjab
SKS Microfinance Ltd., India’s largest microfinance and the fastest growing microfinance institution in the world, has expanded its network into Punjab.
SKS Microfinance extends collateral-free loans to women which they use to start income-generating activities. With operations spread across 19 states, SKS reaches out to 53 lakh poor households across 62,000 villages. It has disbursed collateral-free microloans worth Rs 9840 crore for income generation, through1,676 branches .
“Punjab has approximately 22 lakh people living Below Poverty Line, with a credit demand of Rs 1,168 crore. In line with our vision to provide collateral-free loans at the doorstep of the poor, SKS has started operations in Malout, Mansa, Chandigarh, Bhatinda, Sangrur and Patiala,” said M R Rao, COO, SKS Microfinance.More