Microfinance

SKS Microfinance IPO to hit markets by end of July 2010

SKS Microfinance Ltd, India’s largest microfinance company, plans to sell shares in its initial public offering from July 28 to July 30, according to market sources who are involved with the microfinance IPO. The decision was taken after the market regulator Securities and Exchange Board of India(SEBI) okayed the proposal last week, the source added.

SKS Microfinance plans to raise between Rs 1,000 crore to Rs 1,500 crore to meet its rapid expansion plans through the share sale and will be the first-ever IPO by a large micro finance institution in the domestic markets.

Founded by Vikram Akula, SKS Microfinance had total outstanding loans of Rs 3,208 crore as of September, 2009, and a customer-base of around 53 lakh. Venture capital firm Sequoia ( An early investor in Google and Yahoo) is the largest shareholder in the firm and also listed as one of the promoters of SKS Microfinance , other investors include Kismat Capital,SKS Mutual Benefit Trust and Sandstone Capital.

In March 2010, Narayana Murthy’s Catamaran venture fund invested Rs 28 Crore In SKS in a pre-IPO preferential issue at a discounted price of Rs 300 per share.Catamaran Management Services Pvt Ltd will hold a 1.3% stake in SKS post-issue.

sks microfinance IPO

SKS Microfinance

SKS Promoters are expected to dilute 21.6 per cent of the shares through the issue.After the IPO issue , the holding of Sequoia Capital in the company will come down to below 16 per cent from the current 24 per cent and that of Kismat Capital will reduce to 12.9 per cent from the current 17.9 per cent.

SKS Microfinance plans to offer a total of 1.6 crore shares to the public, out of which about 50 lakh shares will be allocated to the retail investors category.SKS Microfinance has so far raised almost Rs 13,000 crore of debt on a cumulative basis from various investors to meet its funding requirements.

Abhay N

Author : 

Abhay is the founder and managing editor of India Microfinance. He is passionate about microfinance, financial inclusion and social entrepreneurship in India.

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1 Comment

1 Comment

  1. k a prasanna

    July 22, 2010 at 8:29 am

    TEN REASONS WHY ONE SHOULD NOT INVEST IN SKS MICRO FINANCE IPO

    1. Unethical business: The Company is charging interest around 40% p.a. on money lent to the poor and down trodden.

    2. Unsustainable business model: The business model will not sustain in the long -run.

    3. No commitment from the promoters: SKS’s founder and chairman sold his shares to Tree Line Asia Master Fund (Singapore) Pte for $12.9 million in Feb. this year.

    4. Look at the salary of top executives :

    Suresh Gurumani – Managing Director of the Company. The total monthly salary is Rs. 12, 50,000. In addition to the above, Mr. Suresh Gurumani was paid onetime bonus of Rs. 10,000,000, in April 2009.

    Dr. Vikram Akula – chairman Rs 70.00 lacs p.a. In addition, ESOP amounting to Rs10.97lacs, totaling Rs 1.79cr p.a.

    5. Mohd. Yunus says – “I get very worried when investment funds come to microfinance,” said the founder of Bangladesh’s Grameen Bank, which pioneered the industry by giving small loans to rural women to start their own businesses. “I don’t want to excite businessmen that there is profit to be made here,”

    6. The IPO will make the promoters, and other venture capitalists including some P/E funds that have stakes in these companies’ millionaires. The hapless borrowers continue to live in abject poverty.

    7. Government /RBI will not be mute spectators to the exploitation.
    They are bound to regulate the segment. This will make the business un- attractive.

    8. Financial inclusion initiatives taken by the public sector banks will marginalize the micro finance business. Do not buy the theories put forth by the BRLMs to sell the issue.

    9. The average cost of acquisition of shares by promoters is less than Rs50/-The Company has limited period of history and no dividend payment record.

    10. The Andhra Pradesh government has constituted district level ‘Task Force Committees’ (TFCs) to investigate the unethical practices of micro finance institutions in the state. The committees were constituted after the government received many complaints against the loan shark practices adopted by some leading MFI’s of the state.

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