The Hindu Business Line which is one of India’s leading financial newspapers has recommended in an article that Investors with a high risk appetite can consider subscribing to the Initial Public Offer (IPO) of SKS Microfinance, one of the largest microfinance NBFCs in India. Read the report summary below
SKS Microfinance IPO: Invest
High capital adequacy ratio, strong risk-management systems and a diversified sector and geographic profile augur well.
SKS Microfinance has a presence in the under-penetrated micro-financing segment offers immense growth potential. The company has over 2,000 branches across 19 States, a more diversified presence than any other microfinance institution (MFI) in India and is better equipped to leverage future growth opportunities.
Investors may consider SKS Microfinance’s IPO at Rs 724 per share or below. At this price SKS Microfinance may realise Rs 1,260 crore from this IPO. At a price-book value of 3.5 times post-offer, SKS Microfinance’s stock would trade at Rs 724. The PE ratio at this price would be 26 times. Over the last 15 months, SKS Microfinance has raised funds from private equity investors at Rs 300/share.
SKS Microfinance has a high capital adequacy ratio (of 28.3 per cent which may further improve to excess of 40 per cent post-offer) and strong risk-management systems which address two concerns MFI’s are facing today — access to capital and maintenance of asset quality.
The net non-performing asset ratio as of March 31, 2010, was 0.16 per cent. SKS Microfinance’s conservative provisioning on standard assets and high NPA provisioning reduces the inherently high credit risks in this business, to some extent.
Read the rest of the article at Hindu Businesline