Market analysts expect SKS Microfinance to set a price band of Rs 650 – Rs 700 for it’s IPO.This would make SKS Microfinance’s valuation touch US$1 billion
With a price band of Rs 650-700 a share, SKS Microfinance could be looking to raise around Rs 1,500 crore through its initial public offering. SKS Microfinance is India’s first microfinance company to go public and retail investors are expected to get a discount of 10-15% when compared to institutional investors , a senior investment banker added.
In february 2010, Tree Line Asia a hedge fund based in Hong Kong had picked up a stake in SKS microfinance at the price of around Rs 637 per share.The hedge fund had bought the shares from the senior management of SKS Microfinance.This included it’s chairman Dr. Vikram Akula and CEO Suresh Gurmani who have sold their stakes to Tree Line Asia. This transaction valued SKS Microfinance closer to Rs 4,590 crore, or close to $1 billion on post-issue share capital basis and is expected to be the benchmark for the upcoming IPO.Early Investors in SKS Microfinance reap multiple returns
If SKS Microfinance fixes it’s IPO price band at Rs 600-700 range, then it would turn out to be a multibagger investment for its early investors like Unitus, Vinod Khosla, Sequoia Capital India and Small Industries Development Bank of India (SIDBI). As per the share sale price to Tree Line, these players are expected to make anywhere between 6 times to 18 times (6x to 18x) of their initial share acquisition cost.
Sequoia Capital , the largest shareholder and promoter of SKS Microfinance holds a 22% stake in SKS Microfinance.It has invested nearly Rs 124 crore in the firm since 2007.The shares in SKS Microfinance were brought in both fresh capital infusions and through secondary purchases from Vikram Akula and Unitus.
The average cost of acquisition for Sequoia Capital is approximately Rs 88 per share, which means Sequoia could be getting 6x or more depending on the IPO price band. Sequoia Capital is also selling nearly 4 million shares in the issue, with its stake expected to come down to 14% after the issue.
Unitus which is one of the first venture capital investors in SKS Microfinance, is also expected to get nearly 14x or more on its investment. The microfinance focused venture fund is managed by Elevar equity and has already sold a 3% stake to Sequoia last year for Rs 47 crore.
Vinod Khsola, the Indian born venture capitalist and co-founder of Sun Microsystems is set to get nearly 18x or more on his initial investment.Vinod Khosla was an early investor in the firm and invested way back in 2006.
Other investors in the firm include Sandstone Capital, which invested Rs 250 crore last year at the price of Rs 300 per share. Sandstone will have a 11.6% stake in the SKS Microfinance after the IPO.