SKS Microfinance, India’s largest microfinance organisation, has today informed the exchanges that it plans to make an initial public offering. SKS could be the first Indian MFI to be listed on the Indian stock market, an event that will be keenly watched by the investor class, who have deep exposure in this space.
The firm, which is registered as a non-banking financial company (NBFC), is expected to file a Draft Red Herring Prospectus (DRHP) with the market regulator Securities and Exchange Board of India (SEBI). The issue will comprise of 16,791,579 equity shares consisting of fresh issue of 7,445,323 equity shares and offer for sale of 9,346,256 equity shares, it said in a statement.
SKS IPO, which has been keenly awaited, will be the first for an MFI and is expected to set a precedent for further public offering from the sector. Interestingly the majority of the issue comprises of a secondary sale than a primary offering for capital raising. This signals an exit event for the private equity investors of SKS.
SKS has raised Rs 574 crore in private equity funding from Sequoia Capital India, Sandstone Capital, Kismet Capital, Unitus Equity Fund, Silicon Valley Bank, besides Vinod Khosla. It also raised Rs 50 crore from insurance firm Bajaj Allianz Life Insurance last year as a trategic investment.
A report in Mint earlier this month stated that investors like Sequoia, Sandstone, Kismet and SKS Trust are expected to be the promoter group in the IPO. Sequoia owns a 24% stake in the MFI, while Sandstone has 12% and Kismet Capital another 17%. The company is expected a valuation of $2.5 billion for the issue, said the same report.
Last year SKS became the first MFI to raise Rs 75 crore via non convertible debentures (NCD) and list the same in Bombay Stock Exchange.
SKS posted revenue of Rs 385 crore in the April-September 2009 period against Rs 554 crore for the full fiscal year at the end of March 2009. The profit after tax for the half year period (April-September 2009) is Rs 55.6 crore against Rs 80.22 crore in 2008-09. Its return on equity is 15.5% in the first half this fiscal. SKS, which disburses an average loan size of Rs 10,000, has disbursed a cumulative sum of $2.4 billion (Rs 11,208 crore) as on November 2009.
Its loan outstanding stands at Rs 3,590 crore, according to information on its website. The company’s profit after tax has literally leapfrogged from Rs 44 lakh in 2005-06 to Rs 80.22 crore in 2008-09. The return on equity too has been in the high teens in this period.