Despite many naysers raising ethical and valuation issues over the ongoing initial public offer of microfinance firm SKS Microfinance, the lender managed to comfortably see through its offer on day 3. The issue was subscribed more than 10 times even as the offer closes on Monday.
As of end of Day 2, the issue was primarily lapped up by institutional investors with QIB portion oversubscribed even as retail and non institutional investors did not appear too enthused by the issue. Although details of the bidders on Friday is expected later in the day, it is expected the issue would have been seen through by QIB.
The microfinance firm had already roped in a bunch of around three dozen anchor investors with Reliance Capital Trustee, BNP Paribas Arbitrage, Quantum(M) and Smallcap World Fund leading the funding.
Given the demand for shares, the country’s largest microfinance firm could now be looking at potential valuation of $1.5 billion(based on upper end of the price band). This would place it among the top 25 most value financial services firms in India ahead of names such as Indian Overseas Bank, Bajaj Finserv, Federal Bank, Religare Enterprises and M&M Financial Services.
The firm fixed a price band of its initial public offer at Rs 850-985 per share that would allow it to raise up to Rs 1,654 crore at the upper end of the price band. At the lower end of the issue price band the firm will be valued at $1.3 billion and it will be able to raise around Rs 1,427 crore.
Sequoia will be making part exit with returns of over 16x in its three year old investment. It had invested through two funds SCI II Llc and SCIGI I with average cost of purchase pegged at Rs 61.18 and Rs 137.53 per share, respectively. SCI II is a part of the group of shareholders who have together offered to sell a part of their holding in the IPO.
The IPO, the first by a microfinance entity in India, shows investors appetite for such lending institutions that are quietly doing business in hinterlands of the country. The money raised from fresh issue approximately Rs 630-730 crore, is to be used for meeting the company's future capital requirements.
Founded by Vikram Akula, SKS Microfinance has a customer base of over 5 million people. Besides Sequoia it is backed by a number of other financial firms including Catamaran Management Services(backed by Infosys co- founder & chief mentor NR Narayana Murthy), Tejas Ventures, SIDBI and venture capitalist Vinod Khosla.