MICROCAPITAL STORY: Indian SKS Microfinance Plans to Raise $30m in Equity; Possible Future IPO

To finance its ambitious expansion plans, for-profit microlender SKS Microfinance has announced it plans to raise RUP 1.3 billion (USD 30.3 million) in equity capital through private investors, hoping to increase its equity base from roughly USD 50 to 80 million. SKS’ management plans to use the new funds to double its current customer base of 500,000 over the next two years. To meet its equity target, SKS added that it may induct a new investor onto its balance sheet.

In discussing subsequent financing rounds, management also mused at the possibility of an eventual public offering. IPOs by microlenders are a relatively recent development in microfinance’s path to commercialization. To date, three have occurred: Bank Rakyat Indonesia (BRI) in 2003, Equity Bank Kenya in 2006, and Banco Compartamos in 2007. Banco Compartamos’ IPO marked the first offering by an institution originally founded purely as a microlender (MicroCapital story here).

Established in 1997 by Vikram Akula, SKS Microfinance is the largest and fastest growing microlender in India. In FY 2007 alone, SKS grew by nearly 300 percent, expanding its loan portfolio to USD 64 million, all while maintaining a 99.97 percent on-time repayment rate. As of March 2007, SKS held total assets of USD 78.8 million, had a debt-to-equity ratio of 379.22 percent and return on assets of 1.75 percent. In October 2007, Indian microfinance rating agency M-CRIL gave SKS a “2” on a scale of 1 to 8, in which “1” was the best possible rating.

Prominent SKS investors include Seattle-based NGO Unitus, Small Industries Development Bank of India, and private equity firms including Sequoia Capital. In May 2007, SKS made headlines on MicroCapital when it announced a partnership with financial services giant Citi, in which Citi purchases USD 44 million of individual loans originated by SKS and shares the credit risk.

By Ryan Benson, Research Assistant

Additional Resources:

The Economic Times: SKS Microfinance set to raise capital by Rs 130 cr, by Priti Patnaik

SKS: Home

MICROCAPITAL STORY: Breaking the Mould: Mexican Banco Compartamos Drags Microfinance into a Controversial New Era Despite the Kicking and Screaming, by Michael Warmington, May 1, 2007.

MICROCAPITAL STORY: SKS Microfinance, India, and Citibank Announce USD 44mm Financing Programme with Support from Grameen Foundation, by Michael Warmington, May 16, 2007.

Unitus: Home

Small Industries Development Bank of India: Home

Sequoia Capital: Home

MIX Market: SKS Microfinance

M-CRIL: Home

Citi: Home