SKS Microfinance Limited (SKS), a non-banking finance company (NBFC) regulated by the Reserve Bank of India (RBI), reportedly has raised INR 321 crore (USD 63 million) from four undisclosed banks “by selling securities backed by pools of loans to woman borrowers outside its home state of Andhra Pradesh.” The transaction has been rated A1 + (SO) by CARE Ratings, an Indian credit rating agency, indicating the securities “are considered to have a strong capacity for timely payment of short-term debt obligations and carry the lowest credit risk.” The transaction carries an annual interest rate of 12 percent [1]. As MicroCapital reported at the time, SKS completed a similar transaction totaling USD 122 million in February 2012.
According to 2011 data from the US-based nonprofit Microfinance Information Exchange (MIX), SKS Microfinance holds total assets of USD 389 million, a gross loan portfolio of USD 341 million, approximately 4.3 million borrowers, return on assets (ROA) of -66.1 percent and return on equity (ROE) of -152 percent. SKS has raised approximately INR 918 crore (USD 181 million) through securitization deals since January 2012.
By Brendan Millan, Research Associate
About SKS Microfinance: SKS Microfinance is a microfinance institution (MFI) that was launched in 1998. It delivers gold loans and group microloans to impoverished women in India as a for-profit, non-banking finance company. SKS converted into a public limited company in May 2009 and launched an initial public offering on July 28, 2010. Its equity investors include Quantum Hedge Fund, Sequoia Capital, Vinod Khosla, Small Industries Development Bank of India, Bajaj Allianz, Yatish Trading, Kismet Capital, Sandstone Capital, Silicon Valley Bank and Unitus. SKS currently trades on the Bombay Stock Exchange. According to 2011 data from the US-based nonprofit Microfinance Information Exchange (MIX), SKS Microfinance holds total assets of USD 389 million, a gross loan portfolio of USD 341 million, approximately 4.3 million borrowers, return on assets (ROA) of -66.1 percent and return on equity (ROE) of -152 percent. SKS has raised approximately INR 918 crore (USD 181 million) through securitization deals since January 2012.
About the Reserve Bank of India (RBI): Established in 1935, the Reserve Bank of India (RBI) undertakes consolidated supervision of the financial sector comprising commercial banks, financial institutions and non-banking finance companies (NFBCs). The current focus of RBI is to supervise financial institutions, consolidate accounting standards, resolve legal issues in cases of banking fraud, monitor non-performing assets and supervise the rating model for the banking sector. In 1979, the National Bank for Agriculture and Rural Development (NABARD) was formed at the behest of RBI to provide regulatory oversight to regional rural banks (RRBs) and to promote the development of agricultural lenders: tasks that had been the responsibility of RBI. While all microfinance institutions (MFIs) and non-banking financial companies still operate under RBI regulations, the responsibility for inspecting nonprofit MFIs, agricultural lenders, RRBs, state cooperative banks, district central cooperative banks and state cooperative agricultural and rural development banks was transferred to NABARD. RBI maintains these responsibilities for for-profit MFIs. Although RBI was originally the parent organization of NABARD and until October 2010 held a 72.5 percent stake in the outfit, RBI owns a one-percent stake in NABARD as of 2011.
About CARE Ratings: Founded in 1993, CARE Ratings offers credit research, analysis and ratings information for India’s capital markets. Domestic banks and other companies control the majority of the shares of the firm. As of June 30, 2011, CARE Ratings had ratings outstanding on debt totaling approximately INR 33.1 trillion (USD 671 billion).
Sources and Resources:
[1] Live Mint: “SKS Microfinance Securitises Loans Worth Rs 321 cr”, http://www.livemint.com/2012/03/23132932/SKS-Microfinance-securitises-l.html?h=A1
MicroCapital.org Article, February 29, 2012, “SKS Microfinance Completes Securitization Deals Totaling $122m”, https://www.microcapital.org/microcapital-brief-sks-microfinance-completes-securitization-deals-totaling-122m/
MicroCapital.org Article, February 21, 2012, “SKS Suffers $85m Loss as Norway’s Government Pension Fund – Global Buys at 1% Stake”, https://www.microcapital.org/microcapital-brief-sks-suffers-85m-loss-as-norways-government-pension-fund-global-buys-1-stake/
MicroCapital.org Article, January 23, 2012, “SKS Microfinance to Further Downsize Workforce Cap Return on Assets at 3 percent”, https://www.microcapital.org/microcapital-brief-sks-microfinance-to-further-downsize-workforce-cap-return-on-assets-at-3/
MicroCapital.org Article, December 12, 2011, “Vikram Akula Resigns from Board of India’s SKS Microfinance”, https://www.microcapital.org/microcapital-brief-vikram-akula-resigns-from-board-of-india%E2%80%99s-sks-microfinance/
MicroCapital.org Article, November 12, 2011, “Shares of India’s SKS Microfinance Fall 10% Following Announcement of $78m Loss During Quarter Ending September 2011”,https://www.microcapital.org/microcapital-brief-shares-of-indias-sks-microfinance-fall-10-following-announcement-of-78m-loss-during-quarter-ending-september-2011/#more-15553
MicroCapital.org Article, August 29, 2011, “India’s SKS Microfinance Scaling Up Non-Core Businesses of Financing Grocery Stores, Gold Lending”, https://www.microcapital.org/microcapital-brief-india%E2%80%99s-sks-microfinance-scaling-up-non-core-businesses-of-financing-grocery-stores-gold-lending/
MicroCapital.org Article, November 8, 2011, “India’s SKS Microfinance to Raise $184m via Share Sale”, https://www.microcapital.org/microcapital-brief-india%E2%80%99s-sks-microfinance-to-raise-184m-via-share-sale/
MicroCapital Universe Profile: SKS Microfinance (SKS), https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS+Microfinance
MicroCapital Universe Profile: Reserve Bank of India (RBI),https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Reserve+Bank+of+India+%28RBI%29
MicroCapital Universe Profile: CARE Ratings, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=CARE+ratings
Browse the MicroCapital Universe and add your entry to the wiki at: https://www.microcapital.org/microfinanceuniverse/
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