Since its initial investment in SKS Microfinance, an India-based microfinance institution (MFI), Sequoia Capital, a US-based venture capital firm, has experienced significant gains on paper followed by partial losses of those gains.
Before other venture capital firms were investing in SKS, Sequoia invested USD 11.5 million in the MFI [1]. By the end of 2008, venture capital firms had invested a total of USD 75 million in SKS [1]. SKS went public in July 2010, and its share price reached a high of INR 1,490 (USD 32.55) in September 2010 [1]. It is reported that Sequoia’s average cost of purchase is between INR 61.18 (USD 1.33) and INR 137.53 (USD 3) per share, suggesting that on paper it had gained considerably from its investment [1].
Since peaking in September, the share price has fallen as low as INR 262 (USD 5.72) [1]. As of May 29 2011, SKS’s shares were trading at INR 328.50 (USD 7.17) [2]. Sequoia owns 14 percent of SKS with a three-year lock-in as of May 2011 [1].
By: Alexandra Pattee, Research Associate
About Sequoia Capital: Sequoia Capital is a venture capital firm that provides funding for seed stage, early stage and growth stage companies. The firm is headquartered in Menlo Park, California, USA, and has offices in China, India and Israel. Sequoia has provided funding of USD 100,000 to USD 100 million to each of approximately 700 companies.
About SKS Microfinance: SKS Microfinance is a microfinance institution (MFI) that was launched in 1998 and delivers microfinance products through a group-lending model to impoverished women in India. It is a for-profit, non-banking finance company that converted to a public limited company in May 2009 and launched an initial public offering on July 28, 2010. 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. According to 2010 data from the US-based nonprofit data provider Microfinance Information Exchange (MIX), SKS Microfinance reported total assets of USD 1.2 billion, a gross loan portfolio of USD 1.2 billion, approximately 6.6 million borrowers, return on assets of 6.3 percent and return on equity of 22.4 percent.
Sources and Resources:
[1] VcCircle, “Sequoia’s Roller Coaster Ride With SKS: The Gains & The Losses”, http://www.vccircle.com/500/news/sequoias-roller-coaster-ride-with-sks-the-gains-the-losses
[2] Reuters, “India’s SKS Microfinance stock up 10 pct for second straight day”, http://www.reuters.com/article/2011/05/11/idUSI8E7G600D20110511
MicroCapital.org Article, March 23, 2010, “Sequoia Capital India, Sandstone Capital, Kismet Capital Advisors and SKS Trust for the Benefit of Women Entrepreneurs Replace SKS Microfinance Founder Mr Vikram Akula as Promoter of the Company”, https://www.microcapital.org/microcapital-brief-sequoia-capital-india-sandstone-capital-kismet-capital-advisors-and-sks-trust-for-the-benefit-of-women-entrepreneurs-replace-sks-microfinance-founder-mr-vikram-akula-as-promoter/
MicroCapital Universe Profile: SKS Microfinance, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS+Microfinance
MicroCapital Universe Profile: Sequoia Capital, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Sequoia+Capital
Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/
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