MICROCAPITAL STORY: Spandana Sphoorty Financial Ltd. Issues INR 800 million (USD 17 million) One-year 10 Percent Bonds in Deal Arranged by Standard Chartered Bank

Spandana Sphoorty Financial, an Indian microfinance institution (MFI), has raised INR 800 million (USD 17 million) in one-year 10 percent bonds that have been listed on the Bombay Stock Exchange (BSE). Standard Chartered was the sole book runner and arranger. Mrs. Padmaja Reddy, Managing Director of Spandana, indicated the funds would help the MFI to expand to seven new states this year, and that listing on the BSE would help improve Spandana’s corporate governance.

As reported in an earlier MicroCapital story, Spandana intends to raise INR 3 billion this year (USD 63.7 million) in equity funding which will allow the MFI to expand and strengthen its capital adequacy ratio. Recently the Reserve Bank of India (RBI) raised its capital adequacy requirements (CRAR) for non-bank financial institutions, requiring institutions to meet a 12 percent CRAR by April 2009 and a 15 percent CRAR by April 2010. Spandana’s CRAR stood at 19.5 percent last fiscal year. To read a MicroCapital story on the RBI’s new regulations, click here. Currently Mumbai-based JM Financial holds an 18 percent stake in Spandana, private equity fund Valiant holds 11 percent, Lok Capital has a 5 percent stake and another 15 percent is held by senior employees.

Standard Chartered recently underwrote another one-year 10 percent bond issue for SKS Microfinance worth INR 750 million (USD 15.8 million), which will also be listed on the BSE. SKS intends to use those funds to extend loans to new and existing customers. To read a MicroCapital story on the deal, click here.

Standard Chartered is an active creditor in the microfinance industry. As part of the 2006 Clinton Global Initiative, the bank has committed to provide USD 500 million of credit to MFIs around the world within five years. So far the bank is well on its way to meeting that commitment with USD 385 million of credit provided to date. Standard Chartered also recently committed to a USD 450,000 women’s empowerment program in Asia to enhance financial literacy, financial planning, investment and capacity building for women owners of small businesses, with a goal of reaching 5,000 women in the region by 2011.

According to its most recent annual report, as of December 31, 2008, Standard Chartered’s total assets were USD 435 billion and ROE was 15.2 percent. Temasek Holdings Private Ltd., an investment company owned by the Government of Singapore, is the bank’s largest shareholder with an 11.07 percent stake. Fidelity Investments is the next largest holder with 4.94 percent.

According to the MIX Market, the microfinance information clearinghouse, Spandana was established in 1998 and has approximately 1.2 million active borrowers. As of March 31, 2008 Spandana’s gross loan portfolio was USD 182.2 million and total assets were USD 208.9 million. As of the same date, the institution’s debt-to-equity was 8.56, ROE was 53.62 percent and ROA was 4.34 percent.

By Laura Anderson, Research Associate

Additional Resources:

Business Standard: Spandana raise Rs. 80 Crore

Spandana Microfinance: Home

The Bombay Stock Exchange: Home

Standard Chartered Bank: Home

Reserve Bank of India: Home

Lok Capital: Home

JM Capital: Home

MicroCapital Story: Hyderbad-based Spandana Microfinance Seeks to Raise Rs 300 Crore (USD 63.7 million) by June

MicroCapital Story: SKS Microfinance Raises Rs. 75 Crore (USD 15.8 million) Debt and Lists Bonds on Bombay Stock Exchange

MicroCapital Story: Change in Indian Capital Adequacy Standards Affects Microfinance Institution