Investors evince interest in SKS Microfinance's proposed Rs 9 billion share sale

MUMBAI: A couple of existing investors in SKS Microfinance have evinced interest in its proposed 9 billion rupees share sale to institutional investors, a top official said in a statement on Friday.

The potential investors include existing investors, socially relevant investors, microfinance investment vehicles in the developed world, private equity players and public market participants, the statement said.

The company which has started the qualified institutional process, or QIP, process, hopes to have all approvals in place by December first week, Dilli Raj, chief financial officer said.

"The QIP is basically a growth capital raise to help us cash in on the demand-supply gap in the non-Andhra Pradesh markets," said Raj.

SKS posted a net loss of 3.84 billion rupees in July-Sept, compared with a net profit of 0.81 billion rupees during the same quarter a year ago.

A regulatory backlash against aggressive lending and collection practices had crippled microfinance sector with crackdown in Andhra Pradesh last year hurting the loan growth.

SKS said that all the pre-IPO investors including Catamaran Management Services, WestBridge, Sequoia Capital India, Sandstone Investment Partners, Kismet Microfinance and Vinod Khosla remain invested in the company.

SKS Microfinance also said its capital adequacy ratio would remain at 35 percent even if it did not register any collections from the state of Andhra Pradesh.

Its capital adequacy ratio at the end of September stood at 47 percent and its net worth was 11.8 billion rupees.

The company also said it has written off the outstanding loans in Andhra Pradesh and has bought them down to 8.22 billion rupees from 15 billion rupees.

SKS added that if it writes-off the total outstanding in Andhra Pradesh, the company will get a tax benefit on write-off worth 2.7 billion rupees.

The firm will be left with a net residual risk of 3.37 billion rupees in case of zero recovery of loans from the state, it said in the statement.

In recent weeks, funding to micro lenders that do not have a presence in the state of Andhra Pradesh has started to trickle in, but microfinance institutions with a significant exposure to loans in the state have all but suspended operations there.

India's MFIs continue to await the passage of a bill in parliament, which will make the country's central bank the sole regulator of the sector, and remain hopeful this will bring funds flowing back into the sector.

On Friday, shares of the company ended 4.99 percent down at 121.75 rupees in a weak Mumbai market, having shed 88 percent from its 985 rupees offering price when it listed in Aug 2010.

Source: EconomicTimes