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Monday, November 21, 2011

SKS Micro share placement: Two existing investors express interest

SKS Microfinance says a couple of existing investors have evinced interest in its proposed Rs-900 crore Qualified Institutional Placement (QIP).

The exercise is aimed at funding the huge unmet demand in non-AP states. It is also to support opportunities stemming from the unprecedented consolidation in the sector, said Mr Dilli Raj, Chief Financial Officer of the company.

The company has started the QIP process by sending postal ballot to shareholders, and hopes to have all approvals in place by December first week.

The investors include Catamaran Management Services, WestBridge, Sequoia Capital India, Sandstone Investment Partners, Kismet Microfinance and Mr Vinod Khosla.

Huge hit

Referring to the huge hit the company has taken in AP and its fallout, he said: “We can safely put the fear of spread of the AP contagion behind us”. “Our confidence is on account of three reasons: collection efficiency in non-AP states is 96-97 per cent; seven states with strong MFI operations are part of the panel that drafted the Central MFI Bill which is likely to be tabled in Parliament in the Winter Session; and no other state has enacted a law similar to Andhra Pradesh.”

“We have written off the outstanding loans in AP and brought them down from Rs 1,500 crore to Rs 822 crore. In addition, there is a cushioning of deferred tax of Rs 220 crore, and if that is factored in the total outstanding comes down further. If we write off the total loan outstanding in AP, we get a tax benefit on write-off of Rs 270 crore and, in the unlikely worst case scenario of zero recovery of loans in AP, we would only be left with a net residual risk of Rs 337 crore.”


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