SKS Microfinance is India’s largest and the world’s fastest- growing microfinance organization with 1626 branches. It aims to empower the poor by providing them collateral-free loans for income-generation. SKS extends these loans to women who use it to scale up their enterprises and get themselves and their families out of poverty. Started in 1998 as an NGO, SKS transformed into an NBFC in 2005 and is regulated by the RBI.
Since transformation, SKS has been successful in creating a for-profit model of microfinance using commercial funds that is scalable. Delivering services at the doorsteps of its members and following clear-cut processes, SKS has been able to ensure a repayment rate of over 99 % on its loans.
Borrowers take loans for a range of income-generating activities, including livestock, agriculture, trade
(such as vegetable vending), production (from basket weaving to pottery) and new age business (photography to beauty parlours). SKS also provides members with interest-free loans for emergencies as well as life insurance and loan cover insurance to borrowers. It has a customer base of around 53 lakh people.
About the Founder:
SKS Microfinance was founded by former McKinsey consultant Dr.Vikram Akula, an NRI, in 1998. It is head quartered in Hyderabad. Dr.Vikram Akula holds a B.A. from Tufts, an M.A. from Yale, and has a Ph.D. from the University of Chicago. His Ph.D. dissertation focused on the impact of microfinance. He has received several awards for his work with SKS, including the Echoing Green Public Service Entrepreneur Fellowship.
Dr.Akula, who grew up in Schenectady, upstate New York (where father A.V. Krishna is a surgeon), encountered poverty first hand earlier while visiting relatives in Medhak. "It's a tragedy that we NRIs who can do a lot, are not doing enough. We have the skills to solve the problems,"
In the hinterland, where there are few landlines, let alone ATMs, the founder of SKS Microfinance is starting to dispense loans, typically $116, on smart cards, which its loan officers had been using to record repayments electronically.
High Profile Investors of SKS:
(1) In March 2006, SKS closed its first round of equity investment; the largest microfinance investment in India to date - $ 3.2 million from some of the world’s leading microfinance investors
(2) Second round equity investment of $11.5 million in March 2007.
(3) The third round of equity worth Rs 147 crore was raised in January 2008.
(4) In November 2008 SKS raised equity worth $ 75 million(Rs 366 crore), the largest equity raised by an MFI in the world.
(5) In July 2009, Bajaj Allianz made a strategic investment of $ 10 million(INR 50 crore) in SKS Microfinance which was the first-ever investment by an insurance company in an Indian microfinance institution.
(6) U.S. venture capital firm Sequoia, one of Google Inc. and Yahoo! Inc.’s early investors, plans to sell about a third of the SKS holding it has accumulated since March 2007 in the IPO. It began buying stake in SKS in March 2007 for Rs 49.77 per share. It now plans to sell about 40 lakh shares or less than a third of its stake
(7) George Soros’s Quantum (M) Ltd. hedge fund, which bought 300,000 shares for 636 rupees each as late as 23rd July 2010. He will hold a 0.4 percent stake after the sale, according to the prospectus.
(8) Infosys Narayana Murthy’s Catamaran Management Services Pvt. will own 1.3 percent for Rs.300 a share.
(9) Sequoia Capital India (21.8%), Sandstone (12.9%), Kismet Capital (5.7%), Tejas Ventures (2.7%), Bajaj Allianz (2.6%), SIDBI (2.8%), Narayana Murthy’s Catamaran Fund (1.6%) and Unitus (5.7%)
(10)Chairman Dr.Vikram Akula himself holds only 13% of SKS equity
Why so much craze for Micro finance:
There is an expectation that credit to the nation’s poorest may surge by more than 40 percent in a market where about 120 million households don’t have access to banking and financial services.
SKS provides loans from $22 to $260 each for women raising cows or opening a village tea stall in a nation where 828 million people live on less than $2 a day. India has an untapped credit demand of 1.2 trillion rupees, according to Crisil Ratings, the Indian unit of Standard & Poor’s.
Now What is on offer in the IPO :
(1) Price band for the issue is fixed at 850-985 rupees/share of face value of Rs.10
(2) Retail investors to get 50 rupees discount on final price
(3) The Issue will constitute 21.6% of the fully diluted post issue paid-up capital of the company
(4) At the end of the issue, this IPO would have raised as much as 16.3 billion rupees ($347 million) or Rs.1561 Crores.
(5) A 21.6 percent stake in SKS will be offered to investors, with 7.45 million new shares to be sold by the company and 9.35 million shares by existing investors.
Ofcourse there has been a critic article on SKS. We will post it later.
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