Spandana may hire JM, Morgan Stanley for IPO

India’s second-largest microfinance company Spandana Sphoorty Financial was likely to hire Morgan Stanley, Citigroup Inc and JM Financial to manage its initial public offer (IPO), four people with direct knowledge of the matter said.

The lender might seek to raise as much as $400 million (Rs 1,863.2 crore) by early next year, two of the people said, declining to be named before a public announcement. The Hyderabad-based company planned to seek approval from the capital markets regulator as early as next month, one of the people said. Spandana aims to tap investors for funds following the success of larger rival SKS Microfinance, which earlier this month raised about $348 million (Rs 1,621 crore) in its IPO. That stock has climbed seven per cent since its trading debut this week. The more profitable Spandana got bids from over a dozen banks to manage its offering, one of the people said.

“We would want to optimally capitalise the company to support growth in outreach and sustain our financial inclusion efforts,” founder and Managing Director Padmaja Reddy said in an e-mailed response to queries today. “We are evaluating our capital requirements based on various determinants.”

The company and its existing stakeholders are likely to sell shares in an IPO, she said. The company, which has about five million borrowers in 12 states, has disbursed about Rs 15,000 crore in loans in the last 12 years, Reddy said. She declined to comment on the banks.

Spandana was “keen” to sell shares in an IPO, Reddy had said earlier this year. It is India’s second-largest microfinance company, after SKS, by loans outstanding and branches, according to an October 2009 report by Crisil Ratings, the local unit of Standard & Poor’s.

Nick Footitt, a spokesman for Morgan Stanley in Hong Kong, and Smriti Somani, a spokeswoman for JM Financial in Mumbai, couldn’t immediately be reached. Citigroup’s Mumbai-based spokesman Debasis Ghosh declined to comment. Spandana posted a profit of Rs 204 crore for the year ended March 31, according to its website.