Spandana to delay IPO

Spandana Sphoorty Financial, the second-largest microfinance company, will indefinitely postpone an initial public offer (IPO) after a clampdown in its largest market nearly halted loan payments and disbursals.

Spandana plans to seek Rs 500 crore ($110 million) from private equity firms and banks within the next two months, founder and Managing Director Padmaja Reddy said on Monday. Debt collection by MFIs has plummeted below 20 per cent in Andhra Pradesh state, according to ratings agency Crisil, after the local government introduced new rules in mid-October aimed at protecting borrowers.

“I don’t think this is the time for us to go to the market,” Reddy said. The state accounts for 49 per cent of Spandana’s outstanding loans. “We have to make higher provisions due to the impact of the state ordinance, so there is need for us to raise capital.”

In August, Reddy had said Spandana was in the process of hiring Citigroup Inc, JM Financial and Morgan Stanley to manage its IPO. The company wanted to raise $400 million, two people close to the deal said at the time.