Second innings: SKS Trust buys 70% stake in a new company

Biksham Gujja

Surajeet Das Gupta New Delhi
SKS Trust, having decided to withdraw from a bitter battle for a greater say in SKS Microfinance, in which it is the single largest shareholder, has now charted out its next moves.

The Vikram Akula-founded trust is not exiting microfinance or financial inclusion, which are its mainstay. Instead, it is going to begin its second innings: The trust has finalised a deal to buy a 70 per cent stake in Outreach Financial Services India (OFS India), a start-up that is adopting the model of business correspondents partnering with banks to build, manage and service self-help groups on leading Indian lenders' behalf.

The remaining equity will be held by OFS founder Surya Kumar, several employees and a few US-based investors like Sarath Sura, co-founder of information technology company Sierra Atlantic. OFS is promoted by former employees of SKS Trust and SKS Microfinance. The move marks SKS Trust's second foray in the financial inclusion space after its 2003 investment in SKS Microfinance, which has now run into trouble.

Over a year ago, Akula had tried to return to SKS Microfinance, from where he had quit following serious differences with the management. His comeback was supported by SKS Trust, which increased its stake in the microfinancier to 12.5 per cent and threatened to move court on its request for board representation being rejected. But now, the trust has decided to refocus it strategy by moving away from that battle and opening a new chapter in the same business.

Declaring SKS Trust no longer wanted to fight for SKS Microfinance, Chairman Biksham Gujja said: "We asked to be removed as promoter because we had no ability to exercise any control over SKS Microfinance. In the complete absence of influence over company affairs, much less in decision-making, we asked to be removed as a promoter." He added this would help the trust focus on its core activities of furthering financial inclusion.

OFS is close to getting some of the leading Indian banks as clients. "We are in active and advanced stages of discussions with two banks," said OFS India Managing Director & Chief Executive Surya Kumar, adding: "We are also planning to reach out to vendors of the core banking system to jointly develop out-of-the-box capabilities."

According to data maintained by the Reserve Bank of India, there were 152,000 business correspondents deployed by banks as of December 2012. About 183.8 million transactions, valued at Rs 16,533 crore, had been undertaken by these correspondents till then. A study in 2012 showed the customer service points (CSPs) - another name for agents - carried out an average 25 transactions per day. This was much lower than in Brazil, where they did 157 transactions a day, and Kenya (87 transactions per day in 2010).

Gujja added: "Apart from OFS, the trust will continue to evaluate investments that are at the cross-section of technology and financial inclusion and are consistent with the trust's objectives."

OFS plans to have 350 employees by the end of 2014. Armed with tablets, its field staff will connect people in villages to its banking partner's core banking systems for seamless delivery of banking services to rural households.

First Published: May 19 2014 | 12:57 PM IST

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