At a time when microfinance lenders from Andhra Pradesh are struggling to raise money from the market, Hyderabad-based SKS Microfinance seeks to stand out from the rest of the pack. The micro-lender has announced an ambitious plan to raise up to Rs 400 crore in next few months by selling shares to qualified institutional bidders to finance its business growth and strengthen the capital position of the company.
SKS' ability to weather the crisis in Andhra Pradesh's microfinance sector appears to have restored investors' confidence in the microfinance company. Foreign institutional investors (FIIs) have increased their stake in SKS in the past few quarters and currently hold 38.36 per cent stake. FIIs shareholding in SKS is now at an all-time high and the micro-lender's share price has more than doubled in the past 10 months.
"The company has emerged out of the crisis almost unscathed, returned to profitability and growing its businesses. We are confident of getting a good response for the proposed QIP (qualified institutional placement) issue," a senior executive at SKS told Business Standard requesting anonymity.
SKS' executives are not willing to speak on record on the fund-raising programme as the company is currently in the process of seeking shareholders' approval for the same. However, the officials indicated that the share sale programme could be launched as early as in May 2014.
In 2012, SKS had raised Rs 263 crore through a QIP and preferential allotment of shares. "At that time, the shares were offered at Rs 75 each. The share price has gained almost two-and-a-half times since then. The company has also delivered on the promises it made during that issue - business turnaround, profitable growth, diversification, etc. There is no reason why investors will not be willing to subscribe to our shares this time," said another executive of the Hy-derabad-based microfinance company.
The improved earnings performance has certainly helped. SKS reported profits in the past four quarters, after seven successive quarters of losses. In a recent communication to stock exchanges, it has said there could be a "positive surprise" in its guided net profit of Rs 55-60 crore in the current financial year. The company has also issued a profit guidance of Rs 125 crore for 2014-15 (April-March).
SKS' strategy to expand its business outside Andhra Pradesh is also paying rich dividends. At the end of December 2013, nearly the whole of SKS' loan book of Rs 2,029 crore was outside Andhra Pradesh. It has helped the company raise money from banks by selling securitised assets.
In the past seven weeks, the micro-lender has announced six transactions involving sale of securitised loans mopping up Rs 706 crore from the market. So far in the current financial year, the company has raised Rs 1,378 crore through such transactions compared to Rs 1,195 crore in 2012-13. Industry sources also say SKS is the only micro-lender from Andhra Pradesh to sale securitised assets in the recent past. However, this claim could not be independently verified.
SKS has also emerged as one of the leading micro-lenders in the country to sell securitised assets. Consider this: The money raised through securitisation or asset sale by all microfinance companies in India was Rs 868 crore during the October-December 2013 period, a recent report by Microfinance Institutions' Network, the umbrella body for micro-lenders in India, showed. During this period, SKS raised Rs 351 crore through such transactions.
At the end of December, 2013 SKS counted Westbridge Ventures II, LLC (formerly Sequoia Capital India II LLC), Sandstone Investment Partners, Crown Capital, DSP Blackrock Equity Fund, Amundi Funds Equity India and Tejas Ventures among its investors.
