15 Mar 2010, 0706 hrs IST,
Source:M Rajshekhar & Arun Kumar, ET Bureau
NEW DELHI: Hyderabad-based SKS Microfinance
is looking to raise Rs 1,000 crore from its upcoming
public flotation , whose progress is being
keenly watched as it is the first share issue by a
company in the fledgling microfinance sector.keenly watched as it is the first share issue by a
“We plan to sell around 10-15 % stake.
The quantum of stake sale will depend on the
valuation of the company,” said a senior executive
with a private equity investor in SKS, founded by
Vikram Akula, one of the pioneers of the industry.
The firm, which specialises in offering small loans
to poor borrowers, is expected to file its draft red herring
prospectus (DRHP) by end of this month and is looking for
a valuation between Rs 5,000 crore and Rs 7,000 crore,
he said, requesting anonymity.
Akula, SKS managing director and chief executive
Suresh Gurumani and two leading private equity firms
Sequoia Capital and Kismat are putting part of their holdings,
aggregating to 20% under promoters’ category for a mandatory
lock-in for three years, which is needed for doing an IPO.
According to two officials involved in the deal, Akula,
who owns a little over 6% in SKS directly will tender a
miniscule part of his holding in the promoters category
as most of his stake in the company comprises ESOPs,
which was converted into equity only last year.
This too is yet to complete the mandatory one-year
period before it can qualify as promoter’s holding.
It is pertinent to add that there was a speculation in the financial
market for a while that Akula was intending to exit the company
even before the IPO. However, Industry executives familiar
with the lender’s listing plans dismiss these reports, attributing
them to jealous competitors.
All these facts – like Akula being a promoter and the
top management locking in their shares for three years –
will be spelt out in the DRHP, one executive told ET.
“Akula is a promoter too. But, in part because of his small stake
in the company, his contribution to the 20% lock-in will be in
“low single digits” . ET was also told that
SKS management team – Akula, S Gurumani and chief operating
officer MR Rao have agreed to lock up their shares
for the three year period,” a senior industry executive said.
It was reported last week that the company’s investors, led by Sequoia
Capital, have become the promoters of SKS.
Since then, other details about the SKS IPO, which will be India’s
first IPO from the microfinance sector, are slowly entering the public domain.
The company posted a Rs 80 crore profit on revenues of Rs 544 crore in 2008-09 .
The issue will be a combination of fresh issue by the
company and offer for sale by the existing private equity
players. To fulfill SEBI’s requirements for promoters locking
in 20% of their equity for three years, Sequoia Capital and
Kismet will contribute 12% and 8% (out of their 24% and
17% shareholding in the company), said an executive with a
private equity firm, who asked not to be named.
Sandstone, which has around 12% stake in the company,
is not affected by this stipulation as it invested in SKS only last year.
While all three PEs are offloading a part of their holding in the company,
they will continue to hold shares after listing.
The IPO is primarily to help investors and employees
encash their stakes. SKS already enjoys a healthy
capital adequacy ratio of 24.36% — against the
Reserve Bank of India mandated 12%.
This is supported by the fact that this is a combo deal –
part offer for sale by existing investors, part fresh issue by the company.
Hence, the listing is primarily intended to give an exit
route the private equity players.
Agrees PN Vasudevan, Equitas Microfinance :
A lot of the PE firms that entered the market during
2005-06 are looking to exit now. We will now see
a new wave of retail investors.”
