SKS Microfinance IPO to raise up to $353m

Nifty BSE | NSE 24/05/12 Are Mutual Funds betting on Nifty?

SKS Microfinance aims to raise as much as USD 353 million through an initial public offering of shares, as the company bets on strong demand for loans among poorer borrowers in Asia's third-largest economy.

The SKS Microfinance IPO, a first in India and one of only a handful by microfinance institutions around the world, will open on Wednesday and close on August 2.

The for-profit company, which has drawn investors including Sequoia, Kismet Capital, Unitus, venture capitalist Vinod Khosla and Infosys Technologies founder N.R. Narayana Murthy, is India's biggest microfinance institution.

SKS, which gives small loans to poor borrowers, has fixed the price band for the offering at Rs 850-985 per share, the company said in newspaper advertisement. Retail investors will get a Rs 50 discount on the final price, the company said.

Citigroup, Kotak Mahindra and Credit Suisse are the arrangers for the offering.

SKS Microfinance plans to use the share sale proceeds to augment its capital base to meet future capital requirements that is likely to be fuelled by growth in the business, the company said in its offering prospectus.

There are more than 400 active microfinance institutions in India serving about 70 million poor people, as per industry estimates. With a potential base of 120 million unbanked homes, microcredit demand in India is likely to surge rapidly.

While microfinance has existed in many forms for decades, the sector has burgeoned into a large market since Muhammad Yunus, a Bangladeshi economist, was awarded the Nobel Peace Prize in 2006 for increasing access to finance for the poor.

The company was founded by Vikram Akula, a former McKinsey consultant and has been named one of the most influential people by Time magazine.

The SKS IPO has drawn keen interest from countries with major microfinance industries such as Bangladesh, Mexico and South America, as well as the private equity firms who have recently piled into the sector.