SKS Micro response pointer to growing IPO appetite: Citi

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SKS Micro response pointer to growing IPO appetite: Citi

According to Ravi Kapoor, MD & Head of Equity Capital Markets at Citigroup, India presents ample opportunity of growth for micro financing companies.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS SKS Microfinance surges nearly 18% after listing SKS Microfinance may see Rs 1150 in near-term: Udayan SKS Microfin BSE | NSE 31/05/12 Are Mutual Funds betting on SKS Microfin?

The well-established business model of SKS Microfinance , which saw a strong listing on the bourses, places the company at a very advantageous position, feels Ravi Kapoor, Head of Global Banking (India) at Citigroup. According to him, India presents ample opportunity of growth for micro financing companies. SKS Microfinance issue witnessed strong foreign institutional investor (FII) participation.

Talking about the listing, Kapoor said "We haven't seen that kind of a response on the retail in the recent past for IPO, which have concluded in last three-five months."

Here is a verbatim transcript of the exclusive interview with Ravi Kapoor on CNBC-TV18. Also watch the accompanying video.

Q: A lot of pent-up appetite did you sense during the issue, which is keeping the stock going even after more than 15% listing?

A: Yes, I think it is a very strong listing. After a long time we have seen such a listing. The company got real good register of shareholders, most of them are key investors globally and locally on the institution side participated. I think finally they managed to get retail in excess of 1,66,000 retail allottees, which is a lot. We haven't seen that kind of a response on the retail in the recent past for the initial public offerings (IPOs), which have concluded in last three-five months.

Q: What is the plan though for some of the more influential shareholders who participated in the pre-IPO sale? Do they intend to stay invested in SKS for a long while?

A: I think first of all regulatorily they are locked up for 30 days from the listing, atleast the anchors who had come in. Given the demand for USD 60 million of anchor book, there was a demand of about USD 800 million, so probably that answers your question. That demonstrates the appetite of the long only anchor accounts in this kind of a story, very high growth and a differentiated story. Therefore, I am reasonably sure that there will be bias in the market up on listing and also build up on their positions.

Q: The mood is pretty buoyant on financials anyway whether it is banks or non-banking financial companies (NBFCs) and now a microfinance story. What would set SKS apart from the rest of the financial industry over the next couple of years?

A: If you look at the four-five things, which the markets would need, there is a huge opportunity, there is a well-established business model, there is a management which delivers and has a track record and a great leadership and lastly I guess the numbers speak for themselves. They have had a very decent growth. Going forward also, I am sure that given the opportunity that growth is going to continue and the differentiating future would be the high return on equity (ROEs), the high margins as well as the growth which they can deliver. Given the fact that the entire business model is placed, they have got the capital now to put in place for growth.