Subscribe for SKS Microfinance IPO - Kavitha Rajan, Elara Capital

SKS Microfinance

Issue details

SKS Microfinance plans to raise INR14.3Bn - INR16.5Bn by offering fresh issue of shares in the price band of INR850 – INR985. The issue includes an offer for sale of 9.4mn shares by the promoter group including Sequoia Capital India II LLC, SKS MBT, Kismet Microfinance and Mauritius Unitus Corporation. The offering would constitute around 21.6% of the fully diluted post issue paid up capital. The promoters stake would reduce to 37.1% from 55.8% post the issue. The IPO proceeds are proposed to be utilised to augment the capital base to meet future capital requirements arising out of business growth.

Investment Rationale

Strong distribution network

The average loan size of SKS microfinance is in the range of INR2,000 – INR12,000 for income generating loans which forms the bulk of the loan portfolio as on FY10.

Improving financial metrics

The financial parameters of SKS microfinance has been improving steadily as shown in the table below.

Potential to leverage the balance sheet

SKS currently has a debt to equity of 2.9x as on FY10. Post the IPO issue, the debt to equity decreases to 1.5x providing sufficient opportunity to leverage the balance sheet.

Source : Equity Bulls

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