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The world's largest private equity investment in microfinance

•  Funds will be used to accelerate outreach to 8 million members

Hyderabad, November, 10, 2008: SKS Microfinance Pvt. Ltd. has announced the closure of a fourth round of equity funding in which it has raised $ 75 million (Rs. 366 crore). The landmark transaction, led by Sandstone Capital, represents the largest private equity investment to date in microfinance globally.

Based in Hyderabad, SKS has provided micro-insurance products and Rs. 4,729 crore ($ 979 Million) of micro-loans to 3.3 million poor households across 18 states in 50,000 villages and urban slums of India. Its members have maintained a 99% repayment rate. The new equity investment will help SKS expand its outreach to 8 million members over the next two years.

Commenting on the investment, Vikram Akula, Founder and CEO of SKS Microfinance, said, "the fact that this investment has come during the global economic meltdown is proof of the confidence that investors have in SKS- and more importantly of the resilience and entrepreneurial abilities of the poor not only to survive in today's economic crisis but actually to prosper because the poor are largely de-coupled from global trends."
Sandstone Capital led the investment and was joined by existing SKS investors Kismet Capital and SVB India Capital Partners (an affiliate of Silicon Valley Bank). Edelweiss Capital is the investment banker to the issue.
Paresh Patel, Founder and Managing Partner of Sandstone, said, "At SKS there is a unique opportunity to build one of India's next great companies, such as Bharti, Infosys or L&T.  SKS has the right pedigree of leadership, an enormous market where they possess a superior operating model, a desire to incorporate best practices in corporate governance and a passionate set of employees that are driven by the singular mission of enabling the poor, profitably.  Our investment will give some of India's poorest communities the opportunity to improve their lives while simultaneously providing investors returns that are uncorrelated to traditional finance businesses."
Ashish Lakhanpal, MD, Kismet Capital added, "India's microfinance industry is evolving rapidly, with greater efficiency, improved transparency, and increased professionalism. SKS is at the forefront of this movement and is an excellent example of how well-run businesses are able to deliver social solutions that are scalable, sustainable, and profitable." Indeed, impact studies of SKS show that its borrowers earn returns on their micro-enterprises of up to 100% and that their increased incomes lead to improved health, education, and general welfare.

Commenting on the fund raising, S. Dilli Raj, Chief Financial Officer, SKS Microfinance, said "Capitalization of this size has a positive impact on leverage and capital adequacy. The impressive net worth of Rs.610 crore ($126 Million) further encourages credit extensions from SKS's stable funding partners in the banking system and this will enable us to meet the financial needs of our existing micro-borrowers as well as new borrowers."

SKS was launched in 1998 and is India's leading microfinance organization. It works on three inter-linked principles to scale microfinance. This includes using a for-profit methodology to access capital, drawing on best practices from the business world to speed growth, and deploying technology to overcome high delivery costs.  SKS blends this rigorous business approach with a strong social mission that includes ensuring that its members continue to hold a significant stake in the company and benefit from profits that the company earns.
Sequoia Capital, Vinod Khosla, SIDBI, Unitus and Columbia Ventures Corporation are among the existing equity partners of SKS Microfinance.  SKS Borrowers represented by Mutual Benefit Trusts are also one of the largest shareholder groups in the company.