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Existing investors evince interest in SKS Microfinance
Nov '2011
Existing
investors evince interest in SKS Microfinance QIP: Mr Dilli Raj ·
QIP to fund huge unmet demand in non-AP states ·
Existing investors continue to repose faith in the
Company ·
Capital adequacy of 47 per cent; net worth of Rs 1,181
crore ·
Bank balance of Rs 236 crore as at September 30,
2011 Hyderabad,
November 18, 2011: Mr S Dilli Raj, CFO, SKS Microfinance
Limited, today said a couple of existing
investors have evinced interest in the proposed Qualified Institutional
Placement in view of the fact that the Company is seeking growth capital to
fund opportunities stemming from the unprecedented consolidation in the
microfinance sector. “The non-Andhra Pradesh outstanding has
reduced by $2 billion for the sector, and the regulatory clarity is driving
buoyancy in the long term,” said Mr Dilli Raj. “The QIP is basically a growth capital raise to help
us cash in on the demand-supply gap in the non-Andhra Pradesh markets,” said Mr
Dilli Raj. The Company has started the QIP process by sending postal ballot to
shareholders, and hopes to have all approvals in place by December first week. Mr Dilli Raj said the potential investors fall into
five different buckets: existing investors, Socially Relevant Investors,
Microfinance Investment Vehicles in the developed world, Private Equity players
and public market participants. He said the investors have shown interest on
account of the fact that the Company’s bullet-proof balance sheet has weathered
the external event well in the last one year and that the Company is ready to
look beyond the Andhra Pradesh situation. The Company has met all its financial
commitments including repayment to banks. The Company’s balance sheet is strong
because of high liquidity and adequate capitalization with a bank balance of Rs
236 crore and net worth of Rs 1,181 crore as
at September 30, 2011.” “All the pre-IPO
investors continue to stay invested in the Company,” said Mr Dilli Raj. “These
include Catamaran Management Services, WestBridge, Sequoia Capital India,
Sandstone Investment Partners, Kismet Microfinance and Mr Vinod Khosla, founding CEO of Sun Microsystems, formerly a partner at Kleiner,
Perkins, Caufield & Byers, and partner at Khosla Ventures. They have not sold a single share in
the Company.” SKS Micofinance
enjoys a competitive advantage over the other players, as the major ones went
in for a CDR and the smaller ones find it difficult to meet the new enhanced
supervisory standards. Capital adequacy ratio of 47 per cent “We have always remained well
capitalized and highly liquid,” said Mr Dilli Raj. “The average capital
adequacy over the last five years was at least 2.5 times of the RBI norms.
Today we have a capital adequacy of 47 per cent and our net worth is Rs 1,181
crore as at September 30, 2011.” In the unlikely eventuality of the
Company facing the worst-case scenario where its collections would be zero in
AP, the restructured capital adequacy ratio would still be 35 per cent.
However, even in the worst of situations, the Company’s collections did not
drop below the 11 per cent mark in Andhra Pradesh. Losses due to conservative provisioning “The decision to provide for Rs 350
crore in this quarter itself has been voluntary, though we could have easily spread the same over the
next six quarters as per the Reserve Bank of India norms,” said Mr Dilli
Raj. “We have written off the outstanding loans in AP and brought them
down from Rs 1500 crore to Rs 822 crore. In addition, there is a cushioning of
Deferred Tax of Rs 220 crore, and if that is factored in the total outstanding
comes down further. If we write off the total loan outstanding in AP, we get a
tax benefit on write-off of Rs 270 crore and, in the unlikely worst case
scenario of zero recovery of loans in AP, we would only be left with a net
residual risk of Rs 337 crore.” Contagion no longer an issue “We can safely put the fear of spread of
the AP contagion behind us,” said Mr Dilli Raj. “Our confidence is on account
of three reasons: collection efficiency in non-AP states is 96-97 per cent;
seven states with strong MFI operations are part of the panel that drafted the
Central MFI Bill which is likely to be tabled in Parliament in the Winter
Session; and no other state has enacted a law similar to Andhra Pradesh.” About SKS Microfinance Limited: SKS Microfinance Limited (SKS) is a
non-banking finance company (NBFC), registered and regulated by Reserve Bank of
India, whose mission is to provide financial services to low-income
households. SKS operates across 19 states of India.
They include: Andhra Pradesh, Karnataka, Maharashtra, Orissa, Madhya Pradesh,
Bihar, Uttar Pradesh, Rajasthan, Uttaranchal, Himachal Pradesh, Haryana, West
Bengal, Jharkhand, Chhattisgarh, Gujarat, Kerala, Tamil Nadu, Punjab and Delhi.
SKS has been recipient of many awards,
which include Social and Corporate
Governance Award by BSE, NASSCOM Foundation for Best Corporate Social
Responsibility Practice (2007), Social Performance Reporting Award
(MFIs) - Silver Category for Social Performing rating conducted by MIX market
(2009) etc. SKS was founded by Dr Vikram Akula. For further information please contact: J
S Sai, EVP,
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