In the country’s first ever listed non- convertible debentures issue by a microfinance institution, Hyderabad based SKS Microfinance has raised Rs 75 crore by issuing one year NCD at a coupon rate of 10%. The NCDs are listed on the Bombay Stock Exchange (BSE) and have been placed with the Standard Chartered Bank’s Foreign Institutional Investments (FII). Standard Chartered also acted as the sole book runner and the lead arranger for the issue.
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According to Dilli Raj, CFO, SKS Microfinance, “By listing the debt securities on the BSE, our reporting in the public domain increases. That is a very bold step on our part. This also shows that the organisation is prepared for enhanced standards of governance, transparency and public accountability.” He also feels that the listing of the NCDs would help the organisation in diversifying its sources bracket as this is a new avenue of funding for the firm.
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The company chose to raise funds through debt so that it could match its debt with the recently raised equity. Currently, SKS’s debt-equity is 3 times. The total equity capital of the company is around $135 million.
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In the largest microfinance deal in the world, the microfinance institution raised Rs 366 crore or $75 million from private equity investors. This was fourth round of fund raising by SKS. Sandstone Capital, an India focused hedge fund with $1 billion capital under management, has led the deal, while the other investors in this round included SVB India Capital and Kismet Capital.
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The freshly raised funds from the debt capital market will be used towards extending micro-loans to the firm’s existing as well as new borrowers. SKS plans to expand its branch network to 1,750 branches across the country from 1,350 branches currently. At present, it has about 4 million members and plans to increase the number of its members to 6.5 million by the end of the current fiscal.
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The microfinance institution also plans to increase its total incremental disbursement this fiscal. In FY08-09, the firm had put out an incremental disbursement of Rs 4,327 crore. This year, it plans to increase it to Rs 9,000 crore. It is also aiming at doubling its advances portfolio outstanding to Rs 5,200 crore from Rs 2,460 crore last year.
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SKS Microfinance, which was set up in 1998, has raised funds from Sequoia Capital, Vinod Khosla, Odyssey Capital, Silicon Valley Bank and others. It claims to have presence across 60,000 villages and slums in 18 states.