SKS Microfinance Ltd, the Indian lender backed by George Soros, soared on its Mumbai trading debut yesterday as investors bet on rising demand for credit in the world’s largest market for small loans.
SKS, which opened at 1,085 rupees, climbed 13 percent to 1,113.89 rupees as the stock commenced trading. The initial public offering (IPO) by SKS, based in Hyderabad, raised 16.3 billion rupees (US$348 million) after shares were sold for as much as 985 rupees earlier this month.
The first-day performance of SKS, India’s largest microfinance lender, may encourage rivals — including Spandana Sphoorty Financial Ltd — to pursue IPOs.
Nobel Peace Prize laureate Mohammad Yunus, who founded Bangladesh’s Grameen Bank, has said the goal of microfinance companies should be to provide credit to the poor rather than maximizing shareholder profits.
“Nothing excites investors more than growth, and in the financing business, this is as high growth as you can get,” said Apurva Shah, head of research at Prabhudas Lilladher Pvt in Mumbai.
OPPORTUNITY
“If a microfinance business can manage the risks inherent in scaling up, this is a fantastic opportunity,” Shah said.
Kotak Mahindra Capital Co, Citigroup Inc and Credit Suisse Group AG managed the IPO, in which 16.8 million shares were offered by SKS and stakeholders, including Sequoia Capital. Investors on India’s two primary bourses sought 13.7 times the shares on offer.
SKS provides loans from US$43 to US$260 each for women raising cows or opening a village tea stall in a nation where 828 million people live on less than US$2 a day.
India has an untapped credit demand of 1.2 trillion rupees as about 120 million households don’t have access to banking and financial services, according to Crisil Ratings, the local unit of Standard & Poor’s.
Microfinance lending in India may surge about 40 percent annually over the next few years, according to Sanjay Sinha, managing director at New Delhi-based Micro-Credit Ratings, which provides ratings services to potential investors.
ECONOMIC FREEDOM
SKS’s goal is “expanding the promise of economic freedom to those who have been left behind,” founder and chairman Vikram Akula told reporters in Mumbai yesterday.
The company attracted investors including funds managed by Morgan Stanley, BNP Paribas SA and Fidelity Investments.
Indian companies have raised more than 124 billion rupees from first-time sales this year, putting the IPO market on track to exceed last year’s 190 billion rupees, according to Bloomberg data.
The nation’s largest online travel company, MakeMyTrip Ltd, this month became the first Indian firm to complete an IPO in the US since July 2006.
Spandana, a microcredit company that has 4.77 million customers, is “keen” to sell shares in an IPO, managing director Padmaja Reddy said earlier this year.
SKS’s offering cements Kotak Mahindra’s No. 1 ranking among banks managing IPOs in India for a second consecutive year, according to Bloomberg data.
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