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SKS raises Rs400 crore through QIP issue

LiveMint logoLiveMint 22-05-2014 Viswanath Pilla

Hyderabad: SKS Microfinance Ltd, India’s only listed microlender, on Thursday said it had raised Rs400 crore through a sale of shares to institutional investors. The qualified institutional placement (QIP), which was launched on 19 May at a floor price of Rs235, was oversubscribed three times.

The company said it had diluted a 14% stake to raise the money.

“The QIP will enable us to augment our member base from the present 4 million to 8.5 million over the next three years, and meet their credit requirements,” said M.R. Rao, managing director and chief executive officer of SKS.

“This growth capital will help us fund our stable growth plans,” Rao said.

SKS’s networth, which stood at Rs459 crore as of 31 March, is expected cross Rs850 crore after the QIP.

“This capital raise reinforces the confidence reposed in us by our credit grantors, and exponentially enhances our debt fund-raising ability,” said S Dilli Raj, president of SKS.

SKS said the proceeds will meet the capital requirements of company for next three years.

“With an enhanced capital base and a profitable FY14, there is a case for a rating upgrade,” Raj said.

SKS plans to raise around Rs4500 through loans and the securitisation route, to expand its non-Andhra Pradesh loan book to Rs6,000 crore in the current financial year.

The company expects higher networth and profitability to reduce borrowing costs by 50-75 basis points, leading to improved profitability. One basis point is one-hundredth of a percentage point.

The current borrowing cost of SKS is at 13.8%.

The company said it has set profit after tax target of Rs.150 crore in the current financial year.

Raj expressed confidence that the company may even exceed their guidance.

SKS returned to profitability in the year ended March registering a profit Rs.69.9 crore after two consecutive years of losses due to an industry-wide crisis sparked by an October 2010 law put in place by Andhra Pradesh, the biggest market for loans made to low-income earners.

The law sought to rein in lending by MFIs following reports that coercive loan recovery practices were driving over-extended borrowers in the southern state to commit suicide.

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