Shares in SKS Microfinance rose as much as 17.8 per cent on debut early on Monday after the lender raised about $358 million in an IPO, boosting the prospects of more such offers hitting the market.
SKS, which has drawn high-profile investors such as billionaire George Soros, venture capitalist Vinod Khosla and Infosys Technologies founder N R Narayana Murthy, received bids for 13.7 times the 16.8-million shares on offer in its IPO.
"The shares have opened much higher than expected," said Arun Kejriwal, director at KRIS. "It will give an opportunity for more micro finance institutions to come to the market."
At least half a dozen large Indian MFIs, encouraged by the response to SKS, may be contemplating IPOs, analysts say. These may include Spandana Sphoorthy Financial Ltd, Share Microfin Ltd, Asmitha Microfin and Bhartiya Samruddhi Finance.
At 9:17 am (0347 GMT), shares in the SKS that gives tiny loans to poor women, were up 13 percent at Rs 1,114 in a Mumbai market that was little changed. The shares rose as high as Rs 1,159.90 in early trade.
The share sale was priced at 985 rupees each at the top end of the indicative price band.
SKS was founded by Vikram Akula, a former McKinsey consultant who was named one of the world's most influential people by Time magazine.
The company plans to use the sale proceeds to augment its capital base to meet future capital requirements, which are likely to be fuelled by growth in the business, the company had said in its offering prospectus.
The IPO has drawn keen interest from countries with major microfinance industries such as Bangladesh, Mexico and South America, as well as the private equity firms who have recently piled into the sector.
There are more than 400 active microfinance institutions in India serving about 70 million poor people, according to industry estimates. With a potential base of 120 million unbanked homes, microcredit demand in India has the potential to rise sharply.
While microfinance has existed in many forms for decades, the sector has burgeoned into a large market since Muhammad Yunus, a Bangladeshi economist, was awarded the Nobel Peace Prize in 2006 for increasing access to finance for the poor.
