SKS Microfinance to raise fresh funds of Rs 120 cr

SKS Microfinance, a leading micro-finance institution that provides financial services to the poor, will raise fresh funding from its present equity investors. The company is also in talks with a few potential investors for diluting its equity.

Presently, the equity investors who have invested in SKS Microfinance are Sequoia Capital, Unitus, SIDBI, Ravi & Prathiba Reddy Foundation, Kismet Capital, Odyssey Capital Pvt Ltd and an individual Vinod Khosla.

Talking to Business Standard, Vikram Akula, founder and CEO of SKS Microfinace said, "We plan to pump fresh funds into the company." He said the company will raise the fresh funding of Rs 120 crore.

"Primarily the investment will be funded by the present investors who hold a stake in the company," he added. However, he did not rule out the possibility of raising funds from a new investor.

"We are in talks with a few equity investors, and only a minuscule part of the equity will be diluted to the new investor," informed Akula. The company will raise fresh funds by October 2007. The new investment will be utilised for funding its micro-finance programme till March 2009. It will further go in for raising fresh funds after March 2009, informs Akula.

According to estimates, the total demand of micro-finance in India is Rs 2,40,000 crore ($55 billion) but only Rs 20,000 crore ($5 billion) has been disbursed to the poor in India.

The company had made its entry into the Gujarat market and it estimates that there are 24 lakh households living below the poverty line that need micro-finance.

With that number of households living below poverty line, the market size of micro-financing comes to Rs 6,250 crore in Gujarat.

The company recently sold off its portfolio (good debt) to Citibank. "We sold Rs 40 crore of good debt to Citibank," added Akula. The company had Rs 430 crore of portfolio (good debt).

He further said that if the company is looking for 20 per cent off the balancesheet of its portfolio of Rs 430 crore, it would not shed off over Rs 80 crore debt in a year. "We are in talks with three banks for selling off roughly another Rs 40 crore of good debt," added Akula.

The company expects to sell off the good debt by the last quarter of the fiscal as most banks show interest in buying debt of priority sectors so as to comply with the Reserve Bank of India's lending norms for priority sectors in the country.

SKS Microfinance has presence across 13 states and had employed 3,800 staffs. The company which will start its operations in Gujarat, will employ 200 field staff. It has begun work in Dahod in Gujarat, which is amongst the 200 poorest districts in India.

The other districts where it plans to enter are Banaskantha, Dang, Narmada, Panch Mahals and Sabarkantha. SKS's had set the target to reach 2,600 poor households by March 2008 in Gujarat. By 2010, it aims to touch the 50 lakh customer base in India.