Khosla invests $2 m in Share Microfin

Investment through equity contribution

Vinod Khosla, general partner of leading venture capital fund Kleiner Perkins Caufield & Byers and founding chief executive officer of Sun Microsystems, has invested Rs 9 crore ($2 million) in a personal capacity in Hyderabad-based Share Microfin Limited (SML).

Share Microfin is a non-banking finance company that provides micro-finance to poor women.

Speaking to Business Standard, M Udaia Kumar, founder and managing director of Share Microfin Limited, said: "Khosla would be investing in the company through an equity contribution and the funds are expected in the next one month."

With the investment, the paid-up capital of the company has increased from Rs 12.27 crore to Rs 21.28 crore. "The increase in the paid-up capital of the company will now enable us to leverage Rs 63 crore from various banks, which would help in financing the needs of around 1,26,000 families," Kumar said.

During the first half of the financial year, the company was able to raise loan funds of about Rs 48 crore.

"SML has collaborated with new funders - Standard Chartered Bank and Bank of Bahrain - and is currently in talks with the State Bank of India, Canara Bank, Allahabad Bank, Sundaram Finance and Punjab National Bank for raising resources," Kumar said.

According to him, Standard Chartered Bank has invested Rs 20 crore and Bank of Bahrain Rs 3 crore in the company. During the first half, the company has increased its member base from 2,57,500 to 3,05,000 members, recording a growth of 42 per cent.

The company as on September 30, 2004, had disbursed Rs 526 crore. "The outstanding portfolio registered a 74 per cent growth rate over the previous year. SML had a portfolio size of Rs 81.94 crore as on March 31, 2004 and as on September 30, 2004 the portfolio is Rs 142.70 crore," he said.

"The repayment rate is 100 per cent with no arrears and the current portfolio risk is zero per cent," Kumar said. The company's profit before tax during the first half of the year grew 76 per cent over the same period last fiscal to Rs 2.9 crore.

SML has also reduced the cost of funds from 12 per cent at the beginning of the current fiscal to 11 per cent.

The company will also be raising Rs 100 crore through a bond issue, which is expected to come out in the next three months. Kumar said that the bonds would be lead managed by JM Morgan Stanley and the US Treasury, while the Ford Foundation and Citibank would partially guarantee these bonds.

SML has also set up Share Community Super Markets, where goods produced by its customers would be sold in the open market. "The first such community super market was set up in Guntur two months back and the company is looking at a chain of such community super markets in the next three years," Kumar said.

SML has also entered into a partnership with ICICI Bank to distribute loans in the rural areas in the state. "This partnership model has been implemented in 36 branches with a current limit facility of Rs 77 crore," he said.

Share Microfin is also looking at having its own building. According to Kumar the company is waiting for the necessary approvals and the construction work would begin in the next six months time.

"It would be a six-floor building and we would be investing Rs 3 crore in this project, which would be raised through internal accruals," he said.

The company is also looking at expanding its operations to Assam and Maharashtra. SML currently operates in Andhra Pradesh, Karnataka and Chhattisgarh. The company also promotes Asmitha Microfin Limited in Orissa.