Microfinance Industry Bullish by its Maiden IPO

Microfinance Focus, Aug 3, 2010: Indian microfinance institutions who have been nurturing the financially excluded sections of the nation for years against all odds are riding high on the success of the SKS microfinance IPO and are even more excited about the opportunities that the issue has laid open to them.

Speaking to Microfinance Focus, Mr. Suresh K Krishna, the Managing Director of Grameen Financial Services (GFS) points out that this IPO is a land mark event in the history of Indian & Global Microfinance sector. Even though there are lot of criticism, linking the capitals markets to the poor in the remote village is a great achievement.

“We are proud that the Indian microfinance has come a long way from the days of struggling to convince the bankers that poor are bankable and provide onlending funds to us to the stage of easily raising the money from the capital markets. This shows that the poor women have made a mark by demonstrating that they are trust worthy, honest borrowers and the commercial investors have endorsed this” he said.

GFS will be planning an IPO in the next 2 to 3 years. Raising money from IPO will also help in becoming more recognised, transparent and accountable institution, Mr. Suresh noted.

Spandana Sphoorty Financial Ltd. which could be the next in line to issue an IPO with its Board evaluating the option also expressed its confidence. Its Founder and Managing Director, Ms. Padmaja Reddy said, “It signifies the belief of investors on poor women.  It is a full proof to say that poor women are the best borrowers”. “The most important finding in the last two decades in the world of finance is Micro Finance” she emphasized.

 Conveying his optimism, Mr. S. Devaraj, Founder, Chairman & Managing Director of Grama Vidiyal Micro Finance Ltd said, “It is a significant event and marks a new milestone in the journey of microfinance for the last 2 decades in India and around the world. This makes the mainstreaming of microfinance complete.  We would also be looking at an IPO as a route for capital raise in the coming years.”

Bangalore based Ujjivan Financial Services’ Managing Director, Mr. Samit Ghosh who feels that there is a lot to be learnt from SKS IPO, both good and bad, said, “The IPO is a pioneering effort and a very significant milestone for the industry. This is a key goal in the capital raising plans for all major MFIs. It provides access to capital from the largest market & allows us to diversify ownership. However, the risk of unrealistic valuation is that it may not sustainable and may attract unwanted players looking for short term extra-ordinary gains. Microfinance is in the financial services industry. The returns on asset & equity will reflect that of the industry in the long run. Currently it is buoyed by the novelty value and the prospects of substantial growth as a market for providing financial service to the 600 million poor in India is largely virgin.” 

Speaking about his company’s plan to issue an IPO, he said “Our capital raising plans have always included IPO, to move from raising equity through private placements to  public equity issues to access larger pool of capital & diversify our ownership. However, we have just completed our first year profitable operations and so this still some time to go”.

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