SKS Microfinance is India’s largest and one of the world’s fastest-growing microfinance organizations. It claims that its mission is to empower the poor by providing them collateral-free loans for income generation. SKS Microfinance has 7.7 million clients (2010) [1] in 2,403 branches in 19 states across India as of December 31 2010 . SKS charges an interest rate of 24.55% per annum across India.[2]

SKS Microfinance bosses unload shares ahead of issue ET Bureau, Mar 31, 2010, 06.18am ISTNEW DELHI: SKS Microfinance chairman Vikram Akula has part sold his stake in the company making

a 12-fold profit before an initial public offer which may worry potential investors about the commitment of the management, experts say.

Mr Akula, the original promoter of SKS, sold a part of his stake last month to hedge fund Tree Line Asia for Rs 60 crore, a valuation more than double that paid by Infosys founder NR Narayana Murthy's fund a month before, offer document filed with the regulator shows.

"This does not indicate a long-term commitment of the senior management to the company," said MS Sriram, professor of microfinance at the Indian Institute of Management-Ahmedabad. "All they have agreed to lock in is their options as and when they exercise."

Chief executive Suresh Gurumani, finance head S Dilli Raj and chief operating officer MR Rao have also sold shares. Mr Akula, who in the past declined to discuss share transactions, could not be reached for comment. A company spokesperson and Mr Rao declined comment, citing the quiet-period ahead of the IPO.

SKS Microfinance, founded as a not-for-profit organisation, Swayam Krishi Sangam, in 1997, is planning to raise about Rs 1,200 crore in the share sale. It will be the nation's first micro-finance company to list on the exchanges when the IPO process is completed.

Micro lending, where interest charges are an exorbitant 40% a year, is becoming the latest fad in the funds-starved nation, with some top executives such as Morgan Stanley's former India head Narayan Ramachandran heading for it.

All the four SKS executives were allotted shares under the Employees Stock Option Schemes (ESOPs) between 2007 and 2008 at an average price of Rs 49.77 a share. Those were sold to Tree Line at Rs 636.70 per share last month. In January, Mr Murthy's fund, Catamaran Investment, bought 937,770 shares of SKS at Rs 300 apiece, offer document shows.

The sale of stakes by Mr Akula and others has led to a peculiar situation where some private equity funds, which own stakes in the lender, has offered themselves as promoters, a first in India. Regulations require that promoters own at least 20% in the company at the time of IPO. Sequoia Capital, MUC and SKS Capital are SKS Microfinance's promoters now.

In February this year, Mr Akula sold 945,424 shares. He had also sold 16,36,138 shares in September 2008 for Rs 17 crore to SKS Capital, which is owned by Kismet Capital and Ashish Lakhanpal. He was allotted these shares at Rs 10 each at par in March 2007 for Rs 1.64 crore.

Mr Akula has agreed not to sell, or lock-in, the 17,69,537 shares allotted in 2008 under stock options. But these are yet to be converted into common shares.

SKS' IPO consists of 16.80 million shares. It includes offer for sale of 9.35 million shares by Sequoia and others and new issue of 7.45 million shares. At the last transaction price of Rs 363.70 per share, the company will be valued at Rs 4,582.50 crore and the issue may be for Rs 1,075 crore.

Out of this, Rs 475 crore will come into the company and balance Rs 600 crore to private equity firms and mutual benefit trusts.


Borrowers (who are all women) take loans for a range of income-generating activities, including livestock, agriculture, trade (such as vegetable vending), production (from basket weaving to pottery) and new age business (photography to beauty parlours). SKS also provides members with interest-free loans for emergencies as well as life insurance and loan cover insurance to borrowers.

SKS has been a sector leader in sourcing capital. In July 2009, Bajaj Allianz made a strategic investment of $ 10 million(INR 50 crore) in SKS Microfinance which was the first-ever investment by an insurance company in an Indian microfinance institution. In November 2008 SKS raised equity worth $ 75 million(Rs 366 crore), the largest equity raised by an MFI in the world. The third round of equity worth Rs 147 crore was raised in January 2008. In March 2006, SKS closed its first round of equity investment; the largest microfinance investment in India to date - $ 3.2 million from some of the world’s leading microfinance investors, and then eclipsed this accomplishment with a second round equity investment of $11.5 million in March 2007.

It leverages its equity to raise debt from public sector, private sector and multinational banks operating in India. This capital has helped the organisation scale up operations and reach out to millions of poor households across the length and breadth of India.

In addition to rapid expansion, SKS leads the industry in technology innovation and transparency. It is one of the first MFIs in the world to have a fully automated MIS that streamlines operations and helps reduce transaction costs. It is setting up an ERP system that will ensure quick data transfers, data mining, data recovery facilities which will improve operational efficiencies and response times.

It also has set global standards for transparency, having twice received recognition in CGAP’s worldwide microfinance transparency competition. It has a large team of internal auditors who monitor branch level activities on a monthly basis.

Since microfinance is not suitable for the destitute in society who need not just access to finance but livelihood training, social and health inputs, SKS has a unique Ultra Poor programme for this section of society. Under the programme, the beneficiaries receive training to run an income-generating enterprise, financial education and an asset. Over an 18-month period these beneficiaries are trained to become self-sufficient and graduate into regular microfinance. The first phase of the Ultra Poor programme was conducted in Medak district of Andhra Pradesh where nearly 500 women were covered. In all, 426 women have successfully graduated from this programme. In the next phase, the Ultra Poor Programme is being planned in some of the poorest districts of Odisha and Jharkhand.


SKS was ranked as the Number 1 MFI in India and number 2 in the world by MIX Market. Business Week has rated SKS as one of the most influential companies. SKS has received numerous awards including the CGAP Pro-Poor Innovation Award, the ABN-Ambro/Planet Finance Process Excellence Award, Citibank Information Integrity Award, the Digital Partners SEL Award, SHG Foundation funding and the Grameen Foundation USA Excellence Award. SKS is the only MFI in India to receive the MIX Transparency Certification. SKS was selected by Unitus as the most promising microfinance organization in India.

The IPO ControversyModifica

On July 28, 2010, SKS Microfinance, India's biggest Microfinance Institution (MFI), made its debut on Bombay Stock Exchange, offering its shares to the general public. SKS's Chairperson and Founder, Vikram Akula, claimed that Initial Public Offering (IPO) has been made to raise more funds so that SKS could reach out to a larger number of poor people. However, others, most notably the father of microfinance Muhammad Yunus, expressed doubt that Akula will be able to juggle SKS's social mission with the demands of a traditional profit-maximizing business. The main obligation of any public company is to make dividends for its shareholders, while the main obligation of an MFI is to serve the poor. Yunus is afraid that in the end SKS will have to put its shareholders' interests above the ones of the poor. "By offering an IPO, you are sending a message to the people buying the IPO there is an exciting chance of making money out of poor people. This is an idea that is repulsive to me. Microfinance is in the direction of helping the poor retain their money rather than redirecting it in the direction of rich people," Yunus said.[3]

In their face-to-face debate at 2010 Clinton Global Initiative, Akula insisted that going public is the only way for an MFI to raise sufficient funds to provide micro-loans for 3 billion people in need worldwide. Yunus contradicted Akula by saying that micfofinance is, first of all, banking. Therefore, Yunus continued, MFIs need to work towards obtaining banking licenses, which will enable them to take deposits from the public and, thus, become self-sustaining.[4]

On Oct 4, 2010 SKS Microfinance said that its board has passed a resolution terminating the appointment of its managing director and CEO Suresh Gurumani, without giving any specific reason.SEBI has asked the board to justify the reason for terminating its CEO.

Slide in Share PriceModifica

Share price of SKS slides by 20% on 18-Nov-2010, because of a move to monthly collections from weekly to comply with new regulations, sending its shares to an all-time low.


  1. CGAP, "Indian Microfinance Goes Public: The SKS Initial Public Offering,"
  2. Mix Market, "SKS Microfinance Private Limited,"
  3. ABCNews, SKS Launches India's First Microfinance IPO
  4. "Clinton Global Initiative," Special Session: Profiting from the Poor? A Discussion on Microfinance IPOs

External linksModifica