SKS Microfinance Ltd IPO Message Board (Page 63)

Thank you Mr. Saharanporiji,
For giving us indepth information of this IPO.
People like you, Ravi bangalore,Gem,K.k.Natrajan & few others are really "gem" of this site.
I am also impressed by insight given by Mr.Ajay on this IPO
Thanks a ton to all of you!!
milinds

gem,
My sources have not failed me.Guys in villages definitely have financial acumen.They are up to date with their company.Checked Red herring prospectus.Net revenue & profit are 958 & 174 as I had informed you few days back & Guys who are applying for SKS,Enjoy as you will be getting discount(Sone pe suhaga).Retail investors should now only hope the subscription is less so that they can garner more shares.The block buster listing of Technofab & HMVL has revived IPO market.No doubt about that.The result is Midfield's heavy subscription & expected heavy subscription in coming IPOs EIL,SKS & Bajaj corp .

All,

Let me now clarify on the equity infusions and the story which might be behind their pricing of the issue.

Initially in the few years till 2006 the company has issued shares at Rs. 10/- as the society was transformed to the company in 2005-06. Later on still the base was small it started investing in its growth and in a year i.e., 2006-07 it has reached Rs.50/- (approx), a multiple of 5x in an years time. and later in the year 2008-2009 it moved on to Rs. 300/-, a multiple of 6x over a period of two years. No one questioned the math here and there were large PE funds investing at this point of time, who has done huge amount of analysis and privy to important calculations. From Mar'2009 to Dec'2009 when the agreement was entered into with treeline the price was moved to Rs. 637/- (2 times the previous price)and from dec to July in a period of another 6 months i am not surprised if they do a 1.25 times to 1.5 times of the previous price.

Justification might come from their huge growth in operational numbers such as branches, loan officers and disbursements/advances to the poor but also from exponential growth in their PAT numbers.

And when the question of Catamaran deal was asked in the meeting yesterday at Trident, Dr. Akula replied that it was a strategic decision to get Mr. NRN on to the advisory council board as its chairman and this investment was a result of negotiations they were having with him since many months.

Note: I have quoted these data points from their capital structure, stat info and part of agreement details. When asked of confirming the data in this relation the company hasn't provided any response to this.



All these data points were collected from DRHP/RHP and through informal

Hey Mr.Saharanpuri,

Kudos to you yaar. you have reproduced the whole of DRHP/RHP in your analysis by providing a sightful comparison of investment by different PE investors in the company.

But let me give you a different dimension of this story, if any one of us being a PE investor or a venture capital fund would we have ever thought through in our dreams to invest in a micro finance providing a micro loans to the poor audience without any collateral. Atleast i would not have done. But all these people have understood the potential of this business, the visionary focus of Dr. Akula and their team and have done an earlier investment in 2006 and 2007 when the business was nominal or nil. If the story would have turned the other way no one would have spoken of their earnings.

I see no fault in any of these promoters making huge money as they have taken tough decisions during early periods and the benefits are exponential. My only question to the readers is atleast don't miss the bus now.

Let me bring other points, if you see their equity appetite,
they have noteworthy investors like Mr.Vinod Khosla, Sequoia who have invested in google & yahoo, Sandstone (right amidst the global financial crisis while the big biggies of the financial world are falling apart), Bajaj Allianz, SIDBI and many others. Do you think they don't have common sense to look into the future growth.

And I bet in the public forum, tell me one kind of an issue where there was no strong promoter holding, an NRI with such a strong vision have never thought of making profits and winding up but tried for upliftment of poor. Let us appreciate the fact here. And though the returns are huge would you prefer travelling to remote corners of the country, sit with the members on the soil, teach them financial calculations, make them literate to the extent of signature (which the govt. is still planning to achieve. remember an advt. in my childhood in doordarshan where a maid was learnt to write her name. No improvement since then). Go to the rural poor and provide them handy loans. We are privileged to access any bank and they charge 16% to 18% of personal loan flat resulting to 35% to 40% which we happily pay and keep calm. where as he provides a loan at 12.5% to 15% flat and makes a weekly visit to collect the repayments which would come at an average of 28%.

let us all appreciate the story here and contribute for the good cause.

Note: I don't suggest anyone to invest in this company as it's your own personal choice, but let us not criticize the common cause for upliftment of poor without getting our facts correct. Would recommend all of you to listen to Dr. Akula's presentation on the reason and cause for SKS.

govt.ko think karna mangta hai,pvt.sector sks group loot lega 1200crore,aur EIL issue floop hoga,sab ministry corrupt hai,

he pre-IPO preferential issue to rope in Catamaran was made at a discounted price of Rs 300 per share.

SKS Microfinance, India's largest microfinance entity, has filed for its prospectus with backing from none other than Infosys chief mentor N R Narayana Murthy.

The Draft Red Herring Prospectus of Hyderabad-based SKS, which is looking sell around 16.8 million shares, reveals that Murthy's recently launched $129 million venture capital fund Catamaran invested Rs 28.12 crore in January this year. The investment has been made through Catamaran Management Services Pvt Ltd and the firm will hold a 1.3% stake in SKS post-issue.

VCCircle was the first to report that Murthy's fund is likely to make its debut investment in SKS Microfinance, which will be the first Indian MFI to go for a listing. Murthy boarding SKS just ahead of the public issue is significant, as the firm could well be trailblazing the capital market dreams of several other MFIs.

There have not been many MFI IPO's around the world and thus there are not many benchmarks. The world’s first successful MFI IPO was Mexico’s Compartamos, which was valued at $1.5 billion at the time of public offering in 2007. The investors in the Mexican firm sold 30% stake netting $450 million on an original investment of $6 million made by them in 1998-2000 period, according to a note by CGAP (Consultative Group to Assist the Poor) on this watershed public offering.

Also, Singapore and Hong Kong-based hedge fund Tree Line Asia has picked up a stake in SKS last month. But this was done through slew of secondary transactions, with the hedge fund buying shares from senior SKS management, including chairman Dr. Vikram Akula and CEO Suresh Gurmani. This share acquisition was done at a price of around Rs 637 per share.

This transaction values SKS closer to Rs 4,590 crore, or close to $1 billion on post-issue share capital basis, and could well become the benchmark for the upcoming issue.

Interestingly, the preferential issue to Catamaran, done less than a month before Tree Line, was made at Rs 300 share. Though such a discount is not usual for public offerings, but bringing in a marquee investor like Murthy ahead of the public offering is expected to buoy investor sentiments and help SKS navigate the capital markets.

The discount given to Catamaran is likely a result of value add that Murthy will bring to SKS. Besides being an iconic name, Murthy has a track record of being active in socially relevant ventures.

The IPO will also see a partial exit for Sequoia Capital India and Mauritius Unitus Corporation, which were one of the early investors in SKS. Both venture investors Sequoia and Unitus figure among the promoters of SKS, which will be the first for an Indian company going for an IPO. Others promoters include Dr. Vikram Akula, SKS Mutual Benefit Trusts (SKS MBT) and SKS Capital.

Both SKS Capital and SKS MBT will also sell part of their holdings in the issue, which comprises of fresh issue of 7,445,323 equity shares and offer for sale of 9,346,256 equity shares.

SKS has raised Rs 574 crore in private equity funding from Sequoia Capital India, Sandstone Capital, Kismet Capital, Unitus Equity Fund, Silicon Valley Bank, besides Vinod Khosla. It also raised Rs 50 crore from insurance firm Bajaj Allianz Life Insurance last year as a strategic investment.

Quoting a CRISIL report, SKS says its the largest MFI in India with 5.3 million members across 19 states. It has 1,627 branches with loans outstanding of Rs Rs 2,801 crore as on September 30, 2009. The firm has a distributor relationship with Bajaj Allianz, where it gets a fee-based commission on the sales. SKS has distributed 2.3 million such policies till September '09.

SKS posted revenue of Rs 385 crore in the April-September 2009 period against Rs 554 crore for the full fiscal year at the end of March 2009. The profit after tax for the half year period (April-September 2009) is Rs 55.6 crore against Rs 80.22 crore in 2008-09. Its return on equity is 15.5% in the first half this fiscal. SKS, which disburses an average loan size of Rs 10,000, has disbursed a cumulative sum of $2.4 billion (Rs 11,208 crore) as on November 2009.

The company’s profit after tax has literally leapfrogged from Rs 44 lakh in 2005-06 to Rs 80.22 crore in 2008-09. The return on equity too has been in the high teens in this period.

Tree Line Asia Makes Second MFI Deal

This would be the second deal in Indian MFI's this year for Tree Line, which is one of the largest hedge funds in Asia. Earlier this month it led a $10 million equity round in Janalakshmi Financial Services, a Bangalore based MFI which focuses exclusively on urban areas.

Tree Line picked up a 1.5% stake from Akula in February for nearly $13 million, at a share price of $13.67 (Rs 637 per share). The fund is also picking up stakes from SKS CEO Suresh Gurmani, CFO Dilli Raj, COO M R Rao and other management personnel for the same price. Some of these deals are still pending requisite approvals, but Tree Line could end up with more than 2% stake in the after the issue.

Multibagger For Early Investors

The SKS IPO is turning out to be a multibagger for its early investors like Unitus (managed by Bangalore's Elevar Equity), Vinod Khosla, Sequoia Capital India and Small Industries Development Bank of India (SIDBI). As per the share sale price to Tree Line, these players could be anywhere between 7 times to 17 times (6x to 18x) of their per share acquisition cost.

Sequoia, the largest shareholder with nearly 22% in SKS, invested nearly Rs 124 crore in the firm since 2007. The shares were brought in both fresh capital infusions and through secondary purchase from Akula and Unitus. The venture and growth capital player, which manages more than $1.8 billion across five funds in India, has invested a total of Rs 123 crore in the firm. The investment have been made through Sequoia Capital India II and Sequoia Capital India Growth Investments I.

The average cost of acquisition for Sequoia across these two funds is Rs 88 a share, which means Sequoia could be netting 6x or more depending on the IPO price band. Sequoia is selling nearly 4 million shares in the issue, with its stake expected to come down to 14% after the issue.

Unitus, one of the first venture capital investors in SKS, is also expected to net nearly 14x or more on its investment. The MFI focused venture fund, managed by Elevar, has already had some liquidity by selling a 3% stake to Sequoia last year for Rs 47 crore. Unitus, which holds the stake through MUC, is also selling around 1 million shares with its shareholding coming to 3.7% post issue.

For Vinod Khsola, the Indian origin venture capitalist and co-founder of Sun Microsystems, this will be just another one of his venture 'hits'. Khosla, who formed his owned venture firm after being a general partner at KPCB, is set to net nearly 18x or more on this investment. Khosla was an early spotter and invested in the firm in 2006. But Khosla has had mega exits before, including Juniper Networks, which returned KPCB's investment over 1,000 times.

Other investors in the firm include Sandstone Capital, which invested Rs 250 crore last year at Rs 300 per share. Sandstone will have an 11.6% stake in the SKS after the IPO. Other shareholders include Kismet Capital, Tejas Ventures, Yatish Trading Company Private Ltd, ICP Holdings and Infocom Ventures.
Comments

SKS IPO opens from July 28-30 for institutional buyers and on August 2 for others.

SKS Microfinance, India's largest microfinance entity, has roped in another blue-chip investor as its IPO debut date draws near. The latest to invest in the firm is Quantum (M) Ltd, the billionaire investor George Soros' hedge fund.

Quantum has picked up around 3 lakh shares in the company from existing shareholder Yatish Trading Company Pvt Ltd. Quantum will hold a 0.4% stake post the issue while Mumbai-based securities firm Yatish will have a 2.2% holding.

The other investors in SKS include Sequoia Capital India, Infosys chief mentor N R Narayana Murthy and Vinod Khosla, among others. The shares were acquired by Quantum for a total sum of Rs 19.08 crore, translating into Rs 636 per share. The share price is equal to the price paid by hedge fund Tree Line Asia, which picked up 2.3% stake in SKS through slew of secondary transactions earlier this year.

Various reports have pegged the price band of the issue between Rs 650 and Rs 700 per share. This may put the mopup at anywhere between Rs 1,090 crore and Rs 1,175 crore. The Red Herring Prospectus of Hyderabad-based SKS says the MFI is looking sell around 16.8 million shares. Various reports have also said that the issue may give a discount to retail investors.

SKS IPO opens on July 28 and closes on July 30, 2010 for qualified institutional buyers and on August 2 for others.

Murthy's recently launched $129 million venture capital fund Catamaran invested Rs 28.12 crore in January this year. The investment has been made through Catamaran Management Services Pvt Ltd and the firm will hold a 1.3% stake in SKS post-issue.

Coming on 28th July.

Reasonably priced:

At an upper price band of Rs. 515 and FY10 earnings of Rs.175 cr., the issue is priced at a FY10 PE of 23.1x .

This is the same price at which last three allotment of shares have happened at SKS microfinance.
1.)      31st Dec 2009 - @ Rs. 300
2.)      19th Jan 2010 - @ Rs. 300 (to Catamaran Management Services Private Limited)
3.)      23rd Jan 2010 - @ Rs. 300

These transactions would have been based on FY09 EPS which was 13.2x. Thus these transactions would have happened at a PE of 22.8x.

So, I think the IPO is reasonably priced at 23.1x PE for FY10.

Concerns:

56% of the issue proceeds will go to Promoters pocket. This is a sad part that Promoters themselves don’t believe in this growth story and want to cash out on poor retailers money. Obviously, they were not here for a social cause. Shareholders like Vinod Khosla and Narayan Murthy are not selling a single share in this process (this speaks highly of them as individuals)

Remember guys, that seller ALWAYS has more information than buyer in an IPO and they only show us the greener picture.

Also, I was quite disturbed by the negative cash flow from operations, consistently for three years.

You know your risk appetite – take your call on IPO.

I will stay away from this as this is definitely not a long term buy due to lack of promoters commitment and corporate governance.

- IPO ANALYST

70. baba singhMMMMM Jul 21, 2010 5:32:33 PM IST Report Spam!
PRICE BAND DECALARED





ITS 455 TO 515


69. baba singh Jul 21, 2010 5:31:24 PM IST Report Spam!
PRICE BAND DECALARED





ITS 455 TO 515


68. baba singh Jul 21, 2010 5:30:24 PM IST Report Spam!
PRICE BAND DECALARED





ITS 455 TO 515

PRICE BAND DECALARED





ITS 455 TO 515

ye ipo 28 july ko open hoga aur 2 aug.ko bandh hoga,,,,,

HI,PRIYANKA


DIL KI BAAT SUNI.....IS LIYE 3 FULL APPLYCATION KARI....
DEKHTE HAI AAGE KYA HOTA HAI. OVER SUBSCRIP HONE PER SHARES KAM MILENGE OR PRIMIUM 25/27 HO JAYGA ..JAISE MAINE TUJHE PAHLE HI BATAYA THA YAAR 60CRORE IPO SIZE HAI OVER SUBSCRIP HOGA.CONFORM DATA MUJHE NAHI MILE HAI
LET'S SEE...KYA HOTA HAI............................

PRINCEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE

One is an FPO and the other an IPO. Both has got its own benefits. IPO wud be more interesting, reason being the 1st MFI to go for IPO in India.

thanks ajay .and vc two big ipo at soame time means more confusion for retail investor...share your opinion

The discount factor has been mentioned in the RHP cover page

yeah, there was a mention of the retail discount and the management assured that it would be there. management would provide the exact % along with the price band planned to be disclosed on 26th July, 2010

dear ajay can u give us any idea of discount for retail in this ipo which might have discussed in the meeting

@ Ajay,

Even I came to know through one of my friends abt the investor meet at Trident, I heard it went well. You have well justified abt the price of catamaran. I am more interested in knowing the price band. When I see the discussion board, it wud be around 600-700.

I was there on the analyst meet that happenned yesterday in Trident. Mumbai. It is a good IPO with strong fundamentals and high level of commitment from its promoter (Dr. Vikram Akula) and other senior management.

To correct on some of the facts of GEM IPO finder, yes it is correct that catamaran issue was at lower the price than 600/-, they might have confused it with Treeline.

And what they meant by 44% was of the total issue proceeds, the company would get 44% of it and the others go as offer for sale to its selling shareholders.

The management of SKS has been very patient in answering all the questions i had about the company. Keep posting your queries and would provide the reply.

Note: By the way I am following this company from an year or so from the time they have rated their NCD in BSE.