SKS Microfinance raises $75 mn

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Hyderabad, November 10: : SKS Microfinance Pvt. Ltd. has announced the closure of a fourth round of equity funding in which it has raised $ 75 million (Rs. 366 crore). The landmark transaction, led by Sandstone Capital, represents the largest private equity investment to date in microfinance globally.

Based in Hyderabad, SKS has provided micro-insurance products and Rs. 4,729 crore ($ 979 Million) of micro-loans to 3.3 million poor households across 18 states in 50,000 villages and urban slums of India. Its members have maintained a 99% repayment rate. The new equity investment will help SKS expand its outreach to 8 million members over the next two years.

Commenting on the investment, Vikram Akula, Founder and CEO of SKS Microfinance, said, “the fact that this investment has come during the global economic meltdown is proof of the confidence that investors have in SKS—and more importantly of the resilience and entrepreneurial abilities of the poor not only to survive in today’s economic crisis but actually to prosper because the poor are largely de-coupled from global trends.”

Sandstone Capital led the investment and was joined by existing SKS investors Kismet Capital and SVB India Capital Partners (an affiliate of Silicon Valley Bank). Edelweiss Capital is the investment banker to the issue.

Paresh Patel, Founder and Managing Partner of Sandstone, said, “At SKS there is a unique opportunity to build one of India’s next great companies, such as Bharti, Infosys or L&T. SKS has the right pedigree of leadership, an enormous market where they possess a superior operating model, a desire to incorporate best practices in corporate governance and a passionate set of employees that are driven by the singular mission of enabling the poor, profitably. Our investment will give some of India’s poorest communities the opportunity to improve their lives while simultaneously providing investors returns that are uncorrelated to traditional finance businesses.”

Ashish Lakhanpal, MD, Kismet Capital added, “India’s microfinance industry is evolving rapidly, with greater efficiency, improved transparency, and increased professionalism. SKS is at the forefront of this movement and is an excellent example of how well-run businesses are able to deliver social solutions that are scalable, sustainable, and profitable.” Indeed, impact studies of SKS show that its borrowers earn returns on their micro-enterprises of up to 100% and that their increased incomes lead to improved health, education, and general welfare.