What Should We Look for with the SKS IPO?
With the SKS IPO slated to hit the street by the end of July, we will have an opportunity to learn more about where the microfinance industry is headed. There will be some details which the IPO transaction itself will shed light on, but the most important questions about the microfinance industry will take some time. We should not rush to judgement.
The IPO will finally tell us where the price and valuation settled. A price at the low end might dampen investor enthusiasm. On the other hand, a valuation perceived to be a the high end might bring accusations of supernatural profiteering. Expectations about the price and valuation may drive the initial reaction. It will be very interesting to read carefully the reaction from the general public, opinion makers or policymakers to gauge broader perceptions of a changing microfinance industry within India. Microfinance may finally move in the public’s view from a development sector to a fully commercial enterprise. Another key issue is how smoothly the transaction is executed. If it moves through seamlessly with strong subscription this should be a sign that future IPOs for microfinance are possible.
But the most important and contentious issues about the IPO will take more time for us all to weigh carefully. It will be particularly important to see how the proceeds of several Mutual Benefit Trusts are used given the philanthropic purpose for which these MBTs were first created. This is something we may not know for several months or possibly even longer. Another feature that may take time to learn more about is how new transparency and governance standards applied to public companies affects SKS’s performance. And we will have to wait and see how the IPO affects the growth trajectory, expectations, and valuations of the broader microfinance industry.
Will the health of the microfinance industry be advanced? This is something we will have to look beyond the transaction itself into the months and years ahead.