Indian Microfinance Goes Public: The SKS Initial Public Offering
On 28 July 2010 SKS, India’s largest microfinance institution (MFI) with 5.8 million clients, became the first MFI in India to float its shares through an initial public offering (IPO). The IPO was successful by any financial market standard: the offering was 13 times oversubscribed and attracted leading investment groups, such as Morgan Stanley, JP Morgan, and George Soros’ Quantum Fund. The company valuation reached the top of the offer band price at US$1.5 billion, and five weeks after trading began, the share price rose 42 percent.
SKS is among a handful of MFIs globally to have gone public, following the pathbreaking IPO by Banco Compartamos in Mexico in 2007 (see Rosenberg 2007). SKS is also the first to list its shares in the competitive and fast-growing Indian microfinance market. Over the past four years Indian MFIs have grown from 10.5 million to 26.7 million clients (Access Development Services 2007, 2008, 2009, and forthcoming), and for the past three years SKS has stood at the top of this market in terms of size and access to capital. Globally, SKS has been among the fastest growing MFIs in the world, with a compound annual portfolio growth rate of 165 percent since 2004.
The IPO is important not only because SKS is an influential player in a big market but also because it marks an important transition—for the first time individual investors in India can buy shares of an MFI. The IPO and its implications are also being watched carefully by investors, managers, and policy makers around the world, fueling conversations about the rewards and risks of tapping into mainstream capital markets.