SKS Microfinance Raises $75 Million (Rs. 366 Crore)

Hyderabad, Andhra Pradesh, India, Monday, November 10, 2008 -- (Business Wire India)
-- Funds will be used to accelerate outreach to 8 million members

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.

Commenting on the fund raising, S. Dilli Raj, Chief Financial Officer, SKS Microfinance, said “Capitalization of this size has a positive impact on leverage and capital adequacy. The impressive net worth of Rs.610 crore ($126 Million) further encourages credit extensions from SKS’s stable funding partners in the banking system and this will enable us to meet the financial needs of our existing micro-borrowers as well as new borrowers.”

SKS was launched in 1998 and is India’s leading microfinance organization. It works on three inter-linked principles to scale microfinance. This includes using a for-profit methodology to access capital, drawing on best practices from the business world to speed growth, and deploying technology to overcome high delivery costs. SKS blends this rigorous business approach with a strong social mission that includes ensuring that its members continue to hold a significant stake in the company and benefit from profits that the company earns.

Sequoia Capital, Vinod Khosla, SIDBI, Unitus and Columbia Ventures Corporation are among the existing equity partners of SKS Microfinance. SKS Borrowers represented by Mutual Benefit Trusts are also one of the largest shareholder groups in the company.

About SKS Microfinance

SKS Microfinance is a non-bank finance company (NBFC) whose mission is to eradicate poverty by providing financial services to the poor. Launched in 1998, SKS Microfinance is India’s largest and one of the world’s fastest growing microfinance organizations with an annual growth rate of 200 per cent. It currently serves 3.3 million clients across 50,000 villages and slums in 18 states and has disbursed Rs. 4,729 crore ($979 Million) in loans with a 99 % repayment rate. SKS also provides life and health insurance to its clients.

SKS operates in the states of Andhra Pradesh, Karnataka, Maharashtra, Orissa, Madhya Pradesh, Bihar, Uttar Pradesh, Rajasthan, Uttaranchal, West Bengal, Jharkhand, Chhattisgarh, Gujarat, Kerala, Punjab, Haryana and Delhi.

SKS has received numerous awards including the CGAP Pro-Poor Innovation Award, the ABN-AMRO/Planet Finance Process Excellence Award, Information Integrity Award, the Digital Partners SEL Award and the Grameen Foundation USA Excellence Award. It was founded by Vikram Akula, who was named by TIME magazine as one of the 100 Most Influential People in the World(2006).

About Sandstone Capital

Sandstone Capital is a long-term investor in public and private companies in India and the subcontinent. Founded in 2005, its objective is to deliver world class, absolute investment returns by investing in Indian companies across all sectors and market capitalizations. Sandstone has invested and executed transactions in multiple industries including oil & gas, power, banking, retail, real estate, technology, telecommunications, internet, infrastructure and commodities. Sandstone believes that, with investors and management teams, there is a need to forge lasting relationships, built upon the values of integrity, trust and mutual respect. Sandstone is one of the larger India-dedicated funds with a worldwide investor base that includes university endowments, public and private foundations, family offices, individual investors and other institutions.

About Kismet Capital

Kismet Capital is an investment firm focused on private equity, mezzanine, distressed, and special situation opportunities in India and ASEAN countries. Since its founding in 2004, Kismet has invested across numerous sectors including real estate, financial services, hospitality, energy, and contract manufacturing. Kismet has operations in New York, Mumbai, and Bangkok.

About SVB India Capital Partners an affiliate of Silicon Valley Bank

SVB India Capital Partners I, L.P. is a venture capital fund focused on Indian companies and co-invests across various industries and stages with other top-tier venture capital firms. Silicon Valley Bank is the premier commercial bank for companies in the technology, life science, private equity and premium wine industries. SVB provides a comprehensive suite of financing solutions to its clients worldwide. Founded in 1983 and headquartered in Santa Clara, California, the company serves clients around the world through 27 U.S. offices as well as operations in China, India, Israel and the U.K. Silicon Valley Bank is a member of global financial services firm SVB Financial Group(NASDAQ: SIVB). More information on the company can be found at www.svb.com.

About Edelweiss

Edelweiss Capital Limited (www.edelcap.com) is one of India’s leading financial services firms. The Group’s businesses include investment banking, institutional equities, private client broking, asset management, wealth management, mutual funds, wholesale financing and financial products distribution. The Group has built strong corporate, institutional and investor relationships backed by a research-driven approach and a proven ability to capitalize on emerging market trends. The Edelweiss Group employs over 1800 employees including 90 research professionals, leveraging a strong partnership culture and unique model of employee ownership. It now operates from 60 offices in 25 cities.