SKS Microfinance Ltd has raised Rs 100cr through issue of NCDs and commercial papers.The MFI raised Rs 50 cr by issuing non-convertible debentures worth Rs 50 cr to Bajaj Allianz Life Insurance Company. It raised another Rs 50cr by issuing commercial papers worth Rs 25 cr in 2 tranches to Religare Asset Management Company.

The NCD and CP, which have a one year tenure, are both rated PR1+ by CARE (See Here NCD, CP)

The company claims this is the first time NCD is issued by a microfinance institution to an insurance company.

Transaction Reference: ET

SKS Microfinance has been in the news consistently last year for its fund raising activities. The MFI is also planning to issue an IPO by end of this year and have a pre-ipo placement with Catamaran Investments.

Since SKS Microfinance's Q3 results are not available, we aren't able to ascertain its cash position. However, it is possible that SKS will utilize the money raised through this issue to re-finance its NCD debt that will expire in March. It had accessed funds from 35 banks and 4 financial institutions till March 31, 2009, which formed major source of its borrowings. SKS has a debt of Rs 1986cr as on March 31, 2009.

The total AUM (own and managed portfolio loans) managed by SKSML is Rs.2456 cr (including managed portfolio of Rs.1039 cr) and has a net worth of Rs.658cr as on March 31, 2009. The MFI reported income of Rs.554cr and net profit of Rs.80cr for FY09.

Operations:

SKS provides loans to women in Joint liabilty Group with each group consisting of 5 members. SKSML lends to JLGs at interest rates of around 12.5% to 15% with around 50 weeks repayment tenure. Apart from micro-credit services it has also initiated selling of insurance products and other non-financial products.

The loan portfolio was well distributed across states with Andhra Pradesh (29%), Karnataka (17%) and West Bengal (12%) having majority of the portfolio.

SKS Microfinance has served 53 lakh members across 19 Indian states and has a loan outstanding of Rs 28,011.08 mn, with a 99.1% repayment rate as of September last year.

Investments in Microfinance Sector

Overall, there were more than Rs1,000cr capital inflow through 21 deals in the microfinance sector in 2009 (Get List HERE). With a sudden rise in investments in microfinance, can we see a meme in this sector? More on this later..

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