SKS Microfinance, a microfinance institution in India, recently raised INR 100 crore (the equivalent of USD 21 million) by issuing INR 50 crore (the equivalent of USD 10.5 million) worth of non-convertible debentures to Bajaj Allianz Life Insurance Company, an Indian life insurance provider, and INR 50 crore worth of commercial paper to Religare Asset Management Company, a mutual fund.

The non-convertible debentures are medium- to long-term debt instruments issued with a specific maturity date and value. Non-convertible debentures cannot be converted into equity. Commercial paper is a short-term debt instrument that generally has a fixed maturity of less than a year. The maturity dates for the debentures and commercial paper in these transactions was not reported. SKS Microfinance’s chief financial officer, Dilli Raj, sees the investment by an insurance company and a mutual fund as a sign of “the coming of age of microfinance as an asset class” and says that the transactions “should help SKS to diversify the sources basket” [1].

About SKS Microfinance

SKS Microfinance was founded in India in 1998. In 2005, it transformed into a for-profit non-banking financial company (NBFC). As of September 2009, SKS had 3.5 million active borrowers and 1,676 branches, compared with 771 in March of 2008. According to the MIX Market, the microfinance information clearinghouse, its total assets as of 2008 were USD 596.2 million, with a return on assets of 3.68 percent and return on equity of 18.72 percent. SKS products include: income generating loans, mid-term loans, individual loans, loan cover insurance and health insurance.

By Eric McKay, Research Assistant

Bibliography

[1] The Economic Times, “SKS Micro raises Rs100-cr via non-convertible debentures”, February 23, 2010, http://economictimes.indiatimes.com/Stocks-in-News/SKS-Micro-raises-Rs100-cr-via-non-convertible-debentures/articleshow/5605074.cms

Additional Links

MicroCapital Universe: SKS Microfinance: http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SKS+Microfinance

MICROCAPITAL BRIEF: Catamaran Venture Capital Fund to Invest in SKS Microfinance Ltd: http://www.microcapital.org/microcapital-brief-catamaran-venture-capital-fund-to-invest-in-sks-microfinance-ltd-an-indian-microfinance-institution-expected-to-soon-launch-an-initial-public-offering-ipo/