MICROCAPITAL BRIEF: SHARE Microfin Limited Officially Delaying Initial Public Offering (IPO) Due to Rising Loan Defaults

SHARE Microfin Limited, a regulated non-banking financial company (NBFC) in India, officially delayed its planned initial public offering (IPO) of INR 10 billion (USD 218 million), originally scheduled for early 2011, due to rising default rates and tightening government regulations in India’s troubled Andhra Pradesh state. A delay had been rumored since October amidst rising uncertainty in the microfinance industry. SHARE Microfin has USD 577 million in assets, a gross loan portfolio of USD 490 million, 990 branches, 2.3 million active borrowers, return on assets (ROA) of 5.5 percent and return on equity (ROE) of 45.18 percent.

Udaia Kumar, SHARE Microfin’s managing director, also said that the company will postpone a merger with another unnamed microlender. In October, SHARE Microfin was said to be mulling a merger with Asmitha Microfin Limited, which reports assets of USD 389 million.

Loan repayment rates have fallen below 20 percent in Andhra Pradesh and the government has issued an ordinance capping interest rates. According to Mr Kumar “most of the MFIs, including SHARE, have stopped disbursing loans in the state of Andhra Pradesh because of the ordinance.”

Mr Kumar indicated that SHARE Microfin will not consider an IPO until clients begin repaying debts and until the state and central governments indicate whether they will grant loan waivers to borrowers [1].

By John Howard-Smith, Research Associate

About SHARE Microfin Limited: SHARE Microfin Limited is a microfinance institution (MFI) based in Hyderabad, India. It began operations in 1989 as a nonprofit and converted into a non-bank financial company (NBFC) in 2000. It offers loans primarily to women as well as training for borrowers. As of March 31, 2010, it has USD 577 million in assets, a gross loan portfolio of USD 490 million, 990 branches, 2.3 million active borrowers, return on assets (ROA) of 5.5 percent and return on equity (ROE) of 45.18 percent.

About Asmitha Microfin Limited: Asmitha Microfin Limited is a microfinance institution (MFI) based in Hyderabad, India. It offers collateral-free group and individual loans to women. It was founded in 2002 and operates primarily in rural areas. It is registered as a “Public Limited Company.” In October of 2008, MicroCapital reported the purchase of a minority stake in Asmitha on the part of BlueOrchard Private Equity, the private equity arm of BlueOrchard Microfinance Investment Managers. According to the Microfinance Information Exchange (MIX), the microfinance information clearinghouse, the MFI reported a gross loan portfolio of USD 315 million, total assets of 389 million and 1.3 million active borrowers as of 2009.

[1] Bloomberg: “Billionaire Chandler-Backed Microfinance Firm Delays India IPO on Turmoil”, http://www.bloomberg.com/news/2010-11-19/billionaire-chandler-backed-microfinance-firm-delays-india-ipo-on-turmoil.html

MicroCapital.org story, November 23, 2010: “MICROCAPITAL BRIEF: Finance Minister of India Vows Not to Strangle Indian Microfinance Industry”, https://www.microcapital.org/microcapital-brief-finance-minister-of-india-vows-not-to-strangle-indian-microfinance-industry/

MicroCapital.org story, November 16, 2010: “MICROCAPITAL BRIEF: Under Pressure from State Government of Andhra Pradesh, Indian Microfinance Institutions Agree to Cap Interest Rates at 24%”, https://www.microcapital.org/microcapital-brief-under-pressure-from-state-government-of-andhra-pradesh-indian-microfinance-institutions-agree-to-cap-interest-rates-at-24/

MicroCapital.org story, November 15, 2010: “MICROCAPITAL BRIEF: India’s Microfinance Industry on Brink of “Collapse” Due to Credit Freeze in State of Andhra Pradesh”, https://www.microcapital.org/microcapital-brief-indias-microfinance-industry-on-brink-of-collapse-due-to-credit-freeze-in-state-of-andhra-pradesh/

MicroCapital.org story, October 13, 2010: “MICROCAPITAL BRIEF: India’s SHARE Microfin in Talks with Asmitha Regarding Merging in Advance of Initial Public Offering (IPO)”, https://www.microcapital.org/microcapital-brief-indias-share-microfinance-in-talks-with-asmitha-regarding-merging-in-advance-of-initial-public-offering-ipo/

MicroCapital.org story, October 12, 2010: “MICROCAPITAL BRIEF: Suicides and Criticism of Interest Rates, Collection Practices Prompt SHARE Microfinance, Spandana Sphoorty to Delay IPOs”, https://www.microcapital.org/microcapital-brief-suicides-and-criticism-of-interest-rates-collection-practices-prompt-share-microfinance-spandana-sphoorty-to-delay-ipos/

MicroCapital’s Microfinance Universe Profile: SHARE Microfin Limited, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=SHARE+Microfin+Limited

MicroCapital’s Microfinance Universe Profile: Asmitha Microfin Limited, https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Asmitha+Microfin+Limited

Browse the MicroCapital Universe and add your entry to the wiki at https://www.microcapital.org/microfinanceuniverse/

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