India's SKS Microfinance IPO sees strong demand

MUMBAI Mon Aug 2, 2010 9:03am EDT

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MUMBAI (Reuters) - The initial public offering of SKS Microfinance saw a strong response on its last day for bidding as investors bet on its business model of lending to poorer borrowers in Asia's third-largest economy.

By 5:00 p.m. (7:30 a.m. EDT) on Monday, the issue to raise as much as $353 million had received bids for 13.55 times the overall shares on offer. This is likely to go up slightly as bids are still being counted for a few more hours, sources with direct knowledge said.

Most bids were at the top end of the 850 to 985 rupees ($18.40 to $21.30) price band, data showed, indicating a strong demand among investors.

On Friday, the last day for bidding for institutional investors, the total offer had been subscribed 10.5 times, with the institutional part itself subscribed 20.3 times.

Last week, the company allocated 3.02 million shares at 985 rupees per share to 36 cornerstone investors including the fund management arms of JP Morgan (JPM.N), Morgan Stanley (MS.N), Goldman Sachs (GS.N), ICICI Prudential, BNP Paribas, Nomura and Reliance Capital.

The company has also drawn interest from investors such as George Soros, Sequoia, Kismet Capital, Unitus, venture capitalist Vinod Khosla and Infosys Technologies (INFY.BO) founder N.R. Narayana Murthy.

SKS Microfinance plans to use the share sale proceeds to augment its capital base to meet future capital requirements, which are likely to be fueled by growth in the business, the company said in its offering prospectus.

The IPO, a first in India and one of only a handful by microfinance institutions around the world, has drawn keen interest from countries with major microfinance industries such as Bangladesh, Mexico and South America, as well as private equity firms that have piled onto the fast growing sector.

But it has also drawn sharp criticism from some microfinance institutions (MFIs) and non-government organizations (NGOs) who do not favor going to the capital markets or the strong flows of private equity that have pushed up valuations.

Citigroup (C.N), Kotak Mahindra Capital (KTKM.BO) and Credit Suisse (CSGN.VX) are the arrangers for the SKS offering.

($1=46.2 rupees)

(Additional reporting by Rina Chandran)

(Reporting by Prashant Mehra; editing by Jui Chakravorty)

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