Top microfinance companies line up PE to feed fund quest

Hyderabad: In a bid to meet the soaring demand for small loans from poor borrowers, three of India's biggest microfinance providers, all are based in Andhra Pradesh, are planning to raise hundreds of crores in equity from private investors this year.

Share Microfin and Spandana have already begun talks with private equity investors for a second round funding of Rs 300 crore and Rs 100 crore respectively. Meanwhile, SKS Microfinance will seek its fourth round of investments for an unspecified sum.

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The demand for capital by microfinance institutions (MFIs) are estimated at $6 billion by 2012 as the customer base grows five-fold from current levels to 50 million.

Intellecap, a social business advisory firm, puts the number of MFIs in India at between 800 and 1,000, with the top 60 accounting for up to 95 percent of the total business. The loan portfolio of the leading MFIs is seen growing to $2 billion in 2009 from $769 million in 2007.

"We will be raising money by mid this year. This time round we are looking at fresh investors and will divest around 19 percent stake to the private equity funds. The money will be used to expand and increase the customer base," said Padmaja Reddy promoter and Managing Director, Spandana. The company raised Rs 50 crore in its first round of funding last year from JM financial and Lok Capital by divesting a 30 percent stake.

Vikram Akula promoted SKS Microfinance will finalise its fourth round of funding by the end of 2008, Chief Operating Officer M R Rao said, but he did not disclose how much would be raised.
Source: IANS