India: SKS Microfinance IPO Gets CARE Grading of 4

Jul 2010
Hyderabad, India, July, 18 2010 - CARE assigns ‘CARE IPO Grade 4′ to the proposed IPO of SKS Microfinance Ltd.

CARE has assigned a ‘CARE IPO Grade 4’ to the proposed IPO of SKS Microfinance Ltd (SKSML). ‘CARE IPO Grade 4’ indicates Above Average Fundamentals. CARE assigns IPO grades on a scale of Grade 5 to Grade 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals. CARE’s IPO grading is an opinion on the fundamentals of the issuer. The grade assigned to any individual issue represents a relative assessment of the ‘fundamentals’ of the issuer.

Grading Rationale The grading reflects SKSML’s position as one of the largest players in the Indian micro finance industry having pan India operations with a well diversified portfolio. The grading takes into account track record of the promoters, experienced board of directors and strong management profile. The grading also takes into account good corporate governance practices adopted by the company including presence of various committees and independence of the board. The grading considers the strong financial position with healthy margins including good asset quality, comfortable capital adequacy ratio, comfortable liquidity position and access to diverse sources of institutional funding.

The grading also considers the strong industry growth in recent period with good prospects for future growth on account of large unmet potential demand. The grading is however moderated by company’s sensitivity to operational risk on account of large volume of cash transactions & decentralized operations spread across the country. Further, the grading also factors in the industry risks on account of any adverse change in government policies, low seasoning of the industry portfolio and asset quality risks on account of political/religious interventions. However some of these risks are mitigated due to the high diversification of SKSML’s asset portfolio.sks care


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