Is going public a good path for microfinance institutions?

: a case study analysis of SKS's IPO and its post-issue performance

Abstract

Companies go public in order to obtain more attractive financing prices from stock markets in exchange for the promise of delivering profits to the investors who buy their stock. Microfinance Institutions (MFIs) aim at alleviating poverty in the society by providing the poor with opportunities for the creation and development of income generating activities. The uprise in the number of connections between capitalist interests and social ones originated several discussions and controversies among the microfinance community. This paper presents SKS Microfinance IPO, which was the first Microfinance Institution in India to go public. The IPO was a success and so were the ensuing 5 weeks. However, soon afterwards a crisis was triggered in the industry, making SKS’s value fall enormously. In this study it is our goal to understand the reasons behind SKS’s performance and whether going public is a viable path for Microfinance Institutions. Our analysis focuses on the internal and external factors behind the company's market performance, its operational evolution, and its position relative to its peers. We discover that the factors influencing SKS performance were specific to its managerial distress and to external conflicts arising in the sector. With strategic coherence and market transparency we believe there is an open way for MFIs to go public.

Date of Award	Jun 2012
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Jyoti Gupta (Supervisor)