SKS Microfinance IPO: What Went Wrong?

            
 
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Case Details:

Case Code : LDEN075
Case Length : 26 Pages
Period : 2000-2011
Pub Date : 2011
Teaching Note : Available
Organization : SKS Microfinance
Industry : Microfinance
Countries : India

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Introduction Cont...

This fall was even more dramatic considering the initial surge in SKS share prices after the shares were listed on the Indian stock exchanges [the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE)]. On the market debut day (August 16, 2010) SKS shares rose to gain 18% and later climbed even more to return a commendable market return of 51% within a matter of two months (with an intraday high price of Rs.5 1490.70 on September 28, 2010).6 Its IPO bidding price was in the range of Rs. 850 to Rs. 985 with an issue price of Rs. 985 per equity share7 for an equity share having a face value of Rs. 10. No wonder then, that investors were completely in the dark about what had gone wrong with their investment.

Leadership and Entrepreneurship Case Studies | Case Study in Management, Operations, Strategies, Leadership and Entrepreneurship, Case Studies

More so, as the IPO had been oversubscribed just a few months earlier by about 13.55 times (taking all investor segments together).8

SKS had the biggest and the best names on the list of its investors with the likes of George Soros [through his hedge fund Quantum (M) Ltd], N. R. Narayana Murthy (co-founder and Chief Mentor, Infosys Ltd.) and Vinod Khosala (co-founder of Sun Microsystems, a longtime partner at Kleiner Perkins Caufield & Byers and a Venture capitalist through his own Khosla Ventures), to name a few.

Introduction cont.. - Next Page>>

Leadership and Entrepreneurship Case Studies | Case Study in Management, Operations, Strategies, Leadership and Entrepreneurship, Case Studies


5] Rs. = Indian Rupees or INR. As of October 2010, US$ was approximately equal to Rs. 45.38.
6] SKS Cuts Interest Rate to 24.55%, Business Standard, January 12, 2011.
7] SKS Microfinance Fixes IPO Issue Price at Rs 985 per Share, Hindustan Times, August 3, 2010.
8] Prashant Mehra and Jui Chakravorty, -India‘s SKS Microfinance IPO Subscribed 13.55 Times, Reuters, MUMBA, August 2, 2010.


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