SKS Microfinance to move up ?

SKS Microfinance is planning to raise the investment limit for Foreign Institutional Investors (FIIs) from the existing 24% to 74% of the company's paid up equity shares. The decision will be taken in the Extraordinary General Meeting, scheduled on Dec 21, 2011. The move is aimed at attracting foreign investors to the company. As on September 2011, FIIs were holding 19.02% of the paid up capital (decreased by 156 bps sequentially).

We feel that this decision by the company is surprising, not because the investment limit has been raised, but on account of the fact that in the past, FIIs have continuously sold of their shares, bringing down their stake



The move is not expected to have much of an impact on the company, as in any case, the existing FII limit of 24% is not fulfilled. However, one can expect speculative trades, as some FIIs may buy for a shorter tenure, driving the market price of the company up.

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