SKS Microfinance is on way to raise Rs 1,000 crore from its IPO, which would be a first company in microfinance sector. The company has plans to sell around 10-15 % stake and the quantum of stake sale will depend on the valuation of the company.

SKS is expected to file its draft red herring prospectus (DRHP) by end of this month and is looking for a valuation between Rs 5,000 crore and Rs 7,000 crore. Mr. Vikram Akula, MD and Mr. Suresh Gurumani, CEO and private equity firms Sequoia Capital and Kismat are putting part of their holdings, aggregating to 20% under promoters’ category for a mandatory lock-in for three years for the IPO. The issue will be a combination of fresh issue by the company and offer for sale by the existing private equity players.

Sandstone, which has around 12% stake in the company, is not affected by this stipulation as it invested in SKS only last year. Other Private Equity investors are offloading a part of their holding in the company, they will continue to hold shares after listing.

The IPO would also help investors and employees encash their stakes. SKS already enjoys a healthy capital adequacy ratio of 24.36% — against the Reserve Bank of India mandated 12%. This is supported by the fact that this is a combo deal – part offer for sale by existing investors, part fresh issue by the company. Hence, the listing would give an exit route the private equity players.