The Hindu : National : Catamaran can't exit from SKS Microfinance now

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Wednesday, Oct 27, 2010
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National

Catamaran can't exit from SKS Microfinance now

Special Correspondent

N R. Narayana Murthy

Bangalore: Infosys chief mentor and chairman N.R. Narayana Murthy on Tuesday said he had “not had any interaction with either the management or directors of SKS Microfinance,” which is in the thick of controversies, apart from a meeting with its CEO, M.R. Rao, on October 13. He said the exit of his investment firm, Catamaran, from SKS Microfinance, was legally not possible at this juncture.

Catamaran Management Services Pvt. Ltd., a venture capital fund, promoted by Mr. Murthy, had invested Rs. 28.1 crore in SKS Microfinance for acquisition of 9.3777 lakh shares of the company in January, he said in a statement. This represented a 1.3 per cent stake in the company today, on a fully-diluted basis. Mr. Murthy said Catamaran invested in SKS Microfinance because the company had “successfully raised Rs. 1,900 crore from reputed banks and development finance institutions for microfinance lending.”

“Catamaran's due diligence in rural Karnataka and Andhra Pradesh showed that borrowers perceived value in microfinance, provided that lending was done openly, fairly and on their doorstep.” SKS Microfinance's adherence to a woman-only and rural-focussed group lending strategy was another reason for Catamaran investing in the company. Mr. Murthy said he had “a one-on-one meeting” with Mr. Rao in Bangalore, where they discussed “the role of Information Technology in scaling up the company operations.” Vikram Akula, founder of SKS Microfinance, joined this meeting through teleconference, during which he (Mr. Murthy) advised the management and the board “to be open, honest and fair in all matters dealing with every stakeholder.”

In August, SKS Microfinance raised Rs. 1,600 crore through an Initial Public Offer. The company terminated the services of its CEO Suresh Gurumani on October 4, although his tenure was to end only in 2014. Securities and Exchange Board of India Chairman C.B. Bhave on Monday said the regulator was investigating Mr. Gurumani's removal.

Catamaran's investment was made in the belief that there was need for bringing microfinance into the organised sector so as to wean the poor away from moneylenders, Mr. Murthy said.

Catamaran's holdings in SKS Microfinance have a lock-in period of 24 months, apart from statutory lock-in provisions imposed by the SEBI. “Therefore, exit is currently not possible as per law,” he said.

The Infosys chief mentor said he was to chair the SKS Microfinance's Advisory Council, but it has not yet been constituted.

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