New SKS head talks of sea change in business model

The exit of founder Vikram Akula is likely to lead to a revolution of sorts in the way SKS Microfinance has been approaching the market, interim chairman P H Ravikumar hinted on Thursday.

The new management of the company is redesigning the company’s business model with the aim of derisking it and taking it beyond microfinance, though the core of the model would remain rural-focused, he told DNA Money.

“We are working on a host of subjects including rural insurance, rural payments, small businesses and many such areas. May be we will have to set up new companies for handling the new activities. We will finalise the entire plan in the next 4-6 months,” said Ravikumar.

He drew parallels with ICICI Bank. “ICICI was a major corporation with a focus on a particular sector during N Vaghul’s time. During K V Kamath’s time the entire model had undergone a change with the company making forays into several other areas including retail credit, investments, life insurance and general insurance.

SKS would also go through such changes in the months to come and microfinance would be one of the activities of the company and not the only activity.”

“The (company’s) board is of the view that the new business model would make SKS a financial services inclusion company and the changes in the business model would be in that direction,” he said.

SKS has also been working on a plan to raise about Rs900 crore through an equity issue to qualified institutions. The qualified institutional placement (QIP) was primarily aimed at helping SKS overcome the funding problems triggered by the lack of recoveries in Andhra Pradesh. Of the Rs1,500-crore lending stuck in the AP market, the company has already written off about Rs822 crore.

The new management will retain the QIP plan and raise funds, said Ravikumar. But it would also look at raising further funds to meet the capital needs of the new companies it plans to set up in due course.

“We will raise funds for the new entities to be set up in accordance with the new business model separately. The Rs900 crore issue is meant for SKS Microfinance. However, the quantum of funds to be raised for new entities would be known in the next 3-4 months,” he said.

On the buzz about Vikram Akula claiming an exit package of `5 crore, he said, “under the Indian laws, we are not allowed to make any such payments and there is no truth in paying Akula `5 crore. However, he had some ESOPs accumulated during 2007 and 2008. That would be protected.”

Ravikumar also scotched rumours of financial impropriety behind Akula’s exit. “There is no such issue.”