Murthy’s Catamaran not to exit SKS due to lock-in norm

BANGALORE - Catamaran Venture Fund, set up by Infosys Technologies Ltd chairman N.R. Narayana Murthy, will stay invested in the troubled SKS Microfinance Ltd due to the statutory lock-in period till January 2012, the company said Tuesday.

“Catamaran shares in SKS Microfinance are locked for 24 months from date of investment (Jan 16, 2010). The shares are also subject to a concurrent statutory lock-in imposed by the regulator (SEBI) on all pre-IPO investors for 12 months post-IPO,” the venture fund said in a statement here.

Clarifying that exiting from SKS was not possible as per law, the fund said it would take that decision solely based upon data and facts at an appropriate time.

Catamaran invested Rs.28.1 crore in SKS for 937,770 shares, which represent 1.3 percent ownership on a fully-diluted basis.

The Rs.928-crore SKS was the first ever microfinance firm to go public early August to raise Rs.1,654 crore and its initial public offering (IPO) was oversubscribed by 20 times.

As per the terms of Catamaran’s investment, Murthy will chair an advisory council to be formed by SKS to receive advice on issues to be brought before it.

Though the council members had not been identified so far, Murthy had a one-to-one meeting with SKS chief executive M.R. Rao in Bangalore Oct 13 to discuss the role of IT in scaling up its operations.

“When SKS executive chairman Vikram Akula joined the meeting through teleconference, Murthy advised him that it was best for the management and the board of the SKS to be open, honest and fair in all matters dealing with every stakeholder,” the statement noted.

Catamaran also clarified that Murthy had not had any other interaction with either the management or directors of SKS.

Defending investing in SKS, the fund said the microfinance firm had a strong historical adherence to a woman-only, rural-focused, group lending programme with weekly group meetings as pioneered by Grameen Bank in Bangladesh.

“Our due diligence in rural Karnataka and Andhra Pradesh showed that borrowers perceived value in microfinance, provided that lending was done openly, fairly and at their door-step,” the company said.

Giving reasons for investing in the controversial microfinance, the fund said it believed that competition in the marketplace would improve efficiency, bring down interest rates and create easy access to loans for the poor in the years ahead.

The fund invested in SKS out of belief that money lending to the poor in rural and urban India was in the hands of moneylenders who did not report revenues or interest and thus operated with no scrutiny or transparency.

Murthy, also chief mentor of Infosys, promoted Catamaran in March this year with a corpus of Rs.600 crore for investing in technology and knowledge-based companies.

Besides Catamaran, US-based angel investors Vinod Kholsa and George Soros and venture fund partner Sequoia Capital invested in SKS prior to the public issue.

SKS has been mired in controversy due to the sacking of its chief executive Suresh Gurumani for ‘inter personal’ reasons and allegations that it was using strong-arm tactics to recover dues from borrowers, resulting in suicides by some of them in Andhra Pradesh recently.