MICRO FINANCE - THE NEW THEME

Micro finance is developing in India and

in Indian stock market as a new theme.

In a country like India with huge rural

population ,significance and scope of

micro finance is vast. Unfortunately ,

the main microfinance companies are still

unlisted and no scope for retail investors.

But it is a fact that a number of

foreign funds and P/E players are already

invested in such unlisted entities. We have

also three listed players in this sector

even they are not big in size. One such known

name is SE Investment. This company was in

news recently that its 40 Mn GDR issue

subscribed in just 8 hours.This clearly shows

the appetite of foreign investors in companies

from this sector. SE investment already given

almost 1000% return in two years.So let us

check other two companies from this space ,

First is Capital trust and next will be

discussed later. 

Capital trust

Earlier I have recommended this scrip

through MMB when it was  @ RS.13/- and

recommend a profit booking around Rs.30/-.

At present it is quoting around Rs.70/-.

Since there is lot of happenings in the company

and this sector after that now it need re -looking

into it. Capital Trust is a Delhi based company

started its operations way back in 1985.

It was jointly promoted by Mr. K. R. Puri

(Former Governor, Reserve

Bank of India), Justice M. H. Beg

(Former Chief Justice of India), Mr. S. D. Varma

(Former Chairman, Allahabad Bank) and

Dr.A.M.Khusro (Former Member

Planning Commission). Its operations were

only as an NBFC till 2009.Now there was a

change in management after the promoter

holding bought out by IC Constructions 

Services Ltd.They also came out with

an open offer at a price of Rs.10/-, and now they

holds about 70% stake in this company.

After the take over by new management ,now company

ceased all other financing

operations and started Grameen based joint

liability based microfinance. Company is now

operating on the rural markets in UP, Rajasthan

and Madhya Pradesh and Chattisgarh.

It has 23 branches and 150 staffs as on date.

Now the new management seems to be taking serious

efforts to grow this company in microfinance sector.

As part of their efforts in this line, now they are

inducting experienced hands from banking sector in

their board. Recently company inducted Mr.J S Tomar

in the board who served Oriental Bank of Commerce

for 34 years and rose to the position of

General Manager, holding charge of the departments

of Rural Development and Priority Sector,

Planning & Development and Recovery Management.

He also  pioneered the first pilot in Grameen based

microfinance launched by any commercial bank

in India in 1995. He also headed the Microfinance

Department of the Reserve Bank of India as Officer

on Special Duty.(from company web site)

          Again, the company has taken lot of

steps to improve the business which

includes writing off of Rs.1.6 Cr NPA generated

in old business to clean the balance sheet,

fresh fund raising for business expansion..etc.

Now capital trust is expanding

into five more states  and targeting

a mini branch network of 1585 and loan

outstanding of Rs.13700 mn

by 2015.Company has recently appointed

New York based Cedar Street Capital, to raise

Rs 200 million foreign equity and Rs 360 million

debt for its expansion plans.

Considering the efforts and signals from

the new management Capital Trust is expected

to be a  money spinner even from this level.

Risk takers can buy in small lots.

Coverage on the other company in next two days