Suryoday Microfinance secures Rs 20 cr. Is Microfinance turning around in India?

MoneyIt seems investors are gaining their confidence back in the battered micro finance sector in India. On Monday, Mumbai-based Suryoday Microfinance said that it has raised Rs 20 cr from existing investors Aavishkaar Goodwell and Lok Capital.

The announcement comes less than a week after SKS Microfinance, the country’s only listed micro lending company posted a profit of Rs 1.2 crore in the quarter ending December 2012 after losing money for seven straight quarters.

Suryoday Microfinance will use the capital infusion to strengthen its presence in Maharashtra, Tamil Nadu, Gujarat and Orissa, as well as to expand into neighboring states, the company which has a portfolio of Rs 115 cr said.

Since its inception in 2009, the company has built a customer base of 145,000, and targets to cater to one million households by 2014.  Aavishkaar Goodwell was the first round investor followed by Lok Capital in 2010. Recently, Suryoday raised equity capital from the HDFC group.

Is micro finance turning around?

Reckless lending, as described in this article, led to the downfall of the Microfinance industry in India which was at a peak when SKS Microfinance listed at the stock exchanges in 2010. The industry went through many regulatory changes as governments pushed back saying that companies were arm twisting creditors into paying back. Apparently, things are turning around. Microlenders are attracting capital again.

Writes The Economist:

Grameen Capital India, a social-investment bank, says $144m of equity has been injected into microfinance groups in the past 12 months, more than double the amount in the preceding year. The International Finance Corporation, a multilateral lender, invested $18m in Equitas, a mid-sized group in the southern state of Tamil Nadu. SKS, whose loan book is now worth just $325m, raised $47.5m by issuing shares last year.

Last year, we saw the launch of microlending service Kiva and a few others.

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