Poetic Justice - Catamaran loses money on SKS Microfinance!

It is public knowledge that Catamaran Investments, the Venture Capital arm of N R Narayanamurthy invested Rs 28 crores in SKS Microfinance, just a couple of months before its IPO.

What many people dont realize is that Catamaran invested in the IPO at just Rs 300/share - while the IPO price for the public was set at Rs 985/share. Just one week after the Catamaran investment, Standard Chartered and other investors invested in SKS at Rs 630/share.

The thing is, when Catamaran was setup, NRN announced with great fanfare that the ecosystem in India for small companies was very bad - and we desperately needed VC investments to encourage entrepreneurs, and help smaller firms raise much needed capital. When push came to shove, he did not invest in SMALL COMPANIES that really needed the capital - he invested in a company that was operational for a long term, and was ready for an IPO.

This is nothing but misuse of his standing in society to get a big chunk of shares at very low price before the IPO. When NRN was questioned on the propriety of this investment, he gave lot of justification - that there was 24 months lock-in, that this investment was required to help the poor people in India, etc. Even at that time, it was very obvious hogwash - and people in the know realized that this was a clear case of misuse of privilege. But Indian securities laws are such that we cannot do anything about such a blatant case of fraud.

Within a few weeks, Catamaran was crowing about its first investment, about how their money has already tripled, etc.

Within a year, all these issues in SKS have come to the forefront, and the shares have crashed big time. Today the share has fallen even below Catamaran's entry point.

Poetic justice indeed.

Even today, over a year after the fund was launched, Catamaran has made a few similar sham investments - but not even one single investment in a genuine small company desperately seeking money. So despite all the tall talk of NRN, his fund is nothing but an attempt to leverage his clout, his standing in society, and get chunky allocations at very cheap prices, in companies that are at "exit" stage.

Even today, the ecosystem for small companies does not exist. It is a shame that even a person who has made thousands of crores for himself through his Infosys shares, still wants to operate in such cheap ways. I think we should consider ourselves lucky that this man did not become the President of India, as was being considered some time back. Pratibha Patil might not have great credentials for being President - but at least we don't have any expectations from her.

It is for this reason that I think Azim Premji is an infinitely better human being than NRN.

http://articles.economictimes.india...s/27602817_1_catamaran-interest-rates-lending

Helping the poor indeed -- only shows how poor and how cheap NRN is.

Didja ever work for Infy or Wipro? Or have them as your vendors? Just like to know your bias.

Never worked for Infy or Wipro. But have had couple of interactions with Catamaran and indirectly, NRN - because of which I became aware of the facts about Catamaran - and how it's public position is very different from the reality on the ground.

So yes - could call it a bias - but I have spelt out the issues very clearly. Up to you to decide whether my opinions are just because of bias, or based on the facts.

I will be the first person to agree that everyone has a right to take care of their interests, and to do what is best for them. But those rights also have some limitations - esp when it involves misusing power or status.

Wonderful, but I disagree with you.

While you have spelt out the issues, I think you are mixing facts with emotions. On one side you talk about investment numbers and gains / losses. On other side you talk about sham investments without giving any example, and extending your insinuation based on SKS investment.

So you probably pitched something to Cataraman which they did not buy. Did you get a better response from Azim Premji? If so, please describe the differences you saw.

In my opinion, it is hard to make such judgements based on a 1-2 hour interaction we might have had with people at such level, or with their underlings. So it will be good to know your observations (not impressions) in greater detail.

I am not the best judge of my own bias. Will leave it to you to decide whether there is a bias or not. And from what you have said, you definitely think I am biased!

I did pitch something to Catamaran - and yes, you are right that they did not buy. But I am more bothered about the "why" than the "whether". The "why" that they mentioned is directly contradictory to their public position.

Unfortunately I cannot be more elaborate without losing the anonymity that this forum offers!

Let's not worry about what I think about bias. Let's not further talk about your dealings. Let's talk about issues.

First ... hypocrisy. All organizations are hypocrites (and dysfunctional). I do not know if all people are like that, but I believe and have seen some people who are different. I do not have any data to judge NRN or Azim Premji, but I would expect Cataraman to have conflicting needs and many a times they will be going against their stated mission. Or the stated mission might be just a sales pitch. Hypocrisy is life.

Second ... comparisons. What ticked me off was not the comment about Cataraman or NRN, but Premji. Yes, one bad transaction can give us insight into how rotten an organization may be. [ And I am just going by your word in this case. ] But how do you expect a different organization to be different? And how do you extrapolate what a company does to a person?

Seeing the news over last few years I see that even the holier than thou organizations have issues [ Catholic Priests sex scandals, Sathya Sai Baba inheritance, family values based US Republican party can not find candidates who are never divorced, or at least did not have affairs while married. Did Jesus plan it so that priests should be allowed to touch boys? Did Sathya Sai Baba want a public fight over his assets? Does the republican party profile its joinees so that they have higher likelihood for marital infidelity? ] Organizations sometimes rot in less than a generation.

I am curious how you bestowed such greatness on Premji since you said "Premji = infinitely better human being" versus "NRN = cheap".

Firstly, I have not had any dealings with Premji or PremjiInvest. However, I am familiar with 2-3 companies that have been invested in by PremjiInvest - these are the typical startup - small companies, first time entrepreneurs, who have nothing but a good idea and are willing to do their best to succeed with the idea. The fact that Premji has backed these companies speaks for itself - this is the sort of genuine risky stuff that a VC ought to be willing to consider.

Secondly - it is not just the hypocrite aspect. It is not just a case of saying one thing and doing another. What NRN has done is wrong in absolute terms as well. When Raja misuses his ministry for personal gain, we immediately call it wrong. When NRN misuses his influence and status, why is it not similarly wrong?

Only difference is that Raja stole public money, NRN's deal with SKS was a private matter originally. However, the moment SKS decided to go public, NRN's deal with SKS ceased to be a private matter. The fact that this investment was disclosed at the time of the IPO is good, but it still does not absolve the parties completely.

Alright I now understand the context of your remarks. Case closed.

It is known fact that MFIs were fleecing the borrowers by charging exorbitant rates and following opaque processes. Many MBAs rushed into the sector to make hay while the sun shines. Now they are getting out in droves. Individuals following such lending practices, without having MBA degrees and ties, are called kandhu vatti financiers' in Tamilnadu. Of course, there are also some very good MFIs but SKS is not one of them.

I doubt NRN was unaware of the ensuing IPO and its pricing for the retail investor who are the last ones to get aboard and who help enrich the existing stake holders. Promoters and early investors have to be compensated for their sweat and risk taking. But, once an IPO is launched, in most cases, they recover all the actual and risk capital and the company becomes free with lot more funds to control

Considering all these facts, it does not fit with popular perception of NRN.

Premzi has been doing lot of charitable work for a long time now which is not publicized.

Chockalingam