RM Malla-led Small Industries Development Bank of India (Sidbi) has picked up 10.92 per cent stake in Bandhan, one of the largest micro-finance institutions in the country, for Rs 50 crore.

This is by far Sidbi’s largest equity investment in the MFI sector and values the pan-India Bandhan, run by Chandra Sekhar Ghosh, at Rs 457.88 crore.

Top MFIs are being valued at a premium of 5-7 times their book value and investors are looking at an internal rate of return (IRR) of 15-20 per cent per year over a four-five year investment horizon.

The seven-year-old Bandhan, which focuses on women clients, took its first loan of Rs 20 lakh from Sidbi in 2002. Sidbi is the principal financial institution for

promotion, development and financing of micro, small and medium enterprises in the country.

“The Rs 50 crore will help us draw more leverage and allow us to loan around Rs 400 crore from banks, although we are adequately funded right now,” Bandhan chief executive Chandra Sekhar Ghosh told Financial Chronicle.