Microfinance institutions (MFIs) are not getting proper valuations from investors though their business models are similar to banks and NBFCs, Padmaja Reddy, managing director, Spandana Sphoorty Financial, said on Wednesday.

Speaking at a seminar on microfinance in the capital, Reddy said that the private equity investors tend to undervalue the sector. “So far we have never got the right valuations. We are in the same business as banks and non-banking finance companies and should get comparable valuations. However, some listed banks are being valued at 40 times their earnings whereas we are getting much less despite strong business models,” Reddy said.

Reddy felt that the microfinance sector has come of age in India after withstanding several challenges on its way. “We have faced several risks during the past decade ranging from threats from interested politicians and moneylenders. However, the worst seems to be over and the sector has the ability to face up to the coming challengers. There has been a complete turnaround. All stakeholders in the sector including borrowers, investors and promoters are happy,” she said.

Expressing concern from the investors’ side, Christian Banno, CEO, MicroVentures India, however, said that there are concerns on asset quality that the MFIs in India hold. “The quality of portfolio of MFIs in some states is in doubt. Sometimes, we are also faced with institutions presenting unrealistic business plans,” Banoo said.

S Vishwanantha Prasad, managing director, Caspian Advisors, felt that microfinance sector in India is beset with hurdles. “MFIs have had serious problems in India. Some have even gone bust,” he said.