Muthoot Microfin IPO Details – Introduction
Muthoot Microfin is planning an IPO scheduled to open on December 18, 2023. The company provides micro loans in rural India. In this article: Muthoot Microfin IPOWe provide a complete review and analysis, including date, details, price range, GMP, positive aspects, and risk factors.
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about Muthoot Microfin Limited
Established in April 1992, Muthoot Microfin Limited is a subsidiary of Muthoot Pappachan Group. The company is a microfinance institution operating in India that focuses on providing microloans for income generation purposes, primarily to women in rural areas.
As of March 31, 2023, it is the fifth largest NBFC-MFI in India and the third largest in South India based on total loan portfolio. The company holds the largest market share in Kerala and is also an important player in Tamil Nadu. The total loan portfolio as on September 30, 2023 stood at Rs 108,670.66 crore. This business model aims to promote financial inclusion by serving low-income customers. The company has 3.19 million active customers, operates 1,340 branches across 339 districts across 18 states and union territories in India, and employs 12,297 people. The branch network is strategically established in underserved rural markets with growth potential and the branches are equipped with an IT network to ensure customer access.
by MfinIndia reportThe overall microfinance loan industry portfolio stands at Rs 3.5 billion as of end-May 2023.
Muthoot Microfin IPO Date, Price Range, Size
IPO date | The IPO will begin on December 18, 2023 and close on December 20, 2023 |
IPO listing date | December 26, 2023 |
Type of problem | Book Built Issue IPO |
face value | 10 rupees per share |
IPO price range | 277 rupees to 291 rupees per share |
lot size | 51 shares |
Exhibition location | BSE and NSE |
Total publication size | Rs. 960 million rupees |
Latest issue | Rs. 760 million |
OFS | Rs. 200 million |
employee discount | 14 pieces per share of Rs. |
Target of IPO
Muthoot Microfin IPO size is Rs 960 crore, including both fresh issue and OFS.
#1 – Offer for sale (OFS) at Rs 200 million – This becomes the property of the selling shareholder and the company does not receive any profit from it.
#2 – New issue of Rs 760 million – These funds will be used to:
- to carry out existing business activities, and
- To carry out the activities proposed to be funded from the net proceeds.
- Additionally, the company expects that by listing its shares on a stock exchange, it will enjoy benefits such as improving its brand image among existing and potential customers and creating a public market for its shares in India.
About company finances
Fiscal year end/period end (amount in billions) | |||
Period ends | March 31, 2021 | March 31, 22 | March 31, 23 |
assets | 4,183.85 | 5,591.46 | 8,529.20 |
revenue | 696.28 | 842.94 | 1,446.34 |
Profit after tax | 7.05 | 47.40 | 163.89 |
net worth | 889.89 | 1,336.58 | 1,625.85 |
reserves and surplus | 642.84 | 1,040.10 | 1,282.15 |
Total loan amount | 3,015.66 | 3,996.61 | 6,493.18 |
Muthoot Microfin IPO Price Evaluation
- IPO price range is from Rs 277 to Rs 291 per share
- PER analysis
- Considering last year’s FY23 EPS was Rs 11.66, the P/E ratio is 25x.
- Considering the last three years’ weighted EPS of Rs 7.25, the P/E ratio is 40x.
- Comparison with listed peers
- Spandana Sporthy Financial Limited trades at a P/E ratio of 551x (highest price)
- Ujjivan Small Finance Bank Limited is trading at a P/E ratio of 9x (lowest).
- Industry average PER is 94.8x
- Therefore, an IPO price range of 25x to 40x P/E is attractive.
Positive factors for investing in Muthoot Microfin IPO
Investing in this company’s IPO is considered for several reasons.
- Market leadership and presence: The company is India’s fifth largest NBFC-MFI with a significant market share in South India, particularly in Kerala and Tamil Nadu. This market leadership suggests a strong position in the microfinance sector.
- Association with Muthoot Pappachan Group: Being part of the Muthoot Pappachan Group, a well-established conglomerate with over 50 years of history in financial services, provides the company with brand recall and operational benefits. This association also points to a strong support system and potential synergies between the Group’s financial services and microfinance businesses.
- Diverse loan products: The company offers a wide range of financing products, including income-generating loans, life improvement solutions, health and hygiene loans, and secured loans. This diverse product portfolio allows the company to meet the different needs of rural households, contributing to revenue streams and risk mitigation.
- Technology integration: The company has incorporated technology into its business operations, including a unique application called ‘Mahila Mitra’ for digital payments. The use of technology not only enhances customer service, but also improves operational efficiency and risk management, as evidenced by the development of our proprietary credit scorecard in collaboration with Equifax.
- Digital transformation and awareness: The company has won awards for its digital initiatives, demonstrating its commitment to innovation and excellence in the financial services sector. The development of super apps that integrate various products into a single platform reflects a forward-thinking approach to maximizing cross-selling opportunities.
- Robust risk management: The company boasts a robust risk management framework that leads to sound portfolio quality. This is critical to business sustainability and demonstrates prudent lending practices.
- Strategic growth plan: The strategy outlined provides a clear roadmap for future growth and sustainability, including geographic expansion, continued enhancement of information technology, leveraging existing branch networks, and diversification of funding sources. I am.
- Experienced administrator: Our company is led by an experienced and professional management team, supported by strong corporate governance. This factor gives potential investors confidence in the competency and stability of the leadership.
- Diverse capital sources: The company has access to diverse funding sources, contributing to its financial strength and efficient cost of funds.
- Initiatives for social welfare: The company values rural-focused operations that are committed to the health and social well-being of its customers, in line with socially responsible business practices.
Negative or risk factors for investing in this IPO
- OFS portion to selling shareholder: IPO goals include both OFS and new issues. The OFS portion is paid to the selling shareholder and the company receives no profit.
- Customer profile risks: The Indian microfinance industry serves a specific category of customers and faces unique risks not found in other forms of financing. This could lead to an increase in non-performing assets, provisions and write-offs, which could adversely affect the Company’s business, financial condition and results of operations.
- Interest rate vulnerability: The Company’s business is vulnerable to interest rate risk. Changes in interest rates can adversely affect our net interest income and net interest margin, which can affect our overall financial performance.
- Government enforcement risks: The Managing Director received a summons from the Enforcement Directorate, Ministry of Finance, Government of India. The outcome of this regulatory action is uncertain, and any adverse action could have an adverse effect on the Company’s business, operations, financial condition and reputation.
- Concerns about market capitalization: Market metrics such as market capitalization to revenue, market capitalization to tangible assets, and enterprise value to EBITDA based on the offering price may not accurately reflect the market price of the company at the time of listing or thereafter.
- Recordkeeping challenges: Risks arise when historical records are incomplete, such as missing minutes of board meetings or shareholder meetings, or some secretarial records not kept. Legal proceedings and regulatory actions may arise in the future and may affect the Company’s financial condition and reputation.
- Financing agreement limitations: Certain terms in financing arrangements can limit a company’s ability to conduct its business and operations as desired and create operational challenges.
- Reputation risk: Concerns regarding the financing terms offered by the Company could adversely affect the Company’s reputation and affect the growth and market acceptance of the Company’s products and services.
- Sustainability of growth: Going forward, the company may face challenges in maintaining the strong growth and relatively high profit after tax recorded in fiscal year 2023.
- Audit report findings: Our audit reports for fiscal years 2021, 2022, and 2023 contain highlights of material matters and certain negative observations that indicate potential financial and operational concerns.
- Negative cash flow: Negative cash flows from past operating, investing and financing activities create financial risks that can affect our liquidity and financial stability.
- Investors should consider all risk factors set out below. Muthoot Microfin IPO RHP.
Muthoot Microfin IPO GMP
The gray market premium (GMP) for Muthoot Microfin IPO is reported to be in the range of Rs 115-120. It is important to note that the accuracy of GMP cannot be independently verified as these transactions take place in an offline mode, giving us reliable information in real time.
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Muthoot Microfin IPO – To buy or not to buy?
Investors should consider all the pros and cons before evaluating whether this IPO is good or bad for their investment.
- This Muthoot Microfin IPO investment is an opportunity to leverage a leading player in India’s microfinance space, demonstrating market leadership and a strong presence in key geographies. The company’s partnership with his well-established Muthoot Pappachan Group will provide brand recall, marketing benefits and potential synergies, strengthening its competitive position. Our focus on loan product diversification, technology integration, and digital transformation demonstrates our adaptability and innovation in meeting the financial needs of low-income customers. With robust risk management, strategic growth plans and experienced leadership, this IPO offers potential for investors seeking exposure to the microfinance space within a reputable conglomerate.
- However, investing in this IPO also comes with some risk factors. The microfinance industry’s unique customer profile can lead to an increase in non-performing assets, impacting financial performance. Vulnerability to interest rate fluctuations poses a risk to net interest income. There are several other risk factors listed in the Risk Factors section above.
- IPO pricing is attractive.
Investors can invest in this IPO after considering all the positive and risk factors.