The initial public offering (IPO) of Muthoot Microfin will open for public bidding on Monday, December 18. The shadow-lender is offering its shares in the range of Rs 277-291 apiece, with a lot size of Rs 51 equity shares. The bidding process will conclude on Wednesday, December 20.
Muthoot Microfin, a subsidiary of the Muthoot Pappachan Group, specialises in providing micro-loans to female customers, with a particular emphasis on rural areas. It offers group loans for livelihood solutions, individual loans, life betterment solutions; health and hygiene loans; secured loans in the form of gold loans and more.
The company aims to raise Rs 960 crore, with Rs 760 crore from a fresh issue and an offer-for-sale of up to 6,872,852 equity shares, amounting to Rs 200 crore. Muthoot Microfin mobilised Rs 285 crore from anchor investors, as it allocated 97,93,812 shares at Rs 291 apiece. Anchor book investors included WCM International, JNL Multi-Manager International, North Carolina Supplemental Retirement Plans, Clearwater International Fund, Florida Retirement, Morgan Stanley, Integrated Core Strategies, Copthall Mauritius and Societe Generale.
Also read: Muthoot Microfin IPO to open on December 18; check price band and other details
The net proceeds from the IPO would be utilised towards enhancing the capital base for future requirements and sustaining ongoing business activities.
Muthoot Microfin boasts 2.77 million active customers, 1,172 branches across 321 districts in 18 states and union territories in India, as of March 31, 2023. In 2021, the company launched the ‘Mahila Mitra’ mobile application, which enables digital payment methods such as QR codes, websites, SMS-based links and voice-based payment methods.
The IPO also includes a provision for eligible employees, reserving shares worth Rs 10 crore with a discount of Rs 14 per share. Qualified institutional bidders (QIBs) will receive 50 per cent of the net offer, while retail investors and non-institutional investors will receive 35 per cent and 15 per cent, respectively.
Muthoot Microfin witnessed a 72 per cent increase in revenue to Rs 1,446.34 crore in the fiscal year 2022-23. The profit after tax (PAT) surged by 245 per cent reaching Rs 163.89 crore for the year ending March 31, 2023.
ICICI Securities, Axis Capital, JM Financial, and SBI Capital Markets serve as the book running lead managers for the Muthoot Microfin IPO, with Kfin Technologies as the designated registrar. The company’s shares are scheduled to be listed on both BSE and NSE on December 26, Tuesday. Here’s what a host of brokerage firms say about the IPO of Muthoot Microfin:
Anand Rathi Research
Rating: Subscribe for long-term
The company has a market leadership with a pan-India presence. The company is a part of the prestigious Muthoot Pappachan group. At the upper price band, the company is valued at P/BV of 2.2 times with a market cap of Rs 4,960.80 crore post issue of equity shares, said Anand Rathi Research, adding that valuations of the company are fairly priced and recommend a ‘subscribe for long term’ rating.
Swastika Investmart
Rating: Subscribe with caution
Muthoot Microfin is a subsidiary of the well-known Muthoot Pappachan Group. Leveraging its strong brand recognition and rural-focused operations, MML has established a robust risk management framework and diversified capital sources, fostering consistent financial performance with impressive top-and-bottom-line growth, said Swastika Investment.
“However, careful consideration must be given to inherent industry risks. MML’s clientele, exposure to interest rate fluctuations, and intense competition within the microfinance space warrant investor vigilance. Despite the aforementioned risks, valuation favorably in the current market landscape,” it added with a ‘subscribe with caution’ rating acknowledging its potential and inherent risks.
Arihant Capital Markets
Rating: Subscribe
The company’s asset quality has improved tremendously over the past few years. Further, the company’s credit rating is expected to improve, which will reduce its cost of borrowings, thereby improving NIMs. Further, positive change in RBI regulations has signaled growth opportunities for the company, said Arihant Capital Market with a ‘subscribe’ rating for the issue.
Marwadi Financial Services
Rating: Subscribe
The company is going to list at a P/B of 1.91 times with a market cap of Rs 4,960. crore, reasonable valuation to its peers, said Marwadi Financial Services. “We assign ‘subscribe’ rating to this IPO as the company has rural focused operations with a robust
risk management framework and strong brand recall and synergies with the Muthoot Pappachan Group,” it said.
StoxBox by BP Equities
Rating: Subscribe
The NBFC expects a significant portion of its future geographic expansion to include rural areas in these regions of India and intends to grow the branches in four key states: Uttar Pradesh, Bihar, Rajasthan, and Punjab, which are underpenetrated, said StoxBox by BP Equities.
“As the lender will utilize the net proceeds of the fresh equity shares issue to augment its Tier-I capital base, its capital adequacy will enhance and lead to a stable leverage position. At the current P/BV multiple of 2.3 times, we believe the company is fairly valued and advise investors to ‘subscribe’ from a medium to long-term perspective,” it said.
Ventura Securities
Rating: Subscribe
The gross loan portfolio of the microfinance industry has experienced a CAGR of 21 per cent from FY18, reaching around Rs 3.3 lakh crore in the third quarter of the financial year 2023. As of September 30, 2023, the income generating loans constituted Rs 10,211.87 crore, accounting for 94 per cent of the total gross loan portfolio, said Ventura Securities.
“As the company expands its geographic reach and scales up operations, there is a strategic focus on enhancing and investing in technology. The objective is to bolster growth, enhance service quality, and achieve superior turnaround times in operations,” it added.
(Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.)
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