Muthoot Microfin IPO Review: India has been experiencing constant growth, especially in rural regions, which has driven the growth of the microfinance industry. One such company in this sector is, Muthoot Microfin Limited, a subsidiary of Muthoot Pappachan Group.
The company is coming up with an IPO which will open for subscription on December 18, 2023 and close on December 20, 2023. In this article, we will look at the Muthoot Microfin IPO Review and analyse its strengths, weaknesses, financials and GMP. Keep reading to find out!
Table of Contents
Muthoot Microfin IPO – About The Company
Muthoot Microfin Limited, established in April 1992, is a subsidiary of Muthoot Pappachan Group. The company specializes in offering micro-loans to women customers, with a particular emphasis on rural areas in India.
The loan products of the company comprise:
- Group loans for livelihood solutions such as income-generating loans, individual loans and Pragathi loans.
- Life betterment solutions include loans for solar lights, cell phones, and household appliances.
- Health and hygiene loans such as loans to improve sanitary facilities
- Secured loans in the form of gold loans and Muthoot Small & Growing Business loans.
The company has its branch network with an emphasis on under-served rural markets with growth potential, in order to ensure ease of access to customers. Its branches are connected to its IT networks and are primarily located in commercial spaces which are easily accessible by its customers.
As of FY23, the company reported 2.77 million active clients, who are served by 10,227 staff spread throughout 1,172 branches in 321 districts across 18 Indian states and union territories.
Furthermore, as of December 31, 2022, the company was the fourth largest NBFC-MFI in India in terms of gross loan portfolio. As of December 31, 2022, it is also the third largest NBFC-MFI in South India in terms of total loan portfolio, the largest in Kerala in terms of MFI market share, and a prominent player in Tamil Nadu with a nearly 16% market share.
Muthoot Microfin IPO Review – About The Industry
The joint liability group portfolio of the microfinance industry has seen steady growth in recent years. The overall loan portfolio of the industry has increased at a Compound Annual Growth Rate (CAGR) of 21% since the financial year of 2018, reaching approximately ₹3.3 trillion in the third quarter of the Financial Year 2023.
Among the different player groups, NBFC-MFIs have recorded the fastest growth rate. In the future, the microfinance industry is expected to continue witnessing strong growth due to the Government’s focus on strengthening the rural financial ecosystem, the rising demand for credit, and the increasing number of higher-ticket loans being disbursed by microfinance lenders.
Muthoot Microfin – Financial Highlights
If we look at the financials of Muthoot Microfin Limited we notice that its Gross Loan Portfolio has increased from ₹49,86.71 crores in March 2021 to ₹92,08.29 crores in March 2023. An expanding gross loan portfolio is a good sign as it helps the company generate more revenue.
During FY23, the company’s total active customers stood at 2.77 million. Of this, 1.01 million were customers that newly joined the company.
The revenues of the company have increased from ₹684.16 crores in March 2021 to ₹1428.76 crores in March 2023. Their profits have also grown from ₹7.05 crores in March 2021 to ₹163.88 crores in March 2023.
In terms of return ratios, it has an ROE of 11.06% and an ROA of 2.16% as of FY23. These ratios indicate a moderate return to shareholders’ capital and an efficient use of company assets to generate revenue.
Key Players in the Market
The following are the listed peers of Muthoot Microfin in the market:
- Equitas Small Finance Bank Limited
- Ujjivan Small Finance Bank Limited
- Credit Access Grameen Limited
- Spandana Sphoorty Financial Limited
- Bandhan Bank Limited
- Suryoday Small Finance Bank Limited
- Fusion Micro Finance Limited
Strengths of the Company
- As of December 2022, the company has established a PAN-India presence and stands as the fourth largest NBFC-MFI in the country in terms of gross loan portfolio.
- The company’s customer-centric approach and extensive rural distribution network in India enable it to offer a wider range of financial products where penetration is limited.
- The company’s relationship with the Muthoot Pappachan Group provides it with brand recall and significant marketing and operational benefits.
- The company’s loan portfolio performance has been better than the Indian microfinance industry as a whole. Between March 2021 and December 2022, it has a lower proportion of loans at each month-on-book stage compared to its peers
- The company has a streamlined operating model with effective use of technology. This has helped them achieve quicker turn-around times for loan approval and disbursement processes.
- The company has a well-diversified funding profile that underpins its liquidity management system, credit rating and brand equity.
Weaknesses of the Company
- The company is subject to interest rate risk, and interest rate volatility could have a negative impact on its net interest income.
- The company derives a significant portion of its revenue from South India. Any major developments in such regions may have an adverse effect on its business.
- Any disruptions in the source of funding or an increase in funding costs could have an adverse effect on the business
- Any downgrades in the company’s credit ratings may constrain its access to capital and debt markets
- Competition from other micro-finance institutions, banks and financial institutions, as well as state-sponsored social programs, may adversely affect the profitability and position of the company in the Indian microcredit lending industry.
Muthoot Microfin IPO Review – GMP
The shares of Muthoot Microfin Limited traded at a premium of 32.65% in the grey market on December 14th, 2023. The shares tarded at Rs 386. This gives it a premium of Rs 95 per share over the cap price of Rs 291.
Key IPO Information
| Particulars | Details |
|---|---|
| IPO Size | ₹960.00 Cr |
| Fresh Issue | ₹760.00 Cr |
| Offer for Sale (OFS) | ₹200.00 Cr |
| Opening date | December 18, 2023 |
| Closing date | December 20, 2023 |
| Face Value | ₹10 per share |
| Price Band | ₹277 to ₹291 per share |
| Lot Size | 51 Shares |
| Minimum Lot Size | 1 |
| Maximum Lot Size | 13 (663 shares) |
| Listing Date | December 26, 2023 |
Promoters: Thomas John Muthoot, Thomas Muthoot, Thomas George Muthoot, Preethi John Muthoot, Remmy Thomas, Nina George and Muthoot Fincorp Limited.
Book Running Lead Manager: ICICI Securities Limited, Axis Capital Limited, JM Financial Limited and SBI Capital Markets Limited.
Registrar to the Offer: KFin Technologies Limited
The Objective of the Issue
The following are the objects for the issue of the IPO
- To undertake existing business activities of the company.
- To undertake activities proposed to be funded from the Net Proceeds.
- To enhance the brand image through the listing
In Closing
In this article, we looked at the details of Muthoot Microfin IPO Review 2023. Given the microfinance industry’s growth backed by the government and Muthoot Microfin’s strong financials, the company’s outlook appears favourable for the future.
What do you think the future holds for the company? Are you applying for the IPO? Let us know in the comments below.
Written By Aaron Vas
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