Muthoot Microfin IPO - Outlook, Valuations, Key Strengths, Risks, Peer Comparison: KRChoksey

KRChoksey Research Report

Muthoot Microfin Ltd., the microfinance subsidiary of Muthoot Pappachan group launched its initial public offering today and the bid closes on Dec 20. The company has fixed a price band in the range of Rs 277- Rs 291 per piece. The minimum order quantity is 51.

The Rs 960 crore IPO includes a fresh issue of equity shares worth Rs 760 crore, and an offer for sale of up to Rs 200 crore.

Outlook and valuation

Muthoot Microfin is one of the strongest players in microfinance, primarily in rural segments and joint group funding. The major drivers for this NBFC are:

1. strong parentage;

2. government initiatives to boost rural financing;

3. tighter control over asset quality;

4. healthy return ratios; and

5. a wide customer base.

The NBFC is the third largest amongst NBFC-MFIs in South India in terms of gross loan portfolio, the largest in Kerala in terms of MFI market share, and a key player in Tamil Nadu with an almost 16.0% market share as of March 31, 2023.

The MFI industry has seen resilient growth over the last few quarters and is expected to continue to witness this, led by multiple levers. The NBFC-MFI industry is expected to grow at 18-22% compound annual growth rate over FY23-25E led by faster growth in rural segment, expansion in newer states and ticket size.

Thus, we believe the NBFC is well-positioned to capture this opportunity owing to its resilient market positioning and the wider customer base of its parent company. The NBFC has maintained a strong track record of financial performance over the years despite macro hiccups driven by focus on customer acquisition, robust risk management and geographic expansion.

Muthoot Microfin will continue to explore partnerships for co-lending, which may lead to expansion in the potential growth opportunity for the NBFC.

Peer Comparison

Comparison with listed peers: Muthoot Microfin is the fifth largest NBFC-MFIs in India in terms of GLP as of March 30, 2023. Among banks and small finance banks, Bandhan Bank Ltd. leads in terms of GLP.

However, IIFL Samasta Finance reported the highest FY23 growth of 62.74%. Muthoot Microfin reported the second highest clientele growth of 33.3% during March 31, 2023, among the top NBFC-MFIs. In terms of CAGR growth, Svatantra Microfin and Fusion Micro Finance witnessed a stronger clientele growth of 29.6% and 27.2%, respectively, between FY20 and FY23, as against Muthoot Microfin which grew at 13.8%.

Muthoot Microfin reported the second highest total income growth of 71.58% during FY23 trailing behind IIFL Samasta’s growth of 71.92% among its peers.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.