Muthoot Microfin IPO: All You Need To Know

Kerala-headquartered Muthoot Microfin Ltd. launched its three-day initial public offer on Monday. The IPO will close on Wednesday.

The IPO by the Kochi-based microfinance company comprises a fresh issue of shares worth Rs 760 crore and an offer for sale of Rs 200 crore by promoters and shareholders, according to red herring prospectus dated Dec. 13. Through a fundraise of Rs 960 crore in total, Muthoot Microfin intends to increase its capital base to meet future capital requirements.

The price band of Muthoot Microfin IPO is fixed at Rs 277 to Rs 291 per equity share.

The company's promoters are expected to sell equity shares worth Rs 150 crore. Among other investors, Greater Pacific Capital WIV Ltd. is looking to sell shares valued at up to Rs 50 crore. The book running lead managers of the issue are ICICI Securities Ltd., Axis Capital Ltd., JM Financial Ltd., and SBI Capital Markets Ltd.

Investors can bid for a minimum of 51 equity shares, and in multiples of 51 thereafter. The likely date for share listing is Dec. 26. Kfin Technologies Ltd. has been appointed as official registrar of the public offer.

The company, part of the Muthoot Pappachan Group, had capital adequacy ratio of 21.87% as on March 31, 2023, exceeding the 15% mandate, as per the RBI regulations. The net worth of the company was Rs 1,625.85 crore at the end of FY23.

• Issue opens: Dec. 18.

• Issue closes: Dec. 20.

• Fresh issue size: Rs 760 crore.

• Size of offer for sale: Rs 200 crore.

• Total issue size: Rs 960 crore.

• Price band: Rs 277-291 per share.

• Lot size: 51 shares.

• Face value: Rs 10 per share.

• Listing: BSE and NSE.

Muthoot Microfin is the country's fifth-largest microfinance company in terms of gross loan portfolio, with the largest presence in Kerala and Tamil Nadu accounting for an almost 16% market share as of March 31, 2023.

The microfinance company focusses on serving customers in low-income groups and underserved rural markets with growth potential. With 1,340 branches across the country, Muthoot Microfin's branches "are connected to our IT networks and are primarily located in commercial spaces," it said.

At the end of the September quarter, the gross loan portfolio amounted to Rs 10,867 crore. The top three states, namely Kerala, Karnataka and Tamil Nadu, together accounted for 51.36% of the total gross loan portfolio.

"Over the past five years, we have expanded our operations in North, East and West India, which has allowed us to diversify our customer base and gross loan portfolio and increase our revenue from operations," the company said.

In the six months ended September, Muthoot Microfin's net profit stood at Rs 205.2 crore, up 25.2% from March quarter, according to the latest available results.

"With the pandemic impact diminishing, the company’s profitability is returning steadily back to its normal level...This upward trend in profitability is expected to continue, mainly supported by higher net interest margins and controlled credit costs," CRISIL noted in a Dec. 7 report.

The net interest margin as on Sept. 30 stood at 12.39%.

• Possibility of increased levels of non-performing assets and related provisions and write-offs.

• Vulnerability to interest rate risk and volatility in interest rates could have an adverse effect on net interest income.

• The government authorities have issued summons to the managing director for certain information in relation to himself and the company. There is no assurance that the Enforcement Directorate will not take any action against the company or the MD.

• Certain of the company's secretarial records have not been adequately maintained, which may result in legal proceedings or regulatory actions.

• Concerns about terms of loans may adversely affect growth and the market acceptance of their products.

• Inability to sustain the significant growth in our business and relatively high profit after tax recorded in FY23.

• Negative cash flows from operating, investing and financing activities in the past.