Started in 1991, CreditAccess Grameen Limited is a leading Indian micro-finance institution headquartered in Bangalore, focused on providing micro-loans to women customers predominantly in Rural Areas in India. According to CRISIL Research, they were the third largest NBFC-MFI in India in terms of gross loan portfolio as of March 31, 2017. Company's wide range of lending products addresses the critical needs of the Customers throughout their life cycle and includes income generation, family welfare, home improvement and emergency loans. Company focuses predominantly on Customers in Rural Areas in India, who largely lack access to the formal banking sector and present a latent opportunity for offering micro-loans. Company's focus customer segment is women having an annual household income of Rs 1,60,000 or less in Urban Areas and Rs 1,00,000 or less in Rural Areas. Company provides loans primarily under the joint liability group ("JLG") model. Company's primary focus is to provide income generation loans to the Customers, which comprised 87.02% of the total JLG loan portfolio, as of March 31, 2018. In 2016, with a view to diversifying the product profile, company introduced individual retail finance loans for customers who had been the Customers for at least three years and fulfil certain other eligibility criteria linked primarily to their credit history with them, income and business position. We offer these loans to customers to establish a new enterprise or expand an existing business in their individual capacity (for instance, for the purchase of inventories, machinery or two wheelers). Company has followed a strategy of contiguous district based expansion across regions and, as of March 31, 2018, they cover 132 districts in the eight states of Karnataka, Maharashtra, Tamil Nadu, Chhattisgarh, Madhya Pradesh, Odisha, Kerala, Goa and Puducherry (one union territory) in India through 516 branches and 4544 loan officers. Company's operations are well-diversified at the district level, with no single district contributing more than 5% to the Gross AUM (apart from one which contributed less than 6% to the Gross AUM) as of March 31, 2018. Further, out of a total of 132 districts where company had branches as of March 31, 2018, more than 75% of each of these districts individually represents less than 1% of the Gross AUM. The customer base increased from 0.50 million Active Customers as of March 31, 2014 to 1.85 million Active Customers as of March 31, 2018. Company had a high Active Customer Retention Rate of 90% (annualised) for the six months ended September 30, 2017, as compared with the median Active Customer Retention Rate of 15 leading micro-finance players which stood at 78% for the six months ended September 30, 2017 as per CRISIL report. As of March 31, 2018, company had 6306 employees. As per financial performance, CAGL has posted total income/net profits of Rs. 89.24 cr. / Rs. 7.92 cr. (FY13), Rs. 147.83 cr. / Rs. 16.63 cr. (FY14), Rs. 281.43 cr. / Rs. 48.73 cr. (FY15), Rs. 466.72 cr. / Rs. 83.24 cr. (FY16), Rs. 709.26 cr. / Rs. 80.30 cr. (FY17) and Rs. 875.21 cr. / Rs. 124.64 cr. (FY18). So company has posted consistent growth over last couple of years except FY17 where there is decline in bottom-line. CAGL has posted an average EPS of Rs. 11.22 and average RoNW of 11.26% for last three fiscals. Issue is priced at a P/BV of 3.80 as per NAV of 111.12 on 31.03.18. Gross NPAs of company in FY17 and FY18 were 0.08% and 1.97%. So its very big hike in Gross NPAs. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 48.56. As per RHP, industry average P/E ratio is 101.65 and listed peers comparison shown in above table. With current pricing, issue looks fully priced. On BRLM's front, four merchant bankers associated with this issue. ICICI Securities Limited has handled 22 public issues in the past three years. For recent 10 IPOs, 2 issues opened below offer price, one at par and remaining above issue price. Kotak Mahindra Capital Company Limited has handled 24 public issues in the past three years. For recent 10 IPOs, 4 issues opened below offer price, two at par and remaining above issue price. Credit Suisse Securities (India) Private Limited has handled 6 public issues in the past three years. For recent 6 IPOs, one opened at par and remaining above issue price. IIFL Holdings Limited has handled 16 public issues in the past three years. For recent 10 IPOs, 4 opened below issue price, one at par and remaining above issue price. As per financials, company's growth is consistent and very good except FY17 when there is decline in bottom-line, RoNW is 11.26% for last three fiscals and issue is priced at P/E of around 48 as per latest earnings. Company is an NBFC-MFI with focused on providing micro-loans to women customers predominantly in Rural Areas in India and there is great growth opportunity in this segment. But issue is fully priced, So we give NEUTRAL rating to this IPO.
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