Started in 1992, Muthoot Microfin Limited is a Mumbai based micro-finance institutions focused on providing micro-loans to women customers with a focus on rural regions of India. MML is the fifth largest NBFC-MFI in India in terms of gross loan portfolio, as of March 31, 2018, according to CRISIL Research. Company has 1.2 million active borrowers, who are served by the 467 branches across 168 districts in 16 states and union territories in India, as of March 31, 2018. The gross loan portfolio was Rs 29,202.97 million, while the gross loan portfolio in South India was Rs 24,856.50 million, the gross loan portfolio was serviced by 5,583 employees, as of March 31, 2018. Company is part of the Muthoot Pappachan Group, which is one of the leading business conglomerates in South India, with presence across financial services, automotive, hospitality, real estate, healthcare, information technology, precious metals and alternate energy sectors. Company has built the branch network with an emphasis on under-served rural markets with growth potential, in order to ensure ease of access to borrowers. The branches are connected to the IT networks and are primarily located in commercial spaces which are easily accessible by the customers. Company also leverage the infrastructure and branch network of one of the Promoters, Muthoot Fincorp Limited ('MFL'), for loan disbursements, collections of receipts and collection of processing fee, insurance and any other receipts to ensure safety, efficient and better management of cash and to offer the products and services in a more effective manner. MFL commenced the microfinance business currently undertaken by the Company in the financial year 2010, which was subsequently transitioned and transferred to the Company between April 2014 and March 2017, in a staggered manner. Company's wide range of lending products are aimed at catering to the life-cycle needs of rural households. They provide loans for income generating purposes to women entrepreneurs living in rural areas. The loan products comprise of (i) group loans for livelihood solutions such as income generating loans and dairy loans, as well as individual loans such as sewing machine loans; (ii) life betterment solutions including emergency loans, mobile phones loans, solar lantern loans, solar fan and education loans; and (iii) health and hygiene loans such as water purifier loans and induction stove loans. Company has adopted a joint liability group model which caters exclusively to women in lower income households. As of March 31, 2018, company had 5,583 full-time employees with 3,890 employees in field operations and 749 in credit risk management. As per financial performance, ICFL has posted total income/net profits of Rs. 396.91 cr. / Rs. 112.13 cr. (FY14), Rs. 528.06 cr. / Rs. 149.04 cr. (FY15), Rs. 644.05 cr. / Rs. 191.64 cr. (FY16) and Rs. 719.92 cr. / Rs. 210.80 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 164.08 cr. on total revenue of Rs. 585.95 cr. So company has posted consistent growth over last couple of years. ICFL has posted an average EPS of Rs. 25.53 and average RoNW of 11.62% for last three fiscals. Issue is priced at a P/BV of 2.17 as per NAV of 263.96 on 31.12.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 24. As per RHP, industry average P/E ratio is 28.66 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, five merchant bankers associated with this issue and have handled 58 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 6 issues opened below their offer price and 4 opened at par on listing dates. As per financials, company's growth is consistent and very good, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 24 as per latest earnings. Company is an NBFC with principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing. Last two business segments (Vehicle Finance & Housing Finance) are started in recent past and it may give further boost to company's growth, but increasing bond yields and FD rates may put pressure on margins. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO.
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