Muthoot Microfin Limited is a microfinance institution providing micro-loans to women customers (primarily for income generation purposes) with a focus on rural regions of India. They are the fifth largest NBFC-MFI in India in terms of gross loan portfolio as of March 31, 2023. They are also 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% market share, as of March 31, 2023. They are a part of the Muthoot Pappachan Group, a business conglomerate with presence across financial services, automotive, hospitality, real estate, information technology infrastructure, precious metals and alternate energy sectors. As of September 30, 2023, the gross loan portfolio amounted to Rs 108,670.66 million. As of September 30, 2023, they have 3.19 million active customers, who are serviced by 12,297 employees across 1,340 branches in 339 districts in 18 states and union territories in India. As of September 30, 2023, the gross loan portfolio in the top three states, namely Kerala, Karnataka and Tamil Nadu, together accounted for 51.36% of the total gross loan portfolio. They have built the branch network with an emphasis on under-served rural markets with growth potential, in order to ensure ease of access to customers. The branches are connected to the IT networks and are primarily located in commercial spaces which they believe are easily accessible by the customers. Company’s wide range of lending products are aimed at catering to the life-cycle needs of rural households. They primarily provide loans for income generating purposes to women customers living in rural areas. The loan products comprise (i) group loans for livelihood solutions such as income generating loans, Pragathi loans, individual loans and Suvidha loans (ii) life betterment solutions including mobile phones loans, solar lighting product loans and household appliances product loans; (iii) health and hygiene loans such as sanitation improvement loans; and (iv) secured loans in the form of gold loans and the Muthoot Small & Growing Business ('MSGB') loans. As of September 30, 2023, the gross loan portfolio of the income generating loans amounted to Rs 102,118.73 million, representing 93.97% of the total gross loan portfolio. They primarily adopt a joint liability group model which caters exclusively to women in lower income households. For the Financial Years 2021, 2022 and 2023, and the six months ended September 30, 2023, 1.06%, 4.86%, 20.30% and 25.47% of the repayments were collected on a digital basis, respectively. As of September 30, 2023, 1.50 million customers have downloaded the Mahila Mitra application, and 2.46 million customers have transacted digitally with them. Company has, since December 2021, offered digital healthcare facilities to the customers through 'e-clinics'. They collaborate with M-Swasth Solutions Private Limited, a technology driven digital healthcare service provider, to set up these e-clinics across the branches. As of September 30, 2023, they have set up 460 e-clinics across 460 of the branches, representing 34.33% of the total branches. As of September 30, 2023, 14.40% of the customers have enrolled in the e-clinics, and they have facilitated 98,844 medical consultations and 65,878 tele consultations. Further, to protect the customers from the risks of natural calamities, they have, since May 2020, also provided natural calamity insurance to the customers to whom they disburse loans across the branches in India. As of September 30, 2023, they have provided 23.23% of the clients with natural calamity insurance. As per financial performance, Muthoot Microfin Limited has posted total income / net profits of Rs 696.28 Cr / Rs 7.05 Cr (FY21), Rs 842.94 Cr / Rs 47.40 Cr (FY22), Rs 1,446.34 Cr / Rs 163.89 Cr (FY23) and Rs 1,047.23 Cr / Rs 205.26 Cr (upto Q2 FY24). So as per previous financials data, company has shown good growth. Company has an average EPS of Rs 8.58 and average RoNW of 6.35% for last three fiscals. Issue is priced at a P/BV of 2.28 as per NAV of 127.21 as on 30.09.23. For FY21, FY22, FY23 and upto Q2 FY24 gross NPA ratio is 7.39%, 6.26%, 2.97%, 3.26% and 2.37% respectively and Net NPA ratio is 1.42%, 1.55%, 0.60%, 0.88% and 0.33% respectively. If we attribute latest earnings of FY22, FY23, TTM and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 104.66, 30.27, 13.91 and 12.08 respectively, which looks fairly priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, four lead managers are associated with this IPO, and have handled around 153 IPOs in last three fiscals. ICICI Securities Limited : This is 49th IPO from this BRLM. From last 10 IPOs, one opened below issue price and remaining above issue price or at par on the day of listing. As of now, from last 10 IPOs, one is trading below issue price and remaining are trading above issue price or at par. ( As on 13.12.2023 ) Axis Capital Limited : This is 46th IPO from this BRLM. From last 10 IPOs, one opened below issue price and remaining above issue price or at par on the day of listing.. As of now, from last 10 IPOs, one is trading below issue price and remaining are trading above issue price or at par. ( As on 13.12.2023 ) JM Financial Limited : This is 43rd IPO from this BRLM. From last 10 IPOs, one opened below issue price and remaining above issue price or at par on the day of listing. As of now, from last 10 IPOs, all are trading above issue price or at par. ( As on 13.12.2023 ) SBI Capital Markets Limited : This is 19th IPO from this BRLM. From last 10 IPOs, four opened below issue price and remaining above issue price or at par on the day of listing. As of now, from last 10 IPOs, five are trading below issue price and remaining are trading above issue price or at par. ( As on 13.12.2023 ) As per financials, Muthoot Microfin Limited has shown good growth, RoNW is 10.08% and P/E is respectively 104.66, 30.27, 13.91 and 22.08 as per FY22, FY23, TTM (upto Q2 FY24) and annualised FY24 earnings. So, issue looks reasonably priced. Company is an NBFC-MFI providing micro-loans to women customers (primarily for income generation purposes) with a focus on rural regions of India, which is highly competitive segment. Performance of BRLM is good. So, we give SUBSCRIBE rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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