Muthoot Microfin – About the Company
Muthoot Microfin Limited is a subsidiary of Muthoot Pappachan Group, offering micro-loans mainly to female customers with a high focus on the rural population in India. Founded in 1992, with the motive to provide low-cost loans to female groups of people with various types of loans for livelihood solutions such as income-generating loans.
It is offering loan under the scheme name, Pragathi loans that is kind of bridging loans to existing customers for working capital and income-generating activities. Moreover, it is also offering individual loans for cell phones, solar lights and household appliances for Life betterment solutions and Health and hygiene to improve sanitary facilities.
Just like its parent company's business model, Muthoot Microfinis also offering gold loans and Muthoot Small & Growing Business ("MSGB") loans.
As of March 31, 2023, the company has 10,227 employees and 2.77 million active customers who are catered through the 1,172 branches spread into 321 districts in 18 states and union territories across India. The company has also introduced the Mahila Mitra" mobile app to provide digital payment methods such as QR codes, websites, SMS-based links and voice-based payment methods that are currently used by 1.18 million customers.
Muthoot Microfin IPO Objectives
The total issue size of Muthoot Microfin IPO is Rs 960 crore, and out of this Rs 760 crore will be the fresh issue, which means the company will get 79% of the total fund raised from the IPO. As per the DHRP, the major portion of the fund will used to augment the capital base to meet future capital requirements.
Part of the fund will be also used to undertake the existing business activities and activities proposed to be funded. However, one of another objectives of IPO is getting listed on the stock exchanges, which will help the company to improve the brand image among existing and potential customers and become a publically listed company in the stock market.
Muthoot Microfin IPO Details:
|IPO Open Date
|IPO Close Date
|Basis of Allotment
|Rs 10 per share
|Rs 227 to Rs 291 per share
(aggregating up to Rs 960 crore)
|26,116,838 Shares, aggregating up to Rs 760.00 crore
|Offer For Sale
|6,872,852 Shares, aggregating up to Rs 200.00 crore
|Book Built Issue IPO
|BSE & NSE
|QIB Shares Offered
|Not more than 50% of the Net Issue
|Retail Shares Offered
|Not less than 35% of the Net Issue
|NII (HNI) Shares Offered
|Not less than 15% of the Net Issue
Muthoot Microfin IPO Issue Price & Size
The issue price of Muthoot Microfin IPO is between the ranges of Rs 277 to 291 per share. Investors can bid on these lower and upper price bands. The total issue of Muthoot Microfin IPO amounts to Rs 960 crore, out of which Rs 760 will be fresh equity shares, and the remaining Rs 200 will be offered for sale, by the promoters and existing shareholders of the company.
Muthoot Microfin IPO Launch Date
The Muthoot Microfin IPO launch date has been declared by the company. The Muthoot Microfin IPO will be open on 18 Dec, 2023 and closed on 20 Dec 2023. The allotment of shares is likely to be organized on 21 Dec 2023, while the listing date of Muthoot Microfin IPO is set for 26 Dec 2023. Shares will be credited into the demat account by 22 Dec.
Muthoot Microfin Financial Statements:
|Particulars (Rs in Million)
|Revenue from Operations
|Profit Before Tax
|EPS Basic (Rs)
|EPS Diluted (Rs)
Muthoot Microfin Financial Performance
The revenue of the Muthoot Microfin has shown impressive growth in the last three years. In FY23, its revenue from operations stood at Rs 1446.34 crore, which grew at a CAGR of more than 44% from FY21. Thanks to better or improved operating margins company has registered a CAGR growth of 55.23% in EBITDA that reached to Rs 788.49 crore.
However, owing to lower taxes and reducing its finance costs, the company has shown an impressive CAGR growth of 382% in the net profit from FY 21 to FY23. In FY23 Net Profit stood at Rs 163.89 crore, which was only Rs 7.05 crore in FY21. In FY21 the EBITDA margins of the company were around 47%, which became 54.52% in FY23, while the PAT margins in FY21 were merely 1% in FY21, which has surged into many fold to become 11.33% in FY23.
Muthoot Microfin Promoters & Shareholding of the Company
Muthoot Fincorp Limited is the main promoter holding a 72.36% stake in the company, while Creation Investments India, LLC holds 11.13% and Thomas Muthoot, Thomas John Muthoot, and Thomas George Muthoot each hold around 3.03% stake in the company. For other promoters and shareholder name and their holdings details check the table below.
|Name of the Shareholder
|No. of Equity Shares held
|% of pre-Offer Shareholding
|Muthoot Fincorp Limited
|Creation Investments India, LLC
|Thomas John Muthoot
|Thomas George Muthoot
|Preethi John Muthoot
|Greater Pacific Capital WIV Ltd
However, there are 23,360,260 Outstanding compulsory convertible Preference Shares (CCPS) held by Greater Pacific Capital WIV Ltd. The Outstanding CCPS will convert to a maximum of up to 39,251,360 equity shares under the terms and conditions of the CCPS, and such conversion has been completed before the filing of the Red Herring Prospectus with RoC by Regulation 5(2) of the SEBI ICDR Regulations.
And post conversion of CCPS, the equity of all the shareholders will be diluted, resulting in Muthoot Fincorp Limited holding 54.16% of shares. After the conversion of CCCP, Greater Pacific Capital WIV Ltd will become the second largest shareholder in the Muthoot Microfin with a total holding of 25.15%. However, other shareholders like Creation Investments India, LLC holds 8.33% and Thomas Muthoot, Thomas John Muthoot, and Thomas George Muthoot all three each holding 2.27% stake in the company.
|Name of the Shareholder
|No of Equity Shares on a fully diluted basis (post conversion of CCPS, as applicable)*
|Percentage of the pre-Offer Equity Share capital on a fully diluted basis^ (%)
|Muthoot Fincorp Limited
|Creation Investments India, LLC
|Thomas John Muthoot
|Thomas George Muthoot
|Preethi John Muthoot
|Greater Pacific Capital WIV Ltd
*As on the date of this Draft Red Herring Prospectus, there are 23,360,260 Outstanding Compulsorily Convertible Preference Shares (CCPS) held by Greater Pacific Capital WIV Ltd. The Outstanding CCPS will convert to a maximum of up to 39,251,360 Equity Shares pursuant to the terms and conditions of the CCPS, and such conversion will be completed prior to the filing of the Red Herring Prospectus with RoC in accordance with Regulation 5(2) of the SEBI ICDR Regulations. Source: DRHP
And as per the offer document, the promoter selling shareholders are Thomas Muthoot (up to ₹16.38 crore), Thomas George Muthoot (up to ₹16.36 crore), Thomas John Muthoot (up to ₹16.36 crore)Preethi John Muthoot (up to ₹33.74 crore), Nina George (up to ₹33.76 crore), Remmy Thomas (up to ₹33.3 crore), and other investor Greater Pacific Capital WIV Ltd is going to sell (up to ₹50 crore).
Why Invest in Muthoot Microfin IPO?
Over the past few years, owing to encouraging government policies and promotional schemes, many small and microfinance companies have been situated and grown well. And such micro finance companies that are promoted or backed by the major banks or big NBFCs are getting the advantages of their brand image to attract new customers in the market.
Muthoot Microfin is one of them backed by Muthoot Fincorp Limited has also grown well in the past few years due to the strong demand for loans from the small and medium sector group of people from rural and semi-urban areas. This kind of demand from low-income people gives a wonderful opportunity to Muthoot Microfin to expand its business.
However, while investing in such companies or any other company offering shares you need to consider various factors. You need to analyse fundamentals like its strength which will help it to expand its business with positive revenue growth and the risk factors that can affect the business operations and earnings of the company. We highlighted below both the factors.
- Muthoot Microfin is backed by the well-known Muthoot Pappachan Group and operated by experienced and Professional Management, with Strong Corporate Governance and support from Promoters and Investors that bring a brand recall and synergies for the company.
- As per the CRISIL Report, in terms of gross loan portfolio as of March 31, 2023, Muthoot Microfin is the fifth largest NBFC-MFI in India. The company is also the third largest amongst NBFC-MFIs in South India in terms of gross loan portfolio, while in Kerala in terms of MFI market share it is the largest NBFC-MFI and with an almost 16% market share a key player in Tamil Nadu.
- The company is mainly targeting female customers, hence providing micro-loans to women customers (primarily for income generation purposes) with a focus on rural regions of India.
- As of September 30, 2023, it had 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, in India, it has 1,340 branches in 339 districts in 18 states and union territories in India serving 3.19 million active customers across India.
- While in order to ensure ease of access to customers serve the company has built its branch network with an emphasis on under-served rural markets with growth potential. Its branches are well-connected to its IT networks and are primarily located in commercial spaces that are easily accessible by customers.
- In the past years, the company has successfully implemented the use of technology across its microfinance operations. It has its own in-house information technology team to develop the technology platform into a business tool helping the company to enhance its operational efficiency to achieve and maintain high levels of customer service with competitive advantages in the microfinance industry.
- In the last three years, the company has improved its asset quality with better operational efficiency to recover its outstanding loans. In FY21, the Gross NPA of the company was 7.39% which has come down to 2.97% in FY23, showing its outstanding loans are recovering. The Net NPA was 1.42% in FY21 which has improved very well and became only 0.60% in FY23.
- The Net Interest Margins of Muthoot Microfin has been improved from 8.24% in FY21 to 11.60% in FY23 helping the bank to earn better margins from the income earned from borrowing and lending.
- The assets under management per loan officer reached to Rs 14.68 million in FY23 from Rs 10.95 million in FY21. While the disbursement per branch become double from FY 21 to FY23.
- At the financial end, the revenue of the Muthoot Microfin grew at a CAGR of 44% between FY21 to FY23. Thanks to better operating profit and net profit margins, the EBITDA and Net Profit of the company have grown at CAGR of 55% and 382% respectively in the same period.
- Despite the scope and lots of opportunities, the microfinance industry in India faces certain risks due to the category of customers that it services, which are not generally associated with other forms of lending. This increased the levels of NPAs and related provisions and write-offs that may adversely affect the business operations of the banks and eventfully impact the financial condition of the company.
- Muthoot Microfin into a financing and loaning industry, hence it is also highly vulnerable towards interest rate risk, and any kind of volatility in interest rates could have an adverse effect on the net interest income and net interest margin of the company that will affect the business operations.
- Being a non-banking financial company – a microfinance institution, the company is receiving periodic inspections by the central bank (RBI). And. Non-compliance with observations made by the RBI during such inspections can be subject to penalties and restrictions on the company.
- Arranging the funds at a low cost to further advance to its customers is another challenging factor for the company that could also restrict its ability to conduct business and operations.
- The entire financial industry is always at risk of threat from various types of cyber-fraud and cyber-attacks, like hacking, phishing and theft of sensitive internal data or customer information. Muthoot Microfin can also face the threat of a system breakdown and network outage that will not only affect its business operations but also damage the reputation and brand image of the company.
- Apart from that there are several outstanding legal proceedings running against the Company its Directors, Promoters and Group Companies. Any kind of legal action during any of these proceedings may adversely affect the reputation, business operations and financial condition of the company.
- Last but not the least, the company is highly dependent on the recognition of the “Muthoot” brand, and failure to use, maintain and enhance awareness of the brand would adversely affect the ability to retain and expand the base of its customers in the market.
Muthoot Microfin IPO Grey Market Premium (GMP)
As per the various sources, the Grey Market Premium (GMP) of the Muthoot Microfin IPO is hovering at around Rs 90, 30% above the upper band of the IPO price of Rs 291. It means the stock might list around or above Rs 381 giving an opportunity to get listing gains.
GMP is a kind of speculative price of a stock of an unlisted company that has launched its IPO and going to list very soon on the bourses. The GMP is defined as the demand and supply of shares in the grey market and can keep fluctuating till the date of listing. Though, it is not a reliable source to know the share price of any company, instead proper valuation of the share price and comparison of the same with its peer group companies is a reliable factor.
Muthoot Microfin IPO Review & Analysis
At the valuation end, when you analyse the last three years' earnings of the company, it has reported fully diluted average earnings per share (EPS) of Rs. 7.25 with an average RoNW of 6.35%. If you consider the upper price band of the IPO, the issue is priced at a P/BV of 2.28 based on its NAV of Rs. 127.61. And post IPO NAV of Rs. 152.64 per share, its issue price is at P/BV of 1.91.
If we annualise the earnings of Muthoot Microfin for FY24, and consider the post-IPO fully diluted paid-up equity capital of the company, then the share price is at a P/E of around 25. At this P/E the share price of the Muthoot Microfin is fairly priced.
If you compare the valuation of Muthoot Microfin with its peer group companies, like Equitas SFB, Ujjivan SFB, Credit Access Grameen, Spandana Sphoorty, Bandhan Bank, Suryoday SFB, and Fusion Micro are trading around at P/E of 15.59, 9.33, 23.60, 17.51, 15.21, 11.20, and 12.19. Though all companies are comparable on an apple-to-apple basis they are in the same microfinance industry, so you consider these companies while comparing for valuation.
While considering the holding company's brand image in the market with the impressive financial growth of the Muthoot Microfin and fair valuation of share price, you can subscribe for the issue with listing gains from a medium to long-term investment point of view.
How to Apply for Muthoot Microfin IPO?
If you have a trading and demat account with any registered broker, you can apply to the Muthoot Microfin IPO. However, if don't have one, just apply here at Moneysukh to open a trading account and demat account with the world-class facility for trading or investing in equities, commodities and currency markets.
Moneysukh is one the best discount brokers in India and also offers the best trading platform with Trade Radar and TradingView charting systems. You just need to open an account here and enjoy the best trading facilities to trade in the secondary market or invest in IPOs. If you have already a trading and demat account with Moneysukh just follow the steps given below.
Steps to Apply for Muthoot Microfin IPO:
Step 1: First of all open your browser and type trade.moneysukh.com.
Step 2: Now use your User ID & password to log in and proceed.
Step 3:Now go to the IPO section and click on the Muthoot Microfin IPO.
Step 4: Now you need to fill in the required details like price, quantity, and so on.
Note: At the time of applying in any IPO, bid at the cutoff price and then submit your application.
Step 5:Now make the payment and submit your application successfully.
How to Check Muthoot Microfin IPO Allotment Status?
The allotment of shares in IPO is organized 3 to 4 days after the closing of the bidding. The basis of allotment shares in Muthoot Microfin IPO is going to be organized on 21, Dec 2023. And on this date or onwards you can check the Muthoot Microfin IPO allotment status through your broker or various online sources, using your PAN or IPO application details.
The allotment for retail, HNI category and other categories are done on the same day. However, if the IPO is oversubscribed many times, there is less chance of getting the allotment of shares for everyone applied in the Muthoot Microfin IPO.
Also Read: How to Increase the Chances of IPO Allotment
And owing to oversubscription of IPO, if you have been not allocated any shares in the allotment, you will get your IPO application money refunded back into your bank account or the fund will be unblocked in the bank account if you have applied through ASBA.
However, if you have been allocated any shares during Muthoot Microfin IPO allotment you will get the shares into your demat account before the date of listing. That you can sell in the secondary market after the listing and earn some money from profit booking.
Also Read: Golden Rules of investing in Stock Market