Muthoot Microfin Again Applies to SEBI for IPO, Intends to Raise Rs 1350 Crore
Muthoot Microfin
Muthoot Microfin, the microfinance arm of Muthoot Pappachan Group, has recently filed a draft paper with the Securities and Exchange Board of India (SEBI) for its upcoming initial public offering (IPO).
The company aims to raise a total of Rs 1350 crore through this IPO. This move follows their previous filing of draft papers in 2018.
Under the IPO, Muthoot Microfin plans to issue fresh shares worth Rs 950 crore. These new shares will be made available to potential investors, allowing them to participate in the company’s growth and future endeavors.
Additionally, the IPO will include an Offer for Sale (OFS) of shares worth Rs 400 crore. The promoters and existing shareholders of Muthoot Microfin will sell these shares, providing an opportunity for them to divest a portion of their holdings.
By issuing fresh shares and conducting the OFS, Muthoot Microfin aims to raise capital to support its expansion plans and enhance its operations in the microfinance sector.
The IPO will enable the company to access the public markets and potentially attract a broader investor base.
IPO Related Details
In relation to the IPO of Muthoot Microfin, several individuals and entities are planning to sell their shares under the Offer for Sale (OFS) component of the offering. Here are the details of the share sales:
1. Thomas John Muthoot, Thomas Muthoot, and Thomas George Muthoot will collectively sell shares worth up to Rs 70 crore each through the OFS.
2. Priti John Muthoot, Remi Thomas, and Nina George intend to sell shares worth up to Rs 30 crore each through the OFS.
3. Greater Pacific Capital WIV Ltd plans to sell shares worth up to Rs 100 crore via the OFS.
These shareholders, including individuals and entities, have decided to divest a portion of their holdings in Muthoot Microfin by participating in the OFS.
As of March, Muthoot Fincorp holds a 72.36 percent stake in Muthoot Microfin. Creation Investments India owns 11.13 percent of the company, while Greater Pacific Capital WIV Ltd holds a 25.15 percent stake in the firm.
The sale of shares by these shareholders will provide an opportunity for them to monetize their investments in Muthoot Microfin and potentially realize profits. It will also allow for a more diversified ownership structure of the company’s shares in the public markets.
Where Will the Fund Be Used
The funds raised from the fresh issue of shares in Muthoot Microfin’s IPO will primarily be utilized to increase the company’s capital base.
The capital base refers to the funds held by a financial institution to support its lending activities and meet regulatory requirements.
As of March 2023, Muthoot Microfin reported a Capital to Risk-Weighted Assets Ratio (CRAR) of 21.87 percent, with the Tier I capital base also standing at 21.87 percent. CRAR is a measure of a bank’s capital adequacy and represents the proportion of its capital to its risk-weighted assets.
According to guidelines set by the Reserve Bank of India (RBI), financial institutions are required to maintain a CRAR of at least 15 percent, which includes both Tier I and Tier II capital combined. Muthoot Microfin’s CRAR is comfortably above the minimum requirement.
By utilizing the funds raised from the IPO to increase its capital base, Muthoot Microfin aims to strengthen its financial position, enhance its lending capacity, and potentially support future business expansion.
This will enable the company to continue providing microfinance services and support to its customers.
To facilitate the IPO process, ICICI Securities, Axis Capital, JM Financial, and SBI Capital Markets have been appointed as the book running lead managers. These firms will play a crucial role in managing the issuance of shares, marketing the IPO, and coordinating the bidding process.
About the Company
Muthoot Microfin, which is promoted by Muthoot Fincorp, holds the distinction of being the fourth largest Non-Banking Financial Company-Microfinance Institution (NBFC-MFI) in India based on its gross loan portfolio as of December 2022.
In the realm of NBFC-MFIs, it stands as the third largest, particularly in South India. Moreover, Muthoot Microfin boasts the claim of being the largest Microfinance Institution (MFI) in Kerala in terms of market share.
Additionally, the company plays a significant role in Tamil Nadu, where it asserts a market share of approximately 16 percent as of December 2022.
As of March 2023, Muthoot Microfin reported a gross loan portfolio of Rs 9,208.30 crore. The company serves a substantial customer base of 2.77 million active customers and employs 10,227 individuals across its 1,172 branches.
These branches are spread across 321 districts in 18 states and union territories throughout India. Muthoot Microfin has also established 358 e-clinics, which are operational in 358 of its branches, accounting for 30.55 percent of the total branches.
Notably, as of March 2023, 41.60 percent of the company’s customers have enrolled in e-clinics, and it has facilitated 198,826 medical consultations and 78,801 tele-consultations.
Muthoot Microfin’s strong presence, extensive branch network, and substantial customer base highlight its significant role in the microfinance sector, particularly in the regions of Kerala and Tamil Nadu.
The company’s commitment to innovation is evidenced by its establishment of e-clinics, which have allowed it to provide healthcare services to a significant number of customers.
Company’s Financial Status
Muthoot Microfin exhibited strong financial performance in FY23, with notable growth in both revenue and net income.
The company’s revenue for the fiscal year amounted to Rs 1428.76 crore, reflecting an impressive increase of 71.6 percent compared to Rs 832.51 crore in the previous year.
The net income of Muthoot Microfin also experienced significant growth, reaching Rs 163.89 crore in FY23, compared to Rs 47.40 crore in the previous year.
This substantial improvement in net income signifies the company’s effective management of its operations and ability to generate higher profits.
Additionally, Muthoot Microfin has demonstrated improved asset quality during the financial year. The gross Non-Performing Assets (NPA) ratio, which indicates the proportion of loans that are not being repaid on time, decreased by half from 6.26 percent to 2.97 percent.
This reduction in the gross NPA ratio indicates a decline in the percentage of non-performing loans, highlighting the company’s success in managing credit risk.
Furthermore, the net NPA ratio, which represents the amount of non-performing loans after factoring in provisions, decreased to 0.6 percent from 1.55 percent in the previous year.
This decline indicates an enhanced ability to handle loan defaults and manage credit quality, ultimately leading to a stronger financial position for the company.
Muthoot Microfin’s improved financial performance, robust revenue growth, and reduced NPA ratios reflect its effective risk management practices and ability to maintain asset quality.
These positive indicators provide confidence in the company’s financial stability and its ability to navigate the microfinance landscape successfully.
