An Initial Public Offering (IPO) allows a company to sell its shares to public investors for the first time. One of the main reasons companies go for IPOs is to raise capital for various purposes, such as expanding their businesses, tackling general corporate issues, and repayment of debts. When a company plans to launch its IPO, it needs to file a Draft Red Herring Prospectus (DHRP) with the market regulator – the Securities and Exchange Board of India (SEBI).
Recently, Muthoot Micorfin – the microfinance subsidiary of the Muthoot Pappachan Group – has filed draft papers to launch its IPO. The company plans to raise Rs. 1350 from the capital markets through a combination of a new issue and an Offer for Sale (OFS) of its equity shares. Continue reading to learn more details about this IPO and the issuing company.
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Muthoot Micorfin is the fourth-largest microfinance company in India in terms of gross loan portfolio as of 31 December 2022. It is the third-largest microfinance NBFC in South India, with a significant market share in Tamil Nadu and Kerela. The company primarily focuses on providing small-value or micro-loans to women and those in rural regions.
Muthoot Micorfin is a part of the prestigious Muthoot Pappachan group with over 133 years of legacy. Currently, the company caters to more than 2,773,127 customers from 1,172 branches across 18 Indian states and 321 districts.
As per the DRHP filed by the company, it plans to raise Rs. 1350 through its IPO comprising equity shares with a face value of Rs. 10 per share. The IPO will comprise a new issue worth Rs. 950 crores and an offer for sale of Rs. 400 crores.
Up to 50% of the offer will be reserved for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Buyers (NIBs), and the remaining 35% for retail investors.
The company's shareholding pattern indicates that promoters hold a 9.72% stake, a 54.16% stake belongs to Muthoot Fincorp and the Greater Pacific holds a 25.15% stake. Through this offer for sale, Greater Pacific plans to offload equities worth Rs. 100 crores, Thomas Muthoot, Thomas George Muthoot, and Thomas John Muthoot can offload equities worth Rs. 70 crores each, while Preethi John Muthoot, Remmy Thomas, and Nina Geroge can sell equities worth Rs. 30 crores each.
With a net asset value of Rs. 9,200 crores at the end of March 2023, Muthoot Microfin is among the top five NBFC-MFIs in India. The company reported a net profit of Rs. 203 crores, up by more than 150% from Rs. 80 crores in the preceding fiscal year. The company’s gross non-performing asset has also improved drastically to 2.9% at the end of March 2023 from 6.3% a year ago.
The table below depicts the company’s financial snapshot as per the DRHP:
|Particulars||As of and For FY Ending March 31|
|Revenue From Operations||14,288||8,325||6,842|
|Profit After Tax||1,639||474||71|
|Earnings Per Share (Diluted)||11.98||3.97||0.62|
*All amounts in Rs. millions
Muthoot Microfin is yet to get approval from SEBI to launch its IPO. However, if it does – which is widely expected – it can be a great investment proposition. Constantly improving financials for the last three years and a substantial market share in several South Indian states are some factors that can work in the company's favour.
If you wish to invest in this IPO, you must place your bid for the subscription through an Application Supported by Blocked Amount (ASBA) feature. The securities are allotted through a lottery system. If you receive the allotment, IPO shares will be directly credited to your Demat account.
A Demat and trading account is necessary to invest in an IPO. If you don’t have a Demat and trading account, you can open it for free with Motilal Oswal. We do not levy any account maintenance Or admin charges for the first year. Moreover, you can trade at a flat brokerage rate of Rs. 20 per lot.
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