Muthoot Microfin, the microfinance institution (MFI) part of the Muthoot Pappachan Group, is set to go public with an initial public offering of Rs 960 crore.
Kerala-based Muthoot Microfin is a unit of Muthoot Fincorp, the flagship firm of the Muthoot Pappachan Group. Muthoot Fincorp is among the largest gold loan companies in India.
Muthoot Microfin is the fifth largest NBFC-MFI in India and focuses on providing micro-loans to women entrepreneurs, especially in rural regions of India.
The initial public offering consists of a fresh issue of Rs 760 crore and an offer for sale for Rs 200 crore from existing shareholders, which includes promoters and investor Great Pacific Capital.
The company has set a price band of Rs 277 to Rs 291 per share for the public issue, which will open for subscription on Monday, December 18, 2023, and close on December 20, 2023. Bids can be made for a minimum of 51 equity shares and in multiples of 51 equity shares thereafter.
The company proposes to utilise the net proceeds from the primary fundraising towards augmenting its capital base to meet future capital requirements.
"We are growing at a 36 per cent compounded annual growth rate (CAGR). Currently, we have a capital adequacy of 20.4 per cent. But, as we grow, we definitely need more capital. We are putting up more branches. We have opened around 260 branches in the last financial year and this financial year also we will put up more branches. So, this money would be needed for that," Sadaf Sayeed, the CEO of Muthoot Microfin told THE WEEK. The company will also use part of the proceeds to augment its technology, he added.
The company has an app called Mahila Mitra, which has close to 1.5 million users. The loan disbursement is largely done digitally and the company is also seeing an increase in repayments digitally.
Muthoot Microfin is the largest MFI in Kerala and Tamil Nadu and currently, around 51 per cent of its portfolio is from the southern states alone. But the company is focusing on growing its business in other regions, especially in the north.
"We have around 25 per cent of our AUM (assets under management) from Tamil Nadu, which is a key state, and we are rapidly growing in UP and Bihar. We are a strong player in Karnataka as well. So, we have a diversified portfolio and we are growing rapidly in other states as well," Sayeed said in a briefing.
As of September 2023, Muthoot Microfin had an AUM of Rs 10,800 crore and a customer base of 3.2 million. It has 1,340 branches and an employee base of over 12,200.
In the first half of the current financial year, the company reported a net profit of Rs 205 crore. While its gross non-performing assets (GNPA) has come down to at 2.37 per cent, its net NPA is at 0.33 per cent.
The Muthoot Pappachan Group has a diversified financial services business, providing a lot of opportunities to cross-loans across segments to its customers.
"Muthoot Microfin becomes the vertical which acquires the customer who doesn't have access to financial services. Once she comes into the formal financial services segment, we will help her grow and she gets facilities like if she wants an emergency loan or business loan, she gets it from Muthoot Fincorp; she gets two-wheeler loan from Muthoot Capital Services; if she wants home improvement loan, she gets it from Muthoot Housing Finance," explained Sayeed.
The promoter shareholders selling shares in the IPO include Thomas John Muthoot (Rs 16.36 crore), Thomas Muthoot (Rs 16.38 crore), Thomas George Muthoot (Rs 16.36 crore) Preethi John Muthoot (Rs 33.74 crore), Remmy Thomas (Rs 33.39 crore) and Nina George (Rs 33.77 crore). Investor Great Pacific Capital will sell shares aggregating to Rs 50 crore.
Sayeed said even after the share sale, the promoters will continue to hold a majority stake in the microfinance company.
ICICI Securities, Axis Capital, JM Financial and SBI Capital Markets are the book running lead managers to the issue.