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Muthoot Microfin Limited IPO

Muthoot Microfin Limited IPO
Start Date18-12-2023
Application Timing10am-5pm
Price Range₹277 - ₹291
Min Qty51
Min. Investment₹14127
Listing DateNA
Close Date20-12-2023

About Muthoot Microfin Limited IPO

Incorporated in April 1992, Muthoot Microfin Limited is a microfinance institution that specializes in providing micro-loans to female customers, primarily for income generation purposes, focusing on rural regions of India. As of December 31, 2022, the company is the fourth largest NBFC-MFI (Micro Finance Institution) in India in terms of gross loan portfolio. It is also the largest MFI in Kerala in terms of market share and the third largest NBFC-MFI in South India in terms of gross loan portfolio. Additionally, the company is a key player in Tamil Nadu, with an almost 16% market share, as of December 31, 2022.

Muthoot Microfin serves 2.77 million customers through 1,172 branches in 321 districts across 18 Indian states and union territories with the help of 10,227 employees. Muthoot Microfin a part of the Muthoot Pappachan Group which has presence across financial services, automotive, hospitality, real estate, information technology infrastructure, precious metals and alternate energy sectors.

Why To Invest in Muthoot Microfin Limited IPO

India's fourth largest NBFC-MFI with strong presence in South India. Apart from Offer For Sale, IPO net proceeds from the fresh issue will be utilised towards augmenting capital base to meet future capital requirements

Strengths And Risks
Market Leadership: Muthoot Microfin is the fourth largest NBFC-MFI in India and also the third largest amongst NBFC-MFIs in South India in terms of gross loan portfolio. Over the past five years, they have expanded their operations in North, East and West India diversifying their customer base. This leadership position helps them secure capital at competitive costs, acquire and retain customers and expand into new regions.
Rural Focused Operations: Muthoot's widespread branch network in rural markets, along with technology led initiatives, results in significant competitive advantages, particularly by giving them the capability to offer a variety of financial products in areas where financial services penetration is limited.
Brand Strength: Company's relationship with the Muthoot Pappachan Group provides them with brand recall and significant marketing and operational benefits. Several companies forming part of the Muthoot Pappachan Group are in the financial services sector including microfinance, gold finance, two wheeler finance and housing finance.
Robust Risk Management: Our robust risk management framework, customer selection methodologies and regular end use and payment monitoring have resulted in healthy portfolio quality indicators such as high collection efficiency and low NPAs. Their collection efficiency was 95.84% for the FY 2023, gross NPA ratio was 2.97% and net NPA ratio was 0.60%, as of March 31, 2023. As of December 31, 2022, we had the second lowest gross NPA ratio and net NPA ratio among the selected NBFC-MFIs.
Micro Loan Segment Risk: Micro Loan customers generally have limited sources of income, savings and credit histories. Further, there is typically limited or no financial information available and the majority of customers do not have any credit history which increases the NPA risk.
Regional Risk: Company derives a significant portion of their revenues from South India, and any adverse developments in the southern states of India may have an adverse effect on business and operations. Moreover, it is a challenge for them to expand into new regions with established players to grow in future.
Negative Cash Flows: Company had net cash outflow from operating activities of Rs. 703.9 Cr, Rs. 1083.5 Cr and Rs. 2332.8 Cr for the FY 2021, 2022 and 2023, respectively, primarily due to an increase in loans disbursed with increase in scale of business. Any negative cash outflows from operating activities over extended periods, could have an adverse impact on our cash flow requirements, business operations and growth plans.
Legal Proceeding: The Directorate of Enforcement, Ministry of Finance, has issued summons to their Managing Director directing him to provide certain information in relation to himself and the Company. There is no assurance that the ED will not take any action against company or Managing Director, which may adversely impact the business and operations, financial condition and reputation.
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