Muthoot Microfin Limited IPO

Last Updated on September 27, 2023 by BFSLTeam BFSLTeam

Muthoot Microfin Limited, a microfinance provider and a part of Muthoot Papachan Group submitted its draft documents to SEBI for an Initial Public Offering (IPO) in 2018. 

This year, they have refilled their Draft Red Herring Prospectus (DRHP) to the SEBI with plans to launch an IPO. This document comprises all the information that an investor needs to know about a company before investing.

If you find this IPO interesting, this article will provide all available information about the upcoming Muthoot Microfin Limited IPO.

Also Read: How does an IPO work?

About Muthoot Microfin Limited

Muthoot Microfin Limited is among the top microfinance institutions in India. It is a subdivision of the Kerala-based Muthoot Pappachan Group. This financial company focuses on sanctioning loans mainly to female entrepreneurs with special attention to women with rural backgrounds.

The Muthoot Pappachan group primarily focuses on working with customers at the grassroots level of the economic ladder. All the organisations and financial institutions under this group follow this principle.

The gross loan portfolio of Muthoot Microfin Limited amounts to Rs. 92.082.96 million by 31 March 2023, according to their DRHP. Their financial products are intricately structured to suit the needs of middle-class and lower-middle-class households. Their products include group loans or Pragathi loans, health and hygiene loans, household appliances product loans, gold loans and Muthoot Small and Growing Business (MSGB) loans.

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Pan-India Presence

As of 31 March 2023, 10,227 employees work with Muthoot Microfin across 1172 branches in 321 districts in 18 states and Union Territories. Muthoot Microfin specialises in serving a customer base belonging to the low-income group. Up until March 31, 2023, it has served 2.77 million+ active customers on a pan-India level. To ensure proper accessibility to both existing and new customers, its offices are located in major commercial regions.

As of 31 December 2022, Muthoot Microfin Limited ranks fourth in terms of gross loan portfolio across India. In South India, this small finance organisation is the third largest NBFC-MFI. In Tamil Nadu, this organisation is a major player in the microfinance market holding 16% of the market share.

Upcoming IPO and Its Objectives

Under Thomas John Muthoot, Muthoot Microfin Limited plans to raise approximately Rs. 1350 crore by issuing an IPO. To execute this plan, the institution has filed its DRHP with the Securities and Exchange Board of India.

The IPO will consist of a fresh issuance of shares worth Rs. 950 crores, approximately. With it, the microfinance institution will strengthen its capital base and meet future working capital requirements. 

With an Offer for Sale (OFS), the existing promoters and shareholders are planning to sell Rs. 400 crore of IPO shares. The company may also conduct a Rs. 190 crore pre-IPO placement, which would reduce the size of its fresh issuance.

Muthoot Microfin Limited IPO Details

ICICI Securities, Axis Capital, SBI Capital Markets and JM Financial are the book-running lead managers of this IPO issue. Reports say that Muthoot Microfin Limited will list its shares on both BSE and NSE. They have also appointed KFin Technologies as the registrar of their IPO issues. 

Thomas Muthoot, Thomas George Muthoot, Thomas John Muthoot, Preeti John Muthoot, and Remmy and Nina Muthoot along with shareholders Greater Pacific Capitals WIV will participate in the Offer for Sale. 

Furthermore, they reserved 50% of their IPO issues for qualified institutional bidders. Non-institutional investors shall receive 15% of these shares. Finally, retail investors will receive the remaining 35% of their equity shares.  

Also Read: IPO investment strategy: Tips for investing in an IPO

Strengths 

To make an informed decision on investing in Muthoot Microfinance Limited IPO, you must be aware of the company’s strengths and weaknesses. Given are the important strengths of this institution’s business model:

• This firm’s prime focus is the underserved rural population of South India as it caters to their health and social welfare. 
• It has access to a diverse range of capital sources and a strong cost of funds.
• The company holds a significant position in the pan-India microfinance market. 
• Its risk management team helps it ensure a healthy portfolio.
• Muthoot Microfin has a strong brand image and synergy with its parent group.

Risks

Along with the above benefits, you must also consider the business risks before planning to invest in Muthoot Microfin IPO. Some of the notable risks are:

• Interest rate volatility can impact adversely on this company’s net interest income and interest margin. This can directly affect the outcome of its operations.
• Any kind of non-compliance with regulations seen during periodic RBI inspections can lead the bank to penalties and restraints.
• This microfinance institution’s reputation depends largely on the brand image of the Muthoot Pappachan Group. Any image crisis of the conglomerate’s reputation can impact the image of Muthoot Microfin Limited. 

Summary

Muthoot Microfin Limited has received a green signal from SEBI regarding its upcoming IPO. It has yet to declare the tentative opening and closing dates to launch its IPO. Very soon, they will also declare the number of IPO shares they will issue as offers for sale and fresh issues. 

If you are planning to invest in Muthoot Microfin Limited’s IPO, consider keeping an eye out for the announcement of tentative dates. Furthermore, read through the SEBI-verified DRHP of Muthoot Microfin Limited.