Muthoot Microfin IPO Financial Analysis

Muthoot Microfin, a non-banking microfinance company, is launching its IPO on December 18, 2023. Here's a summary of the company's business model, strengths, weaknesses, and growth potential to assist investors in making informed decisions.

Muthoot Microfin Overview

Muthoot Microfin Ltd, a microfinance arm of Muthoot Pappachan Group, was incorporated in April 1992. It is a rapidly growing non-banking financial company focused on providing micro-loans to women entrepreneurs in rural India. The company promotes entrepreneurship and inclusive growth, offering livelihood, life betterment, health & hygiene solutions, secured loans, and other value-added services.

Muthoot Microfin operates on a unique joint liability group model, specifically catering to women in lower-income households. The model aims to empower individuals by providing them with credit access, fostering the identification of new opportunities, and supplementing existing income. As of now, Muthoot Microfin serves approximately 31,93,479 active customers, with nearly 15,04,436 customer app downloads.

IPO Strengths

Recognized Brand: Muthoot Microfin is a well-known name and ranks as the second-largest company in the Muthoot Pappachan Group by Assets Under Management (AUM) in the financial services industry. The group's main company, Muthoot Finance, holds a 59% stake in Muthoot Microfin.

Extensive Presence: Operates 1,172 branches in 18 states, serving 2.7 million women entrepreneurs, showcasing a wide-reaching presence, especially in rural areas.

Diverse Loan Portfolio: With a portfolio size of ₹9,200 crore, the company maintains a diverse range of loans, ensuring a balanced and resilient business.

IPO Weaknesses

Expensive Borrowing: Muthoot Microfin faces a high cost of borrowing, reaching 10.5% in FY23, ranking as the second-highest among its peers.

Competitive Market: The company operates in a competitive market that includes small finance banks, traditional banks, Non-Banking Financial Companies (NBFCs), and other microfinance institutions.

Regional Revenue Shift: A shift in gross loan revenue distribution, particularly with a decrease in the South region's contribution, poses a potential challenge.

IPO details

Muthoot Microfin IPO is scheduled from December 18 to December 20, 2023. The stock has a face value of ₹10 per share, and the IPO's price range is ₹277 to ₹291 per share.

Financial Performance of Muthoot Microfin

In FY23, the company's total assets rose to ₹8,529.20 crore, total revenue reached ₹1,446.34 crore, and profit after tax was ₹163.89 crore. The earnings per share (EPS) is 11.66.

Key Ratios

In the fiscal year 2023, Muthoot Microfin reported a Return on Equity (ROE) of 21.7%, Return on Assets (ROA) of 2.2%, Net Interest Margin (NIM) of 12.3%, and Gross Non-Performing Assets (GNPA) of 3%.

Muthoot Microfin Vs Peers

Muthoot Microfin Limited has a Price-to-Earnings (P/E) ratio of 14.19, its valuation seems reasonable when compared to peers such as Equitas and Ujjivan Small Finance Bank. Spandana Sphoorty Financial stands out with a high P/E of 381.72 and a low EPS of ₹1.74.

Promoters of Muthoot Microfin

1. Thomas John Muthoot

2. Thomas Muthoot

3. Thomas George Muthoot

4. Preethi John Muthoot

5. Remmy Thomas

6. Nina George

Presently, the promoters maintain a 69.08% stake in the company. Following the IPO, this ownership will undergo dilution, reducing to 55.47%.

Final Words

This article reviews the Muthoot Microfin IPO for 2023. The company's strong financials and the government's backing indicate a positive outlook in the promising microfinance industry.