IPO listed on 26 Dec'23
Muthoot Microfin Ltd
Minimum Investment
₹ 14,841 / 51 shares
Grey market premium
₹ 80 (27.5% premium)
Issue price
₹ 291
Listing price
₹ 278
Listing gains
-13 (-4%)
Listing on
Dec 26, 2023
Our Verdict:
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- Muthoot Microfin Ltd (MML) holds a dominant position in the market across India. The firm has a strong risk management framework and has demonstrated significant growth in both revenue and profits. Its asset quality underscores effective risk management, and the notable growth in loan disbursements and assets under management (AUM) reflects its firm market foothold and continuous expansion.
- In terms of valuation, the initial public offering (IPO) seems reasonably priced, with a price-to-earnings (P/E) ratio of 12 times, based on the projected earnings for the fiscal year 2024. Additionally, the grey market premium for the issue suggests a premium listing.
- MML's strong financial performance, growing presence, and emphasis on digital innovation make it well-poised to seize upcoming growth opportunities in this sector. Considering these factors, investors may consider subscribing to this issue from a medium-to-long term perspective.
About the company
Founded in
6 Apr'92
Managing director
Thomas Muthoot
- MML ranks as India's fifth largest NBFC-microfinance entity and holds the top position in Kerala based on its gross loan portfolio size. It is a key part of the Muthoot Pappachan Group, a diversified conglomerate with interests in sectors like financial services, automotive, hospitality, real estate, IT infrastructure, precious metals, and alternate energy. The affiliation with the group enhances MML's brand recognition and provides substantial marketing and operational advantages.
- The firm boasts a substantial clientele with 31.9 lakh active customers. These customers are catered to by a dedicated workforce of 12,297 employees spread across 1,340 branches in 339 districts, covering 18 states and union territories throughout India. Its gross loan portfolio surged 46% YoY, reaching Rs 10,867 crore as of the end of September 2023.
STRENGTHS
- Robust Financial Growth: Between FY21 and FY23, MML displayed remarkable growth, with a 45% CAGR in Revenue from Operations and a 382% CAGR in Net Profit.
- Notable AUM Growth: Between FY21 and FY23, the Assets under Management (AUM) saw significant growth, with a CAGR of 36%, reaching Rs 9,208.29 crore in FY23 and further escalating to Rs 10,867.06 crore by September 2023.
- Rapid Growth in Disbursements: Disbursements increased significantly, with a 75% CAGR, from Rs 2,636.77 crore in FY21 to Rs 8,104.47 crore in FY23.
- Improving Asset Quality: The gross Non-Performing Assets (NPA) improved from 7.39% in FY21 to 2.97% in FY23, and the net NPA saw an improvement from 1.42% to 0.6% during the same timeframe.
- Decent Return Metrics: There was a notable improvement in Return on Equity as well, which climbed from 0.79% in FY21 to 11.06% in FY23, alongside a Return on Assets of 3.3%.
- Strong Capital Adequacy: The capital adequacy ratio stands at 20.46% of risk-weighted assets as of September 2023, which is above the requirement of 15%.
RISK FACTORS
- Nature of Microfinance Loans: The loans offered by MML are predominantly unsecured and extended to customers considered to be in a high-risk category. These loans depend on alternative forms of guarantee instead of traditional collateral.
- Concentration of Loan Portfolio: The combined gross loan portfolio in Kerala, Karnataka, and Tamil Nadu represents 51.4% of MML’s total. Any unfavourable developments in these key states could negatively influence the firm’s performance.
- Cash Flow Concerns: MML has previously faced negative cash flows in its operating, investing, and financing activities. Persistent negative cash flows from operations, or substantial short-term cash outflows from investing and financing, could negatively affect the firm’s cash flow needs, business functionality, and expansion plans.
- Loan Repayment Risks: As of September 30, 2023, the MML has taken loans totalling Rs 8,019 crore, with 59.65% of this amount still outstanding. Lenders have the right to demand repayment of these loans at any time. If any of these unsecured loans are demanded back by the lenders and the company is unable to repay the due amounts, it would lead to a default under the respective loan agreements.
- Legal Proceedings: MML, its Directors, Promoters, and Group Companies are involved in various legal cases totalling Rs 417.8 crore. Negative outcomes in any of these cases could harm the firm’s reputation, business operations, financial health, results, and cash flows.
Issue details
Issue type
Mainstream
Issue size
₹ 960 crore
Fresh Issue
₹ 760 crore
OFS
₹ 200 crore
Price range
₹ 277 - 291
Lot size
51 shares
Issue Objective
The company intends to utilise the proceeds from the net issue towards augmenting its capital base to meet future capital requirements.
Dates
Bidding open
18 Dec'23
Bidding close
20 Dec'23
Allotment date
21 Dec'23
Refund date
22 Dec'23
Listing
26 Dec'23
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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