The initial public offering (IPO) of Belstar Microfinance Ltd is expected to get delayed by three to four quarters due to ongoing stress in the microfinance sector, managing director at its parent Muthoot Finance, George Alexander Muthoot, told Moneycontrol in an interview.
“Because of the stress in the microfinance, it could delay the IPO of Belstar Microfinance. Maybe after three to four quarters, we will think of that,” Muthoot said during an interview.
Muthoot Finance holds 66.13 percent stake in Belstar Microfinance.
On September 3, market regulator Securities and Exchange Board of India (SEBI) gave approval to Belstar Microfinance to launch an IPO. The IPO will feature a fresh issue of Rs 1,000 crore and an offer for sale (OFS) of Rs 300 crore.
In July-September quarter, Belstar Microfinance reported a net profit of Rs 52.6 crore, which was sharply lower than Rs 83.1 crore in the year-ago period.
Edited excerpts from interview:
Why have stage-3 loans increased sharply?
Stage-3 loans have gone up because of gold loan portfolio. Gold loan business is 100 percent secured, so an NPA in gold loan never becomes a loan loss, that means we are never going to lose money in an NPA. The customer is not having money and he is asking us for a little more time to repay, like two months to three months more. If he is not repaying after three to six months, we auction it. But then we give him more time because by giving more time, 90 percent of these customers also take back the gold in the extended time period.
What you see as an NPA in our book, it is actually a rolling NPA.
Why your NIMs have shrunk compared to previous year?
Net interest margin is always in the range of 11 percent. Maybe half a percent up, half a percent down. It depends on quarter to quarter.
All these loans are in the range of Rs 5,000 to Rs 2 lakh and they are going at different rates of interest. So it's a mix.
Going ahead, we expect our NIMs to remain in the range of 11.00 percent to 11.50 percent.
Any plan for ECB or overseas bonds in the second half of this fiscal year?
We have plans. We get money from banks, NCDs and ECB to fund our growth. We have targeted a 25 percent growth this year. For this year, we have permission for ECB and we may raise it in next one year. It will also depend on the external rate of interest.
Have you reviewed your gold loan portfolio after RBI’s notification?
RBI has given the instructions mainly because they see new players and banks, etc., coming into the gold loans. This is a very process-oriented sector and the process has to be very strict. The process is not easy to comply with.
We comply with all the suggestions or the processes, which RBI has said and we found no deficiency in our portfolio.
What are plans for listing for Belstar Microfinance after SEBI’s approval?
Microfinance is going through a stress period. None of the microfinance companies are growing and some have a flat growth. Our microfinance company also, registered a flat growth in last two quarters. So, after three to four quarters, things will improve.
Because of the stress in the microfinance, it could delay the IPO of Belstar Microfinance. Maybe after three to four quarters, we will think of that. By that time, the sector will look up. We will need capital for growth and growth will come. That time, we will go for it.
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