Asirvad Micro Finance, the subsidiary of listed NBFC Manappuram Finance has filed a draft red herring prospectus (DRHP) with market regulator Sebi to raise Rs 1,500 crore via an initial public offer (IPO).
On July 26, 2023, Moneycontrol was the first to report that Asirvad Micro Finance had commenced work on its proposed listing to raise around Rs 1,500 crore and had mandated 3 investment banks for the deal.
In February 2015, Manappuram Finance, the Kerala-based gold loan provider acquired a significant majority stake in the Chennai-based microfinance firm as part of a diversification strategy.
The proceeds from the IPO, meant to be purely a fresh issue with no OFS component, will be used to augment the capital base of the firm to meet future business requirements. In consultation with its bankers, the firm may consider a further issue of equity shares on a private placement for cash consideration aggregating upto Rs 300 crore. In case the placement is completed, the fresh issue size will be reduced, the DRHP said.
JM Financial Limited, Kotak Mahindra Capital, Nomura and SBI Capital are the book-running lead managers for the IPO.
In November 2022, private equity firm Warburg Pincus-backed Fusion Microfinance listed at a two percent discount to its IPO price on market debut, but the stock has rallied since then.
Regulatory shift in NBFC-MFI space
Alluding to the revival in the sector, Asirvad Micro Finance Chairman VP Nandakumar said in the firm's latest annual report, "Having weathered the storms of the past two years, the NBFC-MFI business model stands vindicated once again. The Reserve Bank of India has reiterated its confidence in the sector with the introduction, in March 2022, of harmonized regulations for microfinance as an asset class. The new regulations give greater flexibility to NBFC-MFIs in managing their risks and increasing their reach and this is likely to spur further investment in the sector. "
"The uniform applicability of the regulations and the removal of interest rate ceiling are major positives for the industry. India’s microfinance sector is now better placed to fulfil its goal of extending credit to the unbanked sections," he added.
A closer look at Asirvad Micro Finance
Asirvad Micro Finance kickstarted its journey in 2008 with two branches in Tamil Nadu. As on March 31, 2023, the firm is present across 22 states and 4 UTs through a network of 1684 branches which covers 450 districts.
According to the DRHP, Asirvad Microfinance stands to be the country's largest NBFC MFI in terms of geographic reach and third in terms of assets under management and number of clients.
As on March 31, 2023 it caters to 3.25 million active borrowers in the microfinance portfolio that constitutes a majority of its assets under management. It also caters to Loan against Gold and provides MSMEs loans.
For Fiscal 2022-23, Asirvad Micro Finance had an AUM (assets under management) of Rs 10,040.89 crore against Rs 7,002.18 crore for Fiscal 2021-22. Its Profit After Tax stood at Rs 218.13 crore in FY22-23 as compared to Rs 15.26 crore in FY 21-22, making it the second-best firm in terms of year-on-year growth among the MFI Peer Group.
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