Geojit has come out with its report on CreditAccess Grameen Ltd. The research firm has recommended to "Subscribe" the IPO in its research report as on August 07, 2018.
CreditAccess Grameen Ltd (CAGL) is the 3rd largest NBFC-MFI in India in terms of gross loan portfolio (as of FY17). The company provides micro-loans to women customers predominantly in the rural areas primarily under the joint liability group (JLG) model, which comprised 87% of loan portfolio as of FY18. CAGL is promoted by CreditAccess Asia N.V, a multinational company specializing in MSE financing. The microfinance company enjoys the lowest operating expense ratios amongst the top-eight NBFC MFIs and SFBs showcasing operational efficiencies. Consequently, Net Interest Margin (NIM) stood at 12.7% in FY18, one of the best in the micro finance industry. CAGL’s Gross NPA stood at 1.97% FY18 which was relatively better than its peers despite a challenging economic environment. Further, it has a strong capital position with a Capital adequacy ratio of 28.9% as on FY18 compared to the mandated CAR requirement of 15%.Valuation and Outlook
With large segment of India’s rural and semi-urban population currently unserved and underserved by formal financial institutions presents large opportunity to tap. On the valuation front, at upper price band of Rs422, the issue is reasonably priced at 2.9x on FY18 adjusted book value (post IPO dilution). Good return ratios, higher asset quality, and strong sponsorship of CAA, high customer retention rate places CAGL better prepared to reap profits from industry growth. We recommend ‘Subscribe’ to the issue with a long term perspective.
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