Manappuram Finance arm Asirvad MF prepares for Rs 1,500-crore IPO; picks JM Financial, Nomura & Kotak

In February 2015, the Kerala based gold loan provider acquired a significant majority stake in the Chennai based microfinance firm as part of a diversification strategy.

Asirvad Microfinance, the subsidiary of listed NBFC Manappuram Finance , has commenced work on an IPO (initial public offer) to raise around Rs 1,500 crore and has mandated 3 investment banks for the deal, multiple industry sources with knowledge of the matter told Moneycontrol.

In February 2015, the Kerala based gold loan provider acquired a significant majority stake in the Chennai based microfinance firm as part of a diversification strategy.

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" A meeting with all the advisors happened recently. Asirvad Microfinance has picked JM Financial, Nomura and Kotak Mahindra Capital and work has begun," said one of the two persons above.

A second person told Moneycontrol that the new regulatory environment for the microfinance segment , positive analyst outlook for the sector and the buoyant capital markets are factors which have triggered the IPO plans of the firm.

" The impressive market debut of Uttkarsh Small Finance Bank has also boosted sentiment. Asirvad Microfinance plans to file the DRHP ( draft red herring prospectus) with Sebi by September," this person added.

Uttkarsh Small Finance Bank had a bumper debut on the bourses and listed with a 60 percent premium.

Also Read | Manappuram Finance arm Asirvad Microfinance likely to come up with IPO: All about firm's business, AUM, branches

A third person told Moneycontrol that the IPO is likely to be a pure primary issuance of shares.

" For now, the planned size is around Rs 1,500 crore but that may change and even increase later if required. There are no private equity investors and the subsidiary is almost entirely owned by the parent," the third person added.

A fourth person familiar with the proposed IPO confirmed that work had started for the issue and said, " Asirvad Microfinance is ambitious and wants to increase its book size from a growth story perspective. It doesn't want to rely merely on the parent."

Also Read: Manappuram Finance accepts rights issue proposal of Asirvad Microfinance

All the 4 people above spoke to Moneycontrol on the condition of anonymity.

Moneycontrol has sent an email query followed by reminders to Manappuram Finance and is awaiting an email response. This article will be updated as soon as we hear from the firm. JM Financial, Nomura and Kotak Mahindra Capital could not be reached for an immediate comment.

In Novemeber 2022, private equity firm Warburg Pincus-backed Fusion Microfinance listed at a 2 percent discount to its IPO price on market debut. The firm's stock price has surged by 34 percent in the last three months.

The Asirvad Microfinance Story

According to its FY22-23 annual report, Asirvad Microfinance has an AUM ( assets under management) of Rs 10,040.89 crore and a PAT ( profit after tax) of Rs 218.13 crore ( as compared to Rs 15 crore in FY 21-22).

The firm has 3.2 mn borrowers, 15,784 employees with total disbursements of Rs 19,248 crore. It has a pan India presence with 1,684 branches across 391 districts of 22 states and 3 UTs.

The firm's microfinance loans are curated for women from poor and lower-income households and disbursed via its branch network spread across 22 States and 3 Union Territories as on March 31, 2023. Its product offerings comprise Micro Finance loans, MSME loans, and Gold loans.

Alluding to the revival in the sector, Asirvad Microfinance 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 harmonised 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.

Also read: Utkarsh Small Finance Bank’s IPO will test investor interest in microfinance

Also read: Microfinance outlook positive, credit cost to be lowest in 5 years: Analysts