Muthoot Microfinance Rs 960-crore IPO explained in 5 key charts

Moneycontrol parsed through its Red Herring Prospectus and sums up the company’s management, finances and pitch in 5 charts. Muthoot Microfinance’s Financial History: It is the fifth largest NBFC - MFI in terms of asset book and saw impressive revenue growth in the last fiscal year, with a notable improvement in its asset quality. Additionally, the company experienced a significant increase in its net interest margins, and there are expectations for further improvement, especially considering the current trend of falling interest rates.

Return profile of NBFC- MFI: The company’s return on assets (RoA)has improved above 2 percent (improved by 2 % or improved to over 2%?) The equity returns remain above 10 percent. While MML’s RoA has improved, it is still much lower compared to CreditAccess Grameen that generated an RoA of 5 percent in the latest quarter (Q2 FY24). This indicates scope for further improvement.

More about the growing loan portfolio: The company is also the third largest amongst NBFC-MFIs in South India in terms of gross loan portfolio, the largest in Kerala in terms of MFI market share, and a key player in Tamil Nadu with an almost 16 percent market share. In an interview to Moneycontrol, the company said it expects incremental growth from Northern region.

Shareholding Pattern: Promoters, including Muthoot Microfin, hold 69.08 percent shareholding in the company and the remaining 28.53 (THE TWO DO NOT ADD UP TO 100) percent share are owned by public shareholders, including Greater Pacific Capital WIV (19.06 percent stake) and investment management firm Creation Investments India LLC (9.01 percent stake).

Valuation Versus Peers: On FY23 basis, Muthoot Microfinance’s valuation appears cheaper than CreditAccess Grameen Limited. But more or less in line with other small finance banks like Equitas Small Finance Banks, Ujjivan Small Finance Banks and a bit higher than Bandhan Bank and Suryoday Small Finance Bank Ltd. However, MML’s IPO is priced at 1.6 times (post money) the book value estimated for FY25.