Muthoot Microfin shares to list on Tuesday. What GMP signals ahead of listing?

Muthoot Microfin listing: The shares of Muthoot Microfin will likely get listed on the exchanges on December 26. Ahead of the listing, the company’s shares are commanding a premium of Rs 26 in the unlisted market.Considering the upper price band of Rs 291, the company’s shares are expected to list with a mild premium of 9% on the exchanges.

However, it is important to note that grey market premiums are just an indicator as to how the company’s shares are stacked up in the unlisted market and are subject to change rapidly.

The Rs 960-crore IPO of Muthoot Microfin was subscribed 11.52 times at close.

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The IPO comprised a fresh issue of Rs 760 crore and an offer-for-sale (OFS) of Rs 200 crore. Under the OFS, promoters Thomas John Muthoot, George Muthoot, Preethi John Muthoot, Remmy Thomas and investor Greater Pacific Capital offloaded shares.

The microfinance firm aims to augment its capital base through the proceeds from the initial public offering. As per the RBI regulations, microfinance institutions are required to maintain a minimum capital adequacy of 15% consisting of tier-I capital and tier-II capital.

As of March 2023 end, the company’s capital adequacy was 21.87%, of which, tier-I capital base was 21.87%.

“Since our company continues to grow our loan portfolio and asset base, it will require additional capital in order to continue to meet applicable capital adequacy ratios with respect to its business,” Muthoot Microfin said.

Muthoot Microfin is the fourth largest microfinance company in India in terms of gross loan portfolio. It is the third largest in south India, with the largest in Kerala in terms of market share, and a key player in Tamil Nadu with an almost 16% share.

As of March 2023, its gross loan portfolio stood at Rs 9200 crore, and it had 2.77 million active customers. For FY23, the company reported a revenue of Rs 1430 crore and a profit of Rs 164 crore.

In the six months ended September 2023 period, the company’s revenue increased 72% year-on-year to Rs 1042 crore, while profit jumped multifold to Rs 205 crore.

ICICI Securities, Axis Capital, JM Financial, and SBI Capital Markets acted as the book running lead managers to the issue.

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