India's PE-backed Muthoot files for IPO
Indian microfinance services provider Muthoot Microfin, part of the Muthoot Pappachan Group, has filed for an IPO that will provide a partial exit for several investors, including US private equity firm Creation Investments.
The offering will comprise a fresh issue of shares aggregating INR5 billion ($73 million) along with up to 16 million shares held by existing investors, including 1.9 million shares from Creation. Pricing for the shares has not been announced. According to the prospectus, Muthoot will use the proceeds of the fresh issue to augment its capital base in order to meet future capital requirements.
Muthoot was founded in 2015 to support the microfinance operations of its parent, and provides financial support to low-income women entrepreneurs in rural areas. Its business comprises loans for income generating purposes such as the purchase of equipment or upgrading facilities, life betterment solutions such as education and mobile phone lending, and investments in health and hygiene.
As of March 2018 the company had 1.2 million active borrowers, served by 467 branches across India. Its gross outstanding loan portfolio stood at INR29.2 billion, up significantly from INR19.6 billion the year before. Over the same period the company’s gross non-performing asset ratio grew from 0.29% to 3.43%.
Muthoot derives significant advantage from synergies with financial services business Muthoot Pappachan. The company also uses the infrastructure and branch network of its sister company Muthoot Fincorp for loan disbursements and collecting fees and payments, and can leverage software and information technology systems of its parent.
For the year ended March 2018, Muthoot reported INR4.6 billion in revenue, up from INR2.4 billion the year before. Over the same period net profit grew from INR370 million to INR760 million.
Creation invested in Muthoot last year, committing INR1.3 billion for an 11% stake. The firm currently holds 1.7 million equity shares and 11.3 million compulsorily convertible preference shares, which will be converted into equity shares prior to the offering. Along with Muthoot, Creation has stakes in several other Indian financial services providers, including Fusion Microfinance and small business lender Capital Float.
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