Microfinance firm CreditAccess Grameen Limited has filed draft prospectus with capital market regulator SEBI to launch its IPO. The Bengaluru-based company is better known as Grameen Koota and has recently changed its name to reflect the ownership by CreditAccess. Here are some quick points about CreditAccess Grameen IPO:
CreditAccess Grameen IPO: Fresh + OFS
CreditAccess Grameen IPO will include a fresh issue of INR900 crore (INR9 billion) which will be used to boost the company’s capital base for future capital requirements.
In addition, there will be an Offer For Sale (OFS) by existing shareholders. The microlender is 99% owned by CreditAccess Asia (CAA) while the remaining stake is with promoters and employees.
Hong Kong-headquartered private equity firm Olympus Capital Asia, in turn, owns 16% equity stake in CAA while Asian Development Bank (ADB) holds nearly 10%. CAA plans to offload 10,281,317 shares through the OFS route.
In total, CreditAccess Grameen IPO is expected to mobilize nearly INR1,500 crore.
Focus on microfinance
Grameen Koota has made a conscious decision to remain focused on its core business of microlending in villages and did not apply for a small finance bank (SFB) license. The company operates in Karnataka, Maharashtra, Tamil Nadu, Chhattisgarh and Madhya Pradesh through 440 branches and 3,783 loan officers. It claims to cover 112 districts in the five states. Out of the 440 branches, 368 are categorized as rural branches as they cater to customers in rural areas.
Its customer base increased from 0.50 million active customers as of 31 March 2014 to 1.61 million active customers as of 30 September 2017. Grameen Koota has a high active customer retention rate of 90% for the six months ended 30 September 2017.
Grameen Koota IPO: Strong past but NPAs rising
As the table indicates, Grameen Koota has made steady progress with its financial performance. Its top line increased to nearly 8 times in the last five years. Profits also maintained the stellar rate and increased from INR7.9 crore in FY2013 to INR80.3 crore in FY2017, although the figure in the latest years reflects a decline from a corresponding figure of INR83.2 crore in FY2016. FY2017 saw a spike in finance costs which also hampered profit margins. Nevertheless, the company has already earned INR60.7 crore in profits in the latest six months.
The company has historically managed its loans well but the latest six months saw gross NPAs shooting up sharply to 5.35% from 0.08% in FY2017.
Grameen Koota is among the most efficient players in the lending space in terms of operating expense ratio. For the year ended 31 March 2017, the company’s opex ratio stood at 5%. This is the best among the microfinance players and second only to L&T Finance’s 3.7% in the bigger space of NBFC-MFIs and small finance banks.
CreditAccess Grameen’s financial performance (in INR crore)
|Profit after tax||7.9||16.6||48.7||83.2||80.3||60.7|
|Net margin (%)||8.9||11.2||17.3||17.8||11.3||15.7|
Grameen Koota IPO: Fourth microlender to tap primary market
Last couple of years has been transformative for the microfinance industry as RBI granted SFB licenses. As a result of the regulatory requirements, three microfinance players Ujjivan Financial Services, Equitas Holdings, and AU Small Finance Bank came up with their respective IPOs. All the three offers were well-received in the market and rational pricing meant that IPO investors were rewarded on their investments. Given the positivity associated with microfinance companies in the primary market, Grameen Koota will also attract strong interest from investors.