After the huge success of HDFC AMC IPO, in both subscription and listing gains terms, yet another IPO by a micro-finance company CreditAccess Grameen is all set to hit the primary market.
Issue details: The Rs 1,126.43 crore-1,131 crore public issue by a Bengaluru-based financial company comprises of a fresh issue of up to Rs. 630 crore and an OFS of a maximum of 1,18,76,485 equity shares by CreditAccess Asia N V, the company's promoter group. The price band for the issue has been fixed at between Rs. 418-422 per share. The issue will remain open between August 8 and August 10. On the bourses, the issue is likely to make its debut on August 20.
Investors can subscribe to the issue by making bids for a minimum of 35 shares and in multiples of 35 equity shares thereafter.
The book running lead managers to the CreditAccess Grameen's IPO include ICICI Securities, Credit Suisse Securities (India), IIFL Holdings and Kotak Mahindra Capital Company.
Company profile: The company extends micro-loans primarily to women customers in rural areas. The model adopted by the institution is mainly the joint liability group (JLG) model. As per the CRISIL research study report, CreditAccess Grameen ranked third with respect to overall loan portfolio as on March 2017.
The company has since inception expanded its footprint to include eight states and one UT through a network of 516 branches and 4,544 loan officers.
The company's promoter CreditAccess Asia N V is an MNC company with specialization in the area of MSE financing (micro and small enterprise financing).
Issue objective: Through the fresh issue proceeds amounting to as much as Rs. 630 crore, the company plans to augment its capital base. The proceeds from the OFS will notably go to the promoter company CreditAccess Asia N V.
Financials: The company's total revenue registered an increase of 48% CAGR and its net interest income recorded a growth of 54% CAGR from FY 2015 to FY 2018. Also, the company's profitability increased at a CAGR of 37% during the period.
Notably as against the regulatory requirement of 15%, the company's CRAR or capital to risk (weighted) assets ratio stood well above this level for all these years reaching a mark of close to 30% in FY 2018.
Conclusion: Considering the positives such as robust revenue growth to the tune of 56% CAGR in the last five years and reasonable valuations where the issue price is fully priced in comparison to peer companies such as Shriram Transport, Ujjivan Financial Services, investors can bet on the issue with a four to five year time frame. Nonetheless, investors may or may not get listing gains from the issue.