Almost a decade after Spandana Sphoorty, a Hyderabad-based microfinance institute, shelved its initial public offering (IPO) plan, it hit the capital market on August 5, with a plan to raise about Rs 1,200-crore.
The next few quarters and the financial year are expected to see a number of microfinance firms and small finance banks getting listed, as the sector shifts from being a promoter and private equity investment-driven to a market-driven sector.
At least two other MFIs are planning an IPO soon - Arohan and Muthoot Finance. Last year, CreditAccess Grameen got listed on the exchanges. Apart from this, Satin Creditcare Network is the other listed micro finance company after IndusInd Bank acquired Bharat Financial Inclusion in June.
“We are hopeful of filing an application for an IPO by Q4 of this year. At present we are internally doing a rejig of promoters’ holding, which is set to increase from nearly 33 per cent to 38 per cent ahead of the IPO. The proceeds will help us expand in newer geographies,” according to Manoj Kumar Nambiar, managing director, Arohan.
Muthoon Microfin, has already got a Securities and Exchange Board of India (Sebi) approval for an IPO.
With the listing of Muthoot, Spandana and Arohan, a number the large MFIs, with an average credit outstanding close to Rs 3,000 crore and above would be listed entities. After Bharat Financial, CreditAccess Grameen is the largest MFI, followed by Satin and Arohan, according to data available with MFIN.
According to a top executive in the MFI sector, several mid-sized MFIs could also be thinking to tap the capital markets for funding.
The MFI industry has grown rapidly in the last few months. The industry's gross loan portfolio (GLP) stood at Rs 1,87,386 crore at the end of March, up 38 per cent year-on-year, according to data from Microfinance Institution Network (MFIN).
This apart, several small finance banks would need to mandatorily go for an IPO in the next few months to comply with Reserve Bank of India norms, which specifies finance bank must be listed within three years of the launch of operations. Further, it said, the promoter shareholding should be brought down to 40 per cent within five years of launch.
So far, three SFBs have listed on the stock markets - Equitas Financial Holdings Ltd, Ujjivan Financial Services Ltd and AU Small Finance Bank. Seven other SFBs would need to mandatorily go for an IPO.