Muthoot Microfin gets Sebi nod for IPO, firm eyes Jan or Feb for listing

Muthoot Microfin will be the fourth microfinance company to list on the stock exchanges. The Securities and Exchange Board of India (Sebi) has approved its draft red herring prospectus (DRHP), and the company is eyeing January or February for its initial public offering.

People in the know told Business Standard that it would like to come out with its September and December quarter results before the listing.

There are apprehensions that the September quarter results will be affected by the Kerala floods, but the reality will be different, the people said.

Edelweiss is the lead manager of the issue with Credit Suisse, Motilal Oswal and SMC Capitals being the other bankers.

Muthoot Microfin, a microfinance company of the Muthoot Pappachan group, is looking at pricing similar to Credit Access Grameen, a microfinance company listed on the stock exchanges, the people added, but refused to divulge details.

Satin Creditcare Network and Bharat Financial Inclusion are the two other listed microfinance firms.

As investors turned bullish on some non-banking financial companies' (NBFCs') stocks on Tuesday before hammering them on Monday, Muthoot Pappachan group advises investors to assess each company in the sector on the basis of its fundamentals instead of clubbing them all into one.

Muthoot Capital Services, a listed entity of the group, also saw heavy selling. The stock was down Rs 34.15, or 4.48 per cent, at Rs 727.70 at close on the BSE on Monday. On Tuesday, it was up Rs 28.25, or 3.87 per cent, at Rs 757.20.

Thomas Muthoot, one of the group promoters, said the company does not have any asset-liability mismatch (ALM), a parameter on which NBFC stocks were hammered on Monday.

The firm gives two-wheeler loans with an average maturity of up to three years, and does not have a problem of ALM as such, he said.

The Reserve Bank of India (RBI) had on Friday said it would revise the asset-liability guidelines for NBFCs, as there have been recent concerns over mismatches between their borrowings from the short-term money market and their lending practices.

The Muthoot Capital stock had a 52-week high of Rs 1,300 on its face value of Rs 10. However, even the price-to-book is now at three times, he added.

There was a kind of euphoria over NBFC stocks earlier, but pricing will now be normal and company-specific. When asked whether the stock price of Rs 1,300 was euphoria or normal, he said: "You can say it was reflective of market sentiments at that point of time. I would not say it was over-priced."

Muthoot said even unlisted firms of the group, such as Muthoot Fincorp or Muthoot Microfin, do not have any ALM.

The NBFC crisis was also due to rate sensitivity, given everyone is expecting the interest rate to go up, he said. "The way our products are structured, these are not very interest rate-sensitive," Muthoot said.

The group is also thinking of diversifying its product portfolio. Within Fincorp, it will carve out another division for lending to small and medium enterprises, Muthoot said.