Focused on providing micro-loans to women customers mostly in rural India, CreditAccess Grameen, according to CRISIL Research, is the third largest NBFC-MFI in the country in terms of gross loan portfolio as of March 31, 2017. It has a network of 516 branches spread across 132 districts in eight states. Karnataka and Maharashtra contribute to around 86% of its overall loan book. As on March 2018, it has a loan book of Rs 50 billion spread across 2.2 million clients.
CreditAccess Grameen had concluded an Rs 11.31 billion initial public offer (IPO). The issue was subscribed 2.22 times mainly by qualified institutional buyer (QIB).
QIB subscription was 5.52 times, while non institutional investors subscribed 0.98 times and retail investors subscribed 0.88 times.
The net proceeds will be utilized to augment the capital base of the company to meet future capital requirements which are expected to arise out of growth in company's assets, primarily company's loans and advances and other investments.
“We do laud the strong business momentum (55% last 4 years) with clear rural focus backed by higher customer retention (Rs 90%: best in the industry), 0% net NPA with high repayment rate (Rs 97%) and high CAR at 29%,” the brokerage firm Prabhudas Lilladher said in an IPO note.
In the near-term, high business concentration risks and expensive valuations (at upper price band of Rs 422, valuations post issue stand expensive at over 34x price earnings ratio (PER) and 2.9x P/B FY18, 2.6x P/ABV FY19E given current high GNPA, low RoE) stand as clear deterrents.
Given this, any decline in credit costs and sustainability of high margins ahead would directly translate into stark improvement in return profile. While listing gains in our view should stand limited, we recommend SUBSCRIBE for LONG TERM, it added.