CreditAccess Grameen IPO Review: Should You Subscribe?

CreditAccess Grameen IPO is a mix of the Fresh Issue and the Offer for Sale. The company has planned to raise Rs 630 crore  through the issue fresh equity shares and up to Rs 501 crore through an offer for sale.

Investment Rationale

• The company is promoted by a multinational company specializing in MSE financing, CreditAccess Asia N.V..
• Delivered strong financial performance as Gross AUM grew at a CAGR of 57.45% as in March 31, 2014, the company had posted AUM of Rs 8,095.22 million and in March 31, 2018, posted the AUM of Rs 49,746.61 million.
• The company has deep penetration in the rural market with 1.85 million active Customers out of the total Customer base of 2.19 million. CreditAccess Grameen’s 422 out of 516 branches are categorized as rural branches, which means strong hold on rural economy.
• The company has well-diversified operations and no single district contributes more than 5% of Gross AUM
• CreditAccess Grameen has strong operational efficiency as reflected by its lowest operating expense ratio as seen from the top eight 2017 NBFC, SFBs and MFIs, as per CRISIL

Purpose of the IPO

The Company will not receive any proceeds from the Offer for Sale. The objects of the IPO are:

1. The net Proceeds from the Fresh Issue will be utilized to meet future capital requirements of the company that are expected to arise out of growth in the company’s assets, primarily the company’s loans and advances and other investments.
2. To achieve the benefits of listing their Equity Shares on the Stock Exchanges. The listing of Equity Shares is expected to enhance the company’s brand name and provide liquidity to the existing shareholders.
3. Offer related expenses

CreditAccess Grameen IPO Details

• Issue Open: August 8, 2018 – August 10, 2018
• Issue Type: Book Built Issue IPO
• Issue Size: 26,805,394 Equity Shares of Rs 10 aggregating up to Rs 1,131.19 Cr
• Issue Price: Rs 418 – Rs 422 Per Equity Share
• Minimum Order Quantity: 35 Shares
• Listing At: BSE, NSE
• Finalisation of Basis of Allotment: On or about August 16, 2018
• Initiation of refunds: On or about August 20, 2018
• Credit of Equity Shares to demat accounts: On or about August 21, 2018
• Commencement of trading of the Equity Shares on the Stock Exchanges: On or about August 23, 2018

 Valuation – Should you subscribe?

CreditAccess Grameen from FY14 to FY18, has delivered a topline growth of CAGR 57 per cent and the company’s  bottom line grew at CAGR of 65 per cent. During this period, the company’s gross AUMs grew at a CAGR of 57.45 per cent and the disbursements grew at CAGR of 55 per cent from FY14 to FY18.

As of March 31, 2018, the company has served over 1.85 million active customers out of a total customer base of 2.19 million. The company’s active customer retention rate for FY 18 stood at 84 per cent. Overall the company has registered strong growth in financials and has high customer retention rate. The company also has good operating ratios than most of its peers. The long term investors may “subscribe” for CreditAccess Grameen IPO.