Healthy growth in AUM with consistently improving financials

• Muthoot MicroFin Corp is a key player in microfinance, specializing in micro-loans for rural women and securing its position as the third-largest micro-financing lender in South India. The company has exhibited remarkable financial growth, doubling its Assets Under Management (AUM) in the last three years, leading to a notable 44% revenue increase and an impressive 23x surge in net profit.
• Notably, the company has significantly expanded its client base, acquiring 10 lakh new customers in FY23 alone, a substantial increase from the 2 lakh new customers added in FY21, reflecting its ability to attract and serve a diverse range of customers.
• The company's Net Interest Margin (NIM) has notably improved to 11% from 8% in FY21. Looking ahead, as many Non-Banking Financial Companies (NBFCs) and banks face potential NIM contractions, Muthoot's strategic advantage lies in maintaining low Non-Performing Assets (NPAs) for enhanced profitability. In this regard, Muthoot MicroFin Corp has excelled, with a Gross NPA (GNPA) of 2.7% and a Net NPA of 0.6%, consistently improving over the last two years.
• Additionally, the company’s growth has exhibited substantial growth over the last two years, evident in its multifold increase in its premium.

Valuation

• The company is asking for Price to book of 2.1x and with an ROA of 2.2%, we believe the valuation is justified in comparison to its peers and hence, we recommend you to subscribe to this IPO.​