Muthoot Finance shares saw a 1.5% rise, reaching Rs 1,993 on September 3 after market regulator SEBI cleared the IPO plan of its microfinance subsidiary, Belstar Microfinance. For the IPO, there is a fresh issue of Rs 1000 crore and an Offer For Sale (OFS) of Rs 300 crores.
MAJ Invest of Denmark will sell Rs 175 cr worth of shares in the OFS while Arum Holdings and KP Limitless Trust will sell upto Rs 097 cr worth of shares and Augusta Investments Zero Pte Ltd is seeking to offload upto Rs Script value.
Belstar Microfinance was invested by MAJ Invest for the first time in 2018 and second time in the year 2022. As of date, Muthoot has a dominant stake of more than 66% in Belstar Microfinance.
It has been stated that in the fresh issue, the proceeds will be applied for repayment or prepayment of certain borrowing received by the bank and for meeting long-term capital requirements for onward lending, as well as the balance amount towards general corporate usage.
Belstar Microfinance is an NBFC-MFI of the Microfinance Company which provides micro-enterprise loans, small business loans and consumer durables loan product festival related loans. It mostly makes loans through the ‘self-help group’ (SHG) model, which accounted for 57% of it’s total loans by the end of December 31, 2023.
The total topline from operations has covered Rs 1,283 crore, against the ace size reported as Rs 727 crore for March-21 in DHRP as of 31 December of the current financial year of Belstar Microfinance. On the other hand, its profit stood at Rs 235 crore in Q1 FY25 from a mere Rs 45 crore earlier.
Muthoot Finance has also declared its record standalone and consolidated net income of Rs 1,196 crore for the recently ended June quarter while solidated loan assets under management stood at Rs 98,048 crore.
Given the company’s improved operating performance and that the IPO is being offered under the banner of Muthoot Finance, Belstar Microfinance’s IPO is expected be an attraction to investors. It will help Belstar Microfinance to expand it lending business for its growth plans and existing investors can monetize their stake through OFS.
In conclusion, this development has a positive impact on the two emerging players in the microfinance sector, Muthoot Finance and Belstar Microfinance, due to subsequent improvement in their financial and market positions. The IPO and its outcomes will draw investors’ attention to the company and Belstar Microfinance’s market results.
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