Muthoot Finance (MFL), with gold loan portfolio of Rs.130 billion, is the largest gold financing company in India. With about 20% market share in gold loan business, the company services to the needs of more than 4.1 million customers. A NBFC-ND-SI, MFL has about 67% of its branches located in gold-rich region of South India and accounts for 75% of total loan portfolio from this region. The company came with an IPO, with price band of Rs.160 to Rs.175 in the lot of 40 shares. The issue opens on 18 April 2011 and closes on 21 April 2011.
We see huge potential for growth in the organized gold loan market, we believe :
1. Early entry and leadership position in this niche segment.
2. Wide spread geographical reach with presence primarily in rural and semi-urban markets.
3. Lower LTV ratio (60%-90% of the gold content of the jewellery) with adequate collateral.
4. Smaller ticket size with loan portfolio at less than 1-year.
5. Adequate capital with healthy return ratios.
6. Minimal concerns on asset quality with NPA recognition policy, this should drive valuations for the company.
Muthoot Finance Subscribe or Not: We will strongly recommend you to subscribe this issue. As the fundamentals of the company are suggesting strong growth in future.
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Wise advice! I see a huge potential for earnings in the IPO. I guess the risk takers that will avail of this offer will be duly rewarded with stable dividends. Huge market share is a big yes and go for me too. The risk averse can wait and watch the market closely or hedge funds while deciding when to invest.