The issue comprises fresh share sale for Rs 400 crore and an offer for sale for about Rs 800 crore. The offer of 93 lakh shares, including dilution by early stage investors and by Padmaja Ganjireddy, will be sold in the Rs 853-856 price band.
At the upper end of the price band, the issue is demanding valuation at a price-to-adjusted book value (P/ABV) of 2.4 times. Peers such as Creditaccess Grameen trades at P/ABV of 3.4 times while Satin Credit Care commands 1.1 times.
The prevailing slowdown in the agriculture sector, slow progress of monsoon and rural distress are key concerns for the company, which derives a large chuck of income from the agriculture labour.
“The prevailing sentiments are very much negative for NBFCs and micro-financiers post the IL&FS crisis, making risk-return unfavourable for short-term investors or individuals looking for listing gain,” said Choice Broking. The brokerage has assigned a ‘Subscribe with caution’ rating to the issue.
On Friday, the lender raised around Rs 360.28 crore from 18 anchor investors,including include Wells Fargo Emerging Markets Equity Fund, Florida Retirement System, Bajaj Allianz Life Insurance company, among others.
“We believe strong AUM growth of 35 per cent and increasing leverage will keep ROA /ROEs at 6.5 per cent/24 per cent in the medium term. We believe the risk-reward ratio is encouraging and recommend ‘Subscribe’ to the issue with a long-term perspective,” SPA Securities said. The MFI’s AUM grew 52 per cent compounded annually in the last three years.
Analysts noted that the rural-focused MFI had in March 2017 exited from a corporate debt restructuring (CDR) mechanism, well ahead of the scheduled date of March 2018.
“Consistent profits along with a healthy asset book builds confidence in the prospects. Given the low penetration of financial services in rural India, the ability of MFIs to reach out to the hinterlands and Spandana’s high operational efficiencies, we believe the company could have considerable scope for growth going ahead. Hence, we suggest investors to subscribe to the issue,” Centrum Broking said.
Over 72 per cent of the MFI’s AUM comes from top five states, namely Karnataka, Madhya Pradesh, Odisha, Maharashtra and Chhattisgarh. These states account for 67.6 per cent of bank branches.
The management is confident of growth despite hiccups faced by microlenders over the years, including a clampdown by Andhra Pradesh a few years ago and a series of farm loan waivers.
