CreditAccess Grameen IPO to raise up to Rs 1,131 crore opens today: Should you subscribe?

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Updated: August 8, 2018 10:03:25 AM

CreditAccess Grameen IPO to raise up to Rs 1,131 crore kicks off today. We take a look at what brokerages have to say about the issue.

CreditAccess Grameen IPO consists of a fresh issue of shares for up to Rs 630 crore and an offer for sale (OFS) of Rs 501.18 crore.

CreditAccess Grameen IPO to raise up to Rs 1,131 crore kicks off today. CreditAccess Grameen provides micro loans to women, predominantly in rural areas. Notably, it has presence across 132 district in eight states– Karnataka, Maharashtra, Tamil Nadu, Chhattisgarh, Madhya Pradesh, Odisha, Kerala and Goa in addition to one union territory of Puducherry. The company’s promoter is Credit Access Asia, a multinational company specialising in micro and small enterprise financing.

Through its public offer, CreditAccess Grameen IPO consists of a fresh issue of shares for up to Rs 630 crore and an offer for sale (OFS) of Rs 501.18 crore. The public offer will remain open till August 10. CreditAccess Grameen has set a price band of Rs 418 – Rs 422 for its public offer. Bids can be made for a minimum of 35 equity shares and multiples of 35 thereof. Even as investors mull whether to subscribe to the issue, we take a look at what brokerages have to say.

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Prabhudas Lilladher

The firm advised investors to subscribe to the issue, while at the same time saying that it does not expect any short-term gains. “RoEs for the company have declined almost 800 bps in past 3 years and 500 bps in past 4 years. High opex intensive business (38% avg cost-income), elevated credit costs (3%+ past 2 years) have restricted RoEs to 12%. Against this backdrop, post-IPO valuations (30x+ P/E and 2.9x P/B FY18, 2.6X FY19E) appear expensive and believe stepping up return profile is the key. Any improvement in credit costs and NIMs being retained at 10%+ levels should prove as key catalysts. While, we recommend Subscribe for long-term, do not expect any short term gains,” the firm noted.

HEM Securities

Hem Securities has a subscribe rating on the IPO issue. “The company is bringing the issue at p/b multiple of 2.94 on post issue book value at higher end of price band of Rs 418-422/share. Although co has shown strong growth with CAGR of more than 50% from FY14 to FY18 in its financials added by solid fundamentals as some of the co’s ratios are one of the best in industry but low ROE which will dilute post listing is a concern. Hence, we rated issue a ‘Subscribe’ one with limited upside potential,” Hem Securities said in a report.

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