CreditAccess Grameen IPO Review

 

CreditAccess Grameen Background

 

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CreditAccess Grameen is a leading microfinance institution in India. It is focused on providing micro-loans, especially to the women customers in rural India. The lending products of the company address the financial needs of the customers throughout their life cycle.

This includes income generation, family welfare, home improvement and loans for emergencies.

The focus of the institution is largely on the rural India, where there is less access to formal banking facilities, and provide micro-loans. The products are built keeping in mind the specific needs of the customers from the rural areas.

CreditAccess Grameen is also an aggregator of the National Pension Scheme of the Government of India. It collects the contributions directly from the customers and passes them on to the Government. The other non-financial services of CreditAccess Grameen include financial education, training and awareness through various programs, basic health education, basic medical services and women’s rights and gender issues education.

As of March 2018, CreditAccess Grameen covers about 132 districts in the eight states of Karnataka, Maharashtra, Tamil Nadu, Chattisgarh, Madhya Pradesh, Odisha, Kerala and Goa, through its 516 branches and 4,544 loan officers. The operations are diversified across the districts. The institution has 1.61 million active consumers and is highly customer-centric with about 90% customer retention rate.

CreditAccess Grameen Management

The Board of CreditAccess Grameen comprises of 9 Directors.

The Managing Director and the Chief Executive Officer is Udaya Kumar Hebbar and M. N. Gopinath is the Chairman and one of the Independent Director. The other Independent Directors are Anal Kumar Jain, R. Prabha, George Joseph and Sucharita Mukherjee.

The Nominee Directors, nominated by the promoter CreditAccess Asia N.V. are Paolo Brichetti, Massimo Vita and Sumit Kumar.

Udaya Kumar Hebbar

Managing Director and Chief Executive Officer

Udaya Kumar Hebbar was appointed as Key Management Personnel in 2014. He has a Bachelor degree in Commerce from the University of Mysore and a Master’s degree in Commerce from Karnataka University.

He is certified from the Indian Institute of Bankers and holds a diploma from the Vanderbilt University.

He has work experience with Barclays Bank, Corporation Bank and ICICI Bank.

CreditAccess Grameen IPO Data Points

The IPO of CreditAccess Grameen will open on August 8, 2018, and close on August 10, 2018. The issue size is about 26.8 million shares. This includes 11.8 million shares issued by the promoter CreditAccess Asia, N.V. and a fresh issue of shares of up to ₹630 crore.

The fresh issue has been authorised by the Board of Directors and the shareholders of the company.

The face value of each share is ₹10 and the IPO price band is in the range of ₹418 to ₹422 per share. This makes the CreditAccess Grameen IPO issue size between ₹1,120 crore and ₹1,131 crore. The investment lot size is 35 shares, making the minimum bid value around ₹14,630 and ₹14,770.

CreditAccess Grameen Financial Performance

CreditAccess Grameen has maintained a strong track record of financial performance and operational efficiency over the years due to its customer retention, geographical expansion, improvement in productivity of the staff, enhancement of loan portfolio, lower credit cost and growth in customer base.

 

The Gross Assets Under Management (AUM) of CreditAccess Grameen increased at a CAGR of 55.66% from ₹5,238 million in 2013 to ₹30,754 million in 2017. Net interest income was ₹3,852.04 million for 2017 and the net interest margin was ₹13.72% for the same period.

The net worth of CreditAccess Grameen for the period ended March 31, 2017, was ₹6,904.10 million.

CreditAccess Grameen IPO Objective

The CreditAccess Grameen IPO includes a fresh issue and an offer for sale. The net proceeds from the fresh issue are intended to be used for increasing the capital base of the company to meet the future requirements. With reference to the offer for sale, the promoter will receive the proceeds directly and the company will not receive any part of it.

Along with it, the company intends to benefit from the CreditAccess Grameen IPO by receiving the benefits of the listing of equity shares on the stock exchanges. The objective is the enhancement of the brand image and visibility of the company, along with creating a public market for the equity shares of the company in India.

CreditAccess Grameen IPO Events

CreditAccess Grameen filed the Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India in the month of January 2018.

The CreditAccess Grameen IPO will open for bidding on August 8, 2018, and will remain open till August 10, 2018.

The finalisation of the basis of allotment is expected by August 16, 2018, and the initiation of refunds will start by August 20, 2018. The credit of equity shares to the demat accounts will occur around August 21, 2018, and the trading of the equity shares on the stock exchanges is expected to commence by August 23, 2018.

CreditAccess Grameen IPO Advisors Information

In order to process the IPO of CreditAccess Grameen, Karvy Computershare Private Limited is the Registrar to the Offer and the book running lead managers to the offer are Kotak Mahindra Capital Company Limited, ICICI Securities Limited, Credit Suisse Securities (India) Private Limited and IIFL Holdings Limited.

The Indian legal advisor to CreditAccess Grameen and the selling promoter is Cyril Amarchand Mangaldas. The legal counsel to the book-running lead managers as to Indian Law is Luthra & Luthra and the international legal counsel to the book-running lead managers is Clifford Chance Pte Limited. The auditors of CreditAccess Grameen are S.R. Batliboi & Co. LLP.

 

CreditAccess Grameen IPO Recommendation

CreditAccess Grameen is a very strong company, with high efficiency and noteworthy financial performance.

CreditAccess Grameen is highly customer-centric and has attained high customer retention. The customers are significant stakeholders in the company and the company has always made efforts to retain the existing customers and attract new ones.

The active customer retention rate of CreditAccess Grameen was 90% in 2017, as compared to 78% as the median for 15 leading micro-finance companies. CreditAccess Grameen was one of the first six institutions globally to be certified by Smart Campaign on Client Protection Principles in 2013.

The competition for CreditAccess Grameen is quite low as it is deeply penetrated into the rural areas. It is continuously expanding and currently has 516 branches in 132 districts in India.

The asset quality of CreditAccess Grameen is very healthy as the company follows strong customer selection and risk management policies. The new geographies for new branches are also selected by a systematic methodology.

The financial performance of CreditAccess Grameen has remained strong and consistent. The Gross Assets Under Management (AUM) of CreditAccess Grameen increased at a CAGR of 55.66% from ₹5,238 million in 2013 to ₹30,754 million in 2017.

The profit after tax for the financial year 2017 was ₹802.98 million and the net worth of the company was ₹6,904.10 million for the same period.

Another strength of the company is its competent and experienced management team. All the members of the senior management have an established track record in the financial services industry. The promoter of the company, CreditAccess Asia, NV, specialises in micro and small enterprise financing and is backed by institutional investors.

It is also to be considered that the basic nature of the company’s business is risky. Microfinance loans are unsecured and are susceptible to operational and credit risks. This may affect the business and financial condition of the company at any time in the future.

However, the strengths of CreditAccess Grameen are clearly dominant and the company has practices and policies in place to manage its risks. Therefore, due to the strong background and financial and management strengths, CreditAccess Grameen is a trustworthy bet.

Therefore, the CreditAccess Grameen IPO provides an excellent opportunity to grow with the growing company.

The recommendation for the IPO is to BUY the shares of CreditAccess Grameen.

In case you are looking to invest in this IPO or start stock market investments in general, let us assist you in taking the next steps forward:

 

CreditAccess Grameen Contact Information

If you require more information regarding the IPO or need to get in touch with CreditAccess Grameen for more information about their business, following are the contact details:

CreditAccess Grameen
New No. 49 (Old No. 725), 46th Cross
8th Block, Jayanagar, Next to Rajalakshmi Kalyan Mantap
Bangalore-560071
Karnataka, India