Article

CreditAccess Grameen Ltd- Information Note

07 Aug 2018 Nikita Bhoota

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Herring Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so. This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.

Issue Opens: August 08, 2018
Issue Closes: August 10, 2018
Face Value: Rs 10
Price Band: Rs 418-422
Issue Size: ~Rs 1,131 cr
Public Offer: ~2.68 cr shares
Bid Lot: 35 Equity shares
Issue Type: 100% Book Building

% shareholding

Pre IPO

Post IPO

Promoter

98.88

80.28

Public

1.12

19.72

Source: RHP

Company Background

CreditAccess Grameen Ltd is a leading Indian micro-finance institution focused on providing micro-loans to women customers predominantly in Indian rural areas. Its focus customer segment is women having an annual household income of Rs160,000 or less in urban areas and Rs100,000 or less in rural areas. It provides loans primarily under the joint liability group ("JLG") model. Its primary focus is to provide income generation loans to its customers, which comprised 87.02% of its total JLG loan portfolio as of March 31, 2018. It also provides other categories of loans such as family welfare loans, home improvement loans and emergency loans to its existing customers. Its gross AUM as on March 31, 2018 stood at Rs4,974.66cr.

Objects of the Issue

The Offer comprises of Fresh Issue and the Offer for Sale. The company proposes to utilise the net proceeds from the Fresh Issue towards augmenting its capital base to meet future capital requirements

Financials

Consolidated Rs Cr

FY16

FY17

FY18

Total revenue

467

709

875

PPOP

144

233

321

PAT

83

80

125

EPS (Rs)

11.41

10.01

12.26

P/E*

37.0

45.0

43.5

P/BV*

6.7

5.2

3.8

RoNW (%)

18.13

11.63

8.73

Source: RHP, Company, 5paisa Research, *at upper price band and on undiluted bases

Key Points

  1. The company served over 1.85 million active customers out of a total customer base of 2.19 million. Its customer-centric business model allows it to retain a high proportion of its existing customers and to attract new customers. For the six months ended September 30, 2017, it had an active customer retention rate of 90% (annualised), as compared to the median active customer retention rate of 15 leading micro-finance players, which stood at 78% as of September 30, 2017. Its active customer retention rate for the year ended March 31, 2018 was 84%. It provides loans that are relevant for critical needs of their customers throughout their lifespan. Its customer-centric business model and helps in generating loyalty amongst their existing customers and in attracting new customers.

  2. It has varied funding sources, which coupled with a diversified debt profile ensures that it is not overly dependent on any one type or source for funding. As an NBFC-MFI, they have access to diverse sources of liquidity, such as term loans from banks, financial institutions and non-banking financial companies, proceeds from loan assets assigned and securitized, cash credit, subordinated debt and proceeds from the issuance of NCDs to meet their funding requirements. This enables them to optimize their cost of borrowings, funding and liquidity requirements, capital management and asset liability management.

Key Risk

As of March 31, 2018, 58.08% of its gross AUM originated in Karnataka and 26.73% of its gross AUM originated in Maharashtra. In the event of a regional slowdown in the economic activity in these states, or any other developments including political unrest or disruption the company may experience an adverse impact on company’s financial condition.

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CreditAccess Grameen Ltd- Information Note

07 Aug 2018 Nikita Bhoota

This document summarizes a few key points related to the issue and should not be treated as a comprehensive summary. Investors are requested to refer the Red Herring Prospectus for further details regarding the issue, the issuer company and the risk factors before taking any investment decision. Please note that investment in securities is subject to risks including loss of principal amount and past performance is not indicative of future performance. Nothing herein constitutes an offer of securities for sale in any jurisdiction where it is unlawful to do so. This document is not intended to be an advertisement and does not constitute an invitation or form any part of any issue for sale or solicitation of an offer to subscribe for or purchase any securities and neither this document nor anything contained herein shall form the basis for any contract or commitment whatsoever.

Issue Opens: August 08, 2018
Issue Closes: August 10, 2018
Face Value: Rs 10
Price Band: Rs 418-422
Issue Size: ~Rs 1,131 cr
Public Offer: ~2.68 cr shares
Bid Lot: 35 Equity shares
Issue Type: 100% Book Building

% shareholding

Pre IPO

Post IPO

Promoter

98.88

80.28

Public

1.12

19.72

Source: RHP

Company Background

CreditAccess Grameen Ltd is a leading Indian micro-finance institution focused on providing micro-loans to women customers predominantly in Indian rural areas. Its focus customer segment is women having an annual household income of Rs160,000 or less in urban areas and Rs100,000 or less in rural areas. It provides loans primarily under the joint liability group ("JLG") model. Its primary focus is to provide income generation loans to its customers, which comprised 87.02% of its total JLG loan portfolio as of March 31, 2018. It also provides other categories of loans such as family welfare loans, home improvement loans and emergency loans to its existing customers. Its gross AUM as on March 31, 2018 stood at Rs4,974.66cr.

Objects of the Issue

The Offer comprises of Fresh Issue and the Offer for Sale. The company proposes to utilise the net proceeds from the Fresh Issue towards augmenting its capital base to meet future capital requirements

Financials

Consolidated Rs Cr

FY16

FY17

FY18

Total revenue

467

709

875

PPOP

144

233

321

PAT

83

80

125

EPS (Rs)

11.41

10.01

12.26

P/E*

37.0

45.0

43.5

P/BV*

6.7

5.2

3.8

RoNW (%)

18.13

11.63

8.73

Source: RHP, Company, 5paisa Research, *at upper price band and on undiluted bases

Key Points

  1. The company served over 1.85 million active customers out of a total customer base of 2.19 million. Its customer-centric business model allows it to retain a high proportion of its existing customers and to attract new customers. For the six months ended September 30, 2017, it had an active customer retention rate of 90% (annualised), as compared to the median active customer retention rate of 15 leading micro-finance players, which stood at 78% as of September 30, 2017. Its active customer retention rate for the year ended March 31, 2018 was 84%. It provides loans that are relevant for critical needs of their customers throughout their lifespan. Its customer-centric business model and helps in generating loyalty amongst their existing customers and in attracting new customers.

  2. It has varied funding sources, which coupled with a diversified debt profile ensures that it is not overly dependent on any one type or source for funding. As an NBFC-MFI, they have access to diverse sources of liquidity, such as term loans from banks, financial institutions and non-banking financial companies, proceeds from loan assets assigned and securitized, cash credit, subordinated debt and proceeds from the issuance of NCDs to meet their funding requirements. This enables them to optimize their cost of borrowings, funding and liquidity requirements, capital management and asset liability management.

Key Risk

As of March 31, 2018, 58.08% of its gross AUM originated in Karnataka and 26.73% of its gross AUM originated in Maharashtra. In the event of a regional slowdown in the economic activity in these states, or any other developments including political unrest or disruption the company may experience an adverse impact on company’s financial condition.

Research Disclaimer