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CreditAccess Grameen IPO review (May apply)

Review By Dilip Davda on August 1, 2018

  • Focusing on rural micro financing for women.
  • No plans to opt for banking services
  • FY17 setback was due to demonetization
  • Soon to be leader in Micro finance segment
  • Issue is fully priced, may be considered for long term.

About Company
CreditAccess Grameen Ltd. (CAGL) is a leading Indian micro-finance institution headquartered in Bangalore, focused on providing micro-loans to women customers predominantly in Rural Areas in India. According to CRISIL Research, CAGL is the third largest NBFC-MFI in India in terms of gross loan portfolio as of March 31, 2017. Company's wide range of lending products addresses the critical needs of its Customers throughout their life cycle and includes income generation, family welfare, home improvement and emergency loans.

It focuses predominantly on Customers in Rural Areas in India, who largely lack access to the formal banking sector and present a latent opportunity for offering micro-loans. Company's focus customer segment is women having an annual household income of Rs. 160,000 or less in Urban Areas and Rs. 100,000 or less in Rural Areas. It provides loans primarily under the joint liability group ('JLG') model.

CAGL's primary focus is to provide income generation loans to Customers, which comprised 87.02% of its total JLG loan portfolio, as of March 31, 2018. Company also provides other categories of loans such as family welfare loans, home improvement loans and emergency loans to existing Customers. In 2016, with a view to diversifying its product profile, CAGL introduced individual retail finance loans for customers who had been its Customers for at least three years and fulfill certain other eligibility criteria linked primarily to their credit history with the company, income, and business position.

Credit Access

Company has followed a strategy of contiguous district-based expansion across regions and, as of March 31, 2018, it covered 132 districts in the eight states (Karnataka, Maharashtra, Tamil Nadu, Chhattisgarh, Madhya Pradesh, Odisha, Kerala, Goa) and one union territory (Puducherry) in India through 516 branches and 4,544 loan officers.

CAGL's operations are well –diversified at the district level, with no single district contributing more than 5% to its Gross AUM (apart from one which contributed less than 6% to Gross AUM) as of March 31, 2018. Further, out of a total of 132 districts where it had branches as of March 31, 2018, more than 75% of each of these districts individually represents less than 1% of gross AUM. Company's customer base increased from 0.50 million Active Customers as of March 31, 2014 to 1.85 million Active Customers as of March 31, 2018. According to management, as Bharat Finance is getting merged with IndusInd Bank, CAGL will be the Numero Uno in micro finance segment very soon.

Capital History & Issue Structure
For listing gains and augmenting its future capital requirements, CAGL is coming out with a maiden IPO of fresh equity issue (FV of Rs. 10 each) worth Rs. 630 crore (approx. 14928910 shares at upper price band) and offer for sale of 11876485 shares by existing stakeholders via book building route. It has fixed a price band of Rs. 418 – Rs. 422 per share. Issue opens for subscription on 08.08.18 and will close on 10.08.18. CAGL hopes to mobilize Rs. 1131.19 crore at the upper price band. Minimum application is to be made for 35 shares and in multiples thereon, thereafter. Post allotment shares will be listed on BSE and NSE. The average cost of acquisition of shares by the selling shareholder is Rs. 102.19 per share. Issue constitutes around 18.70% of post issue equity. Having issued initial equity at par, it raised further equity in the price range of Rs. 19.11 to Rs. 154 per share between November 2008 and March 2018. Its current paid up equity capital of Rs. 128.43 cr. will stand enhanced to Rs. 143.36 cr. (approx) post issue. BRLMs to this issue are ICICI Securities Ltd., Credit Suisse Securities (India) Pvt. Ltd., IIFL Holdings Ltd., Kotak Mahindra Capital Ltd. Karvy Computershare Pvt. Ltd. is the registrar to the issue.

Financial Performance
On performance front, for last four fiscals, CAGL has posted total revenue/net profits of Rs. 281.43 cr. / Rs. 48.73 cr. (FY15), Rs. 466.72 cr. / Rs. 83.24 cr. (FY16), Rs. 709.26 cr. / Rs. 80.30 cr. (FY17) and Rs. 875.21 cr. / Rs. 124.64 cr. (FY18). Despite growth in top line, it suffered a setback in bottom line for FY17 that is attributed to demonatization. For last three fiscals, it has posted an average EPS of Rs. 11.22 and an average 11.26%. As per offer document, CAGL is issuing shares at a P/BV of 3.80 against peers group P/BV of 3.56 (as on 12.07.18 on FY18 financial data). Based on FY 18 earnings attribution on post issue equity, asking price is at a P/E of around 48 plus against industry average of 101. Its Gross NPA stood at 1.97% and net NPA at 0% as on 31.03.18. Its debt ratio is at 2.52 as on said date.

Listed peers comparision
It has shown Bharat Financial, Satin Creditcare, AU Small Finance, Ujjivan Financial, Equitas Holdings, Shriram Transport Fin., M&M Financial as its listed peers that are currently trading around 27,00,64,NA,152,21 and 31 P/Es (as on 01.08.18 closing). All these companies are not strictly comparable with the business model of CAGL.

BRLM's track record
On BRLM's front, four merchant bankers associated with the offer have handled 50 public issues in the past three financial years out of which 16 public issues closed below the issue price on listing date.

Conclusion / Investment Strategy

According to management, they will continue their core business and are not having banking and other activities forey plans. With the current portfolio it will expand its horizon and performance going forward. Based on these aspects, although prima facie issue appears fully priced, investors may consider investment for long term.

Review By Dilip Davda on August 1, 2018

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

CreditAccess Grameen IPO FAQs

  1. 1. Why CreditAccess Grameen IPO?

    The initial public offer (IPO) of CreditAccess Grameen Limited offers an early investment opportunity in CreditAccess Grameen Limited. A stock market investor can buy CreditAccess Grameen IPO shares by applying in IPO before CreditAccess Grameen Limited shares get listed at the stock exchanges. An investor could invest in CreditAccess Grameen IPO for short term listing gain or a long term.

  2. 2. How is CreditAccess Grameen IPO?

    Read the CreditAccess Grameen IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. CreditAccess Grameen IPO what should investors do?

    CreditAccess Grameen IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the CreditAccess Grameen IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is CreditAccess Grameen IPO good?

    Our recommendation for CreditAccess Grameen IPO is to subscribe for long term.

  5. 5. Is CreditAccess Grameen IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the CreditAccess Grameen IPO.

  6. 6. When will CreditAccess Grameen IPO allotment status?

    The CreditAccess Grameen IPO allotment status will be available on or around August 16, 2018. The allotted shares will be credited in demat account by August 21, 2018. Visit CreditAccess Grameen IPO allotment status to check.

  7. 7. When will CreditAccess Grameen IPO list?

    The CreditAccess Grameen IPO will list on Thursday, August 23, 2018, at BSE, NSE.
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