Muthoot Finance IPO: What experts recommend:-
(A)HSBC has advised investors to 'Subscribe'for listing benefits as well as long-term gains.
"We feel Muthoot Finance has few concerns over gold price fluctuation and RBI policy norms, however, it leverages on strong NIM margins, better asset quality, attractive ROE and ROA followed by a reputed brand name with the management's expertise, which balances the cart.
Muthoot Finance is the highest credit rated gold loan company in India, with a credit rating of AA- (CRISIL) for its long-term debts and P1+ (CRISIL) and A1+ (ICRA) for its short-term debt instruments.
(B) Prabhudas Lilladher is of the view that initial public offering of Muthoot Finance is available at reasonable valuations. It has advised clients to 'Subscribe' to the IPO.
"MFL is well poised to tap the strong growth opportunities in the rapidly growing gold loan market, given its robust distribution strength and strong brand. MFL is expanding its footprint by diversifying its presence into the non-Southern regions.
Although return ratios are likely to compress in the near term on account of capital raising, we expect it to still remain higher compared to other financing companies (we expect RoEs to remain in the region of 25-30% in the medium term).
Moreover, despite steep asset growth witnessed in the past (72.4% CAGR for MFL during FY07-10 v/s industry CAGR of 43%), we expect MFL to continue to outpace industry growth. Valuations remain reasonable, we recommend 'Subscribe'," the report said.
(C) GEPL Capital has advised investors to 'Subscribe' to initial public offering of Muthoot Finance with a medium to long term perspective.
"MFL is a market leader in its segment. It has had an average RONW of 39% which is far better than its competitor (19.61% for Manappuram). The company has major global PE firms invested in it; namely Matrix Partners India Investments LLC, Baring India Private Equity Fund III Limited and The Wellcome Trust Limited.
At the upper and lower ends of IPO price band of Rs160-Rs.175, MFL is available at a P/E of 11.72x and 12.82x respectively as compared to 22.73x for Manappuram.
Considering robust GDP growth of India, increasing purchasing power and ever-growing appetite for gold, the company looks well poised for a sound growth trajectory in the years to come.
(D)SPA Securities has advised investors to 'Subscribe' to the initial public offering of Muthoot Finance.
"MFL, being the largest gold loan provider in the country, would likely grow in line with the industry growth and we expect it to post an EPS of INR 14.81 and ABV of INR 50.19 for FY11E. This makes it trade at 12x and 3.5x its P/E and P/ABV at higher price band.
As compared to its listed peer, MFL fares better on it Return on Equity largely due to leverage differential on the balance sheet among both the companies. Having the benefit of sheer size, we believe MFL deserves a better multiple on its book value. However, we believe the current pricing captures the likely growth of MFL, we recommend "SUBSCRIBE',"
(E)Ajcon Global has recommended clients to 'Subscribe' to the initial public offering of Muthoot Finance for listing gains.
"We believe the stock valuation of P/BV - 3.2x at the upper end of the price band of Rs 175 is justified, because of the following reasons,
a) MFL being the market leader in gold financing business,
b) Early mover advantage in gold financing business and strong brand in southern India,
c) Strong fund raising capabilities at competitive rates,
d) Diversifying presence in northern and western parts of the country,
(F)Fair Wealth Equity Research has advised investors to 'Subscribe' to initial public offering of Muthoot Finance. It expects the stock to give 15-20 per cent gains on listing.
The company has entered the primary market to raise between Rs 824 crores to Rs 901 crores by issuing shares in the price-band of Rs 160-175 per share.
"Considering the P/E valuation, the stock is priced at pre issue P/E of 16.5x on the lower end and 18.1x on the higher end of its annualized FY11 EPS of 9.67. Post issue, at the price of Rs 160 and Rs 175, the stock discounts its FY11 annualized earnings (a share of Rs. 10) by 19.2x and 21.0x respectively.
Hence, considering attractive valuations and the strong earnings growth potential, we recommend investors to subscribe this issue. We expect gain of 15%-20% on its listing," the report said.
(G)Sharekhan is of the view that at the upper band of the price-band, the initial public offering of Muthoot Finance is available at premium to other NBFCs.
The company has entered the primary market with and IPO to raise between Rs 824 crores to Rs 901 crores by issuing shares in the price-band of Rs 160-175 per share.
"At the upper end of the price band the issue is priced at 3.2x M8FY2011 book value, which is at a premium to Manapuram General Finance and the other NBFCs. The premium pricing is due to a leadership position in its segment, strong brand visibility and better operational metrics. However, considering the regulatory risks in the sector and the other macro factors the company should trade at a slight discount to the larger NBFCs," said Sharekhan report.
Zerodha (Trading & Demat Account)
RHP
IPO Guru (2500+ Posts, 2700+ Likes)
