Belstar Microfinance Limited IPO Details

Belstar Microfinance – About the Company

Belstar Microfinance, established in 1988 and acquired by Dr. Kalpanaa Sankar in 2008, is India's ninth-largest NBFC-Micro Finance Institution in India. The company aims to be a socially responsible microfinance institution, driving financial inclusion by promoting entrepreneurship and economic empowerment of women in rural and semi-urban regions. The company offers a variety of loan products, including micro enterprise, small enterprise, consumer goods, festival, education, and emergency loans. The company's lending model, the "self help group" (SHG) model, represents 56.94% of its gross loan portfolio as of December 31, 2023.

With 1,009 branches, the company serves approx. 2.67 million customers across 279 districts in 19 states and union territories. The company is supported by Muthoot Finance Limited and private equity investors Maj Invest and Affirma Capital.

Belstar Microfinance IPO Issue Price & Size

Belstar Microfinance IPO issue price is not yet known as the issue date and other details not declared by the company. As of DRHP, only the total issue size is available, which is Rs. 1300 crores. Rs 1300 crores Issue comprises of fresh issue of Rs. 1000 crores and offer for sale of Rs. 300 crores.

Belstar Microfinance IPO Launch Date

As of date, only the DRHP has been filed with the SEBI, so no tentative dates has been officially announced by the company through RHP. Once the company files the RHP document, all the necessary dates and price band will be updated.

Why Invest in Belstar Microfinance IPO?

While investing in an IPO-bound company, one should check their strength and weaknesses that help an investor to visions company’s prospects. Fundamental analysis apart from financial and competitive strength, also help you to know the risk factors that can affect the business operations and future prospects of the company. After evaluating the variables such strength weakness, financials, you may strike a balance and decide to invest or not invest in an IPO.

Strength

Pan-India presence

The company serves 2.67 million active customers across 279 districts and 1,009 branches in 19 states. The company has diversified its loan portfolio by geography and by type of activities connected to the loans.

The institution continuously aims to reduce state concentration risk through expansion into new states and widening its reach into untapped markets.

The top three states in terms of total gross loan portfolio are Tamil Nadu, Karnataka, and Madhya Pradesh, representing 48.46%, 9.02%, and 5.62% of the total gross loan portfolio as of December 31, 2023.

The top three activities connected to the loans provided are agriculture and agriculture-allied, services, and trade and business, representing 59.75%, 22.75%, and 11.76% of the gross loan portfolio as of March 31, 2021, and 66.09%, 16.23%, and 11.78% of the gross loan portfolio as of December 31, 2023.

Professional and experienced leadership

Belstar Microfinance is run by professional management, and after associating with Muthoot group, the company continues to receive managerial and financial synergies from Muthoot group and private equity investors like Maj Invest and Affirma Capital. Muthoot Finance. Belstar is a strategic investment for Muthoot Group and at time of filing prospectus, the group holds 66.13 percent stake in company.

Robust credit assessment process

The company has implemented robust policies addressing various risks, including credit, liquidity, market, concentration, information security, operational, and political risks.

Customer due diligence procedures include multiple levels of checks and controls, including evaluation of repayment capacity and group training sessions. Credit bureau data is used to verify customer details and obtain information on past credit behavior. Portfolio risk levels are periodically evaluated and monitored to minimize bad debt incidence.

The company's robust credit assessment process and risk management framework have resulted in a decrease in gross non-performing assets (NPA) from 2.72% in 2021 to 2.42% in 2023, and a stable net non-performing assets (NPA) from 0.59% to 0.66% in 2023.

Weakness

Asset quality

BML primarily operates in rural and semi-urban areas, serving customers engaged in agriculture and related activities. The customers are predominantly rural women borrowers who have limited sources of income, savings, and credit histories, making it difficult to consistently carry out credit risk analyses.

Even though their loans are secured against hypothecation, the hypothecated assets contain borrowers' stock, receivables, and other current assets, which fall into the higher-risk category. The gross non-performing asset (GNPA) has fallen to 1.88% as of Dec 31, 2023 from 2.42 as of FY23.

Loan maturity

As per the draft, approx. 98.00% of loan issued by the company will due within two years of disbursement. This can have both negative and positive effects. Positive in a case, the loan has less chances of getting default as the lender is in close contact with the borrower. Short maturity can have negative affect as the company could not yield higher interest income from longer.