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Please refer to important disclosures at the end of this report
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CreditAccess Grameen Ltd (CAGL) is a Bangalore based NBFC, which is
promoted by CreditAccess Asia N.V. (“CAA”). It is focused on providing micro-
loans to women customers, predominantly in Indian rural areas. Their primary
focus is to provide income generation loans to their customers, which
comprised 87.02% of their total joint lending group (JLG) loan portfolio, as of
March 31, 2018. Company’s AUM has grown at healthy 65% CAGR over
FY2014-18 with strong asset quality (GNPA -1.97%, NNPA- NIL).
Fairly strong AUM growth at 65% CAGR over FY2014-18: Focused approach
towards micro loans to unbanked women in deep rural areas, has helped the
company to achieve a strong 65% CAGR in AUM over FY2014-18. Further, 86%
of the AUM has been lent for income generation activity.
Calibrate approach of branch expansion to propel business: CAGL’s expansion
strategy, whereby they aim to expand to the next (typically adjoining) district and
ensure deep penetration in a particular district within 3 years of commencement
of operations in the district has reaped huge benefits. As of March 31, 2018,
CAGL had 516 branches and 4,544 loan officers, with its operations being well-
diversified at the district level, with no single district contributing more than 5% to
their gross AUM.
Strong asset quality, high CAR to support growth: Robust credit assessment
process and understanding of targeted market has helped CAGL to maintain
superior asset quality (GNP 0.08% in FY17). However, due to demonetisation,
asset quality has deteriorated marginally to 1.97% (GNPA), for which 100%
provision has been accounted. As on FY18, CAR was 29% and post IPO it would
increase further. Given the strong internal capital generation ability, high CAR
and IPO proceeds, CAGL would not require equity dilution in the near term.
Outlook & Valuation: At upper end of the IPO price band, CAGL is valued at 3.8x
FY18 book value (pre-IPO) and on post dilution basis at 2.9x of BV. The strong
sponsorship of CreditAccess Asia, along with a well capitalised balance sheet and
an experienced and focused management provides an excellent base for the next
level of growth. Based on the above positive factors we assign SUBSCRIBE rating
to the issue.
Key Financials
FY14
FY15
FY16
FY17
FY18
53
110
204
344
441
-
107
85
69
28
17
49
83
80
125
-
193
71
(4)
55
1
4
6
6
10
16
29
36
54
111
326
111
65
67
43
26
14
12
8
4
8
17
20
14
12
2
3
4
3
3
Source: RHP, Angel Research; Note: Valuation ratios based on pre-issue outstanding shares and at upper end of the price band
SUBSCRIBE
Issue Open: Aug 08, 2018
Issue Close: Aug 10, 2018
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 80.3%
Others 19.7%
Fresh issue: `630cr
Issue D etails
Face Value: `10
Present Eq. Paid up Capital: `128cr
Offer for Sale: **1.19cr Shares
P ost Issue S hare holdi ng P att er n
Post Eq. Paid up Capital: `143cr
Issue size (amount): *`1,126.4 cr -
**1,131.2 cr
Price Band: `418 - `422
Lot Size: 35 shares and in multiple
thereafter
Post-issue implied mkt. cap: *`5,992cr
- **`6,049cr
Promoters holding Pre-Issue: 98.9%
Promoters holding Post-Issue: 80.3%
*Calculated on lower price band
** Calculated on upper price band
Book Bu ilding
Jaikishan J Parmar
Research Analyst
+022 39357600, Extn: 6810
[email protected]
CreditAccess Grameen Ltd
IPO Note | Financials
Aug 06, 2018
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Company Background
CreditAccess Grameen Ltd (CAGL) is a Bangalore based NBFC, which is promoted
by CreditAccess Asia N.V. (“CAA”). It is focused on providing micro-loans to
women customers, predominantly in Indian rural areas. Their primary focus is to
provide income generation loans to their customers, which comprised 87.02%
of their total joint lending group (JLG) loan portfolio, as of March 31, 2018.
Company’s AUM has grown at healthy 65% CAGR over FY2014-18 with strong
asset quality (GNPA -1.97%, NNPA- NIL).
CAGL has adopted the strategy of joint liability group model and equal
geographical distribution, which reduces risk of NPAs. It is present across 132
districts in 8 states and 1 union territory (Pondicherry) via 516 branches. None of
these locations contributes more than 5% of the gross AUM, ensuring well-
diversified distribution and lower risk
Exhibit 1: Details of the Gross AUM & Productivity ratio
Particulars (` cr)
FY14
FY15
FY16
FY17
FY18
AUM
AUM
AUM
AUM
AUM
Income Generation Products
716
1,256
2,243
2,697
4,284
Family Welfare Products
17
32
66
119
117
Home Improvement Products
63
138
212
247
520
Emergency Loan Product
13
21
18
12
2
Individual Retail Finance
-
-
-
1
51
Loan Products
-
-
-
-
-
Micro Insurance Products
-
-
-
-
-
Pension Products
-
-
-
-
-
Total AUM
809
1,447
2,539
3,075
4,974
Number of branches (Nos.)
176
238
298
393
516
Gross AUM per branch (` Cr)
4.6
6.1
8.5
7.8
9.6
Gross AUM per employee (` Cr)
0.52
0.54
0.66
0.62
0.79
Average ticket size(`)
6,086
6,660
8,201
10,887
19,671
Source: RHP
Key Management Personnel:
Udaya Kumar Hebbar is the MD & CEO of the company. He has served as the
head, commercial and banking operations at Barclays Bank PLC, Mumbai for 3
years. He also served at Corporation Bank for a period of over 10 years. He was
also associated with ICICI Bank for over 11 years.
Diwakar B.R. is the Chief Financial Officer of the company. He has 20 years of
experience in the financial services sector. Prior to joining the company, he worked
with Small Industries Development Bank of India. He was served as Chief Manager
at ICICI Bank Limited and as Commercial Supervisor at ACCION International.
Paolo Brichetti is a Nominee Director of the Promoter, CAA, in the company. He is
also the founder, chief executive officer and sole executive director of CAA since
March, 2017.
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Issue details
This IPO is a mix of OFS and issue of fresh shares. The issue would constitute fresh
issue worth `630cr and OFS worth `501cr. OFS largely would offer partial exit to
investors, namely Credit access Asia N.V.
Exhibit 2: Pre and Post-IPO shareholding pattern
Particulars
No of shares
(Pre-issue)
%
No of shares
(Post-issue)
%
Promoter
12,69,85,513
99
11,51,09,028
80
Investor/Public
14,41,824
1
2,82,47,219
20
Total
12,84,27,337
100
14,33,56,247
100
Source: RHP Note: Calculated on upper price band
Objects of the offer
To achieve benefits of listing equity shares on stock exchanges and to carry out
the offer for sale. Listing of equity shares will enhance CAGL’s brand name
and provide liquidity to existing shareholders.
To augment its Tier-I capital base to meet the future capital requirements.
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Outlook & Valuation
At upper end of the IPO price band, CAGL is valued at 3.8x FY18 book value (pre-
IPO) and on post dilution basis at 2.9x of BV. The strong sponsorship of
CreditAccess Asia, along with a well capitalised balance sheet and an experienced
and focused management provides an excellent base for the next level of growth.
Based on the above positive factors we assign SUBSCRIBE rating to the issue.
Risks
1. The operations are concentrated in Karnataka and Maharashtra and any
adverse sustained economic downturn and political unrest/disruption
could change repayment behaviour of the borrowers.
2. Unsecured Portfolio - CAGL’s operations involve transactions with
relatively high risk borrowers (Unsecured Loan). Any default from the
customers could adversely affect the business, operations and financial
condition.
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Income Statement
Y/E March (` cr)
FY14
FY15
FY16
FY17
FY18
Net Interest Income
53
110
204
344
441
- YoY Growth (%)
107
85
69
28
Other Income
22
42
54
48
80
- YoY Growth (%)
88
29
(11)
65
Operating Income
76
152
258
393
521
- YoY Growth (%)
102
70
52
33
Operating Expenses
45
71
115
160
200
- YoY Growth (%)
57
63
39
25
Pre - Provision Profit
31
82
144
233
321
- YoY Growth (%)
168
76
62
38
Prov. & Cont.
6
7
14
109
128
- YoY Growth (%)
19
105
675
18
Profit Before Tax
25
75
130
124
193
- YoY Growth (%)
202
73
(4)
55
Prov. for Taxation
8
26
46
44
68
- Tax Rate
33
35
36
35
35
PAT
16.6
48.7
83.2
80.3
124.6
- YoY Growth (%)
193
71
(4)
55
Source: Company
Balance Sheet
Y/E March (` cr)
FY14
FY15
FY16
FY17
FY18
Equity
53
73
73
86
128
Reserve & Surplus
154
303
387
605
1,299
Net worth
207
376
460
691
1,428
Borrowings
805
1,291
2,233
2,668
3,603
Other Liab. & Prov.
46
60
115
205
188
Total Liabilities
1,058
1,727
2,808
3,564
5,218
Cash Balances
325
280
255
364
138
Investments
0.20
0.20
0.20
0.20
0.20
Advances
669
1,340
2,465
3,075
4,975
- Growth (%)
100
84
25
62
Fixed Assets
3
6
11
15
17
Other Assets
58
95
65
61
53
Deffered Tax
3
6
11
48
36
Total Assets
1,058
1,727
2,808
3,564
5,218
- Growth (%)
63%
63%
27%
46%
Source: Company
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Key Ratio
Y/E March (` cr)
FY14
FY15
FY16
FY17
FY18
Profitability ratios (%)
NIMs
8.0
11.0
10.7
12.4
11.0
Cost to Income Ratio
59.6
46.3
44.5
40.7
38.3
RoA
1.6
3.5
3.7
2.5
2.8
RoE
8.0
16.7
19.9
14.0
11.8
B/S ratios (%)
CAR
31.5
28.1
21.5
29.7
28.9
- Tier I
28.7
26.5
17.6
20.2
28.1
- Tier II
2.83
1.58
3.88
9.50
0.87
Asset Quality (%)
Gross NPAs
0.01
0.04
0.08
0.08
1.97
Gross NPAs (` cr)
0.1
0.5
2.0
2.6
98.1
Net NPAs
-
-
-
-
-
Net NPAs (` cr)
-
-
-
-
-
Credit Cost on Advance
0.71
0.47
0.55
3.53
2.58
Provision Coverage
100%
100%
100%
100%
100%
Per Share Data (`)
EPS
1
4
6
6
10
BV
16
29
36
54
111
ABVPS (75% cover.)
16
29
36
54
111
DPS
-
-
-
-
-
Valuation Ratios
PER (x)
326
111.2
65.1
67.5
43.5
P/BV (x)
26.1
14.4
11.8
7.8
3.8
P/ABVPS (x)
26.1
14.4
11.8
7.8
3.8
Dividend Yield (%)
-
-
-
-
-
Source: Company
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Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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