Thursday, April 21, 2011

Muthoot Finance to outpace industry growth: P Lilladher

Country's largest gold financing company Muthoot Finance's (MFL) initial public offering opened for subscription. Prabhudas Lilladher has recommended subscribing the issue, citing valuations remain reasonable, according to its research report.

The issue, which closes on April 21, has been subscribed 10 times so far, as per data available on NSE. Reserved portion of qualified institutional bidders, which closes today, has subscribed more than 23 times.

The non-banking finance company engaged in gold loan business plans to raise Rs 901 crore via an initial public offer of 5.15 crore equity shares at the higher end of price band of Rs 160-175 a share.

The report says, "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’."

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