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Business News/ Markets / Ipo/  Planning to subscribe to Muthoot Microfin IPO? Know key risks involved before applying
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Planning to subscribe to Muthoot Microfin IPO? Know key risks involved before applying

On day 1, Muthoot Microfin IPO's retail investors portion was subscribed 1.38 times, NII portion was subscribed 61%, and QIB portion is yet to be booked. Employee portion has been booked 1.24 times.

Muthoot Microfin IPO opened for subscription on Monday, December 18, and will close on Wednesday, December 20. Premium
Muthoot Microfin IPO opened for subscription on Monday, December 18, and will close on Wednesday, December 20.

The first day of bidding saw a  modest beginning, persisting with resilience even in the absence of a complete subscription. As the first day concluded, the Muthoot Microfin IPO subscription status stood at 83%. The response from retail and non-institutional investors (NIIs) for the Muthoot IPO gradually gained momentum, with the retail and employee portion reaching full subscriptions.

On day 1, Muthoot Microfin IPO's retail investors' portion was subscribed 1.38 times, the NII portion was subscribed 61%, and the QIB portion is yet to be booked. The employee portion has been booked 1.24 times.

Muthoot Microfin IPO price band has been fixed in the range of 277 to 291 per equity share of the face value of 10. Muthoot Microfin Limited raised 284.99 crore from anchor investors on Friday, December 15. 

Investors who did not invest yesterday still have a two-day window to subscribe to the issue. Nonetheless, investors must be well-versed in the key risks associated with the public offer before submitting their applications.

Muthoot Microfin IPO: Key Risks

  1. The microfinance industry in India faces certain risks due to the category of customers that it services, which are not generally associated with other forms of lending. As a result, the company experiences increased levels of nonperforming assets and related provisions and write-offs that may adversely affect its business, financial condition, and results of operations.

2. The business of Muthoot Microfin is vulnerable to interest rate risk, and volatility in interest rates could hurt our net interest income and net interest margin, thereby affecting our results of operations.

3. The Directorate of Enforcement, Ministry of Finance, Government of India (“ED") has issued a summons to the Managing Director of the company directing him to provide certain information concerning himself and the company. There is no assurance that the ED will not take any action against the company or its managing director, which may adversely impact our business and operations, financial condition, and reputation. 

4. Muthoot Microfin is unable to trace some of its historical records including minutes of the Board and Shareholders meetings and corresponding form filings. Further, certain of its secretarial records have not been adequately maintained. Thus, the company cannot assure that no legal proceedings or regulatory actions will be initiated against it in the future about these matters, which may impact its financial condition and reputation.

5. We may not be able to sustain the significant growth in our business and relatively high profit after tax that we recorded for the Financial Year 2023 in the future.

6. The company may not be able to sustain the significant growth in its business and relatively high profit after tax that it recorded for the Financial Year 2023 in the future.

7. The company has experienced negative cash flows from operating, investing, and financing activities in the past. 

8. There are several outstanding legal proceedings against the company and its Directors, Promoters, and Group Companies. An adverse outcome in any of these proceedings may adversely affect its reputation, business, financial condition, results of operations, and cash flows.

9. Some of its Promoters and Directors have provided personal guarantees for loan facilities obtained by third 41 parties, and any failure or default by such third parties to repay such loans could trigger repayment obligations on them, which may impact their ability to effectively perform their obligations as its Promoters and/or Directors, as applicable, and thereby, adversely impact the business and operations. 

10. The company faces the threat of cyber fraud and cyber-attacks, such as hacking, phishing, and theft of sensitive internal data or customer information. It also faces the threat of a system breakdown, network outage, and system failure. These may damage its reputation and adversely affect its business and results of operations. 

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Published: 19 Dec 2023, 09:28 AM IST
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