Manappuram's Asirvad Micro Finance delays IPO plan set for month-end

Asirvad Micro Finance, a subsidiary of the Kerala-based Manappuram Finance, is considering postponement of its initial public offering (IPO), moneycontrol.com reported. Unfavourable market conditions forced the company to delay the listing slated for late September, sources said.

Until recently, Asirvad Micro Finance was actively promoting its IPO through roadshows. However, these efforts have come to a standstill, indicating a lack of progress towards the listing. According to sources quoted, there has been minimal activity concerning the company's IPO plans, rising concerns among investors.

 Microfinance sector under stress

The microfinance sector has been under increasing stress this fiscal year, with rising delinquency rates impacting many lenders. A recent report from Fusion Finance Limited highlighted a significant revision in its provisioning estimates, increasing from ₹348 crore to ₹550 crore. This suggests further asset quality issues within the sector, reducing investor sentiment.

Experts in the industry believe that this shift has led to a mismatch between the valuation expectations of Asirvad’s promoters and what the market is prepared to accept. This variation may also be a contributing factor to the decision to delay the IPO.

V P Nandakumar, the managing director and CEO of Manappuram Finance, confirmed that the IPO for Asirvad Micro Finance has indeed been postponed. However, he did not provide any updates on potential new timelines for the listing.

1,500-crore IPO, top managers

Asirvad Micro Finance submitted its draft red herring prospectus (DRHP) in October 2023, receiving approval from the Securities and Exchange Board of India (Sebi) on April 30, 2024. The IPO was set to consist of a fresh issue of shares worth ₹1,500 crore, with financial firms including JM Financial, Kotak, Nomura, and SBI Caps appointed to manage the process.

There are indications that Manappuram Finance may inject additional capital to support Asirvad Micro Finance's short-term financial needs. Manappuram acquired Asirvad in 2015 as part of its strategy to diversify its business. As of June 30, 2024, Asirvad reported a net profit of ₹1,340 crore and revenues of ₹7,530 crore, with a capital adequacy ratio of 21.8%.