Muthoot Finance IPO valuations reasonable: Prabhudas Lilladher

MUMBAI: Prabhudas Lilladher is of the view that initial public offering of Muthoot Finance is available at reasonable valuations. It has advised clients to ‘Subscribe’ to the IPO.

“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’,” the report said.