The three-day IPO of Muthoot Microfin, the microfinance unit of the Muthoot Pappachan Group, opened for subscription on December 18. In an exclusive conversation with Fortune India, the company's CEO, Sadaf Sayeed talked about the Kerala-based micro lender’s business model, future plans, and microfinance industry.

Muthoot Microfin’s CEO says, “Microfinance industry is in a very sweet spot and more because of the regulatory environment that RBI has created. Recently, the central bank liberalised the microfinance policy where they removed the interest rate cap on microfinance loans and also redefined the target segment.”

“The RBI has increased the loan cap, as collateral-free loan given to a household having annual household income up to ₹3 lakh. Earlier, the income caps were kept at ₹1.25 lakh in rural areas. So, it really increases the total addressable market for us from 1.25 to 3 lakh, almost one and half times and that is helping rural-focused organisation like us,” says Sadaf Sayeed.

“With the rise in annual household income, we can target more customers for microfinance. The regulatory environment is quite conducive and there is a need for credit at the bottom of the pyramid which microfinance companies are very adequately supporting. So I feel the growth rate that we have seen in recent years will continue to grow in the coming future as well,” he adds.

Muthoot Microfin is the country's fifth largest non-banking financial company (NBFC) microfinance institution with a pan-India presence. As of September 2023, the company had a net worth of around ₹1,842 crore and assets under management of ₹10,800 crore, operating a branch network of 1,330 catering to around 3.2 million customers.

Sayeed says the company focuses on promoting financial and digital inclusion by disbursing 100% paperless loans to female customers in rural areas. “Last year, ₹8,100 crore worth of loans were disbursed entirely into the customers’ bank account and this was all possible because of the Pradhan Mantri Jan Dhan Yojana, Aadhaar, and mobile infrastructure which the government created.”

In a bid to empower customers with quick access to funds, Muthoot Microfin launched “Mahila Mitra App”, a vernacular mobile application platform to empower customers with quick access to funds. Currently, 14 lakh customers of the company utilise the Mahila Mitra app, which operates in around 14 different languages, to service their loans and avail digital services. As per the company, 33% of its loan repayments are coming digitally, directly from the customers' wallet and their bank accounts.

Muthoot Microfin launched its three-day IPO on December 18. The non-banking finance company has fixed price band at ₹277-291 apiece, and looks to raise ₹960 at the upper end of the price band, which includes a fresh issue of ₹760 crore. Ahead of the IPO, Muthoot Microfin raised ₹284.99 crore from 26 anchor investors by allotting 97,93,812 equity shares at ₹291 per equity share.

Sadaf Sayeed interview

Muthoot Microfin CEO on journey to IPO, future of microfinance