Is My Mudra Fincorp IPO a Trap for the Unwary?

My Mudra Fincorp Introduction

My Mudra Fincorp is a financial services company established in 2013. It operates as a Channel Partner (Direct Selling Agent) for major banks and Non-Banking Financial Companies (NBFCs) in India. The company offers a wide range of financial products.

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Brief about My Mudra Fincorp

Summary of the business of My Mudra Fincorp

Established in 2013, our company operates as a Channel Partner (DSA) for major Banks and NBFCs in India. We integrate tele-calling, advertising, direct marketing, referrals, networking, and a combined physical and digital (physital) approach to acquire customers. We specialize in distributing secured loans (home loans, loans against property), unsecured loans (business loans, personal loans, professional loans), and credit cards. Recently, we expanded to include insurance products. Our platform allows customers to research and compare a wide range of financial products, enhancing choice and transparency.

My Mudra Fincorp History

Company was originally incorporated as a Private Limited Company under the name “My Mudra Fincorp Private Limited” under the Companies Act, 1956 pursuant to a certificate of incorporation dated September 11, 2013 bearing CIN U65191DL2013PTC257611 issued by Registrar of Companies, National Capital Territory of Delhi and Haryana. Subsequently, pursuant to Special Resolution passed by the Shareholders at the Extra Ordinary General Meeting held on August 11, 2023 our Company was converted into a Public Limited Company and consequently the name of our Company was changed from “My Mudra Fincorp Private Limited” to “My Mudra Fincorp Limited” vide a fresh certificate of incorporation consequent upon conversion from private company to public company dated October 19, 2023, issued by the Registrar of Companies, Delhi.

My Mudra Fincorp Promoters & Board of Directors

• The Promoters of Company are Vaibhav Kulshrestha and Nisha Kulshrestha.

My Mudra Fincorp Board of directors

My Mudra Fincorp Share Holding pattern

My Mudra Fincorp Strength

• Strong portfolio and diverse range of Loan products across consumer preferences
• Diversified revenue from multiple locations and geographies of India
• Capital efficient model with low operating costs
• Strategic Partnerships with Banks and NBFCs
• Experienced Leadership and Management

My Mudra Fincorp Strategies

• Broaden and deepen our Consumer reach in India:
• Product diversification:
• Continue to invest in our digital and technology infrastructure:
• Increasing Collaboration with Banks & NBFCs:
• Strengthening Customer Retention:
• Enhancing sales, promotional and marketing activities:

Industry Outlook

Growing digital transaction

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• RBI has taken several steps to enable mobile payments to enhance their role in digital transactions.
• According to the Boston Consulting Group, PhonePe has 47% of UPI market share followed by Google Pay (at 34%) in FY23 (April-December). Financial transactions via digital channels accounted for 92% of the overall transactions. Out of which, the total share of UPI transactions was 42% in 9M FY23.
• In November 2022, RBI launched a pilot project on central bank digital currency (CBDC). The platform is called NDSOM CBDC. The Central Bank stated that the use case for the wholesale digital rupee is for the “settlement of secondary market transactions in government securities” as it would reduce transaction costs.
• According to data released by the National Payments Corporation of India (NPCI), UPI transactions reached 10.241 billion until August 30, 2023.

Rising rural penetration

• In October 2022, Prime Minister Mr. Narendra Modi inaugurated 75 Digital Banking Units (DBUs) across 75 districts in India.
• The RBI has launched a pilot to digitalize KCC lending in a bid for efficiency, higher cost savings, and reduction of TAT. This is expected to transform the flow of credit in the rural economy. 100% of new bank account openings in rural India are being done digitally.

Advantage India

• Robust demand
  • BCG predicts that the proportion of digital payments will grow to 65% by 2026.
  • That demand seems particularly strong when it comes to the critical need of protecting consumer data, where incumbent banks have a trust advantage. Some super apps may also turn to banks for access to banking licenses and to meet other regulatory requirements.
  • Indian Fintech industry is estimated to be at US$ 150 billion by 2025. India has the 3rd largest FinTech ecosystem globally.
• Business fundamentals
  • Digital modes of payments have grown by leaps and bounds over the last few years. As a result, conventional paper-based instruments such as cheques and demand drafts now constitute a negligible share in both volume and value of payments.
• Policy support
  • In Union Budget 2023, a national financial information registry would be constructed to serve as the central repository for financial and ancillary data.
  • In November 2022, RBI launched a pilot project on central bank digital currency (CBDC).
  • In March 2023, India Post Payments Bank (IPPB), in collaboration with Airtel, announced the launch of WhatsApp Banking Services for IPPB customers in Delhi.
• Innovation in services
  • In the recent period, technological innovations have led to marked improvements in efficiency, productivity, quality, inclusion and competitiveness in extension of financial services, especially in the area of digital lending.
  • In Union Budget 2023, the KYC process will be streamlined by using a ‘risk-based’ strategy rather than a ‘one size fits all’ approach.
  • In September 2023, Hitachi Payment Services launched India’s first-ever UPIATM with NPCI.
  • Digitalization of Agri-finance was conceptualized jointly by the Reserve Bank and the Reserve Bank Innovation Hub (RBIH).

INDIAN BANKING SECTOR HAS GROWN AT A HEALTHY PACE

• The Indian banking industry has been on an upward trajectory aided by strong economic growth, rising disposable incomes, increasing consumerism and easier access to credit.
• Bank accounts opened under GoI Pradhan Mantri Jan Dhan Yojana have deposits of over ~US$ 25.13 billion in beneficiary accounts. 51.11 crore beneficiaries banked till December 15th, 2023.
• Demand has grown for both corporate and retail loans. Services, real estate, consumer durables and agriculture allied sectors have led the growth in credit.
• India is one of the fastest-growing Fintech markets in the world. There are currently more than 2,000 DPIIT- recognized Financial Technology (FinTech) businesses in India, and this number is rapidly increasing.
• Being the largest consumption market, India will become the 3rd largest consumer economy by 2030, driven by a young population comprising 65% population below the age of 35 years.
• India already has the 2nd highest number of smartphone users globally and is the 2nd largest Internet user market.
• India is set to become the third-largest domestic banking sector by 2050.
• Bank credit witnessed a growth of 18.1% showing post-pandemic recovery; Private-New Banks continue to gain market share.
• On a year-on-year (y-o-y) basis, non-food bank credit registered a growth of 15.3% in December 2022 as compared with 9.4% a year ago.
• Access to banking system has also improved over the years due to persistent effort from Government to promote banking technology and promote expansion in unbanked and non-metropolitan regions.
• At the same time, India’s banking sector has remained stable despite global upheavals, thereby retaining public confidence over the years.
• Indian banking has benefited from high savings rates and growth in savings as well as disposable income growth.
• According to RBI, the performance of the Indian banking sector improved in FY20, as lenders reported a profit on an aggregate basis after two years of losses.
• According to RBI’s Scheduled Banks’ Statement, deposits of all scheduled banks collectively surged by a whopping Rs.1.75 lakh crore (US$ 2,110.87 billion) as of December 1st, 2023.

NOTABLE TRENDS IN THE BANKING INDUSTRY SECTOR

• Improved risk management practices
  • Indian banks are increasingly focused on adopting integrated approach to risk management.
  • A draft MD providing a consolidated and updated IT governance and risk management framework for regulated entities (Res) has been placed on the Reserve Bank’s website in October 2022 for public comments.
  • As of August 2022, Notably, public sector banks (PSBs) stumbled in achieving greater compliance with the dimensions of board effectiveness, risk management, and audit functions.
  • In Union Budget 2023, the KYC process will be streamlined by using a ‘risk-based’ strategy rather than a ‘one size fits all’ approach.
• Technological innovations
  • Technology-oriented business models are no longer the niche of these banks alone; almost all banks are leveraging technology to improve and expand delivery of financial services and products.
  • Digitalization of Agri-finance was conceptualized jointly by the Reserve Bank and the Reserve Bank Innovation Hub (RBIH). This will enable the delivery of Kisan Credit Card (KCC) loans in a fully digital and hassle-free manner.
  • In November 2022, RBI launched a pilot project on central bank digital currency (CBDC).
  • Digital Push: 93% digital payments (by volume) done via mobile (2021) and over 1 billion cards are in circulation
  • As per the Union Budget 2023-24, US$ 900 million (Rs. 7,400 crore) digital payments of US$ 1.5 trillion (Rs. 126 lakh crore) has taken place through UPI in 2022. UPI transactions reached 10.241 billion till August 30th, 2023.
• Focus on financial inclusion
  • Technological innovations have led to marked improvements in efficiency, productivity, quality, inclusion and competitiveness in extension of financial services, especially in the area of digital lending.
  • The National Strategy for Financial Inclusion (NSFI) 2019-24 sets forth the vision and key objectives of financial inclusion policies in India, with an emphasis on enhancing digital financial inclusion, promoting financial literacy and strengthening the grievance redressal mechanism in the country.
• Know Your Client
  • RBI mandated the Know Your Customer (KYC) Standards, wherein, all banks are required to put in place a comprehensive policy framework in order to avoid money laundering activities.
  • The KYC policy is now compulsory for opening an account or making any investment such as mutual funds.
• RBI Retail Direct Scheme
  • RBI Retail Direct. Retail Direct scheme is a one-stop solution to facilitate investment in Government Securities by Individual Investors.
  • Retail investors (individuals) will have the facility to open and maintain the ‘Retail Direct Gilt Account’ (RDG Account) with RBI. Under this scheme, the individual can also access Secondary market through “NDS OM” – RBI’s trading system. The investor will automatically receive any interest paid/maturity proceeds into his linked bank account on due dates.

DIGITAL LENDING MARKET SCENARIO

• India is the world’s largest market for Android-based mobile lending apps, accounting for ~82% of all online lenders worldwide.
• The Indian digital consumer lending market is projected to surpass US$ 720 billion by 2030, representing nearly 55% of the total US$ 1.3 trillion digital lending market opportunity in the country.
• The value of the digital lending market in India was US$ 110 billion in 2019. By 2023, the digital lending market was predicted to be worth around US$ 350 billion. Most of the market was served by fintech firms and NBFCs.
• India’s digital lending market witnessed a growth of CAGR 39.5% over a span of 10 years.
• The digital lending market size is set to grow to US$ 800 billion in 2030 from US$ 90 billion in 2020.
• Digital lending is set to account for 60% of the total Indian fintech market by 2030.
• Between 2014 and Q2 2022, digital lending startups raised US$6.49 billion in funding across 447 deals, accounting for about 28% of all fintech funding.
• Data analysis indicates that digital lending is set to account for 60% of the total Indian fintech market by 2030. The increase in the proliferation of formal finance, growing per capita income and greater internet penetration, among others, will drive the growth in digital lending.
• Digi Dhan Mela: Under the vision of Digital India, Government of Uttar Pradesh is promoting Digital payment through awareness campaign being organized in the State as a Digi Dhan Mela. The core objective of this event is to increase the awareness among the citizen w.r.t to Digital Payment

Housing and personal finance have been key drivers

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• According to a report published by the Associated Chambers of Commerce and Industry of India, In terms of development and maturity, the Indian financial sector has recently exhibited an encouraging trend. The amount of outstanding mortgage loans has increased by a healthy 16% over the past 5 fiscal years.
• Credit under the housing segment rose at a CAGR of 13.23% from FY16 to FY24* (till October 2023) and stood at US$ 308.31 billion in FY24.
• By 2040, it is predicted that the real estate market will reach US$ 7.9 billion (Rs. 65,000 crore). This represents a considerable increase over the 2019 real estate market value, which was pegged at US$ 1.4 billion (Rs. 12,000 crore). 13% of India’s GDP is projected to be generated by the housing industry by 2025.
• Players in the housing finance sector include public and private sector banks and home finance companies. Public Sector Banks (PSBs) and Housing Finance Companies (HFCs) had around 40% and 39% of the market share, respectively, in the 2019 fiscal year.
• According to BCG analysis, banks like Bank of Baroda and Induslnd Bank sourced 85% and 77% personal loans digitally.
• RBI’s adoption of the Co-lending Model has paved the way for a model in which non-banking finance companies (NBFCs), housing finance companies (HFCs), and banks can collaborate and enter into an agreement to perform joint origination and lending in the market.
• Growth in disposable income has been encouraging households to raise their standard of living and boost demand for personal credit.
• Credit under the personal finance segment (excluding housing) rose at a CAGR of 14.57% from FY16 to FY24 (till October 2023) and stood at US$ 292.68 billion in FY24.
• Unlike some other emerging markets, credit-induced consumption is still less in India.
• The various policy intervention by the government, including ‘Housing for All’, Aatma nirbhar Bharat, etc., provided an impetus to the Housing Finance sector.

INDIAN INSURANCE SECTOR

Rapidly growing insurance segments

• As per the Insurance Regulatory and Development Authority of India (IRDAI), India will be the sixth-largest insurance market within a decade, leapfrogging Germany, Canada, Italy and South Korea.
• The regulatory developments would furthermore contribute to the growth.
• The recent pandemic has emphasized the importance of healthcare on the economy, and health insurance would play a critical role in the effort to strengthen the healthcare ecosystem.

Increasing private sector contribution

• With the introduction of new private sector companies, the insurance sector in India gained momentum in the year 2000.
• India allowed private companies in the insurance sector in 2000, setting a limit on FDI to 26%, which was increased to 49% in 2014 and further increased to 74% in the Union Budget (Feb 2021).
• The market share of private sector companies in the non-life insurance market rose from 15% in 2004 to 62% in FY23.
• Private insurers like HDFC, ICICI and SBI have been some tough competitors for providing life as well as non- life products to the insurance sector in India.

Advantage India

• Increasing Investments
• Robust Demand
• Attractive Opportunities
• Policy support

INCREASING PENETRATION AND DENSITY OF INSURANCE OVER THE YEARS

Strong growth in non-life insurance market

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ROAD AHEAD

Enhanced spending on infrastructure, speedy implementation of projects and continuation of reforms are expected to provide further impetus to growth in the banking sector. All these factors suggest that India’s banking sector is poised for robust growth as rapidly growing businesses will turn to banks for their credit needs. The advancement in technology has brought mobile and internet banking services to the fore. The banking sector is laying greater emphasis on providing improved services to their clients and upgrading their technology infrastructure to enhance customer’s overall experience as well as give banks a competitive edge.

In recent years India has experienced a rise in fintech and microfinancing. India’s digital lending stood at US$ 75 billion in FY18 and is estimated to reach US$ 1 trillion by FY23 driven by the five-fold increase in digital disbursements. The Indian fintech market has attracted US$ 29 billion in funding over 2,084 deals so far (January 2017-July 2022), accounting for 14% of global funding and ranking second in terms of deal volume. By 2025, India’s fintech market is expected to reach Rs. 6.2 trillion (US$ 83.48 billion).

CREDIT CARD INDUSTRY IN INDIA

According to Reserve Bank of India (RBI) data, in April 2023, over 8.6 crore credit cards were outstanding. This is a growth of about 15 percent from the 7.5 crore outstanding credit cards in April 2022.

According to the RBI data, in April 2023, the industry average was Rs 5,120 per transaction. The industry average monthly spend per card was Rs 15,388. In April 2022, the industry average spend per card was Rs 14,070, and the average transaction was Rs 4,731.

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My Mudra Fincorp Business Data

My Mudra Fincorp Verticals

• Personal Loan
• Business Loan
• Secured Loan
• Professional Loan
• Credit Cards
• Insurance

My Mudra Fincorp Product wise break-up

My Mudra Fincorp Revenue contribution from Geography presence

My Mudra FincorpCustomer dependency

My Mudra Fincorp top ten and top five customers contribute approximately 63.56% and 42.54% respectively of our revenues for the financial year ended March 31, 2024.

Competition

My Mudra Fincorp face intense competition from both organized and unorganized players across various regions in India. Competitors offer similar financial products, gaining an edge in areas such as interest rates, loan terms, customer service, operational efficiency, timely delivery, and reliability. Keeping pace with the ever-changing financial landscape and regulatory environment is crucial, and our ability to adapt will significantly impact our competitive standing. The industry’s low entry barriers and rapid growth attract many new entrants, indicating that competition will likely intensify in the future. However, our extensive experience in the financial services industry, commitment to quality assurance, and strong reputation enable us to compete effectively. Key factors influencing our competitive position include maintaining strong client relationships, upholding our reputation, and consistently delivering high-quality services at competitive prices.

My Mudra Fincorp Peer companies comparison

(Amount in ₹ Lakhs except percentages and ratios)

My Mudra Fincorp SWOT ANALYSIS

• Strengths
  • Diverse Product Portfolio: Offers a wide range of financial products including secured and unsecured loans, credit cards, and insurance products.
  • Strong Network: Presence in eight states with nine branches and over 140 franchise/channel partners and sub-DSAs.
  • Integrated Marketing Approach: Utilizes a combination of tele-calling, advertising, direct marketing, referrals, networking, and a “physital” approach.
  • Financial Performance: Reported total revenues of ₹71 crore and a net profit of ₹8.35 crore for the financial year ending March 2024.
• Weaknesses
  • Geographical Limitation: Currently operates in only eight states, which may limit market reach and growth potential.
  • Dependence on Partners: Heavy reliance on banks, NBFCs, and channel partners for product offerings and customer acquisition.
  • Operational Costs: Maintaining a network of branches and partners can lead to high operational costs.
• Opportunities
  • Expansion: Potential to expand operations to more states and regions, increasing market share.
  • Digital Transformation: Leveraging digital platforms and fintech innovations to enhance customer experience and streamline operations.
  • New Product Offerings: Introducing new financial products and services to meet evolving customer needs.
  • Strategic Partnerships: Forming new alliances with more banks, NBFCs, and fintech companies to diversify offerings.
• Threats
  • Regulatory Changes: Changes in financial regulations could impact operations and profitability.
  • Economic Downturns: Economic instability can affect loan repayment rates and overall financial health.
  • Competition: Intense competition from other financial service providers and fintech companies.
  • Technological Disruptions: Rapid technological advancements could render current systems and processes obsolete.

My Mudra Fincorp Business risk factors

• My Mudra Fincorp business is depended on relationship with Banks & NBFCs. We have entered into agreements with major Banks and NBFCs, any termination of these existing relationship would adversely affect our business, results of operations, financial condition and prospects.
• A substantial portion of the revenue is generated from banking partners and financial institutions. banking partners and financial institutions are regulated by the Reserve Bank of India (“RBI”) and any change in the RBI’s policies, decisions and regulatory framework could adversely affect our business, cash flows, results of operations and financial condition.
• My Mudra Fincorp top ten and top five customers contribute approximately 63.56% and 42.54% respectively of our revenues for the financial year ended March 31, 2024. Any loss of business from one or more of them may adversely affect our revenues and profitability.

My Mudra Fincorp Financials

My Mudra Fincorp Key Financial Ratios

My Mudra Fincorp Key Performance Indicators

(Amount in ₹ Lakhs except percentages and ratios)

My Mudra Fincorp Assets & Liabilities

My Mudra Fincorp Profit & Loss

My Mudra Fincorp Cash Flow

My Mudra Fincorp Capital structure

IPO Details

My Mudra Fincorp IPO Details

Object of the issue

Litigation involved in My Mudra Fincorp

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