­Established presence in the areas of operations
MML commenced its microfinance operations in 2011, extending micro-credit to women borrowers engaged in income generating activities under Joint Liability Group (JLG) model. The company caters to rural and semi-urban areas where the borrowers are mainly engaged in agri and agri allied activities and providing essential services. MML commenced its operations in Punjab and over the years has expanded its presence in other states namely Bihar, Rajasthan, Haryana, Uttar Pradesh, Jharkhand, Himachal Pradesh, Gujarat, Madhya Pradesh, Uttarakhand and West Bengal. The company has presence in 209 districts with a network of 436 branches with an asset under management (AUM) of Rs. 2,543.25 Cr. as on March 31, 2024. MML is promoted by Mr. Amardeep Singh Samra (Managing Director) who has been previously engaged in asset financing, hire-purchase and leasing businesses. Mr. Samra purchased an existing NBFC - Sajan Hire Purchase Private Limited in 2010 and renamed it to Midland Microfin Limited. The company is led by Mr. Samra who is supported by other members on the board which comprise Mrs. Kamna Aggarwalla, ex Chairperson of the Confederation of Indian Industry (CII), Punjab amongst others. Private equity investor Kitara Capital have board representation and MML benefits from their expertise. Mr. Sachin Kamath founder member of Kitara Capital International Limited is on the board of MML. The company has on-boarded Mr. Praveen Kumar Gupta as an Independent Director who has over 3 decades in the banking sector to further strengthen their management board.
Acuité believes that MML will continue to benefit from its established presence and experience of the promoters in micro finance segment.

Demonstrated fund raising ability
MML’s networth stood at Rs. 487.86 Cr. as on March 31, 2024 , as compared to Rs.347.57 Cr. as on March 31, 2023 and Rs. 270.85 Cr. as on March 31, 2022. The company has demonstrated fund raising ability by raising funds from private equity investor and promoter group. Over the last four years the company has raised ~224 crore of capital from its investors in the form of equity or Compulsorily convertible preference shares (CCPS). Further, during FY24, MML received a capital infusion of Rs. 71.02 Cr. from its existing shareholders and ICICI Bank in the form of Compulsorily convertible preference shares and equity. MML received sanctions totalling to ~Rs. 2,157 Cr. during FY2024 in the form of term loans and NCDs from Banks & NBFC/FI’s throughout the year. MML has demonstrated its fund raising ability with access to funds from Banks, NBFC/FI’s, External commercial borrowings, NCD’s and also securitization.
Acuité believes that the company’s growth prospectus will be supported by promoter’s experience in the industry along with their demonstrated track record of resource raising ability.

Sustained growth in AUM and profit ability
MML’s AUM growth during FY24 led by expansion in newer geographies and thereby also reducing its overall geographical concentration. The company has expanded its overall network to 436 branches in 209 districts as on March 31,2024. The AUM stands at Rs. 2,553.34 Cr. as on September 30, 2024 with a PAT of Rs. 28.45 Cr. during the H1FY25. The AUM of the company stood at Rs. 2,543.25 Cr. as on March 31, 2024 as against 1,789.45 Cr. as on March 31, 2023 and Rs. 1,137.42 Cr. as on March 31, 2022. The company’s AUM comprises of a mix of on book and off book exposure. MML takes off book exposure through securitized transactions like Pass through Certificates (PTC) and Direct Assignments. As a result of the increased scale, the profitability of the company has improved reflected by improvement in Return on Average Assets (RoAA) and Net Interest Margins (NIM) during FY24. The ROAA for FY24 stood at 3.14 percent as against 2.64 percent for FY23. The Net interest Margins of the company improved to 15.10 percent for FY24 as against 15.62 percent for FY23. The profit after tax for FY24 stood at Rs. 72.15 Cr. as against Rs. 46.83 Cr. for FY23.

­Deteriorating asset quality
The asset quality has deteriorated, marked by a GNPA of 4.97 percent as on October 31, 2024, whereas the GNPA levels were at 2.93 percent as on June 30, 2024. The total zero plus dpd as on October 31, 2024 stands at over 13 percent. Since lower collection efficiency rates is one of the predominant factors of stress in the MFI segment, MML has also struggled in this facet where the on-time portfolio has declined to ~87 percent as on October 31, 2024. It is noted that there is a marginal improvement in asset quality with GNPA standing at 4.62% as on December 31, 2024 as compared to 4.97% as on October 31, 2024. On account high provisioning of 80.42 percent as on December 31, 2024, the NNPA ratio remains comfortable at 0.80 percent as on December 31, 2024. There is a sharp increase in GPNA from 0.06 percent in FY 23 to 2.97 percent in FY 24 is largely on account of factors such as expectation of loan waivers to be extended by RBI, farmer’s protests and floods.
Acuite believes that the ability of the company to profitably scale-up its operations while maintaining healthy asset quality will be key monitorable.

­Modest albeit improving capital structure
­MML is engaged in microfinance lending providing short term loans up to 12-24 months. The company extends micro-credit through the Joint Liability Group (JLG) model. The company’s networth stood at Rs. 487.86 Cr. and total borrowings at Rs. 1,982.77 Cr. as on March 31, 2024 which translates into a gearing of 4.06 times. The gearing as on September 30, 2024 stands at 4.39 times. While the gearing has seen a sequential improvement the capital structure of the company continues to remain modest. The improvement seen in the capital structure is supported by regular capital infusions by the promoters and investors and increased accretion of profits to reserves. To support the growth momentum MML would require further debt and in order to maintain the capital structure the promoters might be required to infuse additional equity to support any future business growth.
Acuité believes that company’s ability to manage its gearing will be a key monitorable.