Company and IPO Overview:
SBFC Finance is a non-deposit-taking, non-banking financing company (NBFC) engaged in the business of offering secured and gold-backed loans to MSMEs and individuals. The NBFC primarily lends to entrepreneurs & small businesses and self-employed, salaried and working professionals. SBFC Finance boasts a widespread presence across India, with an extensive network in its target customer segment.
SBFC Finance is one of the largest NBFCs in India focused towards micro, small and medium enterprises. SBFC Finance has a well-established presence in India with a presence in 120 cities of 16 states and 2 union territories through its 152 branches.
SBFC Finance targets customers in tier II and tier III cities of the country. Small and medium-sized borrowers earning up to Rs 1.5 lakhs every month are the target market of the company. The NBFC reaches out to them through its large sales team of 1900 people.
SBFC Finance has a strong on-ground collections infrastructure which is technology-driven. As of March 31, 2023, approximately 89.49% of their Secured MSME Loan collections and 90.92% of our unsecured loan collections were non-cash-based EMI collections. This helped in reducing their cash management risk and enabled customers to receive real-time payment receipts. Additionally, the company has experienced robust disbursement growth at a CAGR of 39% during the same period.
After a series of super successful IPO’s SBFC Finance IPO is the next main board IPO which is ready to set its footprints in the stock market and the company is about to raise around ₹ 1025 crores via IPO comprising fresh issue of ₹ 600 crores and Offer For Sale up to ₹425 crores only. The price band of the issue is ₹ 54 to ₹ 57 with a minimum market lot of 260 shares, the company is also allowing an employee discount of ₹2 per share. SBFC Finance IPO subscription for retail quota is 35.00%, NII is 15.00% and QIB is 50.00%.
Financials (rounded off):
Date | Total Revenue (₹ in cr) | PAT (₹ in cr) |
31/03/2021 | 512 | 85 |
31/03/2022 | 531 | 65 |
31/03/2023 | 740 | 150 |
Objectives of the Issue:
1. To increase the company’s capital base. In order to meet its future capital requirements arising out of the growth of our business and assets.
2. To enhance the company’s brand name through its listing.
3. To carry out its existing activities set out in the Memorandum of Association.
IPO Details:
IPO Date | 03/08/2023-07/08/2023 |
Face Value | ₹10 per share |
IPO Price Band | ₹54-₹57 per share |
IPO Lot Size | 260 Shares |
Listing at | NSE, BSE |
Basis of Allotment | 10/08/2023 |
Credit of Shares in Demat | 14/08/2023 |
Listing Date | 16/08/2023 |
Pre-Issue Shareholding | 78.83% |
Post-Issue Shareholding | 64.03% |
Retail Minimum Lot Size | 260 shares (₹14,820) |
Valuations & Margins:
Indicators | FY 21 | FY 22 | FY 23 |
EPS | 1.06 | 0.79 | 1.62 |
P/E | - | - | 35.19 |
EBITDA (%) | 78.17 | 67.44 | 74.96 |
Debt/Equity | 2.93 | 2.87 | 2.55 |
ROE (%) | 7.67 | 5.18 | 9.93 |
Key Financial and Operational Parameters of SBFC Finance Limited:
Particulars | FY 21 | FY 22 | FY 23 |
Customers | 56,587 | 72,816 | 102,722 |
AUM (Rs. in millions) | 22,213.23 | 31,921.81 | 49,428.23 |
Net Worth (Rs. in millions) | 12,051.08 | 12,871.67 | 17,272.68 |
GNPA Ratio (%) | 3.16 | 2.74 | 2.43 |
NNPA Ratio (%) | 1.95 | 1.63 | 1.41 |
Operating Expenses to Average AUM (%) | 6.59 | 6.59 | 5.7 |
Average Cost of Borrowing (%) | 8.11 | 7.65 | 8.22 |
Cost to Income Ratio (%) | 46.34 | 57.19 | 49.82 |
Provision Coverage Ratio (%) | 38.25 | 40.44 | 42.04 |
Average yield on Gross Loan Book (%) | 15.09 | 14.89 | 15.91 |
NIM (%) | 11.73 | 9.39 | 9.32 |
Important things to note about the Company:
Top reasons to consider the IPO:
1. SBFC Finance has a PAN-India presence that allows them to provide service to their existing customers and also attract new customers. This has attributed to the personal relationships cultivated through proximity and frequent interaction by our employees.
2. SBFC Finance finds customers through its sales team and a direct sourcing model, which helps maintain close relationships, high satisfaction, and increased loyalty.
3. The NBFC, SBFC Finance has a comprehensive credit assessment and risk management framework to identify, monitor and manage risks inherent in its operations.
4. SBFC Finance has an extensive on-ground collections infrastructure to ensure that it maintains high asset quality, thereby maintaining relatively low Gross NPA ratios.
5. The AUM of NBFCs has expanded from US$ 44.02 billion in March 2008 to about US$ 330.21 billion in March 2022 and is likely to rise further in the future due to the sector’s importance to overall credit delivery in the economy.
Risk factors to watch out in the IPO:
1. During the fiscal, the majority of the MSME loans sanctioned were to self-employed customers. Self-employed customers and MSMEs are often considered to be high-risk customers and any default on their end would adversely affect the business operations.
2. SBFC relies on the information given by customers and some third-party providers to determine their creditworthiness. Any errors or misinformation may affect the company’s ability to judge the creditworthiness of the customers.
3. The portfolio of SBFC Finance may be impacted if it has high amounts of NPA and they are unable to provide for such NPA.
4. As the entity is in the lending business, they require a huge amount of capital for its operations. Any disruptions in the flow of capital can impact the business.
5. The NBFC’s net interest income could be affected if there is any volatility in interest rates for both lending and treasury operations.
Crisp Insights:
SBFC Finance IPO GMP Today: The Company is commanding a strong GMP of around Rs.40.
SBFC Finance is a strong nation-wide player in MSME Lending.
SBFC Finance IPO Review: Listing gains possible as per GMP data.
Disclaimer: All information is provided for educational and informational purpose only. Data is fetched from publicly available sources such as the DRHP filed by the company. The website or the author takes no guarantee for the accuracy of the data however, we have tried our best to present accurate data to out readers. Please consult a financial advisor or do your own analysis before investing/trading in the stock market.
Comments