Private equity firms Clermont Group and Arpwood Group are backed by non-banking finance firm SBFC Finance, which is more focused on the MSME segment, which will be the first public offering in August 2023.
Here are 10 important things to know before applying for a number:
1) IPO date
The offer will be open for registration on August 3, while the closing date will be August 7. The anchor book, part of qualified institutional buyers, will be open for one day on August 2, one day before the opening of the exhibition.
2) Price range
The asking price range is set at Rs 54-57 per share.
3) Bid size
NBFC plans to raise Rs 1,025 crore through a public offering consisting of a new equity issuance of Rs 600 crore and an offer of sale (OFS) of Rs 425 crore by promoters. Promoters – Arpwood Partners Investment Advisors LLP will sell shares worth Rs 306.25 crore, Arpwood Capital 75.16 crore and Eight45 Services LLP 43.59 crore through OFS.
The actual size of the new issue is Rs 750 crore, of which Rs 150 crore has been raised through the allocation of 2.72 crore shares to Amansa Investments in a pre-IPO position. As a result, the new issuance size was reduced to Rs 600 crore from Rs 750 crore.
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4) Objectives of the program
SBFC Finance will use the new proceeds from the issuance, excluding IPO fees, mainly to increase the capital base to meet future capital needs arising from business operations and asset growth, while the money from the offering will be transferred to the selling shareholders.
5) Land size
Investors can buy a minimum of 260 shares at the IPO and buy in multiples of 260 shares afterwards. Accordingly, retail investors can invest a minimum of Rs 14,820 per lot (260 shares) and their maximum investment will be Rs 1,92,660 for 13 lots (3,380 shares).
The minimum investment of high net worth individuals in the IPO will be Rs 2,07,480 for 14 lots (3,640 shares) and a maximum of Rs 9,92,940 for 67 lots (17,420 shares). Meanwhile, for high net worth individuals with equity above Rs 10 lakh, the minimum bid size will be Rs 10,07,760 for 68 lots (17,680 shares).
The company has reserved half the size of the offering to qualified institutional buyers, while 15% of the shares are reserved for high net worth individuals and the remaining 35% are for sale investors. odd.
6) Company Profile
SBFC Finance mainly provides secured loans to MSMEs and loans in gold, mainly serving customers in tier II and tier III cities. By March of fiscal year 23, it had extended loans to more than 1.02 thousand customers.
Among the MSME-focused NBFCs in India, it is one of the NBFCs with the highest growth in assets under management (AUM), with a CAGR of 44% in FY 2019-2023, reached Rs 4,942.82 cores in fiscal year 2023, while the disbursement rate increased over the same period to a CAGR of 40%, as reported by CRISIL.
With footprints in 120 cities with 152 branches in India, the company focuses on disbursing loans in the amount of Rs 0.5 million to Rs 3 million and as of March 2023, 87.27 % AUM of companies with fines in this range. limit.
With the growing presence of MSME lenders in small towns and lenders increasingly focusing on underserved customers, MSME’s secured loan portfolio with Larger bonds are expected to grow at a CAGR of 18-20% during periods 23 and 26. In 2023, the average amount of secured loans to MSMEs on a disbursed loan basis was Rs 0.99 million, gold secured loans at Rs 0.09 million and Other unsecured loan is Rs 0.69 million.
7) Finance
SBFC Finance posted a massive growth of Rs 132% in after-tax profit to Rs 150 crore for the year ended March 2023, with fees and other income up 50% year-on-year to 86.2. Rs crore in the same period.
Net interest income, the difference between interest earned and interest expensed, increased by 49% to Rs 378.9 billion, with disbursements to the guaranteed MSME segment up 71% year-on-year to Rs 2,277 billion and for Borrowing for gold rose 17.4% year-on-year to 1,323.4 crore rupees for the year. Assets under management surged 55% y/y to Rs 4,943 crore y/y.
Net profit margin fell to 9.32% in 2023 from 9.39% in 2022, while return on assets increased to 2.92% from 1.48% in the same period. We see a steady improvement in the company’s asset quality, with total bad assets in 2023 down 31 basis points y/y to 2.43% and net NPA down 22 basis points to 1, 41% over the same period last year.
On a fiscal year 2023 basis, SBFC currently has a P/BV (price to book value) of 3 times in the higher price range of Rs 57 per share, better than its peers. Aavas Financials, Home First Finance Company and Five Star Business Finance are available between 3.78x and 4.62x, while its P/E (price/earnings) stands at 35.18x, which is higher than that of other companies. Industry peers range from 28.8x to 32.47x.
8) Promotion and management
Group companies Clermont SBFC Holdings Pte Ltd and Clermont Financial Pte Ltd, and Arpwood Capital and Arpwood Partners Investment Advisors LLP, part of the Arpwood group, which are promoters of the company, jointly hold 80.48% of the shares. part.
Neeraj Swaroop is the independent director and chairman of the board, while Aseem Dhru, who owns 4.2% of the company’s capital, is the company’s chief executive officer and chief executive officer.
Narayan Barasia is the company’s chief financial officer, while Jay Mistry is the company’s secretary and chief compliance officer.
9) Key Risks
Here are the key risks highlighted by Incred:
a) With pressure on profit margins and high operating expenses, SBFC’s profitability trend may remain weak in the coming quarters.
b) Although the home loan is a security asset, the recovery mechanism is long due to the accompanying legal procedures with many differences. Most major banks have remained cautious about LAP loans in the past, which has led to an increase in LAP loans to NBFCs.
c) SBFC has experienced a sharp increase in employee turnover over the past few years, with attrition peaking at around 60%, which could lead to a slowdown and also potentially increase in turnover. increase in overdue debts.
d) The business has higher operating costs due to rapid expansion. However, management has provided operational leverage to enhance operations. But due to the need to increase operational costs for employee retention as well as digitization, operating leverage may manifest at a relatively slower pace than expected.
10) Allocation and registration date
The IPO stock allocation basis will be finalized by the NBFC on August 10. Shares will be credited to qualifying investors’ deposit accounts by August 14. Unsuccessful investors will receive a refund to their bank accounts by August 11. .
SBFC will launch on BSE and NSE on August 16, in line with the IPO schedule.
Its IPO shares traded at 70 percent premium, in the gray market, the analysts said, speaking on condition of anonymity. The gray market is an unofficial market for trading IPO shares until they are listed on a stock exchange. ICICI Securities, Axis Capital and Kotak Mahindra Capital Company are the investment bankers in this regard, while KFin Technologies is the registration company for the offering.
