SBFC Finance Limited IPO - Review, Valuation, Price & GMP

SBFC Finance Limited - Complete Overview

Established in 2008, SBFC Finance Limited is a systemically important, non-deposit taking non-banking finance company that specializes in offering Secured MSME Loans and Loans against Gold.

The majority of their borrowers comprise entrepreneurs, small business owners, self-employed individuals, salaried and working-class individuals.

In the segment of MSME-focused NBFCs in India, SBFC Finance has achieved impressive growth in Assets Under Management (AUM), with a Compound Annual Growth Rate (CAGR) of 40% between Fiscal 2019 and Fiscal 2022. 

Additionally, the company has experienced robust disbursement growth at a CAGR of 39% during the same period.

The company's primary focus is on serving customers in tier II and tier III cities, fostering entrepreneurship in these regions. They cater to customers with a strong credit history, but they may lack formal proof of income documents.

SBFC Finance boasts a widespread presence across India, with an extensive network in its target customer segment. As of December 31, 2022, the organization has a significant footprint in 105 cities, spanning 16 Indian states and two union territories, with 137 branches.

 

What does the company do?

SBFC Finance Limited is a systemically important, non-deposit taking non-banking finance company that specializes in offering Secured MSME Loans and Loans against Gold.

 

 

IPO Overview

SBFC Finance Limited's upcoming IPO is anticipated to be listed on the share market on August 16, 2023. The company has not disclosed the SBFC Finance share price yet.

The SBFC Finance IPO opening date is scheduled on August 3, 2023, and bids will be accepted until August 7, 2023. The total issue size of the IPO is 1,025.00 Cr.

Regarding the allocation, the company has allocated 50% of the IPO shares to institutional investors, 15% to non-institutional investors, and 35% to retail investors.

 

SBFC Finance Limited IPO timetable (Tentative)

EVENTS	DATE
IPO Opening Date	3 August 2023
IPO Closing Date	7 August 2023
IPO Allotment Date	10 August 2023
Refund initiation	11 August 2023
IPO Listing Date	16 August 2023

 

SBFC Finance Limited IPO Details

IPO Opening & Closing Date	3 August to 7 August 2023
Face Value	Rs. 10 per share
Issue Price	Rs. 54 to Rs. 57 per share
Lot Size	260 Shares
Price of 1 Lot	Rs. 14,820
Issue Size	[.] shares (aggregating up to Rs. 1,025.00 Cr)
Offer for Sale	[.] shares of Rs. 10 (aggregating up to Rs. 425.00 Cr)
Fresh Issue	[.] shares (aggregating up to Rs. 600.00 Cr)
Listing at	BSE, NSE
Issue Type	Book Built Issue IPO
Registrar	Kfin Technologies Ltd.

 

SBFC Finance Limited IPO Lot Details

Minimum Lot Investment (Retail)	1 Lot
Maximum Lot Investment (Retail)	13 Lot
Minimum Lot Investment (HNI)	14 Lot
Maximum Lot Investment (HNI)	67 Lot

 

SBFC Finance Limited IPO Reservation

Institution Portion	50%
Non-Institution Portion	15%
Retail Portion	35%

 

Company Financial

Amount in Crores

Period	FY 21	FY 22	FY 23
Total Assets	4231.19	4515.03	5746.44
Total Revenue	511.53	530.70	740.36
PAT	85.01	64.52	149.74
Net Worth	944.72	1026.78	1466.88
Total Borrowings	2772.55	2948.82	3745.83

 

Key Financial and Operational Parameters of SBFC Finance Limited

Particulars	FY 20	FY21	FY 22
Customers	40,432	56,587	72,816
AUM (Rs. in million)	16,482.07	22,213.23	31,921.81
Net Worth (Rs. in million)	10,124.77	12,051.08	12,871.67
Tangible Net Worth (Rs. in million)	7,520.85	9,447.16	10,267.75
Leverage (AUM/ Net worth)	1.63	1.84	2.48
AUM/ Tangible Net Worth	2.19	2.35	3.11
Restated Profit After Tax for the Year / Period (Rs. in million)	354.95	850.10	645.21
RoA (%)	1.18%	2.01%	1.48%
ROE (%)	3.75%	7.67%	5.18%
Return on Tangible Equity	5.17%	10.02%	6.55%
Branches	96	124	135
Employees	1,153	1,471	2,048
AUM per branch (Rs. in million)	171.69	179.14	236.46
AUM per employee (Rs. in million)	14.29	15.10	15.59
Disbursement (Secured MSME Loans) per branch per month (Rs. in million)	3.87	4.00	8.23
Disbursement (Secured MSME Loans) per employee per month (Rs. in million)	0.59	0.66	0.89
Gross NPA ratio (%)	2.28%	3.16%	2.74%
Net NPA ratio (%)	1.58%	1.95%	1.63%
Operating Expenses to Average AUM (%)	7.99%	6.59%	6.59%
Average cost of borrowing (%)	12.39%	8.11%	7.65%
Cost to income ratio (%)	55.25%	46.34%	57.19%
Provision Coverage Ratio (%)	30.80%	38.25%	40.44%
Average yield on Gross Loan Book (%)	15.78%	15.09%	14.89%
Net Interest Margin (%)	11.96%	11.73%	9.39%

 

Financial and operational parameters pertaining to the Secured MSME Loan

Particulars	FY 20	FY 21	FY 22
Live MSME loan accounts	7,793	12,250	23,018
MSME borrowers	6,167	9,665	19,004
MSME disbursements (Rs. in million)	4,455.01	5,955.21	13,328.28
AUM from MSMEs (Rs. in million)	10,792.30	14,422.75	23,262.70

 

Objective of the Issue

The company intends to utilize the net proceeds to enhance its capital base, addressing future capital requirements arising from business growth and asset expansion.

 

Promoters and Management of SBFC Finance Limited

The key promoters of the company include SBFC Holdings Pte. Ltd., Clermont Financial Pte. Ltd., Arpwood Partners Investment Advisors LLP, Arpwood Capital Private Limited, and Eight45 Services LLP.

Pre-issue Promoters Holding	80.48%
Post-issue Promoters Holding	NA

 

Peer Comparison

The company operates in a competitive market and has mentioned the following key competitors in its DRHP.

Company Name	EPS (Rs.)	P/E Ratio (FY22 )	PAT FY22  (Rs. in million)
SBFC Finance Limited (Standalone)	0.79	NA	645.21
Aavas Financiers Ltd (Consolidated)	44.81	40.80x	3,551.81
Home First Finance Company India Ltd (Standalone)	20.85	35.83x	1,860.98
Aptus Value Housing Finance India Ltd (Consolidated)	7.53	37.44x	3,701.40
AU Small Finance Bank Ltd (Standalone)	17.85	35.01x	11,298.34
Five Star Business Finance Limited (Standalone)	15.92	34.93x	4,535.45

 

IPO's Valuations

The upcoming IPO of SBFC Finance is scheduled to be listed on the share market with an issue price ranging from Rs. 54 to Rs. 57 per share. As per the DRHP, the EPS of the share is Rs. 0.79. Although the PE ratio is not specified, based on the given data, it is approximately 72. 

 

Dividend Policy

In the past, the company has not distributed any dividends. However, it may consider paying dividends in the future, subject to financial conditions and other prospective.

 

IPO's Strengths

• Profitable growth supporting consistent financial performance
• Strong liability franchise with low funding costs
• Robust asset quality maintained through a well-established on-ground collections infrastructure
• Comprehensive credit assessment, underwriting, and risk management framework in place
• Superior business outcomes achieved through 100% in-house sourcing
• Extensive pan-India presence with a diverse network to cater to the target customer segment.

 

IPO Weaknesses

• The business may be adversely affected by the risk of non-payment or default from borrowers.
• The company's reliance on information provided by customers and third-party service providers, any erroneous or misleading information, can impact creditworthiness assessment and collateral value and title.
• Higher levels of NPAs can be a concern.
• Inability to assess and recover the full value of collateral or outstanding amounts from defaulted loans could adversely affect the business.
• Fluctuating interest rates for lending and treasury operations.
• Compliance with specific laws and regulations is mandatory for the company.
• Asset-liability mismatches may affect liquidity, operations, and profitability.
• As an NBFC, the company is subject to periodic inspections by the RBI.
• Defaults or delays in payment of statutory dues may attract financial penalties and negatively impact the financial condition and cash flows.
• Limited experience of the company's Promoters in certain functional areas of business operations.

 

 

IPO GMP

The SBFC finance IPO GMP today is Rs. 38.

 

Conclusion

SBFC Finance Limited has consistently achieved impressive revenue figures. Additionally, the company's performance in the grey market has been positive. Nevertheless, before considering an investment in the IPO, it is prudent to conduct a comprehensive evaluation of all factors to make an informed decision. 

 

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To Read the Prospectus of the Company Click Here to Download the DRHP

 

 

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