SBFC Finance IPO: All you need to know
SBFC Finance is a non-deposit-taking Non-Banking Finance Company (NBFC) that is set to open its IPO for subscription on 3 August 2023 to 7 August 2023. The set IPO price range is Rs. 54 to Rs. 57 with a lot size of 260 shares with a minimum investment of Rs. 14,040.
The listing date of the IPO is 16 August 2023. The total IPO size is Rs. 1025 crore which includes a Rs. 600 Crore fresh issue and Rs. 425 crore Offer-for-Sale (OFS).
SBFC Finance Overview:
Established in 2008, SBFC Finance Limited is a non-deposit-accepting NBFC. It provides secured loans to micro, small, and medium businesses and loans against gold.
The company has a wide-reaching presence across India via its comprehensive network. As of December 31, 2022, SBFC Finance had a presence in more than 105 cities across 16 states and two union territories in India, with a total of 137 branches.
The company has a well-distributed pan-India presence, with 30.89% in the North, 38.16% in the South, and 30.95% in both the West and East regions, as of December 31, 2022.
In terms of portfolio quality, SBFC Finance has a Gross NPA ratio of 2.28% as of March 31, 2020, 3.16% as of March 31, 2021, and 2.74% as of March 31, 2022. The Net NPA ratio was 1.58% on March 31, 2020, 1.95% on March 31, 2021, and 1.63% on March 31, 2022.
Industry overview:
According to CRISIL, NBFC’s credit growth is expected at a steady pace of 10% - 12% from FY2023 to FY2025. Analysts expect India’s swift economic revival from the Covid-19 pandemic driven by higher consumer demand, benefiting banks and NBFCs.
In addition, larger NBFCs are consolidating organically, with the top five increasing their market share from 40% to 46% between FY2018 and 2022. The growth of non-banking will be led by well-supported NBFCs with funding advantages.
From 2000 to 2022, NBFCs' wealth grew hugely, from ₹2 trillion to ₹29 trillion. Their share of the loan market also grew. Experts predict they'll keep playing a key role in India's economy.
IPO Details:
| IPO Open and Close Date | 3 August 2023 - 7 August 2023 |
| IPO price range | Rs. 54 to Rs. 57 |
| Lot Size | 260 |
| IPO size | Rs. 1025 Crores |
| Basis of Allotment | 10 August 2023 |
| Credit of Shares to Demat | 14 August 2023 |
| Listing Date | 16 August 2023 |
(Source : DRHP)
SBFC Finance IPO Reservation:
| QIB Shares Offered | Not more than 50% of the Net Issue |
| NII (HNI) Shares Offered | Not less than 15% of the Net Issue |
| Retail Shares Offered | Not less than 35% of the Net Issue |
(Source:DRHP)
The IPO is scheduled to open for subscription in the following week.
ICICI Securities Ltd., Axis Capital Ltd., and Kotak Mahindra Capital Co. Ltd have been appointed as the book-running lead managers for the SBFC Finance IPO, while Kfin Technologies will serve as the registrar of the issue. The shares of the bank are expected to be listed on both the BSE and NSE, with a tentative listing date of August 16, which falls on a Wednesday.
The objective of the issue:
The company plans to use the money gained from the sale for strengthening its capital base to support business and asset growth in the future.
Financial Analysis:
| Segment | FY23(in Rs Crores) | FY22(in Rs Crores) | FY21(in Rs Crores) |
| Revenue from Operations | 732.81 | 529.05 | 507.09 |
| Expenses | 538.99 | 444 | 397.46 |
| Profit after Tax | 149.73 | 64.52 | 85.01 |
| Loans or Advances | 4415.3 | 2982.4 | 2107.1 |
| Gross NPA Ratio(%) | 2.4 | 2.7 | 3.1 |
(Source : DRHP)
The advances of the bank have also increased from Rs 2982.4 Crores in March 2022 to Rs 4415.3 Crores in March 2023, with a significant increase of 48.04% indicating high-interest income and growth in overall performance.
In terms of revenue, the NBFC has experienced a significant growth in operations revenue, rising from Rs. 529.05 Crores in FY22 to Rs. 732.81 Crores in FY23, with a significant increase of 38.51%. Moreover, the NBFC’s Net profits have also seen a notable increase, going up from Rs. 64.52 Crores in FY22 to Rs. 149.73 Crores in FY23, with a significant increase of 132.06% over the past year.
As of March 31, 2023, our company's financial health measured by CRAR stood strong at ₹14,135.76 million (31.90%). The core Tier I capital was ₹14,049.52 million (31.71%) and supplementary Tier II capital was ₹86.24 million (0.19%). The company expects the net profits to meet our Tier I capital needs, as stated in the RHP.
| Key Performance Indicator | Values |
| P/E (x) | 40.42 |
| Market Cap (₹ Cr.) | 6065.78 |
| ROE | 9.93% |
| RoNW | 9.93% |
SBFC Finance IPO: Strengths of the company
To improve business outcomes, they manage all loan origination in-house, minimizing dependence on external agents. This enables them to better understand each customer's profile directly and thoroughly.
The company's risk management committee has created policies to manage credit, market, liquidity, and operational risks. They use their experience to implement strict credit quality checks and customized procedures for comprehensive risk management at every stage.
SBFC Finance IPO: Risks
If borrowers don't pay back the money or fail to meet their obligations, it could harm the business, financial situation, and overall performance.
When interest rates for lending and treasury operations keep changing a lot, it can negatively affect the net interest income. If interest rates go up, borrowers may struggle to repay loans, leading to more missed payments, and this could reduce the demand for retail loans and slow down growth.
SBFC Finance IPO Peer Comparison:
| Name | Total Income (In crores) | P/E Ratio | PAT (In Crores) |
| SBFC Finance Limited | 740.36 | 40.42 | 149.73 |
| Aavas Financiers Ltd | 1610.6 | 28.8 | 429.64 |
| Home First Finance Company India Ltd | 795.6 | 31.12 | 228.29 |
| Aptus Value Housing Finance India Ltd | 1129 | 24.8 | 503 |
| AU Small Finance Bank Ltd | 5,460 | 35.01 | 1,428 |
| Five Star Business Finance Limited | 1528.9 | 32.47 | 603.5 |
(Source : DRHP)
(As of FY2023)
This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.