Mumbai-based SBFC Finance Limited, a non-deposit-taking non-banking finance company (NBFC-ND-SI) has refiled draft red herring prospectus (DRHP) with the market regulator Securities and Exchange Board of India (SEBI) and reduced its Initial Public Offering (IPO) size to Rs 1200 crore from Rs 1600 crore planned earlier. The initial share sale comprises fresh issuance of equity shares worth Rs 750 crore and an Offer for Sale (OFS) of Rs 450 crore.
Moneycontrol was the first to report the listing plans of Arpwood Partners and Clermont Group-backed SBFC Finance on June 1, 2021
The company had filed preliminary IPO papers with SEBI in November last year.
The OFS comprises up to Rs 207.75 crore by Arpwood Partners Investment Advisors LLP, Rs 50.99 crore by Arpwood Capital Private Limited, Rs 41.26 crore by Eight45 Services LLP, and Rs 150 crore by SBFC Holdings Pte. Ltd. The offer also includes a reservation for subscription by eligible employees.
The offer is being made through the Book Building Process, wherein not more than 50 percent of the offer shall be available for allocation to Qualified Institutional Buyers, not less than 15 percent of the offer shall be available for allocation to Non-Institutional Bidders and not less than 35 percent of the offer shall be available for allocation to Retail Individual Bidders.
The company in consultation with merchant bankers may consider issuing equity shares on a private placement basis, aggregating up to Rs. 150 crore. If such Pre-IPO placement is completed, the fresh issue size will be reduced.
The proceeds from the fresh issuance worth Rs 750 crore will be used towards augmentation of its capital base to meet future capital requirements. As of December 31, 2022 the company's CRAR stood at 33.23 percent.
As per the CRISIL report stated in the DRHP, the company amongst all MSME-focused NBFCs has had the highest assets under management (AUM) growth. Between FY2019 and FY2022 its growth was at a CAGR of 40 percent. It is the lowest proportion of AUM arising out from the largest state in its portfolio and has maintained so despite its growth since its inception in 2017.
The lender provides financial assistance to entrepreneurs, small business owners, and self-employed and salaried individuals. Up to 81.57 percent of its MSME loan customers have a CIBIL score above 700 at the time of origination.
Backed by marquee institutional investors, SBFC Finance focuses on disbursing loans with a ticket size in the range of Rs 0.50 million to Rs 3.00 million and as of December 31, 2022, 86.48 percent of its AUM had ticket sizes in this range. It has a 137-branch footprint in 105 cities across 16 states and two union territories and has grown from 40,432 customers in FY20 to 94,997 customers as on December 31, 2022.
The organization is chaired by Neeraj Swaroop, Chairperson, and Independent Director. The key management team members include Aseem Dhru, Managing Director and Chief Executive Officer, and Mahesh Dayani, Chief Business Officer, amongst others.
SBFC’s revenue from operations stood at Rs 529.05 crore in Fiscal 2022 against Rs 507.10 in FY21. It reported Rs 525.25 crore for the nine months ended December 31, 2022. It has also seen an increase in its profitability due to a reduction in finance costs, and an increase in fees and commission from Rs 64.52 crore in FY22 to Rs 107.03 crore as on December 31, 2022.
In December 2022, SBFC incorporated a subsidiary, SBFC Home Finance Private Limited, through which it intends to commence its housing finance business focusing on affordable housing loans to individual borrowers from the EWS, LIG, and middle-income segments.
As of March 31, 2022 the Crisil report in its DRHP states that less than 15 percent of the approximate 70 million MSMEs in India have access to formal credit augmented by lower credit penetration in tier 2 and tier 3 cities.
ICICI Securities Limited, Axis Capital Limited, and Kotak Mahindra Capital Company Limited are the book-running lead managers and KFin Technologies Limited is the registrar of the offer. The equity shares are proposed to be listed on BSE and NSE.