Subscribe to SBFC Finance: LKP Research

LKP Research IPO report on SBFC Finance

SBFC FINANCE LTD is a systemically important, non-deposit taking non-banking finance company (“NBFC-ND-SI”) offering Secured MSME Loans and Loans against Gold, with a majority of the borrowers being entrepreneurs, small business owners, self-employed individuals, salaried and working class individuals. Among MSME-focused NBFCs in India, the company has one of the highest assets under management (“AUM”) growth, at a CAGR of 44% in the period from Fiscal 2019 to Fiscal 2023. The company has also witnessed healthy disbursement growth, at a CAGR of 40% between Fiscal 2021 and Fiscal 2023. As of June 20, 2023, approximately only 16.9 million MSMEs have registered on UDYAM, of the estimated 70 million MSMEs in India, leaving a large number of MSMEs without access to organised finance owing to their unregistered status.

Valuation and Outlook

At higher price band (Rs57), the stock is valued at 2.4(x) P/BVPS with current book value per share of Rs23. Factoring the superlative return ratio, FY23 ROA of ~3% and further improvement post fund raise; we believe that SBFC Finance Limited is worth subscribing. Thus we recommend SUBSCRIBE.