SBFC Finance, which is backed by private equity firm Clermont Group and investment bank Arpwood Group, has started off the first day of trading with 43.8 percent premium on August 16. This was above the analysts expectation of 35-40 percent.
The stock opened the day at Rs 81.99 on the BSE, against the issue price of Rs 57 per share.
We have seen some impact of recent correction and consolidation of the equity markets, on the listing premium. The benchmark indices fell nearly 3 percent after hitting record highs on July 20.
The professionally managed non-deposit-taking non-banking finance company had seen a strong response to its maiden public issue which was subscribed 70.16 times during August 3-7, given the robust business model with strong financial performance and stable asset quality. Qualified institutional buyers (QIBs) had taken the lead amongst investors, buying 192.89 times the portion set aside for them and the high net-worth individuals had bid 49.09 times the reserved portion. The parts allotted for retail investors and employees were subscribed 10.99 times and 5.87 times, respectively.
SBFC Finance raised Rs 1,025 crore via public issue last week, comprising a fresh issue of Rs 600 crore and an offer for sale of Rs 425 crore by Arpwood Group. The price band for the offer was Rs 54-57 per share.
Most analysts had a positive view of the IPO, and hence advised subscribing to the offer.
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"At the higher price band of Rs 57, demanded valuation at Rs 6,066 crore is derived at P/BV (price-to-book-value) of 2.5x on post issues trailing BV basis (after considering fresh issue proceed) which seems on the higher side. Mentioned peers in RHP are mainly affordable housing finance companies that can’t be compared on apple- to-apple basis. Meanwhile, Ugro Capital, having a similar business to SBFC, is currently trading at a P/BV of 1.9x. Thus considering the above parameters, we assign ‘subscribe with caution’ rating to the issue," Choice Broking had said.
On financial performance, SBFC Finance witnessed a 30 percent CAGR in net interest income and a 33 percent CAGR in profit during FY21-FY23. Net interest margin stood at 9.3 percent with yield of loans at 15.9 percent. Assets quality remained stable with gross non-performing assets and net NPAs at 2.4 percent and 1.4 percent in FY23, falling from 2.7 percent and 1.6 percent in FY22, respectively.
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The primary focus of SBFC Finance was on MSME loans, which accounted for over 80 percent of their business, followed by gold loans contributing approximately 17 percent. With a footprint in 120 cities with 152 branches in India, the company focuses more on loans, with ticket sizes in the range of Rs 5 lakh to Rs 30 lakh, which accounts for over 87 percent of its total assets under management in FY23.
Considering the growth opportunities in the company and strong fundamentals, Ventura Securities recommended a subscribe rating on the IPO.
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SBFC has registered growth at a 44 percent CAGR in AUM during FY19-FY23 and disbursements growth at a CAGR of 40 percent during the same period.
Its AUM is well-diversified across different regions, with around 31 percent in the North, 39 percent in the South, and the rest in the West and East combined as of March 2023.
The company will be utilising the fresh issue proceeds towards augmenting its capital base to meet the future capital requirements arising out of the growth of the business and assets.
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