SBFC Finance Limited’s Initial Public Offering to open on Thursday, August 3, 2023, sets price band at ₹54 to ₹57 per Equity Share

 

SBFC Finance Limited’s Initial Public Offering to open on Thursday, August 3, 2023, sets price band at ₹54 to ₹57 per Equity Share

 

·         Price Band of ₹54 – ₹57 per equity share bearing face value of  ₹10 each (“Equity Shares”)

·         Bid/Offer Opening Date – Thursday, August 3, 2023 and Bid/Offer Closing Date – Monday, August 7, 2023.

·         Minimum Bid Lot is 260 Equity Shares and in multiples of 260 Equity Shares thereafter.

·         The Floor Price is 5.4 times the face value of the Equity Share and the Cap Price is 5.7 times the face value of the Equity Share.

 

Risks to Investors

Regulatory Risk

• As an NBFC, we are subject to periodic inspections by the RBI. Non-compliance with observations made by the RBI during these inspections could expose us to penalties and restrictions.

• We are subject to laws and regulations governing the financial services industry and our operations in India, including laws in relation to capital adequacy ratios. Changes in regulations governing us could adversely affect our business, results of operations and prospects.

• Our non-convertible debentures are listed on the BSE and we are subject to rules and regulations with respect to such listed non-convertible debentures. We have had instances of non-compliances in the past and if we fail to comply with such rules and regulations, we may be subject to certain penal actions, which may have an adverse effect on our business, results of operations, financial condition and cash flows.

Business Risk

 • The risk of non-payment or default by our borrowers may adversely affect our business, results of operations and financial condition.

• The quality of our portfolio may be impacted due to higher levels of NPAs and our business may be adversely affected if we are unable to provide for such higher levels of NPAs. Set forth below are details of our asset quality ratios, as well as provision coverage ratio, as of each of the corresponding periods:

Particulars	As of March 31,
	2021	2022	2023
Gross NPA (1) (₹million)	666.55	828.94	1,081.65
Gross NPA ratio (2) (%)	3.16%	2.74%	2.43%
Net NPA (3) (₹million)	411.59	493.72	626.88
Net NPA ratio (4)(%)	1.95%	1.63%	1.41%
Provision Coverage Ratio (5) (%)	38.25%	40.44%	42.04%

 

(1) Gross NPA represents Gross Loan Book pertaining to loans which are required to be classified as NPA as per the Income Recognition, Asset Classification and Provisioning norms issued and modified by RBI from time to time.

(2) Gross NPA ratio (%) represents the Gross NPA to the Gross Loan Book as of the last day of the relevant period.

(3) Net NPA represents Gross NPA reduced by NPA provisions as of the last day of relevant period.

(4) Net NPA ratio (%) represents the Net NPA to the Gross Loan Book as of the last day of the relevant period.

(5) Provision Coverage Ratio represents total provisions held on Gross NPA as of the last day of the period, as a percentage of total Gross NPAs as of the last day of the period.

• Our inability to assess and recover the full value of collateral, or amounts outstanding under defaulted loans in a timely manner, or at all, could adversely affect our business, results of operations and financial condition.

• We require substantial capital for our business and any disruption in our sources of capital could have an adverse effect on our business, results of operations and financial condition.

• Our business is particularly vulnerable to interest rate risk, and volatility in interest ratesfor both lending and treasury operations, could have an adverse effect on our net interestincome and net interest margin, thereby affecting our results of operations and cashflows.

• The Weighted Average Cost of acquisition of all Equity Shares transacted in last three

years, 18 months and one year:                      

Period	Weighted Cap Price is Range of Average Cost of Acquisition per Share (in ₹ )	Cap Price is Range of Average Cost 'x' times the weighted average cost of acquisition^	Range of Acquisition price per Equity Share: per Equity average cost Lowest Price -  Highest Price (in ₹)
Last one year	44.95	1.27	12.50 to 60.00
Last 18 months	43.02	1.32	12.50 to 60.00
Last three years	41.57	1.37	12.50 to 60.00

As certified by M/s Suresh Surana & Associates LLP, Statutory Auditors, vide their certificate dated July 28, 2023.

Weighted average cost of acquisition compared to Floor Price and Cap Price:

Past Transactions	Weighted Average Cost of Acquisition (in ₹)	Floor price of  ₹54	Cap price of ₹ 57
WACA of primary issuance in last 18 months	40.00	1.35 times	1.43 times
WACA of secondary issuance in last 18 months	55.00	0. 98 times	1.04  times

As certified by M/s Suresh Surana & Associates LLP, Statutory Auditors, pursuant to a certificate dated July 28, 2023.

•Average cost of acquisition of Equity Shares for the Promoters and Promoter Selling Shareholders namely, SBFC Holdings Pte. Ltd. is ₹ 16.08, Arpwood Partners Investment Advisors LLP is ₹ 12.69, Arpwood Capital Private Limited is ₹ 15.98 and Eight 45 Services LLP is ₹ 12.73 and the Offer Price at the upper end of the Price Band is ₹ 57 per Equity Share.

• The Price/Earnings ratio based on diluted EPS for Fiscal 2023 for our Company at the upper end of the price band is 35.19 times and Price/Earnings ratio of the average industry peer group as on the date of the RHP is 30.44 times.

• Weighted Average Return on Net Worth for Fiscals 2023, 2022 and 2021:

Year ended	RoNW (%)	Weight
As on March 31, 2023	9.93	3
As on March 31, 2022	5.18	2
As on March 31, 2021	7.67	1
Weighted Average	7.97

 

• Our market capitalisation at the lower end and higher end of price band to revenue from operations for Fiscal 2023 is 7.88 times and 8.28 times respectively.

• The three BRLMs associated with the Offer have handled 88 public issues in the past three

Fiscal Years, out of which 30 issues closed below the Offer price on the listing date.

Name of the BRLM	Total Issues	Issues closed below IPO price on listing date
ICICI Securities Limited*	15	4
Axis Capital Limited*	19	6
Kotak Mahindra Capital Company Limited*	13	3
Common Issues of above BRLMs	41	17
Total	88	30

*Issues handled where there were no common BRLMs

 

 

Mumbai, July 31, 2023:SBFC Finance Limited (”Company”) 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 its borrowers being entrepreneurs, small business owners, self-employed individuals, salaried and working class individualshas fixed the price band at ₹ 54to ₹ 57per Equity Share for its maiden public offer. The initial public offering (“IPO” or “Offer”) of the Company will open on Thursday, August 3, 2023, for subscription and closes on Monday, August 7, 2023. Investors can bid for a minimum of 260Equity Shares and in multiples of 260Equity Shares thereafter.

 

The Public Issue of face value of ₹10 per Equity Share comprises of fresh issuance of equity shares worth Rs 600 crore and an Offer for Sale of Rs425 crore.

 

SBFC Finance is an NBFC in India that concentrates on supporting Micro, Small, and Medium Enterprises (“MSMEs”). According to a CRISIL Report, among MSME-focused NBFCs in India, the company has achieved one of the highest growth in its assets under management (“AUM”), with a Compound Annual Growth Rate ("CAGR”) of 44% during the period from Fiscal 2019 to Fiscal 2023. Additionally, it has experienced robust disbursement growth, with a CAGR of 40% between Fiscal 2021 and Fiscal 2023. As of March 31, 2023, the average ticket size for its Secured MSME Loans stood at ₹0.99 million and for its Loans Against Gold stood at ₹0.09 million, based on disbursed amounts. The Company's total AUM as of March 31, 2023, amounted to ₹4,942.82 crore, and it had provided loans to 102,722 customers as of such date.

 

The Company primarily caters to customers in tier II and tier III cities, thereby fostering entrepreneurship in these regions. It focuses on serving customers who have a strong credit history but may lack formal proof of income documents. By focusing on this niche, the Company aims to address the funding needs of underserved individuals and businesses. As of March 31, 2023, the Company boasts an expansive footprint in 120 cities across 16 Indian states and two union territories, operating through a network of 152 branches. This widespread presence enables the Company to reach a diverse customer base and provide financial assistance to those in need throughout the country.

 

ICICI Securities Limited, Axis Capital Limited, and Kotak Mahindra Capital Company Limited are the book running lead managers to the Offer and KFin Technologies Limited is the Registrar to the Offer. The Equity Shares are proposed to be listed on BSE and NSE.