MAS Financial Services IPO would open for subscription on 6th October, 2017. MAS Financial Services Ltd is a leading NBFC company in India which his head quartered in Gujarat. Its consolidated revenues grew at 26% CAGR in last 5 years. It is generating consistent profits. It posted margins of 18.8% for FY2017. What are the positive factors in MAS Financial Services Ltd IPO? What are the hidden factors in MAS Financial Services IPO? Is MAS Financial Services IPO Price is reasonably priced? In this article, I would provide some interesting insights and do MAS Financial Services Limited IPO Review.
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About MAS Financial Services Ltd
They are a Gujarat-headquartered NBFC with more than two decades of business operations and as of June 30, 2017, they operated across six States and the NCT of Delhi. company business and financing products are primarily focused on middle and low income customer segments, and include five principal categories: (i) micro-enterprise loans; (ii) SME loans; (iii) two-wheeler loans; (iv) Commercial Vehicle loans (which include new and used commercial vehicle loans, used car loans and tractor loans); and (v) housing loans. Company Promoters have significant operational experience in the financial services sector in India, and company shareholders include development finance institutions including FMO and DEG and private equity investors including Sarva Capital.
MAS Financial Services IPO Issue details
- IPO open date: 6-Oct-2017
- IPO close date: 10-Oct-2017
- Face Value: Rs 10 per share
- Issue price band: Rs 456 to Rs 459 per share
- Issue size: Approx Rs 460 Crores on higher price band
- MAS Financial Services IPO Lot size: 32 shares and 32 shares there-off
- Minimum investment: Rs 14,688
- Leading Managers: Motilal Oswal Investment Advisors
- Listing: BSE / NSE
- Download MAS Financial Services IPO RHP Prospectus at this link.
Objects of the MAS Financial Services Ltd IPO issue
The Issue comprises the Fresh Issue and the Offer for Sale.
a) Offer for Sale:
Each of the Selling Shareholders will be entitled to the respective portion of the proceeds of the Offer for Sale net of their proportion of Issue related expenses. Company will not receive any proceeds from the Offer for Sale. Except for listing fees which shall be solely borne by its Company, all Issue expenses will be shared, upon successful completion of the Issue, between its Company and the Selling Shareholders on a pro-rata basis, in proportion to the Equity Shares issued and allotted by its Company in the Fresh Issue and the Equity Shares sold by the Selling Shareholders in the Offer for Sale.
b) Fresh Issue
Company proposes to utilise the Net Proceeds from the Fresh Issue towards:
i) Offer related expenses.
ii) The Net Proceeds are currently expected to be deployed in Fiscal Years 2018 and 2019
Company Financials (reinstated-consolidated)
1) The company generated revenue of Rs 143.1 Crores for the year ended Mar-13 and Rs 364.7 Crores for the year ended Mar-17.
2) The company posted a profit of Rs 27.3 Crores for the year ended Mar-13 and profit of Rs 68.5 Crores for the year ended Mar-17.
3) Its FY17 EPS is Rs 16.14 and 3 years average EPS is Rs 13.53.
Company Financials (reinstated-standalone)
1) The company generated revenue of Rs 138.8 Crores for the year ended Mar-13 and Rs 341.5 Crores for the year ended Mar-17.
2) The company posted a profit of Rs 26.8 Crores for the year ended Mar-13 and profit of Rs 67.4 Crores for the year ended Mar-17.
3) Its FY17 EPS is Rs 15.86 and 3 years average EPS is Rs 13.28.
What are the key strengths of MAS Financial Services Limited?
Here are the key strengths of the company.
1) Track record of consistent growth with quality loan portfolio.
2) Diversified product offerings presenting significant growth opportunities.
3) Access to diversified scompanyces of capital and cost-effective funding.
4) Deep market knowledge through extensive scompanycing channels.
5) Robust credit assessment and risk management framework.
6) Experienced management team with reputed investors.
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What are the Strategies of MAS Financial Services Ltd?
Here are the key strategies of MAS Financial Services which it want to focus.
1) Strengthen marketing and sourcing channels while maintaining stable growth and quality of portfolio.
2) Expand company product offerings.
3) Leverage company existing network and customer base to develop company housing finance business.
4) Leverage technology to foster growth.
Reasons to invest in MAS Financial Services IPO
1) It posted strong revenue growth of 26% CAGR (consolidated) in the last 5 years. Even its standalone revenues grew at 25% CAGR in last 5 years.
2) It posted consistent margins between 16.7% to 19.7% in the last 4 out of 5 years (both consolidated and standalone).
Risk Factors / Reasons not to invest in a MAS Financial Services Ltd IPO
1) Company, Promoters, Directors and company Subsidiary are involved in certain legal proceedings, any adverse developments related to which could materially and adversely affect company business, reputation and cash flows.
2) Company business operations involve transactions with relatively high risk borrowers. Any default from company customers could adversely affect company business, results of operations and financial condition.
3) They extend loans to other financial institutions such as MFIs, NBFCs and HFCs. If there is a default by these financial institutions or if they are unable to maintain company relationships with these institutions, company business, financial condition and results of operations may be adversely affected.
4) As an NBFC, they are subject to periodic inspections by the RBI. Non-compliance with observations made by RBI during these inspections could expose us to penalties and restrictions
5) Company inability to maintain relationships with company sourcing intermediaries could have an adverse effect on company business, prospects, results of operations and financial condition.
6) The quality of company portfolio may be impacted due to higher levels of NPAs and company business may be adversely affected if they are unable to provide for such higher levels of NPAs.
7) Company business requires substantial funds, and any disruption in funding scompanyces would have a material adverse effect on company liquidity and financial condition.
8) Company inability to compete effectively in an increasingly competitive industry may adversely affect company net interest margins, income and market share.
9) As part of company business strategy, they have assigned or securitized a significant portion of the receivables from company loan portfolio to banks and other financial institutions. Any deterioration in the performance of any portfolio of receivables assigned to banks and other institutions may affect company ability to conduct further assignment and securitization and thus adversely impacting company business prospects, financial condition and results of operations.
10) Company financial performance is subject to interest rate risk, and an inability to manage company interest rate risk may have a material adverse effect on company interest income from financing activities, thereby adversely affecting company business prospects and financial performance.
11) The recent currency demonetisation measures imposed by the Government of India adversely affected the Indian economy and similar unanticipated measures may adversely affect company business company business operations, financial condition, results of operations and financial condition.
12) Other risk factors (Internal and external) can be viewed in the prospectus.
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Recommendation / Investment strategy – MAS Financial Services IPO
1) On the upper price band of Rs 459 and on consolidated restated FY17 EPS of Rs 16.14, P/E ratio works out to 28.4x. Even based on last 3 years restated consolidated EPS of Rs 13.5, P/E ratio works out to 33.9x. Similarly, on the upper price band of Rs 459 and on standlone restated FY17 EPS of Rs 15.8, P/E ratio works out to 28.9x. Even based on last 3 years restated standlone EPS of Rs 13.28, P/E ratio works out to 34.5x. Means, company is asking higher price band of Rs 459 in the P/E ratio of 28.4x to 34.5x. Its listed peers like Bajaj Finance is trading at P/E ratio of 56x (Highest) and Shriram City Union Finance is trading at P/E ratio of 23.7x (Lowest) and industry average is 41.5x, hence MAS Financial IPO issue price is reasonably priced.
2) Company revenues grew at 26% CAGR in the last 5 years. It has posted consistent margins between 16.5% to 19.7% in the last 5 years. The issue price is also reasonably priced. Considering all these positive factors, investors can invest in this IPO for 2-3 years time frame. If one gets listing gains, we can do party.
Disclaimer: I would like to invest in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy. Please consult your investment advisor before you invest in such high risk investment options.
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MAS Financial Services IPO – Should you invest in this IPO
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Thank you for the wonderful analysis and sharing