SBFC Finance IPO Details, Date, Price, GMP, Analysis & Review

SBFC Finance IPO Date is announced now which would open for subscription on August 3, 2023. SBFC Finance is a leading non-banking finance company in India, specializing in secured MSME loans and loans against gold. Should you invest in SBFC Finance IPO? This article provides IPO Details, Dates, IPO Price Band, GMP, Analysis and do SBFC Finance IPO Review.

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SBFC Finance IPO Details

IPO Opening Date 03-Aug-23
IPO Closing Date 07-Aug-23
IPO Listing Date 16-Aug-23
Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price band Rs 54 to Rs 57 per equity share
Lot Size 260 Shares
Min Order Quantity 260 Shares
Listing at BSE and NSE
Total Issue Size Rs. 1025 Crores
    Fresh issue     Rs. 600 Crores
    OFS     Rs. 425 Crores
Employee Discount Rs.2 Per Share

SBFC Finance IPO Reservation

QIB shares offered Not less than 50% of the offer
NII/HNI shares offered Not more than 15% of the offer
Retail shares offered Not more than 35% of the offer

What is SBFC Finance IPO Market Lot?

Application Lot Size No. of Shares Amount
Retail – Minimum 1 260 14,820
Retail – Maximum 13 3380 1,92,660
S-HNI Minimum 14 3640 2,07,480
S-HNI Maximum 67 17420 9,92,940
B-HNI Minimum 68 17680 10,07,760

About SBFC Finance Ltd

The company is a systemically important non-banking finance company in India, offering Secured MSME Loans and Loans against Gold. They primarily serve entrepreneurs, small business owners, self-employed individuals, and the working class. With significant AUM and disbursement growth, they focus on underserved customers, aiming to bridge the credit gap in the MSME sector. The company maintains a diverse geographical presence, strong risk management, and underwriting processes, resulting in a healthy portfolio with low NPAs.

We can summarise their business into few points:

  • Indian NBFC-ND-SI offering Secured MSME Loans and Loans against Gold
  • Majority of borrowers are entrepreneurs, small business owners, self-employed, and salaried individuals
  • High AUM growth (44% CAGR from Fiscal 2019 to Fiscal 2023) and healthy disbursement growth (40% CAGR between Fiscal 2021 and Fiscal 2023)
  • Focus on underserved and unregistered MSMEs, bridging the credit gap
  • AUM mainly within ₹0.50 million to ₹3.00 million ticket size range
  • Diversified presence in 120 cities across 16 Indian states and two union territories
  • Low portfolio concentration risk with no industry contributing more than 10%
  • Strong risk management and underwriting processes resulting in lower Gross NPAs and Net NPAs (as of March 31, 2023: Gross NPA ratio – 2.43%, Net NPA ratio – 1.41%)
  • Active customer sourcing through direct model and branch-led local marketing efforts
  • Focus on small enterprise borrowers with CIBIL scores above 700 and demonstrable loan servicing track record
  • 27% of AUM in the ₹0.50 million to ₹3.00 million ticket size range
  • Growth potential in the secured MSME loans segment in smaller cities (expected CAGR of 18%-20% from Fiscal 2023 to Fiscal 2026)

SBFC Finance Ltd Financials

Here are the financials of the company.

Financial Year ending / Period ending (Amt in Crores)
Particulars FY20 FY21 FY22 FY23
Total Assets 4,208.0 4,231.2 4,515.0 5,746.4
Total Revenue 444.9 511.5 530.7 740.4
Profit After Tax 35.5 85.0 64.5 149.7
Profit % 7.98% 16.62% 12.16% 20.23%
Net Worth 752.1 944.7 1,026.8 1,466.9
Total Borrowing 3,056.4 2,772.6 2,948.8 3,745.8

Objects of the Issue

The IPO size is Rs 1,025 Crores. It has both OFS and fresh issue.

1) Offer for sale (OFS) for Rs 425 Crores: Under OFS, these are sold by selling shareholders and proceeds would go to selling shareholders and company would not get anything.

2) Fresh issue of Rs 600 Crores: Augmenting the capital base of the company.

How is SBFC Finance IPO Price Valuation?

SBFC Finance IPO price band is Rs 54 to 57 per share.

  • If we consider last year FY23 EPS of Rs 1.62, P/E ratio works out to be 35x
  • If we consider Last 3 Years Weighted EPS of Rs 1.25, P/E ratio works out to be 46x
  • The listed peers like AU Small Finance Bank trading at P/E 35x (Highest) and Aptus Value Housing Finance is trading at P/E of 25x (Lowest) and industry average P/E is 30.4x. Hence, the IPO Price band at P/E of 35x to 46x is over-priced.

What is SBFC Finance IPO GMP today?

As per the market sources, Grey market premium now is between Rs 30 to Rs 35 which is over 50% premium.

What are SBFC Finance IPO Expected Returns?

Grey market premium is around 50%, which gives an indication that Sbfc finance ipo expected price could be in similar lines, i.e. Higher by 50%.

SBFC Finance IPO Allotment & Listing Dates

IPO Opens on 03-Aug-23
IPO Closes on 07-Aug-23
Basis of Allotment 10-Aug-23
Initiation of Refunds 11-Aug-23
Credit of Shares to Demat 14-Aug-23
Listing Date 16-Aug-23
Cut-off time for UPI mandate confirmation 07-Aug-23

SBFC Finance Competitive Strengths

  • Diversified pan-India presence with an extensive network to cater to our target customer segment
  • 100% in-house sourcing, leading to favourable business outcomes
  • Comprehensive credit assessment, underwriting and risk management framework
  • Extensive on-ground collections infrastructure leading to maintenance of asset quality
  • Healthy liability franchise, with low cost of funds
  • Consistent financial performance, backed by profitable growth
  • Experienced, cycle-tested and professional management team with good corporate governance backed by marquee investors

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SBFC Finance IPO  – Positive Factors to invest

Strong Financial Performance: The company has demonstrated consistent financial growth over the years, with increasing total revenue and profit percentages. This indicates the company’s ability to generate profits and deliver favorable returns to its investors.

Growing Total Assets: The continuous expansion of total assets from FY20 to FY23 showcases the company’s ability to efficiently utilize funds and invest in profitable ventures, which could lead to higher shareholder value.

Increasing Net Worth: The steady rise in net worth reflects the company’s retained earnings and accumulated wealth, indicating financial stability and improved capacity to withstand economic fluctuations.

Profit After Tax Growth: The company’s growing profit after tax figures signify efficient cost management, operational excellence, and potential for increased dividends or reinvestment.

Favorable Profit Percentage: The consistent increase in profit percentages over the years demonstrates the company’s ability to generate higher returns on its investments and operational activities.

Diversified Business Portfolio: With a focus on secured MSME loans and loans against gold, the company caters to diverse customer segments, reducing the risk associated with concentration in a single market.

Robust Risk Management Framework: The company’s comprehensive credit assessment, underwriting, and risk management framework indicate a prudent approach to minimize credit losses and maintain a healthy portfolio.

Expanding Geographical Presence: The company’s presence in 120 cities across 16 Indian states and two union territories provides a broad customer base and access to untapped markets, fostering potential for further growth.

Experienced Management Team: The company is backed by a skilled and cycle-tested management team with good corporate governance practices, instilling confidence in their ability to navigate challenges effectively.

Support from Marquee Investors: The backing of marquee investors enhances the company’s credibility and may signal future growth prospects, making it an attractive proposition for potential investors.

Potential to Benefit from MSME Growth: As the MSME sector in India continues to grow, the company’s focus on serving this segment positions it to benefit from the increasing demand for financial services

SBFC Finance IPO – Risk or Negative Factors

High Valuation: The IPO price band at a P/E ratio of 35x to 46x is considered overpriced when compared to industry peers and the industry average P/E ratio, raising concerns about potential limited upside for investors.

Default Risk: The risk of non-payment or default by borrowers, could adversely impact the company’s financial performance and profitability, leading to potential losses for investors.

NPAs Impact: Higher levels of Non-Performing Assets (NPAs) could negatively impact the quality of the company’s loan portfolio and, in turn, affect their business operations, posing a risk to investors’ returns.

Collateral Recovery Uncertainty: The company’s inability to assess and recover the full value of the collateral or defaulted loan amounts may lead to adverse effects on the company’s financial condition, potentially affecting investors’ interests.

Interest Rate Risk: Interest rate volatility could impact the company’s net interest income and margin, posing a risk to investors’ returns, especially in uncertain economic conditions.

Competitive Pressure: Operating in a competitive industry, the company’s inability to compete effectively may negatively impact their net interest margins, income, and market share, posing challenges for investors.

Compliance and Regulatory Risks: Non-compliance with regulations, particularly concerning listed non-convertible debentures and RBI inspections, may expose the company to penalties and restrictions, which could have a negative impact on investors.

Capital Dependency: The company requires substantial capital for its operations, and any disruption in its sources of capital could have an adverse effect on its business, which might not be favorable for investors.

Negative Cash Flows: Any negative cash flows in the future could adversely affect the company’s ability to operate and implement growth plans, thereby impacting investors’ confidence in the company’s prospects.

Limited Benefit from IPO Proceeds: The IPO’s offer for sale (OFS) portion means that the company will not receive any benefit from those proceeds, potentially limiting its capital-raising capacity and shareholder value.

Concentration Risk: The company’s focus on a specific segment (MSME loans and loans against gold) may expose it to concentration risk, where adverse developments in these sectors could impact the company’s overall performance.

Investors should read all internal and external risk factors from RHP before investing in this IPO.

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SBFC Finance IPO Review – Should you Apply or not?

After reading the pros and cons, investors might want to know whether it is good to invest in SBFC Finance IPO or not.

The company’s IPO offers several positive aspects, including a strong financial performance demonstrated by the consistent growth in total assets and total revenue over the years. The increasing profitability, as reflected by the rising profit after tax and profit percentage, showcases the company’s ability to generate returns for its shareholders. The diversified pan-India presence and extensive network provide access to untapped markets, fostering growth opportunities. Additionally, the company’s focus on secured MSME loans and loans against gold positions it to benefit from the growing MSME sector in India.

On the other side, the IPO valuation, with a P/E ratio of 35x to 46x, looks relatively high when compared to industry peers and the industry average. The risk of non-payment or default by borrowers, coupled with uncertainties in collateral recovery, may impact the quality of the loan portfolio and result in potential losses. Additionally, the company’s exposure to interest rate risk, regulatory compliance risks, and competitive pressures pose potential challenges.

While, overall the IPO is good, the IPO valuation seems to be very high. High risk investors who understand all these risk factors can invest in this IPO from medium to long term perspective. Alternatively, investors can wait for any correction post listing of the IPO and then invest at lower price levels.

FAQ’s on SBFC Finance IPO

This IPO would open on 3 August and closes on 10 August, 2023.

The issue price band is Rs 54 to Rs 57.

The GMP is being traded between Rs 30 to Rs 35 per share.

IPO Price is currently at P/E of 35x to 45x. The listed peers like AU Small Finance trading at P/E 35x and Aptus Value Housing Finance trading at P/E of 25x and industry average P/E is 30.4x. Hence, SBFC Finance IPO Share Price is over-priced.

The overall IPO review and analysis indicate that while the company has strong financials, its IPO issue price is overpriced.

SBFC Finance Limited

103, 1st Floor, C&B Square, Sangam Complex, Andheri Kurla Road, Village Chakala, Andheri (East), Mumbai - 400 059;

Phone: 022 6787 5344; Email: complianceofficer@sbfc.com

Website: http://www.sbfc.com/

Kfin Technologies Limited

Phone: 04067162222, 04079611000

Email: Sbfc.ipo@kfintech.com

Website: https://kosmic.kfintech.com/ipostatus/

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Suresh KP

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