SBFC Finance IPO Review: SBFC Finance Limited is coming up with its Initial Public Offering. The IPO will open for subscription on August 3, 2023, and close on August 7, 2023.

In this article, we will look at the SBFC Finance IPO Review 2023 and analyze its strengths and weaknesses. Keep reading to find out! 

SBFC Finance IPO – About The Company

SBFC Finance is a non-deposit-taking, non-banking financing company (NBFC) engaged in the business of offering secured and gold-backed loans to MSMEs and individuals. It primarily lends to entrepreneurs & small businesses and self-employed, salaried and working professionals. 

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It is one of the largest NBFCs in India focused towards micro, small and medium enterprises. It has a well-established presence in India with a presence in 120 cities of 16 states and 2 union territories through its 152 branches.

SBFC Finance targets customers in tier II and tier III cities of the country. Small and medium-sized borrowers earning up to Rs 1.5 lakh every month are the target market of the company. It reaches out to them through its large sales team of 1,911 people.

The company has a strong on-ground collections infrastructure which is technology-driven. As of March 31, 2023, approximately 89.49% of their Secured MSME Loan collections and 90.92% of our unsecured loan collections were non-cash-based EMI collections. This helped in reducing their cash management risk and enabled customers to receive real-time payment receipts.

Industry Overview

NBFCs have grown in importance in recent years, playing an essential role in providing finance to individuals and enterprises that are underserved by traditional banks.

With the growing presence of MSME lenders in smaller locations and lenders increasingly focusing on underserved customers, the portfolio of secured MSME loans with ticket sizes ranging from 0.50 million to 3.00 million is predicted to rise at a CAGR of 18% – 20% between Fiscal 2023 and Fiscal 2026.

NBFCs’ market share has grown in recent years, with Asset Under Management (AUM) accounting for up to 18% of total lending in March 2019, up from 12% in March 2008. But due to the increasing growth strides of the bank, this number has lowered to 16% in FY22.

The AUM of NBFCs has expanded from US$ 44.02 billion in March 2008 to about US$ 330.21 billion in March 2022 and is likely to rise further in the future due to the sector’s importance to overall credit delivery in the economy.

SBFC Finance IPO Review – Financial Highlights

If we look at the financials of SBFC Finance Limited we notice that its AUM has increased from ₹2,221.3 crores in March 2021 to ₹4,942.8 crores in March 2023. This means the company is managing a larger pool of assets, such as loans, investments, and other financial products, indicating an expansion in business

Their revenues follow a similar trend, it has increased from ₹511.53 crores in March 2021 to ₹740.36 crores in March 2023. Their profits have also grown from ₹85.01 crores in March 2021 to ₹149.74 crores in March 2023. Although there was an increase in the amount of profits, its net interest margins have decreased from 11.73% to 9.32% in the last three years

Coming to the NPA of the company, it reported a gross NPA of 2.43% and a net NPA of 1.41% in FY23. This means, even though the amount of NPA has increased, the number of defaults comparatively in FY23 compared to the last three years the number of defaults in FY23 was less. 

The key metric of the company

SBFC Finance IPO - Financials ratios
(Source: RHP of the company)

Key Players in the Market

Below are the peers of SBFC Finance along with their presence across states

SBFC Finance IPO - Key Players List

Strengths of the Company

  • The company has a PAN-India presence that allows them to provide service to their existing customers and also attract new customers. This is attributed to the personal relationships cultivated through proximity and frequent interaction by our employees.
  • The company finds customers through its sales team and a direct sourcing model, which helps maintain close relationships, high satisfaction, and increased loyalty.
  • The company has a comprehensive credit assessment and risk management framework to identify, monitor and manage risks inherent in its operations.
  • The company also has an extensive on-ground collections infrastructure to ensure that it maintains high asset quality. It also has an in-house collections team, responsible for detecting likely defaults early, thereby maintaining relatively low Gross NPA ratios.
  • The company’s ability to access diversified sources of funding is a key contributor to its growth. The company intend to continue to diversify its funding sources, identify new sources and pools of capital and implement ALM policies to further optimize its borrowing costs and help expand its net interest margin

Weaknesses of the Company

  • During FY23, the majority of the MSME loans sanctioned were to self-employed customers. Self-employed customers and MSMEs are often considered to be high-risk customers and any default on their end would adversely affect the business operations.
  • The company relies on the information given by customers and some third-party providers to determine their creditworthiness. Any errors or misinformation may affect the company’s ability to judge the creditworthiness of the customers
  • The portfolio of the company may be impacted if it has high amounts of NPA and they are unable to provide for such NPA.
  • As the company is in the lending business, they require a huge amount of capital for its operations. Any disruptions in the flow of capital can impact the business.
  • The company’s net interest income could be affected if there is any volatility in interest rates for both lending and treasury operations.

SBFC Finance IPO Review – Key IPO Information

IPO Size₹1,025.00 Cr
Fresh Issue₹600.00 Cr
Offer for Sale (OFS)₹425.00 Cr
Opening date3 August 2023
Closing date7 August 2023
Face Value₹10 per share
Price Band
Lot Size
Minimum Lot Size
Maximum Lot Size
Listing Date16 August 2023

Promoters: Sbfc Holdings Pte. Ltd., Clermont Financial Pte. Ltd., Arpwood Partners Investment Advisors Llp, Arpwood Capital Private Limited And Eight45 Services Llp.

Book Running Lead Manager: ICICI Securities Limited, Axis Capital Limited and Kotak Mahindra Capital Company Limited

Registrar to the Offer: KFin Technologies Limited

The Objective of the Issue

The NBFC intends to utilise the net proceeds of the IPO towards the following purposes:

  • To increase the company’s capital base. in order to meet its future capital requirements arising out of the growth of our business and assets.
  • To enhance the company’s brand name through its listing
  • To carry out its existing activities set out in the Memorandum of Association

SBFC Finance IPO Review – GMP

Currently exact GMP information is not available, we shall update the article once we receive the information

In Closing

In this article, we looked at the details of SBFC Finance IPO Review 2023. Analysts remain divided on the IPO and its potential gains. This is a good opportunity for investors to look into the company and analyze its strengths and weaknesses. That’s it for this post.

Are you applying for the IPO? Let us know in the comments below.

Written by Aaron Vas

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