SFBC Finance IPO subscribed 3.28 times on day 2 so far; NIIs & retailers lead bidders

The Rs 1,025-crore initial public offering (IPO) of SBFC Finance continued to witness a strong demand from the investors during the second day of the bidding process, led by non-institutional and retail investors. The issue was booked 1.91 times on the first day of the bidding.

SBFC Finance is selling its shares in the range of Rs 54-57 apiece during the three-day bidding process and investors can make a bid of a minimum of 260 equity shares and its multiples thereafter. The issue includes a sale of fresh equity shares worth Rs 600 crore and an offer-for-sale of around Rs 425 crore.

According to the data, the investors made bids for 43,84,34,620 equity shares, or 3.28 times, compared to the 13,35,12,817 equity shares offered for the subscription by 12.50 pm on Friday, August 04, 2023. The issue opened on Thursday and can be subscribed till Monday.

The quota for non-institutional investors was booked 6.87 times, whereas the allocation for retail bidders fetched 3.38 times and the portion of employees was booked 1.77 times. However, the portion of qualified institutional bidders (QIBs) was 51 per cent as of the same time.

Incorporated in 2008, SBFC Finance is a non-banking finance company which provides secured MSME loans and loans against gold primarily to entrepreneurs, small business owners, self-employed individuals, and salaried and working-class individuals. The company has an extensive pan-India network in over 157 Branches in 105 cities in 16 states and two union territories.

Majority of the brokerage firms are positive on the issue, suggesting investors to subscribe to the issue citing its pan India network, strong return ratios, superior business model and lower cost of funds. However, they have also flagged risks of higher valuations and rate sensitive factors as the key risks for the company.

SBFC is a proxy play on secured business loans to self-employed individuals which is one of the fastest growing segments in lending. SFBC has grown its AUM at a CAGR of 46 per cent over FY21-23, one of the fastest amongst listed financials. With a loan book of just Rs 4,415 Cr as on FY23, the runway for accelerated growth is huge, said Nirmal Bang Securities.

"Its business is a difficult one to establish and execute, especially with regards to the underwriting capabilities for this segment which acts as a durable competitive advantage and thus SBFC faces low competition. SBFC is being offered at a discount to listed comparable peers on P/B basis," it added with a 'subscribe' rating on the issue.

Ahead of its IPO, SBFC Finance has raised Rs 304.42 crore by allocation of 5.34 crore equity shares to 37 anchor investors at a price of Rs 57 per share, a BSE circular said. Abu Dhabi Investment Authority, Amansa Holdings, Neuberger Berman, Ashoka India, Steadview Capital Master Fund, Carmignac Portfolio, Think India Opportunities and Natixis International were the marquee investors that participated in the anchor book.

SBFC Finance is bringing the issue at a price band of Rs 54-57 per share at a P/B multiple of 2.5 times. The company has diversified pan-India presence with an extensive network to cater to the target customer segment. Due to 100 per cent inhouse sourcing in turn leading to superior business outcomes. Company has a healthy liability franchise with low cost of funds, said Hem Securities.

"The company has a comprehensive credit assessment, underwriting and risk management framework with extensive on-ground collections infrastructure leading to maintenance of robust asset quality. It has shown consistent financial performance backed by profitable growth and experienced, cycle-tested and professional management team," it added with a subscribe rating.

ICICI Securities, Axis Capital and Kotak Mahindra Capital Company are the lead managers to the issue, while KFin Technologies has been appointed as the registrar to the issue. Shares of the company will be listed on both NSE and BSE with Wednesday, August 16 as the tentative date of listing.


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