SFBC Finance IPO subscribed 73% in first three hours; NII & retail portion fully booked

The Rs 1,025-crore initial public offering (IPO) of SBFC Finance saw a positive demand from the investors during the first few hours of the bidding as the issue kicked-off for subscription on Thursday. The demand majorly came in from non-institutional and retail investors.

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 9,71,56,540 equity shares, or 0.73 per cent, compared to the 13,35,12,817 equity shares offered for the subscription by 1.00 pm on Thursday, August 3, 2023.

The quota for non-institutional investors was booked 1.08 times, whereas the allocation for retail bidders fetched 99 per cent and portion of employees was booked 63 per cent. However, the portion of qualified institutional bidders (QIBs) was not even off the mark 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 well-established company with consistent financial performance and a stable asset quality; it is showing growing AUM and a decline in its NPAs. It has a diversified presence across India, and its access to diversified funding sources is a key contributor to its growth. The Issue looks fair and investors may consider applying for this IPO, said Swastika Investmart.

"However, there are a few risks as well. SBFC is dependent on a few key customers. Secondly, The company is also exposed to fluctuations in the price of securities it takes as collateral for loans. Additionally, an increase in interest rates could pose a challenge for the company." it added.

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 has shown impressive growth with a 44% CAGR in assets under management from FY2019 to FY2023 and a 40 per cent CAGR in disbursements during the same period. At the IPO price of Rs 57, SBFC is valued at P/B of 3.6 times. Considering the growth opportunities in the company and strong fundamentals, we recommend a 'subscribe' rating," said Ventura Securities.
 

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.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Business Today)

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