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05 August 2023

SBFC Finance Limited IPO: Empowering Small Businesses with Financial Solutions

Introduction:

Founded in 2008, SBFC Finance Limited is a significant player in the financial sector as a systemically important, non-deposit-taking Non-Banking Finance Company (NBFC-ND-SI). Catering to a diverse customer base, including entrepreneurs, small business owners, self-employed individuals, and the working class, SBFC Finance provides specialized financial solutions to support their growth and aspirations.

Pan-India Presence:

With a robust and extensive network, SBFC Finance has established its footprint across 105 cities in 16 Indian states and two union territories. Operating through 137 branches, the company ensures that its financial services are accessible to a wide range of customers.

SBFC Finance IPO Highlights:

The upcoming SBFC Finance IPO is a Book Built Issue with a total issue size of Rs 1,025.00 Crores. The IPO price range is set between ₹54 to ₹57 per share, and the listing is planned on both the BSE and NSE platforms. The IPO subscription window spans from August 3, 2023, to August 7, 2023.

IPO Details at a Glance:

IPO Open Date	Aug 3, 2023
IPO Close Date	Aug 7, 2023
Face Value	₹10 per share
Price	₹54 to ₹57 per share
Lot Size	260 Shares
Total Issue Size	To Be Announced
Fresh Issue	To Be Announced
Offer for Sale	To Be Announced
Employee Discount	Rs 2 per share
Issue Type	Book Built Issue IPO
Listing At	BSE, NSE

Promoter Holding:

Prominent promoters of SBFC Finance Limited include SBFC Holdings Pte. Ltd., Clermont Financial Pte. Ltd., Arpwood Partners Investment Advisors LLP, Arpwood Capital Private Limited, and Eight45 Services LLP. The pre-issue shareholding stands at 78.83%, which is expected to decrease to 64.03% post the IPO.

Financial Performance:

Financial Information (Restated)

Period Ended	31-Mar-2020 to 31-Mar-2023
Total Assets	₹4,207.99 Crores to ₹5,746.44 Crores
Total Revenue	₹444.85 Crores to ₹740.36 Crores
Profit After Tax	₹35.50 Crores to ₹149.74 Crores
Net Worth	₹752.09 Crores to ₹1,466.88 Crores
Total Borrowing	₹3,056.38 Crores to ₹3,745.83 Crores

Key Performance Indicators:

P/E (x)	40.42
Market Cap (₹ Cr.)	₹6065.78
ROE	9.93%
Debt/Equity	2.2
EPS (Rs)	1.25
RoNW	7.97%

Use of Proceeds:

The net proceeds from the IPO will be directed towards strengthening the company's capital base, enabling it to meet future capital requirements driven by business expansion.

SBFC Finance IPO Review:

[Dilip Davda] SBFC Finance's impressive track record of managing NPAs and its focus on MSMEs instills confidence. However, as the competition intensifies and the RBI's monetary policies fluctuate, challenges may arise. With declining Net Interest Margins (NIM) and aggressive pricing compared to peers, the IPO appeals primarily to well-informed and risk-seeking investors with a medium to long-term outlook.

IPO Subscription Status (as of Aug 4, 2023):

The SBFC Finance IPO is subscribed 2.82 times, with retail subscriptions leading at 3.00 times, NII at 6.19 times, and QIB at 0.05 times.

Conclusion:

SBFC Finance Limited's IPO offers investors an opportunity to support the growth of small businesses and entrepreneurs through tailored financial solutions. While the company's solid performance and focus on underserved segments are noteworthy, investors should carefully evaluate the competitive landscape and changing regulatory dynamics before making an investment decision.