Price Band of ₹54 – ₹57 per equity share bearing face value of ₹10 each (“Equity Shares”)
• Bid/Offer Opening Date – Thursday, August 3, 2023 and Bid/Offer Closing Date – Monday, August 7, 2023.
• Minimum Bid Lot is 260 Equity Shares and in multiples of 260 Equity Shares thereafter.
• The Floor Price is 5.4 times the face value of the Equity Share and the Cap Price is 5.7 times the face value of the Equity Share.
Risks to Investors
• As an NBFC, we are subject to periodic inspections by the RBI. Non-compliance with observations made by the RBI during these inspections could expose us to penalties and restrictions.
• We are subject to laws and regulations governing the financial services industry and our operations in India, including laws in relation to capital adequacy ratios. Changes in regulations governing us could adversely affect our business, results of operations and prospects.
• Our non-convertible debentures are listed on the BSE and we are subject to rules and regulations with respect to such listed non-convertible debentures. We have had instances of non-compliances in the past and if we fail to comply with such rules and regulations, we may be subject to certain penal actions, which may have an adverse effect on our business, results of operations, financial condition and cash flows.
• The risk of non-payment or default by our borrowers may adversely affect our business, results of operations and financial condition.
• The quality of our portfolio may be impacted due to higher levels of NPAs and our business may be adversely affected if we are unable to provide for such higher levels of NPAs. Set forth below are details of our asset quality ratios, as well as provision coverage ratio, as of each of the corresponding periods:
Particulars As of March 31,
2021 2022 2023
Gross NPA (1) (₹million) 666.55 828.94 1,081.65
Gross NPA ratio (2) (%) 3.16% 2.74% 2.43%
Net NPA (3) (₹million) 411.59 493.72 626.88
Net NPA ratio (4)(%) 1.95% 1.63% 1.41%
Provision Coverage Ratio (5) (%) 38.25% 40.44% 42.04%
(1) Gross NPA represents Gross Loan Book pertaining to loans which are required to be classified as NPA as per the Income Recognition, Asset Classification and Provisioning norms issued and modified by RBI from time to time.
(2) Gross NPA ratio (%) represents the Gross NPA to the Gross Loan Book as of the last day of the relevant period.
(3) Net NPA represents Gross NPA reduced by NPA provisions as of the last day of relevant period.
(4) Net NPA ratio (%) represents the Net NPA to the Gross Loan Book as of the last day of the relevant period.
(5) Provision Coverage Ratio represents total provisions held on Gross NPA as of the last day of the period, as a percentage of total Gross NPAs as of the last day of the period.
• Our inability to assess and recover the full value of collateral, or amounts outstanding under defaulted loans in a timely manner, or at all, could adversely affect our business, results of operations and financial condition.
• We require substantial capital for our business and any disruption in our sources of capital could have an adverse effect on our business, results of operations and financial condition.
• Our business is particularly vulnerable to interest rate risk, and volatility in interest rates for both lending and treasury operations, could have an adverse effect on our net interest income and net interest margin, thereby affecting our results of operations and cash flows.
• The Weighted Average Cost of acquisition of all Equity Shares transacted in last three
years, 18 months and one year:
Period Weighted Cap Price is Range of Average Cost of Acquisition per Share (in ₹ ) Cap Price is Range of Average Cost 'x' times the weighted average cost of acquisition^ Range of Acquisition price per Equity Share: per Equity average cost Lowest Price - Highest Price (in ₹)
Last one year 44.95 1.27 12.50 to 60.00
Last 18 months 43.02 1.32 12.50 to 60.00
Last three years 41.57 1.37 12.50 to 60.00
As certified by M/s Suresh Surana & Associates LLP, Statutory Auditors, vide their certificate dated July 28, 2023.
Weighted average cost of acquisition compared to Floor Price and Cap Price:
Past Transactions Weighted Average Cost of Acquisition (in ₹) Floor price of ₹ 54 Cap price of ₹ 57
WACA of primary issuance in last 18 months 40.00 1.35 times 1.43 times
WACA of secondary issuance in last 18 months 55.00 0. 98 times 1.04 times
As certified by M/s Suresh Surana & Associates LLP, Statutory Auditors, pursuant to a certificate dated July 28, 2023.
•Average cost of acquisition of Equity Shares for the Promoters and Promoter Selling Shareholders namely, SBFC Holdings Pte. Ltd. is ₹ 16.08, Arpwood Partners Investment Advisors LLP is ₹ 12.69, Arpwood Capital Private Limited is ₹ 15.98 and Eight 45 Services LLP is ₹ 12.73 and the Offer Price at the upper end of the Price Band is ₹ 57 per Equity Share.
• The Price/Earnings ratio based on diluted EPS for Fiscal 2023 for our Company at the upper end of the price band is 35.19 times and Price/Earnings ratio of the average industry peer group as on the date of the RHP is 30.44 times.
• Weighted Average Return on Net Worth for Fiscals 2023, 2022 and 2021:
Year ended RoNW (%) Weight
As on March 31, 2023 9.93 3
As on March 31, 2022 5.18 2
As on March 31, 2021 7.67 1
Weighted Average 7.97
• Our market capitalisation at the lower end and higher end of price band to revenue from operations for Fiscal 2023 is 7.88 times and 8.28 times respectively.
• The three BRLMs associated with the Offer have handled 88 public issues in the past three
Fiscal Years, out of which 30 issues closed below the Offer price on the listing date.
Name of the BRLM Total Issues Issues closed below IPO price on listing date
ICICI Securities Limited* 15 4
Axis Capital Limited* 19 6
Kotak Mahindra Capital Company Limited* 13 3
Common Issues of above BRLMs 41 17
Total 88 30
*Issues handled where there were no common BRLMs
Mumbai, July 31, 2023: SBFC Finance Limited (”Company”) is a systemically important, non-deposit taking non-banking finance company (“NBFC-ND-SI”) offering Secured MSME Loans and Loans against Gold, with a majority of its borrowers being entrepreneurs, small business owners, self-employed individuals, salaried and working class individuals has fixed the price band at ₹ 54 to ₹ 57 per Equity Share for its maiden public offer. The initial public offering (“IPO” or “Offer”) of the Company will open on Thursday, August 3, 2023, for subscription and closes on Monday, August 7, 2023. Investors can bid for a minimum of 260 Equity Shares and in multiples of 260 Equity Shares thereafter.
The Public Issue of face value of ₹10 per Equity Share comprises of fresh issuance of equity shares worth Rs 600 crore and an Offer for Sale of Rs 425 crore.
SBFC Finance is an NBFC in India that concentrates on supporting Micro, Small, and Medium Enterprises (“MSMEs”). According to a CRISIL Report, among MSME-focused NBFCs in India, the company has achieved one of the highest growth in its assets under management (“AUM”), with a Compound Annual Growth Rate ("CAGR”) of 44% during the period from Fiscal 2019 to Fiscal 2023. Additionally, it has experienced robust disbursement growth, with a CAGR of 40% between Fiscal 2021 and Fiscal 2023. As of March 31, 2023, the average ticket size for its Secured MSME Loans stood at ₹0.99 million and for its Loans Against Gold stood at ₹0.09 million, based on disbursed amounts. The Company's total AUM as of March 31, 2023, amounted to ₹4,942.82 crore, and it had provided loans to 102,722 customers as of such date.
The Company primarily caters to customers in tier II and tier III cities, thereby fostering entrepreneurship in these regions. It focuses on serving customers who have a strong credit history but may lack formal proof of income documents. By focusing on this niche, the Company aims to address the funding needs of underserved individuals and businesses. As of March 31, 2023, the Company boasts an expansive footprint in 120 cities across 16 Indian states and two union territories, operating through a network of 152 branches. This widespread presence enables the Company to reach a diverse customer base and provide financial assistance to those in need throughout the country.
ICICI Securities Limited, Axis Capital Limited, and Kotak Mahindra Capital Company Limited are the book running lead managers to the Offer and KFin Technologies Limited is the Registrar to the Offer. The Equity Shares are proposed to be listed on BSE and NSE.
DISCLAIMERS: SBFC FINANCE LIMITED is proposing, subject to receipt of requisite approvals, market conditions and other considerations, to make an initial public offer of its Equity Shares and has filed a draft red herring prospectus dated March 21, 2023 with SEBI (the “DRHP”) and a red herring prospectus dated July 26, 2023 with the RoC. The RHP is made available on the website of the SEBI at www.sebi.gov.in as well as on the website of the BRLMs i.e., ICICI Securities Limited at www.icicisecurities.com; Axis Capital Limited at www.axiscapital.co.in and Kotak Mahindra Capital Company Limited at https://investmentbank.kotak.com, the website of the NSE at www.nseindia.com and the website of the BSE at www.bseindia.com. Any potential investor should note that investment in equity shares involves a high degree of risk and for details relating to such risks, please see the section titled “Risk Factors” beginning on page 26 of the RHP. Potential investors should not rely on the DRHP for making any investment decision. The Equity Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any other applicable law of the United States and, unless so registered, may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable state securities laws. Accordingly, the Equity Shares are being offered and sold (a) only to persons reasonably believed to be (i) “qualified institutional buyers” (as defined in Rule 144A under the U.S. Securities Act and referred to as “U.S. QIBs”) in transactions exempt from the registration requirements of the U.S. Securities Act, and (ii) Qualified Purchasers, as defined in Section 2(a)(51) of the U.S. Investment Company Act of 1940, and (b) outside the United States in offshore transactions in compliance with Regulation S and the applicable laws of the jurisdiction where those offers and sales are made. There will be no public offering of the Equity Shares in the United States.
DISCLAIMER CLAUSE OF SECURITIES AND EXCHANGE BOARD OF INDIA (“SEBI”): SEBI only gives its observations on the offer documents and this does not constitute approval of either the Offer or the specified securities stated in the Offer Document. The investors are advised to refer to pages 435 of the RHP for the full text of the disclaimer clause of SEBI.
DISCLAIMER CLAUSE OF BSE: It is to be distinctly understood that the permission given by BSE Limited should not in any way be deemed or construed that the RHP has been cleared or approved by BSE Limited nor does it certify the correctness or completeness of any of the contents of the RHP. The investors are advised to refer to the pages 449-450 of the RHP for the full text of the disclaimer clause of BSE