SBFC IPO: Issue Subscribed By 7.09x, Last Day Of Bidding On Monday; Is It Worth Buying?

SBFC Finance, an NBFC offering secured MSME loans and loans against gold, received healthy demand for its initial public offering (IPO) with the issue fully subscribing by 7.09 times in two days of its bidding. Non-institutional investors are among the top buyers of the IPO, followed by strong appetite from qualified institutional buyers (QIBs) and retail investors as well. August 7 (Monday) will be the last day for the bidding.

As per the NSE data, by the end of the second day of its issue (August 4), the IPO received bids of 94,60,90,080 equity shares against its offered size of 13,35,12,817 equity shares, registering a subscription of 7.09% cumulatively.

The portion reserved for NIIs subscribed by 12.95 times, while the reserved shares for QIBs subscribed by 6.71 times. Retail investors' portion subscribed by 4.93 times, and the employees' portion also subscribed by 2.44 times.

SBFC which launched its IPO on August 3rd, plans to raise about Rs 1,025 crore from the issue. The IPO will close on August 7.

The lower price band for the IPO is fixed at Rs 54 per share and the upper price band is Rs 57 per share. The company also offers a Rs 2 per share discount to eligible employees who are bidding in the Employee Reservation Portion. The face value for the proposed equity shares is set at Rs 10 each.

The company will utilise the proceeds from the issue to augment its capital base to meet future capital requirements arising out of the growth of the business and assets. However, the company will receive any funds from the offer for sale as those will be paid to selling shareholders.

Founded in January 2008, SBFC is a systemically important, non-deposit non-banking finance company offering Secured MSME Loans and Loans against Gold, with a majority of its r borrowers being entrepreneurs, small business owners, self-employed individuals, salaried and working-class individuals.

Is the IPO worth buying?

In its IPO note, LKP Securities said, "At a higher price band (Rs57), the stock is valued at 2.4(x) P/BVPS with current book value per share of Rs23. Factoring the superlative return ratio, FY23 ROA of ~3% and further improvement post fund raise; we believe that SBFC Finance Limited is worth subscribing. Thus we recommend SUBSCRIBE."

LKP cited that the has also witnessed healthy disbursement growth, at a CAGR of 40% between Fiscal 2021 and Fiscal 2023. As of June 20, 2023, approximately only 16.9 million MSMEs have registered on UDYAM, of the
estimated 70 million MSMEs in India, leaving a large number of MSMEs without access to organised finance owing to their unregistered status.

Ventura Securities note said, "At the IPO price of INR 57 (upper price band), SBFC is valued at P/B of 3.6x. Considering the growth opportunities in the company and strong fundamentals, we recommend a SUBSCRIBE rating."

Disclaimer

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