Last Updated on December 26, 2023 by BFSLTeam BFSLTeam
Did you know that 7 crore MSMEs create 30% of India’s GDP and generate employment for nearly 11 crore people in the country? SBFC is a new-age financial services company that has been serving micro, small and medium-sized businesses since 2008. Its IPO will be open for subscription on August 3, 2023.
Table of Content
IPO details
SBFC Finance IPO is a book-built issue that opens on the 3rd of August and closes on the 7th August. Here are all the important details of this IPO that you need to know:
| IPO Open Date | August 3, 2023 |
| IPO Close Date | August 7, 2023 |
| Face Value | Rs. 10 per share |
| Price Band | Rs. 54 to Rs. 57 per share |
| Lot Size | 260 shares |
| Total Issue Size | Aggregates up to Rs. 1,025 crore |
| Fresh Issue | Aggregates up to Rs. 600 crore |
| Offer for Sale | Aggregates up to Rs. 425 crore |
| Employee Discount | Rs. 2 per share |
| Issue Type | Book Built Issue IPO |
| Listing at | NSE and BSE |
| Share-holding Pre-issue | 958,908,906 |
Apply for the SBFC Finance IPO via Bajaj Financial Securities.
About the company
SBFC Finance Limited was formed with a simple idea— provide MSMEs with easy access to credit. If our country is to reach its true potential, having this service is essential.
SBFC is a new-age financial institution, headquartered in Mumbai that offers various financing opportunities for micro, small and medium-sized enterprises in India. It is registered as a non-deposit-taking NBFC (non-banking financial company). Its main two products are secured MSME loans and gold loans.
SBFC Finance reimagines lending with innovative approaches, for example, the ‘PhyGital’ model which combines digital technology and personal relationships to create a loan for customers—a loan which would serve them well at the right moment.
SBFC Finance Limited serves customers throughout the country and has a strong network in many Tier 1 and Tier 2 cities. The NBFC has around 137 branches across 105 cities across India serving over 95,000 customers.
IPO tentative timeline
To subscribe to the SBFC Finance IPO, you must put in your bids between 3 and 7 August during market opening hours. You will need to have a demat account and sufficient funds in your bank account to apply for an IPO.
Check the tentative timeline for SBFC Finance Limited IPO:
| IPO Open Date | 3 August 2023, Thursday |
| IPO Close Date | 7 August 2023, Monday |
| Basis of Allotment | 10 August 2023, Thursday |
| Initiation of Refunds | 11 August 2023, Friday |
| Credit of Shares to Demat accounts | 14 August 2023, Monday |
| Listing Date | 16 August 2023, Wednesday |
| Cut-off time for confirmation of UPI mandate | August 7, 2023; 5 P.M |
IPO lot size
As a retail investor, you will need to put in a bid for at least one lot, i.e. 260 shares worth Rs. 14,820. Here are the details of minimum and maximum lot sizes for different investors:
| Application | Lots | Shares | Amount |
| Retail (Min) | 1 | 260 | Rs. 14,820 |
| Retail (Max) | 13 | 3380 | Rs. 1,92,660 |
| S-HNI (Min) | 14 | 3640 | Rs. 2,07,480 |
| S-HNI (Max) | 67 | 17,420 | Rs. 9,92,940 |
| B-HNI (Min) | 68 | 17,680 | Rs. 1,007,760 |
Company financials
In FY2022-23, the company witnessed steady growth and improvement in its credit quality. The total income of SBFC Finance grew 39% from FY 2022 to Rs. 7404 million while profit after tax grew to Rs. 1497 million from Rs. 645 million in FY22.
Here are the key financials of the company for the past three financial years:
| Particulars | For the financial year ending (in Rs. million) | ||
| March 31, 2022 | March 31, 2021 | March 31, 2020 | |
| Total Assets | 45,150.34 | 42,311.90 | 42,079.85 |
| Total Liabilities | 32,278.67 | 30,260.82 | 31,955.08 |
| Total Expenses | 4,440.06 | 3,974.68 | 3,862.34 |
| Total Revenue | 5,307.02 | 5,115.33 | 4,448.46 |
| Profit After Tax | 645.21 | 850.10 | 354.95 |
| EBITDA | 3,190.94 | 3,620.61 | 3,108.31 |
Strengths
Let’s check the competitive strengths of SBFC Finance Limited:
- Diversified pan India presence
SBFC Finance Limited has strategised its expansion to cater to small business owners, entrepreneurs, self-employed individuals, and salaried and working-class individuals throughout India. With a footprint in 105 cities across 16 states, it has built a strong customer base. As of December 2022, it has 137 branches.
The presence of branches across India reduces concentration risk which is a significant advantage against its peers. The company has invested in high-quality infrastructure and personnel while setting up its branch offices.
- 100% in-house sourcing
100% of the company’s loan portfolio comes from in-house sourcing. As a result, SBFC Finance doesn’t have to rely on direct selling agents for understanding the profiles of customers. The company has adopted a direct sourcing model through branch-led local marketing efforts which has benefitted it greatly. It has helped to cement the relationship with customers.
- Comprehensive credit assessment and risk management framework
SBFC Finance Limited has a proper credit assessment and risk management framework in place to identify, track and manage risks in its operations. It focuses on small business owners whose monthly income is Rs. 0.15 million and who have, previously, serviced gold loans, two-wheeler loans, etc. By focusing on customers who have a better income profile, SBFC achieved a stable growth trajectory.
Good risk management is critical for a financial services company as it helps it maintain financial stability. This maximises its long-term growth potential which makes the company desirable for investors like you.
- Robust asset quality
SBFC has built an extensive on-grounds collection infrastructure to maintain high asset quality. Its branches, which serve a limited radius, have been filled by local hires. So, the branch staff can attend to a customer’s needs quickly. There’s a three-tier collection infrastructure—tele-calling, field collection and legal recovery—which helps in optimum collections.
- Healthy liability franchise with low cost of funds
The ability to access diverse funding sources is one of the key contributors to the growth of SBFC. The company intends to diversify its funding sources, identify new sources of capital and expand its net interest margin.
SBFC has received an A+ credit rating from ICRA which indicates its resilience despite the challenges faced by the Indian economy. Its co-origination agreement with ICICI Limited has helped it to extend priority sector loans and maintain a smooth flow of funds.
- Consistent financial performance backed by profitable growth
SBFC’s financial reports show steady financial performance and profitable growth. The company has taken initiatives to reduce its concentration risk across industries and sectors. So, you won’t find any particular industry contributing more than 10% to their loan portfolio. While its secured loan portfolio has undergone an increase, its quality loan portfolio is securitised regularly. This reduces operational risks.
The loan against the gold portfolio of SBFC helps with the total yield profile and lends additional growth levers. It also acts as a hedge against the cyclic movements of the Indian lending industry caused by various factors.
There’s another point you need to take into consideration when looking at the company’s financial strength. SBFC offers loan management services to third-party financial institutions. It is also a backup service provider for a leading global bank.
- Professional management team with good corporate governance
SBFC has a good management team with experienced and dedicated professionals. The senior management has a good combination of both management executives and independent members. Their business experience has helped the company make optimum use of growth opportunities.
The knowledge and experience of the heads of functional groups such as risk, operations, finance, audit and collections have enhanced the overall management quality.
Risks involved
Every equity investment comes with some risks. Here are some of the risks related to the business of SBFC Finance Limited that you should be aware of:
- Repayment failure may adversely affect their business
If customers fail to repay their loans, it will reduce SBFC’s cashflow. Their risk management and monitoring systems may not be sufficient to counter future losses because of customer defaults. This would increase its gross NPAs and have an adverse impact on the overall business.
- Misleading information may affect SBFC’s judgement of collateral value
If the information provided by customers and third-party service providers turns out to be false, it will heavily impact SBFC’s judgement of its creditworthiness. This is because the financial company relies, to a great extent, on the accuracy of information furnished by its customers.
While SBFC conducts a credit check for all its customers, it cannot provide a guarantee that credit information will always be accurately available.
- Portfolio quality may be affected by high levels of NPAs
SBFC cannot assure that it will always maintain its NPA ratios at favourable levels concerning the credit performance of its customers. The company can also face greater defaults with respect to principal and/or interest repayments in the future.
Moreover, if SBFC’s provisioning coverage is not sufficient to cover the levels of NPAs, the company’s prospects may be adversely affected.
- Disruption in capital flow can adversely affect business
The company’s ability to raise funds on favourable terms and conditions depends on several factors such as results of operations, credit ratings and risk management policies. It also depends on brand equity, regulatory environment, policy initiatives and developments in both domestic and international markets.
If SBFC Finance is unable to acquire funds in time, the company’s financial condition and results of operations will be negatively affected.
Summary
SBFC Finance Limited IPO will be open for subscription on August 3, 2023, and close on August 7, 2023. It is expected to get listed on both NSE and BSE. Given above are the company overview, financials, risks and strengths of the company; you should check these details to make an informed decision.
If you are interested in this IPO, should do your due diligence and check the strength and weaknesses before investing. You can also take the help of an investment expert to safely invest in its IPO.
