SBFC Finance IPO opens for subscription. Should you bid?
Analysts have given a mixed verdict, staying cautious on IPO with probable pressure on margins, profitability and rising risk of defaults. At the upper price band of Rs 57 per share, the stock is valued at 3x P/BV trailing FY23 book. «Considering the subdued ROE profile of the company as well as high post-issue adequacy of 50%, return ratios are expected to remain under pressure in coming years.
We have a cautious view on the issue,» said Incred Equities. SBFC Finance is a non-deposit-taking, non-banking financial company offering loans including secured MSME loans and loans against gold. The key competitive strengths include its pan-India presence, in-house sourcing, comprehensive credit assessment, underwriting and risk management framework.
The IPO, which comprises fresh equity issue of up to Rs 600 crore and an offer for sale (OFS) of up to Rs 425 crore, is priced in the range of Rs 54-57 per share. At the higher price band, analysts value the stock at 2.4x P/BVPS with a current book value per share of Rs 23. Investors can bid for a minimum of 260 shares and in multiples thereafter.
About 50% of the offer is reserved for qualified institutional buyers (QIBs), 15% for non-institutional investors (NII) and the rest 35% for retail investors. Choice Broking said it expects SBFC Finance to sustain a strong growth trajectory given the ample growth opportunities in the MSME segment and adequate capital with an additional boost to capital adequacy through a fresh issue of Rs 600 crore. However, it added that rising competition in self-employed, secured MSME segments, high risky nature of focused segments, geographical risk and economic uncertainties are the key risks to the business.
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