The SBFC Finance IPO has garnered significant attention from investors since its opening for subscription on Thursday, August 3, and is scheduled to close on Monday, August 7. The IPO has set the price band for each equity share at ₹54 to ₹57, with a lot size consisting of a minimum of 260 equity shares and in multiples of 260 equity shares thereafter.
Anchor Investors’ Participation:
Prior to the subscription period, SBFC Finance managed to raise ₹304.4 crore from anchor investors. This list included esteemed names like Abu Dhabi Investment Authority, Carmignac Portfolio, Axis Mutual Fund, Birla Mutual Fund, Loomis Sayles, Neuberger Berman, and several others. Additionally, existing investors such as ICICI MF, SBI MF, HDFC MF, Amansa, Malabar, and Steadview Capital also participated in the offer. In total, 5,34,07,893 equity shares were allotted to anchor investors, with 2,23,08,260 equity shares being allocated to 10 domestic mutual funds through a total of 18 schemes, amounting to ₹127.15 crore, or 42% of the anchor book size.
Composition of SBFC Finance IPO:
The SBFC Finance IPO consists of a fresh issuance of equity shares worth ₹600 crore and an offer for sale (OFS) of ₹425 crore, according to the Red Herring Prospectus (RHP). This brings the total offer size of the SBFC Finance IPO to ₹1,025 crore. The company plans to utilize the net proceeds to meet future capital requirements arising from the expansion of their operations and assets, as mentioned in the red herring prospectus.
Grey Market Premium (GMP) and Estimated Listing Price:
The Grey Market Premium (GMP) for SBFC Finance shares stands at +39, indicating that the shares were trading at a premium of ₹39 in the grey market on Thursday, according to topsharebrokers.com. Based on the upper end of the IPO price band and the current premium in the grey market, the estimated listing price for SBFC Finance shares is ₹96 apiece, representing a 68.42% increase over the IPO price. Notably, on the previous session, the grey market premium was ₹40.
SBFC Finance IPO Subscription Status:
As of 10:42 IST on day 1, the subscription status of the SBFC Finance IPO stood at 25%. The retail portion of the IPO saw a subscription of 38%, while non-institutional investors subscribed 31%. However, the Qualified Institutional Buyers (QIBs) portion did not receive any subscription at that time, while the employee portion witnessed a subscription of 26%.
Several brokerages have analyzed the SBFC Finance IPO and provided their recommendations:
- LKP Research: The brokerage recommends a “Subscribe” rating for SBFC Finance Limited, considering its higher price band of ₹57, valuing the stock at 2.4 times Price/Book Value per Share (P/BVPS) based on the current book value per share of ₹23. The brokerage is optimistic about the company’s return ratio, FY23 ROA (Return on Assets) of about 3%, and further improvements post-fund raise.
- Choice Equity Broking Pvt Ltd: The brokerage acknowledges the potential for a strong growth trajectory for SBFC Finance due to ample growth opportunities in the MSME segment and adequate capital, with an additional boost from the fresh issuance of ₹600 crore. However, they also highlight key risks, such as rising competition in self-employed, secured MSME segments, geographical risk, and economic uncertainties. Thus, they assign a “Subscribe with Caution” rating to the issue.
- SBICAP Securities Ltd: The brokerage considers SBFC Finance fairly valued when comparing it with its close peers on similar valuation parameters. They recommend investors to subscribe to the IPO for potential listing gains at a CUT-OFF price.
- Ventura Securities Ltd: The brokerage emphasizes SBFC Finance’s excellent growth, with assets under management (AUM) increasing by 44% from Fiscal 2019 to Fiscal 2023, and disbursements rising by 40% over the same period. The presence of renowned institutional investors supporting the company further adds to its credibility. Ventura Securities Ltd recommends a “Subscribe” rating for the IPO.
The SBFC Finance IPO has attracted considerable interest from both anchor investors and retail investors. While some brokerages recommend subscribing to the IPO, others advise caution and consider valuation and potential risks. Investors should conduct thorough research and consider their risk appetite before making any investment decision.