If strong initial public offering (IPO) subscription numbers and a robust business model with stable asset quality were the primary reasons for bullishness up until last week, the equity market correction is the primary reason for this transition, according to experts.

In more than three and a half weeks, particularly since July 20 when Nifty reached a record high of 19,992, the index has retraced approximately 3 percent, and analysts predict the market consolidation to continue. In the future weeks, the runaway rally since the end of March is unlikely to continue.

On the grey market, SBFC consistently traded at a 70 percent premium until the beginning of this week, when the premium fell to 40-45 percent over the upper price band, analysts said under the condition of anonymity. The grey market is an unofficial market where IPO shares are traded prior to listing.

The Rs 1,025 crore IPO was oversubscribed 70.16 times from August 3-7, with qualified institutional buyers (QIBs) purchasing 192.89 times the allotted quota, high net worth individuals 49.09 times, retail 10.99 times, and employees 5.87 times their allotted portion.

In light of the subdued market sentiment, Prashanth Tapse, Research Analyst and Senior Vice President of Research at Mehta Equities, expects a listing gain of 35 to 40 percent over the final IPO price, as opposed to the 65 to 70 percent previously anticipated.

‘Listing gain justified’

He believes that the present listing gain is warranted based on the company’s attractive IPO valuations, strong anchor book, and impressive financial track record, followed by a business model with a strong emphasis on under-served and under-banked customers, which affords the company the opportunity to receive a premium listing.

Astha Jain, a senior research analyst at Hem Securities, also anticipates that SBFC will list at a 40 percent premium to its IPO price.

The professionally managed NBFC, with a primary focus on the MSME loans segment (which contributes over 80% of total revenue) and gold loans (17% of total revenue), saw assets under management grow at a CAGR of 44% during FY19-FY23, while disbursements grew at a CAGR of 40% over the same period.

“Its balance sheet has steadily improved, with its net worth reaching Rs 1,727.27 billion as of March 2023, an increase of 34 percent over March 2022.

Additionally, a stable credit history, risk management policies, and brand equity have enabled it to access borrowings at competitive rates, with an average cost of borrowing of 8.22 percent for FY23 compared to 7.65 percent for FY22,” SBI Securities said.

With a presence in 120 cities and 152 branches in India, the company emphasises on loans with ticket sizes ranging from Rs 5 lakh to Rs 30 lakh, which comprised over 87 percent of its total AUM in FY23.

With direct customer sourcing and strong relationships, the company sustains gross non-performing assets (NPAs) and net NPAs ratios of 2.43 percent and 1.41 percent in FY23 compared to 2.7 percent and 1.6 percent, respectively, in FY22.

SBFC Finance reported a net profit of Rs 150 crore for the year FY23, up 132% from the previous year, and net interest income increased by 49% to Rs 378.9 crore during the same period.

The NBFC is supported by the private equity firm Clermont Group and the investment banking firm Arpwood Group. Its public offering consists of a fresh issuance of shares worth Rs 600 crore and an offer to sell shares worth Rs 425 crore by entities within the Arpwood Group. The offer price range was between Rs 54 and Rs 57 per share.

The proceeds from the new issue will be used to increase the company’s capital base in order to satisfy its future capital needs for business and asset expansion.

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As anticipated, the stock opened at Rs 82, up 44 percent from its issuance price of Rs 57, on the NSE. It maintained its opening price, which was also its day’s low, throughout the session and reached a 67.5 percent intraday high of Rs 95.45.

At market close, the stock was up 61.75 percent to Rs 92.20 on the NSE and up 61.77 percent to Rs 92.21 on the BSE.

SBFC Finance traded 20,44 crore equity shares on the NSE and 1.09 crore shares on the BSE in terms of volume.

Last week, the professionally managed NBFC, backed by illustrious institutional investors including Clermont Group, Arpwood Group, and the Malabar Group, raised Rs 1,025 crore through its initial public offering. The offer price range was Rs 54-57 per share.

SBFC Finance focuses primarily on MSME loans, which account for over 80% of its total business, while the gold loans segment accounts for approximately 17%.

Read Also : SBFC Finance IPO grey market premium falls. Will it still debut on a strong note?

The company has 152 branches in 120 locations spanning 16 states and 2 union territories. In addition, the company is well-diversified, with 31% of its AUM (assets under management) in the North, 38% in the South, and the rest in the West and East.

The AUM as of March FY23 was Rs 4,943 crore, growing at a robust rate of 44% CAGR during FY19-FY23, while disbursements grew at a rate of 40% CAGR during the same period.

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On the BSE website:

a) Select issue type ‘equity’ and issue name ‘SBFC Finance Limited’

b) Enter either ‘Application Number’ or ‘PAN Number’

c) Check box (I am not a robot), and click on ‘Search’ button

In case of IPO registrar’s portal:

a) Select IPO Name ‘SBFC Finance Limited’

b) Select and accordingly enter either ‘Application Number’, or ‘Demat Account’ or ‘PAN Number’

c) Enter ‘Captcha’ and finally click on ‘Submit’ button

Eligible investors will have their equity shares transferred to their demat accounts after the basis of allotment is finalised on August 14, and failed investors will have their refunds refunded to their bank accounts by August 11.

SBFC Finance shares will be listed on the BSE and NSE on August 16.

Under cover of anonymity, experts claimed, “We have seen strong demand for its shares in the grey market as it traded with 70% premium over the upper price band.”

Reasonable valuations, a professional management team, strong finances, and rising asset quality in the face of rigorous credit quality checks are just some of the factors that analysts say contribute to the grey market premium’s overall health.

Grey market premium may also be supported by the positive reaction to the initial public offering (IPO) of private equity firm Clermont Group and SBFC Finance, which was sponsored by investment bank Arpwood Group.

Qualified institutional buyers (QIBs) provided the most support for the sale, bidding 192.9 times its permitted quota during the Rs 1,025-crore public issue from August 3-7, for a total of a 70.16 times subscription. Retail investors booked their allotment 10.99 times, high net worth individuals 49.09 times, and employees 5.87 times.

The offer, with a price range of Rs 54-57 per share, included a new issuance of Rs 600 crore, the majority of which would be used to increase the company’s capital base in order to meet the financial needs that will inevitably arise from the expansion of the business and its assets.

The selling shareholder, Arpwood Group, will receive Rs 425 crore from the issue’s offer for sale.

SBFC has one of the greatest AUM growth rates among MSME-focused NBFCs in India, at a CAGR of 44% between FY19-FY23, with substantial disbursement growth, at a CAGR of 40% during the same period, supported by its widespread presence in 120 cities through its 152 branches.

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By the end of the 10th of August, the IPO programme predicts that the basis of allotment would be finalised. Due to the high number of applications, each qualified investor will receive at least one lot (260 shares) in the allotment.

Share allotment status can be checked by the participants on the BSE website or the IPO registrar’s portal.

By August 14, successful investors will have their equity shares transferred to their demat accounts, and by August 11, failed investors will have their refunds deposited into their bank accounts.

Since trading venues will be closed on August 15 in observance of Independence Day, SBFC Finance’s public debut will take place on August 16.

From August 3-7, a diverse group of investors showed strong interest in the first public offering of the NBFC that focuses on micro, small, and medium enterprises. For a total of Rs 53,395 crore, they have paid for 936,76 crore in equity shares, out of an offer size of 13.35 crore shares.

High net worth individuals purchased 49.09 times their permitted quota, while qualified institutional buyers bid 192.9 times their quota. Ten and a half times as many reservations were made for the reserved portion of retail investors as were made for the reserved portion of employees.

Because of this, there has been a lot of interest in its shares among unregulated markets. In the grey market, the unofficial market for IPO shares that can be purchased and sold until the listing, its shares were offered at a premium of 70% over the upper price band, analysts said on condition of anonymity.

The offer has a price range of Rs 54-57 per share.

SBFC Finance, which is supported by the Clermont Group and the Arpwood Group, has successfully raised Rs 1,025 crore in its first public offering. Only Rs 600 crore was offered to the public as a fresh issuance, with the remaining amount being sold to investors. Companies owned by the Arpwood Group sold stock through the offer to the public.

The majority of the proceeds from the new offering will go towards strengthening the company’s capital foundation in preparation for the inevitable expansion of the business and its assets.

The Mumbai-based NBFC primarily distributes loans with ticket sizes between Rs 0.5 million and Rs 3 million, with secured MSME loans accounting for 80% of the AUM and loans against gold accounting for the remaining 17%. In addition, as of the first quarter of 2023, more than 87% of its AUM had a ticket size in this range.

Promoters owning 80.48 percent of the company are the Clermont Group’s SBFC Holdings Pte Ltd and Clermont Financial Pte Ltd, as well as the Arpwood Group’s Arpwood Capital and Arpwood Partners Investment Advisors LLP.

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According to subscription data made available by the exchanges, investors bid for 936,03 billion shares against an offer size of 13,35 billion.

Retail investors purchased 10.89 times their allotted quota, whereas the portion reserved for employees, who will receive shares worth Rs 10.25 crore, was subscribed 5.78 times.

High-net-worth individuals (HNIs) outbid their reserved portion by 49.08 times, while qualified institutional purchasers (QIBs) outbid by 192.9 times. Half of the issue is reserved for qualified institutional buyers, 15 percent for high-net-worth investors, and the remaining 35 percent for retail investors.

The Clermont Group and Arpwood Group-backed NBFC hope to raise Rs 1,025 crore through the IPO, which includes a fresh issue of shares worth Rs 600 crore and the sale of shares worth Rs 425 crore by three Arpwood Group-owned companies.

The price range for the offering, which began on August 3, has been set between Rs 54 and Rs 57 per share.

Anchor investors, including Abu Dhabi Investment Authority, Steadview Capital Master Fund, Amansa Holdings, Carmignac Portfolio, Think India Opportunities Master Fund LP, SBI Mutual Fund, ICICI Prudential, and Tata Mutual Fund, have provided Rs 304.42 crore to SBFC Finance.

The proceeds from the offering will be used to increase SBFC’s capital base as the company expands, according to the company.

By August 10, the non-banking finance company will finalise the basis of allotment, and by August 14, the shares will be transmitted to the demat accounts of qualified investors.

By August 11, refunds will be credited to the accounts of unsuccessful investors. The stock will begin trading on August 16.

Anonymous analysts reported that on the grey market, SBFC Finance shares were available at a 70 percent premium to the upper price band.

The grey market is an unofficial platform for trading IPO shares, and its price is closely monitored for estimation purposes.

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The post SBFC Finance IPO subscribed over 70.11 times on final day appeared first on Republic Aeon.

On August 10, only TVS Supply Chain Solutions, a provider of services related to supply chain management, will launch an initial public offering on the mainboard. The issue opening is on August 9 and the anchor book will be open for one day. The closing date is August 14.

Omega TC Holdings and Tata Capital Financial Services, among others, are selling a combined 1.42 billion equity shares as part of the public issue, which totals Rs 600 billion. The company has not yet disclosed the expected price range.

The funds raised in the new issue will be used primarily to reduce outstanding debt and for other general corporate purposes.

Srivari Spices and Foods, a small and medium-sized enterprise, will be the second company to go public. Offer bidding will take place from August 7 to 9, and the price range per share will be between Rs 40 and Rs 42.

The spice and flour maker’s public issue would only consist of a new issue of 21.42 lakh equity shares, but it will still aim to raise Rs 9 crore.

The monies will be used for the company’s working capital needs and other general corporate objectives.

Other IPOs concluding this week include SBFC Finance’s Rs 1,025-crore public issue on August 7 and Concord Biotech’s Rs 1,551-crore offer backed by the late Rakesh Jhunjhunwala’s RARE Trusts on August 8.

While the initial public offering (IPO) of Concord Biotech was subscribed 58% on its debut, the public issue by SBFC Finance has so far been subscribed 7.09 times in the last two days.

SME providers Yudiz Solutions, which offers IT solutions and consultation services, and Sangani Hospitals, which offers a wide range of medical specialties in the Indian state of Gujarat, will both close their public issues on August 8. Both have received almost 80% of their target subscriptions.

The post Dalal Street week ahead: Two IPOs, 4 stocks to debut next week appeared first on Republic Aeon.