Shares of SBFC Finance were under pressure on Thursday, dragged on account of profit booking, a day after its stellar listing.
The stock fell as much as 6.2 percent to its intra-day low of ₹86.50.
On Wednesday, August 16, the stock listed at ₹82, a robust premium of 43.8 percent against its IPO price of ₹57. The stock further extended gains to end its debut session almost 62 percent higher at ₹91.2.
Most brokerage firms had suggested subscribing to the issue of its pan India network, strong return ratios, robust business model and lower cost of funds. However, some have flagged risks of higher valuations and probable pressure on margins as the key risks for the company.
After its stellar listing, Anubhuti Mishra, Equity Research Analyst at Swastika Investmart, said, "SBFC Finance Limited debuted in the secondary market at a listing price of ₹82 versus its issue price of ₹57, making it another intriguing listing where investors would receive some decent returns in the IPO. That represents a premium of almost 43 percent, although it falls short of earlier projections, which is probably a result of broader market volatility. SBFC stands out as a rapidly expanding non-banking financial company (NBFC) with robust earnings growth and stable asset quality. However, it bears the vulnerability of being sensitive to interest rates and market cycles, so in this market, after listing at such a premium, one should book profit, however aggressive investors may hold it for the long term."
Meanwhile, Vinit Bolinjkar, Head of Research - Ventura Securities, believes that the stock discounts the fair value and more. “Expect profit booking. For long-term investors ₹75 can be a good stop to continue holding,” he advised.
Incorporated in 2008, SBFC Finance provides secured MSME loans and loans against gold primarily to entrepreneurs, small business owners, self-employed individuals, and salaried and working-class individuals. The company has an extensive pan-India network with over 157 branches in 105 cities in 16 states and two union territories.
The ₹1,025-crore issue of SBFC Finance opened for subscription on Thursday, August 3 and closed on August 7. The price band for the offer was set in the range of ₹54-57 per share. This was the first IPO to be launched in the month of August 2023. It comprised of a fresh issuance of shares worth ₹600 crore and an offer for sale (OFS) of shares worth ₹425 crore by promoters.
The IPO received a solid response from the investors and was subscribed to 74.06 times in the 3 days of bidding. The portion for qualified institutional bidders was booked 203.61 times, while the non-institutional investors' category was subscribed to 51.82 times. The quota reserved for retail investors was subscribed to 11.60 times, while the employee portion fetched bids 6.21 times the offer.
SBFC Finance recorded a massive 132 percent growth in its net profit at ₹150 crore for the year ended March FY23, with other income rising 50 percent YoY to ₹86.2 crore during the same period.
Its net interest income also grew by 49 percent to ₹378.9 crore, with disbursement for the secured MSME segment growing 71 percent YoY to ₹2,277 crore and loan against gold rising 17.4 percent YoY to ₹1,323.4 crore for the year. Assets under management, as well, increased sharply by 55 percent YoY to ₹4,943 crore during the same period. However, its net interest margin dropped to 9.32 percent for FY23, down from 9.39 percent for FY22, while return on assets rose to 2.92 percent from 1.48 percent during the same period.
Asset quality of the firm has also seen consistent improvement, with the gross non-performing assets in FY23 falling 31 bps YoY to 2.43 percent, and net NPA declining 22 bps to 1.41 percent compared to the previous year.
