SBFC Finance shares made a healthy debut at Dalal Street on Wednesday, August 16, as the stock was listed at Rs 82, a premium of 44 percent, against its issue price of Rs 57 per share on the National Stock Exchange (NSE). Similarly, the stock was listed at a premium of 44 percent at Rs 81.99 apiece on the BSE.

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A day ahead of its listing, shares of the new-age financial services firm were commanding a premium of Rs 30 per share, or about 53 percent, in the grey market. Till last week, SBFC traded consistently with a 70 percent premium in the unofficial market, but since the start of this week, the premium dropped up to 40-45 percent over the upper price band, according to analysts.

"SBFC Finance debuted in the secondary market at a listing price of Rs 82 versus its issue price of Rs 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," said Anubhuti Mishra, Equity Research Analyst at Swastika Investmart.

"SBFC stands out as a rapidly expanding 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," Mishra said.

About the offer

The Rs 1,025-crore primary offering of the shadow lender had received a robust response from the investors during the bidding process and was overall subscribed more than 74 times.

The IPO of SBFC Finance was sold in the range of Rs 54-57 apiece with a lot size of 260 shares between August 3-7.

The category for qualified institutional bidders was booked 203.61 times, while the non-institutional investors' portion was subscribed 51.82 times. The quota reserved for retail investors was subscribed 11.60 times, while the employee portion fetched 6.21 times bids.

Analysts mostly had a positive view on the issue, advising investors to subscribe to the IPO, citing its pan India network, strong return ratios, superior business model and lower cost of funds. However, they have also flagged risks of higher valuations and rate sensitive factors as the key risks for the company.

"Considering all the rationale, we expect a listing gain of around 35-40 percent against the 65-70 percent expected earlier over the final IPO price, given the subdued market mood," Prashanth Tapse, Research Analyst & Senior VP, Research, Mehta Equities, stated.

Astha Jain, senior research analyst at Hem Securities, also expected SBFC to list at a 40 percent premium to the issue price.

The NBFC is backed by private equity company Clermont Group and investment bank Arpwood Group. Its public issue comprises a fresh issuance of shares worth Rs 600 crore and an offer for sale of Rs 425 crore by Arpwood Group entities.

The proceeds from the fresh issuance worth Rs 600 crore will be used to boost its capital base to meet future capital requirements.

ICICI Securities, Axis Capital, and Kotak Mahindra Capital Company acted as the book-running lead managers and KFin Technologies was the registrar of the offer.

For the year ending March 2023, the company's revenues stood at Rs 740 crore. The net profit for the period came in at Rs 149.7 crore.

Incorporated in 2008, SBFC Finance is a non-deposit-taking, non-banking financial company offering loans including 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 in over 157 Branches in 105 cities in 16 states and two union territories.

First Published:Aug 16, 2023 10:02 AM IST