Shares of SBFC Finance debuted at a healthy premium of 44% on the exchanges in Wednesday’s trade. The stock listed at Rs 82 on NSE over the IPO price of Rs 57 apiece. The stock then went on to rally another 11% in intraday trade, taking the listing day gains to over 60%.
Analysts said aggressive investors may hold it for the long term while others can look to book profits.
SBFC Finance stands out as a rapidly expanding non-banking financial company (NBFC) with robust earnings growth and stable asset quality, said Anubhuti Mishra, Equity Research Analyst at Swastika Investmart.
“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 added.
Led by the robust institutional response, the initial public offer (IPO) of SBFC Finance was subscribed by a whopping 70.16 times at close.
The QIB portion of the IPO was subscribed by an overwhelming 192 times, followed by non-institutional investors at 49 times and retail investors at nearly 11 times.
The IPO, which comprised fresh equity issue of up to Rs 600 crore and an offer for sale (OFS) of up to Rs 425 crore, was 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 the current book value per share of Rs 23.
Astha Jain of Hem Securities advised investors to book partial profits while holding the remaining shares for the long term.
“The IPO had a reasonable pricing and the future growth prospects look strong with a pan India presence, good corporate governance backed by marquee investors,” Jain said.
The proceeds from the fresh issuance worth Rs 600 crore will be used to boost its capital base to meet future capital requirements.
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, and comprehensive credit assessment, underwriting, and risk management framework.
The company has witnessed spread expansion from 7% in FY21 to 7.7% in FY23 despite monetary tightening due to effective re-pricing of loans as well as improved rating profile which has kept the cost of funds under check.
For the year ending March 2023, the company’s revenues were Rs 740 crore. The profit for the period was Rs 149.7 crore.
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.
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