SBFC Finance IPO subscribed 70.16 times at close

The ₹1,025 crore IPO of SBFC Finance Ltd, consisted of a combination of fresh issue and offer for sale. The fresh issue was to the tune of ₹600 crore while the offer for sale (OFS) was worth ₹425 crore. The IPO pricing was done in the band of ₹54 to ₹57 with the final price to be discovered through the process of book building. While the QIB portion only picked up traction on the last day, the retail portion and the HNI / NII portion got fully subscribed on the first day of the IPO itself. In fact, even the overall IPO had been fully subscribed on the first day of the IPO itself.

Quick update on the overall IPO response

The IPO saw fairly steady response on Day-1 and Day-2 of the IPO and closed with rather healthy subscription numbers at the close of Day-3. In fact, the company got fully subscribed on the first day of the IPO itself. As per the combined bid details put out by the BSE at the close of Day-3, SBFC Finance Ltd IPO was subscribed 70.16X overall, with best demand coming from the QIB segment, followed by the HNI / NII segment and the retail segment in that order. In fact, the institutional segment saw some very good traction on the last day. The HNI portion did do well and a lot of the surge of funding applications and corporate applications did come in on the last day of the IPO. Retail portion got fully subscribed on Day-1 and built up heft gradually. Firstly, let us look at re the details of overall allocation.

As of close of 07th August 2023, out of the 1,335.13 lakh shares on offer in the IPO, SBFC Finance Ltd saw bids for 93,676.17 lakh shares. This implies an overall subscription of 70.16X overall. The granular break-up of subscriptions was in favour of the QIB investors followed by the HNI / NII investors while the retail portion got the lowest subscription among the various categories. QIB bids and NII bids typically gather most of the momentum on the last day, and that was the case in this issue also in the case of QIB bids. Both the QIB and the NII bids picked momentum on the last day and added to its heft of the previous days. Here are the details of the category-wise subscription.

Subscription status of QIB Portion

Let us first talk about the pre-IPO anchor placement. On 02nd August 2023, SBFC Finance Ltd did an anchor placement with 29.7% of the IPO size getting absorbed by the anchors. Out of the 17,98,24,561 shares on offer, the anchors picked up 5,34,07,893 shares accounting for 29.7% of the total IPO size. The anchor placement reporting was made to the BSE late on 02nd August 2023. The IPO of SBFC Finance Ltd opened on 03rd August 2023 in the price band of ₹54 to ₹57 and closed for subscription on 07th August 2023 (both days inclusive). The entire anchor allocation was made at the upper price band of ₹57. Here are the details of the anchor allocation with the principal subscriber names and quantity absorbed for those with the highest allocation. It is just a cross section.

Data Source: BSE Filings

The QIB portion (net of anchor allocation as explained above) had a quota of 375.83 lakh shares of which it has got bids for 72,496.36 lakh shares at the close of Day-3, implying a subscription ratio of 192.90X for QIBs at the close of Day-3. QIB bids typically get bunched on the last day and while the heavy demand for the anchor placement had given an indication of the institutional appetite for the SBFC Finance Ltd IPO subscription overall, the actual demand did turn to be quite robust for the IPO.

Subscription status of HNI / NII Portion

The HNI portion got subscribed 49.09X (getting applications for 13,837.55 lakh shares against the quota of 281.88 lakh shares). That is a very strong response at the close of Day-3 largely because this segment normally sees the maximum response bunched on the last day. Bulk of the funded applications and corporate applications, come in on the last day of the IPO, and that was visible as the overall HNI / NII portion added to its heft on the last day of the IPO. Apart from the QIB portion, even HNIs saw good traction on the last day.

Now the NII/HNI portion is reported in two parts viz. bids below ₹10 lakhs (S-HNI) and bids above ₹10 lakhs (B-HNI). The bids above the ₹10 lakh category (B-HNIs) typically represents most of the major funding customers. If you break up the HNI portion, the above ₹10 lakh bid category got subscribed 53.71X while the below ₹10 lakh bid category (S-HNIs) got subscribed 39.86X. This is just for information and is already part of the overall HNI bids explained in the previous para.

Subscription status of Retail Individuals

The retail portion was subscribed just 10.99X at the close of Day-3, showing steady to strong retail appetite. It must be noted that retail allocation is 35% in this IPO. For retail investors; out of the 657.71 lakh shares on offer, valid bids were received for 7,226.53 lakh shares, which included bids for 6,209.34 lakh shares at the cut-off price. The IPO is priced in the band of (₹54 to ₹57) and has closed for subscription as of the close of Monday, 07th August 2023.

Brief on the business model of SBFC Finance Ltd

SBFC Finance Ltd is classified as a systemically important non-deposit taking NBFC (non-banking finance company). SBFC Finance Ltd was established in the year 2008, with a primary focus on small business owners, entrepreneurs, self-employed as well as on the salaried persons, with limited access to formal sources of finance. Its predominant lending products are the secured MSME loans and gold loans. Today, there are a vast number of entrepreneurs and small business owners who lack access to traditional sources of bank financing. Most banks insist on formal lines of employment for a loan, which is where SBFC Finance fills the gap. It is this gap that SBFC Finance intends to fill up.

Considering that the traditional assessment metrics may not be applicable to the self-employed professionals, SBFC Finance a unique set of parameters for evaluating this segment before giving a loan. The network of SBFC Finance is spread across 105 cities and towns located across 16 states and these are served through a network of 137 branches. The NBFC will use the proceeds from the fresh issue portion to boost its capital adequacy buffers to enable further growth in the loan book. The most recent financial year ended FY23 saw net interest income (NII) grow by a healthy 49% to ₹379 crore. The net interest margins or NIMs are extremely healthy at 9.32%.

The issue is jointly lead managed by ICICI Securities, Axis Capital, and Kotak Mahindra Capital. KFIN Technologies Ltd will be the registrars to the issue. The company will use the fresh funds to boost its capital base, which is essential to expand its asset book.