SBFC Finance plans to file for Rs.1,000 crore IPO

SBFC Finance always had all the right credentials. It was floated by Aseem Dhru, the former CEO of HDFC Securities and a long term banking veteran with HDFC Bank. A man with wide experience in private sector banking, he belonged to the old breed of HDFC Bankers who were both ambitious, aggressive and extremely committed to compliance. SBFC Finance has just kickstarted the process of filing for its IPO, and that should happen soon enough.

SBFC Finance has the backing of marquee names like Clermont Group and Arpwood Partners. Both have bene early backers of SBFC Finance almost from the early stages. SBFC Finance is based out of Mumbai and started its operations only in 2017.

It got a big boost to its lending book when it managed to acquire the entire retail lending business of Karvy Financial Services Private Limited. This was well before Karvy slipped into a huge scam.

With the acquisition of Karvy Financial Services, SBFC Finance got access to a total of 65 branches and a staff of over 700 people. Both the backers of SBFC Finance viz. Clermont Group and Arpwood Partners are based out of Singapore.

The lending business at the entry level is not only seeing big growth but also rapid consolidation and a greater shift out of the informal system to the formal channel. SBFC is likely to benefit from these trends.
 

SBFC Finance is a NBFC that primarily is involved in giving loans to MSMEs, salaried and self-employed non-professionals. Essentially, it caters to the segment of the population that does not get easy access to credit through the formal channels.

In this process, SBFC Finance will join peers like Home First Finance and Aptus Value Housing Finance which had listings recently. These also focus on the low and middle-income groups.

The investment bankers have already been appointed for the issue and the first step will be filing the DRHP or draft red herring prospectus with SEBI. ICICI Securities Ltd will be the lead manager to the issue while Axis Capital and HDFC Bank will be the other advisors who have come on board. The filing is expected to happen shortly and the SEBI approval normally takes around 2-3 months. The actual IPO process will start only after that.

While these are early days, what is evident from reports is that the size of the IPO would be around Rs.1,000 crore. It is also supposed to be a combination of a fresh issue and an offer for sale and Arpwood Partners is likely to be a key participant offering its shares in the OFS. The market is huge and there is a lot of institutional demand for such business models that cater to the bottom of the pyramid. 

SBFC Finance has a PHYGITAL business model with presence across 126 cities in 16 Indian states. Currently, while the Singapore based Clermont Group holds 73% stake in SBFC Finance, Arpwood Group holds 23% stake.

Currently, only 8% of the medium, small and medium enterprises (MSMEs) avail any form of organized credit. The idea of SBFC is to expand that share much higher so that such outfits don’t become victims of usury.

As of the close of March 2022, SBFC Finance had assets under management (AUM) of Rs.3,342 crore. For the full year, it generated top line revenues of Rs.511 crore. It managed to disburse loans worth Rs.1,266 crore during the year while the profit after tax (PAT) for the year stood at a healthy Rs85 crore. In fact, the profits for FY22 surged by 85% on a YoY basis.