Started in 1986, Ascom Leasing & Investments Ltd is an NBFC providing financial services to economically active poor (who are not served by the financial institutions). The company started as NBFC in 2001. The company is engaged in the business of finance, hire purchase, leasing and lending terms loans, mortgage financing. Financial products of company includes:1. Micro-Enterprise Loans (Loan against property/ Personal Loan)2. Pre-Owned Vehicle Loans3. Home Renovation Loans As of 30th June 2019, it has around 2000 plus active customers with the business size of more than Rs 20 crore. The business operation of the company is situated in the Gujarat state only. The decentralized management structure helps the company to manage pan-India presence. As it is an NBFC, it cannot take deposits from the public. The fund requirement of the company is fulfilled by the banks and promoters' investment. Ascom Leasing doesn't generate any revenue from the trading operations as of now. Loan-to-value (LTV) ratio of Ascom Leasing for loan against property and home renovation loan is 50 % and 60-65% respectively, as calculated Market Value. The customers of the company are mostly professional, self-employed or nonprofessional individuals, first-time buyers of vehicles, customers with informal income, customers with limited banking & credit history, and small and medium entrepreneurs (SMEs). On a standalone basis, for the last three fiscals, Ascom has posted turnover/net profits of Rs. 0.97 cr. / Rs. 0.04 cr. (FY16), Rs. 3.66 cr. / Rs. 0.49 cr. (FY17), Rs. 6.24 cr./ Rs. 4.44 cr. (FY18) and Rs. 9.14 cr. / Rs. 3.45 cr. (FY19). For Q1 of FY20, it has clocked in the net profit of Rs. 1.97 cr. on a turnover of Rs. 2.62 cr. Super increase in bottom line in pre-IPO and IPO year raises concern, when complete NBFC segment is facing worst time. For last 3 fiscals, Ascom has posted an average EPS of Rs. 5.77 and average RoNW of 27.2% respectively. The issue is priced at a P/BV of 1.04 on the basis of its NAV of Rs. 28.88 post issue. If we annualise Q1 earnings and attribute it to post issue paid-up equity capital then asking price is at a P/E of around 3 against the industry average of 97 as per RHP. As per FY19 earnings, P/E is 6.8. Company has shown Bajaj Finserve, Kama Holdings, LKP Finance, Edelweiss Financial as its listed peers and comparison is shown in above table, but they are not strictly comparable. On BRLM's front, for Fast Track Finsec Private Limited this is the 3rd IPO in the last three fiscals. Out of the last 2 listings, 1 issue opened at a discount and the rest with premium of 5.77% on the day of listings. As of now from last 2 listings, one is trading above issue price and another below issue price. (25.11.2019) Ascom has shown great financials, RoNW is 27.2% and issue looks very reasonably priced. But main concern is super earnings in pre-IPO and IPO year, and if company can maintain same growth in future also. As complete NBFC sector is facing worst period and showing dull performances. Performance of BRLM is average. Considering all these, we give 'NEUTRAL' rating to this SME IPO.
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