Started in 2008, Hinduja Leyland Finance Limited is one of the leading vehicle finance NBFCs in India with a focus on urban and semi-urban markets (as per CRISIL Report). They provide retail finance through a wide range of vehicle financing and housing finance products. The assets under management ('AUM') have grown at a CAGR of 48.30% from Rs 41,370.54 million as of March 31, 2014 to Rs 200,091.66 million as of March 31, 2018. Company finances a wide range of commercial and personal vehicles, which include medium and heavy commercial vehicles ('MHCVs'), light commercial vehicles ('LCVs'), small commercial vehicles ('SCVs'), cars, multi utility vehicles, tippers, three wheelers, and two-wheelers, tractors and construction equipment including used vehicles. As of March 31, 2018, the vehicle finance business represented 61.89% of the AUM. The vehicle finance business has a diversified customer base comprising of First Time Buyers or FTBs, fleet operators (small, medium, strategic and large) captive users and self-employed individuals, who are largely based in urban and semi-urban locations. Company commenced the housing finance business in Fiscal 2016 through its wholly-owned subsidiary, Hinduja Housing Finance Limited, which focuses on providing finance for housing loans including affordable housing loans. As of March 31, 2018, retail mortgage loans (comprising its home loans and loans against property) represented 14.95% of the total AUM. They also extend loans to other NBFCs that provide financing products including micro-finance, vehicle loans, affordable housing, and MSME loans. HLFL is promoted by Ashok Leyland Limited ('ALL') and is a part of the Hinduja group which is a diversified global business group with a track record of growing business in several industries. Company leverages its relationship with ALL, which is the second largest carrier in the MHCV segment in India (as per CRISIL Report), to source customers and expand its operational network. As of March 31, 2018, loans for vehicles manufactured by ALL represented 42.12% of the Company's total AUM. Company has established an expansive operational network within nine years of commencing operations. As of March 31, 2018, the operations included 349 branch offices and 1550 Business Locations spread across 23 States and two Union Territories across India. Out of the total 1550 Business Locations they have categorised 867 Business Locations as urban, 637 Business Locations as semi-urban and 46 Business Locations as rural based on the classification provided by the Census Organisation of India Report. In addition, as of March 31, 2018, they had 80 branches and 101 Business Locations from where they conduct housing finance activities. Company has entered into preferred financier arrangements with various motor vehicle OEMs to provide financing for their vehicles, and work closely with their respective dealer network to provide the vehicle finance products to their customer base. As of March 31, 2018, Company had 1131 full-time employees while the Subsidiary, HHFL had 118 full time employees, including a large number of field personnel responsible for marketing the financial products and building relationships with potential customers. As per financial performance, ICFL has posted total income/net profits of Rs. 396.91 cr. / Rs. 112.13 cr. (FY14), Rs. 528.06 cr. / Rs. 149.04 cr. (FY15), Rs. 644.05 cr. / Rs. 191.64 cr. (FY16) and Rs. 719.92 cr. / Rs. 210.80 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 164.08 cr. on total revenue of Rs. 585.95 cr. So company has posted consistent growth over last couple of years. ICFL has posted an average EPS of Rs. 25.53 and average RoNW of 11.62% for last three fiscals. Issue is priced at a P/BV of 2.17 as per NAV of 263.96 on 31.12.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 24. As per RHP, industry average P/E ratio is 28.66 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, five merchant bankers associated with this issue and have handled 58 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 6 issues opened below their offer price and 4 opened at par on listing dates. As per financials, company's growth is consistent and very good, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 24 as per latest earnings. Company is an NBFC with principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing. Last two business segments (Vehicle Finance & Housing Finance) are started in recent past and it may give further boost to company's growth, but increasing bond yields and FD rates may put pressure on margins. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO.
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