Started in 2009, IndoStar Capital Finance Limited is a leading non-banking finance company ('NBFC') registered with the Reserve Bank of India as a systemically important non-deposit taking company. Company is primarily engaged in providing structured term financing solutions to corporates and loans to small and medium enterprise ('SME') borrowers in India. Company has recently expanded its portfolio to offer vehicle finance and housing finance products. ICFL operates four principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing.1. Corporate lending: Its corporate lending business primarily consists of (i) lending to mid-to-large sized corporates in manufacturing, services and infrastructure industries, by way of senior secured debt, structured financing, promoter financing and special situation funding and (ii) lending to real estate developers, mainly for financing project level construction of residential and commercial building projects and take-out of early-stage equity investors. Company generally provides lending solutions against tangible collateral as well as security in other forms, such as charge on operating cash flows. Its corporate lending business accounted for 99.8%, 94.8%, 87.6% and 76.8% of its Total Credit Exposure for the fiscal 2015, 2016 and 2017 and upto December 31, 2017 respectively. 2. SME lending: SME lending business, which company commenced in 2015, primarily involves extending secured loans for business purposes to small and medium size enterprises, including businessmen, traders, manufacturers and self-employed professionals. The property securing these loans are typically completed and largely self-occupied residential and commercial property. Company provides SME lending loans from its branches located in ten key locations across India, namely Mumbai, Delhi, Chennai, Bengaluru, Hyderabad, Jaipur, Surat, Ahmedabad, Pune and Indore. Company's SME lending business accounted for 0.2%, 5.2%, 12.4% and 22.7% of its Total Credit Exposure for the fiscal 2015, 2016 and 2017 and upto December 31, 2017, respectively. 3. Vehicle finance: Company's vehicle finance business primarily involves providing financing for purchases of used or new commercial vehicles, passenger vehicles and two-wheelers. Company started vehicle finance business in November 2017. 4. Housing finance: It's housing finance business comprises two business lines, namely (i) affordable housing finance, which commenced operations in September 2017, and (ii) retail housing finance, which commenced operations in March 2018. It operates housing finance business through its wholly owned subsidiary IndoStar Home Finance Private Limited. As of December 31, 2017, company's lenders included, 14 public sector banks, 13 private sector banks, 21 mutual funds and four insurance companies and other financial institutions. As of February 28, 2018, its distribution network included 548 personnel in its in-house sales team, and approximately 949 third-party direct sales associates (the 'DSAs') and other third-party intermediaries who are empaneled with them. Between fiscal 2013 and 2017, its Total Credit Exposure and total revenue grew at a CAGR of 30.0% and 31.4%, respectively. 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.
✍️ Post a Comment