IndoStar Capital Finance Ltd IPO - Should you subscribe?
After a series of mainstream IPOs launched in March 2018, there happened to be a break in an IPO market due to bearish market sentiments and LTCG applicability from April 1, 2018. Full 30 days of April'18 passed without having a single IPO. However, it is hoped that IPO market will pick up from May'18 onwards.
After a temporary break, Indostar Capital Finance Ltd a non-public deposit taking NBFC (Non-banking finance corporation) is going to hit the primary market in May'18. This is 15th mainstream IPO of 2018. The issue size is a whopping Rs. 1844 Crore approx.
Issue Details:
Company background:
Incorporated in 2009 and promoted by Indostar Capital (an arm of Everstone Groun - an India and Southeas Asia focused investor), IndoStar Capital Finance Ltd is a leading non-banking finance company (“NBFC”) registered with the Reserve Bank of India as a systemically important non-deposit taking company which is primarily engaged in providing bespoke Indian Rupee denominated structured term financing solutions to corporates and loans to small and medium enterprise (“SME”) borrowers in India. It has recently expanded its portfolio to offer vehicle finance and housing finance products.
Object of the issue:
It is a mix of Offer For Sale and Fresh Issue
Offer For Sale:
Existing investors are offloading 2,00,00,000 equity shares of Rs. 10 face value. The company will not receive any proceeds from the Offer For Sale. The major selling shareholder is its promoter IndoStar Capital. The summary of selling shareholders along with cost of acquisition is given below:
Fresh Issue:
The Company proposes to utilize the Net Proceeds from the Fresh Issue towards augmenting its capital base to meet future capital requirements.
The company has set the price range between Rs.570 - Rs.572 per share. As on March 31, 2017, EPS (Diluted on consolidated basis) was Rs. 26.31. At upper and lower price band, PE ranges between 21.66 - 21.74. The valuation seems reasonable as industry average PE was 28.66.
The book value as on December 31, 2017 was Rs. 263.96 (on consolidated basis), at upper and lower price band P/B comes to 2.16 - 2.17. From this angle also, the company has set the price which is very competitive. Listing gain can be expected.
Peer Comparison
As on May 3, 2018, the company's peers were trading at PE higher than IndoStar Capital Finance Ltd except Repco Home Finance Ltd. And PB of all peers were higher than the company. The RoNW of the company is also at par with industry. The peer comparisons are given below:
From the above table, it can be gauged that IndoStar Capital Finance Ltd share is cheaper than its peers.
Revenue and profitability:
The company's total revenues have grown from Rs. 241.58 Crore in fiscal 2013 to Rs 719.92 Crore in the fiscal 2017 at a CAGR of 31.4%.
The profit after tax has grown from Rs. 90.09 Crore in fiscal 2013 to Rs. 210.80 Crore in the fiscal 2017 at a CAGR of 23.7%.
In spite of having severe competition in the industry, the company has been performing good and growing fast. It has been working with sound profit margin as well. At this level of operation, the price set seems quite reasonable.
Non-performing Assets
There is always risk of NPAs in any finance company and IndoStar Capital Finance Ltd is no exception. The company's Gross NPAs were Rs. 89.00 Crore or 1.7% of Gross Advances as of December 31, 2017, as compared to Rs. 72.73 Crore or 1.4% of Gross Advances as of March 31, 2017 and Rs. 10.00 Crore or 0.2% of Gross Advances as of March 31, 2016. As the business volume increases, NPA percentage may also increase.
The company's provision for NPAs was Rs.18.29 Crore as of December 31, 2017, as compared to Rs. 10.78 Crore as of March 31, 2017 and Rs. 2.00 Crore as of
March 31, 2016. The Gross NPAs and provisions have increased in recent periods and may continue to increase in future.
Increase in Indebtedness/Debt Equity Ratio
As on December 31, 2017, the Debt/Equity ratio stood at 1.78. The company's Total Borrowings have increased significantly over the years from Rs. 2,573.79 Crore in Fiscal 2015 to Rs. 3,373.30 Crore in Fiscal 2017. As of February 28, 2018, the company had Total Borrowings of Rs. 4794.29 Crore
Conclusion:
Overall, the performance of the company seems good. However, higher debt/equity ratio and rising NPAs may hamper the growth of the company. Further, the company has not paid any dividend so far. One should wait for initial a day or two to take a call of whether to subscribe or not after vouching for subscription status and anchor investor interest.
Thank you for reading....Jai Hind
(Note: I write reviews based on my knowledge and understanding. The reader of this article should do his/her own research before applying)
After a temporary break, Indostar Capital Finance Ltd a non-public deposit taking NBFC (Non-banking finance corporation) is going to hit the primary market in May'18. This is 15th mainstream IPO of 2018. The issue size is a whopping Rs. 1844 Crore approx.
Issue Details:
Company background:
Incorporated in 2009 and promoted by Indostar Capital (an arm of Everstone Groun - an India and Southeas Asia focused investor), IndoStar Capital Finance Ltd is a leading non-banking finance company (“NBFC”) registered with the Reserve Bank of India as a systemically important non-deposit taking company which is primarily engaged in providing bespoke Indian Rupee denominated structured term financing solutions to corporates and loans to small and medium enterprise (“SME”) borrowers in India. It has recently expanded its portfolio to offer vehicle finance and housing finance products.
Its corporate lending business is operated from its registered and corporate office. As of February 28, 2018, the company conducted its retail operations through 71 branches across India and its central support office in Mumbai. In its SME lending and vehicle and housing finance businesses, its branches act as the primary point of sale and assist with the origination of loans, various collection processes and enhancing customer service, while its central support office provides support functions, such as loan processing and credit monitoring. Its enterprise-wide loan management system integrates all activities and functions within its organization under a single technology and data platform, bringing efficiencies to its back-end processes and enabling it to focus its resources on delivering quality services to its customers.
Object of the issue:
It is a mix of Offer For Sale and Fresh Issue
Offer For Sale:
Existing investors are offloading 2,00,00,000 equity shares of Rs. 10 face value. The company will not receive any proceeds from the Offer For Sale. The major selling shareholder is its promoter IndoStar Capital. The summary of selling shareholders along with cost of acquisition is given below:
Fresh Issue:
The Company proposes to utilize the Net Proceeds from the Fresh Issue towards augmenting its capital base to meet future capital requirements.
The company has set the price range between Rs.570 - Rs.572 per share. As on March 31, 2017, EPS (Diluted on consolidated basis) was Rs. 26.31. At upper and lower price band, PE ranges between 21.66 - 21.74. The valuation seems reasonable as industry average PE was 28.66.
The book value as on December 31, 2017 was Rs. 263.96 (on consolidated basis), at upper and lower price band P/B comes to 2.16 - 2.17. From this angle also, the company has set the price which is very competitive. Listing gain can be expected.
Peer Comparison
As on May 3, 2018, the company's peers were trading at PE higher than IndoStar Capital Finance Ltd except Repco Home Finance Ltd. And PB of all peers were higher than the company. The RoNW of the company is also at par with industry. The peer comparisons are given below:
From the above table, it can be gauged that IndoStar Capital Finance Ltd share is cheaper than its peers.
Revenue and profitability:
The company's total revenues have grown from Rs. 241.58 Crore in fiscal 2013 to Rs 719.92 Crore in the fiscal 2017 at a CAGR of 31.4%.
The profit after tax has grown from Rs. 90.09 Crore in fiscal 2013 to Rs. 210.80 Crore in the fiscal 2017 at a CAGR of 23.7%.
In spite of having severe competition in the industry, the company has been performing good and growing fast. It has been working with sound profit margin as well. At this level of operation, the price set seems quite reasonable.
Non-performing Assets
There is always risk of NPAs in any finance company and IndoStar Capital Finance Ltd is no exception. The company's Gross NPAs were Rs. 89.00 Crore or 1.7% of Gross Advances as of December 31, 2017, as compared to Rs. 72.73 Crore or 1.4% of Gross Advances as of March 31, 2017 and Rs. 10.00 Crore or 0.2% of Gross Advances as of March 31, 2016. As the business volume increases, NPA percentage may also increase.
The company's provision for NPAs was Rs.18.29 Crore as of December 31, 2017, as compared to Rs. 10.78 Crore as of March 31, 2017 and Rs. 2.00 Crore as of
March 31, 2016. The Gross NPAs and provisions have increased in recent periods and may continue to increase in future.
As of December 31, 2017, the company's cumulative loans disbursed since commencement of operations amounted to Rs. 22592.98 Crore out of which Rs. 17418.54 Crore had been repaid. As of March 31, 2015, 2016 and 2017 and December 31, 2017, the Company’s Gross NPAs accounted for 0.6%, 0.2%, 1.4% and 1.7% of the Company’s Gross Advances, while the Company’s Net NPAs accounted for 0.5%, 0.2%, 1.2% and 1.3% of the Company’s Net Advances respectively.
Its Average Cost of Borrowings in the fiscal 2015, 2016 and 2017 and the nine month period ended December 31, 2017 was 11.9%, 11.1%, 10.3% and 9.1%, respectively.
Increase in Indebtedness/Debt Equity Ratio
As on December 31, 2017, the Debt/Equity ratio stood at 1.78. The company's Total Borrowings have increased significantly over the years from Rs. 2,573.79 Crore in Fiscal 2015 to Rs. 3,373.30 Crore in Fiscal 2017. As of February 28, 2018, the company had Total Borrowings of Rs. 4794.29 Crore
Conclusion:
Overall, the performance of the company seems good. However, higher debt/equity ratio and rising NPAs may hamper the growth of the company. Further, the company has not paid any dividend so far. One should wait for initial a day or two to take a call of whether to subscribe or not after vouching for subscription status and anchor investor interest.
Thank you for reading....Jai Hind
(Note: I write reviews based on my knowledge and understanding. The reader of this article should do his/her own research before applying)
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