Indostar Capital Finance Limited IPO

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Indostar Capital Finance Limited IPO

Indostar Capital Finance Limited
It is a leading non-banking finance company which is primarily engaged in providing bespoke Indian Rupee denominated structured term financing solutions to corporates and loans to small and medium enterprise borrowers in India. The company recently expanded Their portfolio to offer vehicle finance and housing finance products. Company expertise and focus on our customers, experienced management team and vigilant monitoring of our assets, our business has experienced growth since the commencement of our operations in 2011. Between fiscal 2013 and 2017, our Total Credit Exposure and total revenue grew at a CAGR of 30.0% and 31.4%, respectively. We operate four principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing.

(i) Corporate Lending
 (a) Lending to mid-to-large sized corporate in manufacturing, services and infrastructure industries, by way of senior secured debt, structured financing, promoter financing and special situation funding.
(b) Lending to real estate developers, mainly for financing project-level construction of residential and commercial building projects

(ii) SME Lending.
 SME lending business, which we commenced in 2015, primarily involves us extending secured loans for business purposes to small and medium-sized 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. The company currently provide SME lending loans from our branches located in ten key locations across India, namely Mumbai, Delhi, Chennai, Bengaluru, Hyderabad, Jaipur, Surat, Ahmedabad, Pune, and Indore. Our SME Lending Credit Exposure amounted to 9,67.042 Cr.

(iii) Vehicle Finance.
Vehicle Finance business primarily involves providing financing for purchases of used or new commercial vehicles, passenger vehicles, and two-wheelers. The company commenced vehicle finance business in November 2017. Vehicle finance operations involve a relatively larger sourcing team as compared to our other business lines as it is largely based on our experience of working with customers with limited credit history and our ability to effectively assess risks associated with financing used vehicles.

(iv) H
ousing Finance.
  (a) Affordable housing finance, which commenced operations in September 2017.
(b) retail housing finance, which is expected to commence operations by March 2018.

Indostar Capital Finance Limited IPO Stock Quote & Charts

361.80

-8.31%

  • Open: 392.85
  • High - Low: 400.30 - 352.70
  • Previous Close: 394.60
  • Total Traded Volume: 6074
  • Updated On: 24-Sep-2018

Objects of the Indostar Capital Finance Limited IPO:

Objective of

Indostar Capital Finance Limited IPO

are: Offer for Sale Offer for sale of up to 20,000,000 equity shares. Fresh Issue Equity Shares[*] of Rs 10 aggregating up to Rs 700.00 Cr

Indostar Capital Finance Limited IPO Details:

Open Date: May 09 2018
Close Date: May 11 2018
Total Shares: 32,237,762
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Built Issue IPO
Issue Size: 1844 Cr.
Lot Size: 26 Shares
Issue Price: ₹ 570-572 Per Equity Share
Listing At: NSE,BSE
Listing Date: May 21 2018

Promoters And Management:

Promoters of Indostar Capital Finance Limited Company is: (i) Indostar Capital. The Shareholding pattern of the Indostar Capital Finance.
Entity/Person Number of equity shares Percentage of equity share capital (%)
Indostar Everstone 9,070,118 42.54
ACP LIBRA Limited 3,487,256 16.35
Beacon India Private Equity Fund 2,300,000 10.79
Everstar Holdings Pte. Ltd 1,855,090 8.7
Global Long Short Partners Mauritius I Limited 1,800,000 8.44
Private Opportunities (Mauritius) I Limited 1,200,000 5.63
CDIB Capital Investment II Limited 992,674 4.65
Beacon Light Group Limited 618,363 2.9
Total 21,323,501 100%

Company Business:

(i) The company business has experienced growth since the commencement of operations in 2011 and they have a proven track record of delivering results. Between fiscal 2013 and 2017, the Total Credit Exposure and total revenue grew at a CAGR of 30.0% and 31.4%, respectively. Over the same period, the company has also experienced high growth in disbursements. Since fiscal 2013, the profit after tax has grown every year, and between fiscal 2013 and 2017, our profit after tax grew at a CAGR of 23.7%. (ii) They maintain long-term relationships with their lenders and, as of September 30, 2017, their lenders included, among others, 14 public sector banks, 13 private sector banks, 21 mutual funds and four insurance companies and other financial institutions. Diversification of their sources of funding has contributed to an overall reduction in their Company‘s Average Cost of Borrowings in recent fiscal periods. For fiscal 2015, 2016 and 2017 and the six months ended September 30, 2017, their Company‘s Average Cost of Borrowing was 11.9%, 11.1%, 10.3% and 9.3%,respectively. The decrease in their Cost of Borrowings has allowed them to maintain sufficient interest margins and achieve their liquidity goals, as well as maintain funding stability. Expansion Plan of the Company The Company is planning to selectively expand their business operations, including sourcing and sale of their products, into regions where they expect increasing urbanization, commercial activity and household incomes to result in demand for their various loan products. They currently expect that a significant portion of their geographic expansion will include tier I,tier II and tier III cities in the northern, southern and western regions of India. They intend to grow their branches in fifteen key states across India and currently expect to have approximately 130 branches by June 2018 out of which approximately 100 will be focused on vehicle finance business and remaining 30 for SME lending and housing finance business.

Financials of Indostar Capital Finance Limited IPO:

  1. Balance Sheet Snippet[ Financials as of Sept 2017]
       (i) Shareholders’ Fund[Equity] Value 2023.195 Cr
      (ii) Asset 5390.455 Cr
      (iii) Liability 3367.26 Cr
      (iv) Debt/Equity[<1 ideal] 1.67
      (v)  Net Worth[Asset- Liability] 2023.195 Cr
     (vi)  RONW[PAT/Net Worth] or ROE 5%
     (vii) Book Value or NAV[ Net Worth/No.of Shares] 257
     (viii) P/B  [<5 ideal] 2.225
2. Profit n Loss Snippet (i) The Reveune of the company in last 4 years ( FY14 to FY17) is growing at a CAGR of 21.95%. (ii) The PAT of the company in last 4 years ( FY14 to FY17) is growing at a CAGR of 23.41%. (iii) The Net Interest Margins, for FY 2015, 2016 and 2017 and the six months ended September 30, 2017 was 6.0%, 6.5%, 6.8% and 7.4% respectively. (iv) The Company‘s Capital adequacy ratio, for FY 2015, 2016 and 2017 and the six months ended September 30, 2017 was 32.6%, 34.2%, 33.8% and 36.1%, respectively. (v) The Company‘s Average Cost of Borrowing, for FY 2015, 2016 and 2017 and the six months ended September 30, 2017 was 11.9%, 11.1%, 10.3% and 9.3%, respectively. (vi) P/B(post issue)= 1.90 (vii) Annualized EPS(post issue)= 24.29 (viii) Annualized P/E(post issue)=23.54 at the cutoff price of 572

Comparison With Peers:

Name of the Company FV EPS NAV P/E P/B RONW
Indostar Capital Finance Limited 10 24.29 242.82 23.54 1.90 11.08%
L&T Finance Holdings Ltd 10 5.14 51.87 33.11 3.33 11.44%
Piramal Enterprises Ltd 2 72.57 862.44 37.7 3.17 8.41%
Aditya Birla Capital Ltd. 10 6.35 53.52 26.94 3.2 8.04%
Capital First Ltd 10 23.97 236.48 28.88 3.12 10.37%
Shriram Transport Finance Co. Ltd. 10 55.78 499.46 24.7 2.76 11.37%
Sundaram Finance Ltd 10 61.52 433.47 30.47 4.32 14.19%
Cholamandalam Investment and Finance Company Ltd. 10 46.03 276.49 27.92 4.65 16.63%

Recommendation on Indostar Capital Finance Limited IPO:

Review and Recommendation of

Indostar Capital Finance Limited IPO

from our side is: The valuation looks reasonable at Issue price of 572 as compared to its peers and also company has shown decent growth in the past years. Rating: 7/10. 1-5: Fair 5-7: Good 7-10: Excellent

Registrar of Indostar Capital Finance Limited IPO:

  1. Link Intime India Private Limited

Company Address:

One Indiabulls Center, 20th Floor, Tower 2A, Jupiter Mills Compound, Senapati Bapat Marg, Mumbai 400 013, Maharashtra, India Phone No. 91 22 4315 7000 Fax No. +91 22 4315 7010 E-mail: investor.relations@indostarcapital.com Website: www.indostarcapital.com

25th Sep 2018 - 27th Sep 2018 => Aavas Financiers IPO

Bid Details of Indostar Capital Finance Limited IPO as on
11-May-2018 22:30:01 IST

No.of shares offered No. of shares bid No. of total times
6,435,086 103,495,314 16.08
4,842,106 33,438,704 6.91
11,298,246 16,679,234 1.48
- - -
- - -
22,575,438 153,613,252 6.80
No.of shares offered No. of shares bid No. of total times
6,435,086 66,874,782 10.39
4,842,106 12,035,400 2.49
11,298,246 12,354,498 1.09
- - -
- - -
22,575,438 91,264,680 4.04
No.of shares offered No. of shares bid No. of total times
6,435,086 36,620,532 5.69
4,842,106 21,403,304 4.42
11,298,246 4,324,736 0.38
- - -
- - -
22,575,438 62,348,572 2.76

Discussion on Indostar Capital Finance Limited IPO:

    Dear friends,

    We are now experiencing that SMEs are not able to deliver the same returns which they were giving us around 6 months back.  I have tried to find out the reasons and found some points which I m putting herewith :

    1.  Over-expectations from retailers from SMEs

    2.  Change of sentiment (market conditions)

    3.  Removal of LTCG (got feedback from some ultra HNIs).

    4.  Dreaming of circuits (still in memories).

    5.  Pricing of SME IPOs are considerably high.

    6.  Introduction of funding in SME IPOs (this put up some extra pressure during listing)

    *SME exchange is only a tool which enables retail investors to do private equity in startups and small companies. Anyone who doesn’t invest with a loooong term mindset, and with proper risk allocation, will soon be dissatisfied and sell at whatever price..leading to sharp falls.*

    It is not justified to comment on each rise and each fall … if you are applying in SMEs then please sit patiently … and if you cannot sit patiently then may please sold off your holdings and sleep peacefully.

    Any other comments / queries are most welcome.

    Thanks,
    Monika

    Currently very less activity in the grey market. HNI response in last two days is not encouraging. Let us see how it fares on final day. I will apply only after seeing subscription figure.

    *Indostar Capital Finance LTD*….

    Company was incorporated as *RV Vyapaar LTD* on July 21,2009 & later name was Changed to *Indostar Capital Finance Pvt ltd* on November 8, 2010.
    Promoter – Indostar Capital.
    IPO of fresh issue of 700 Cr and OFS of 2 Cr Equity shares, at a price of *572* aggregating to *1844 Cr* , comprising OFS of upto 1.85 Cr Equity shares by *Indostar Capital*(Promoter selling Shareholder) and OFS of 14,91,593 by other selling Shareholder & offer will constitute 34.55% of post issue paid up capital.
    Equity share outstanding after the offer = 9.1141 Cr.
    It is NBFC, Major loan book comprises of loans to Corporate & loans to SME borrowers in India, & Recently expanded Portfolio to offer vehicle financing & housing Finance products.
    Between FY13 to FY17, Total Credit Expsoure & total revenue grew at a CAGR of 30% & 31.4% Respectively.
    As of Feb 28,2018, it conducted retail operations through 71 branches across India & central Support office in Mumbai.
    Total Revenue has grown to 719 Cr in FY17 from 241.5 Cr in FY13 at a CAGR of 31.4% & PAT has grown to 210 Cr in FY17 from 90 Cr in FY13 at a CAGR of 23.7%.
    As of December 31,2017 it had significant exposure in Real Estate, financial services, Poultry products, infrastructure & digital cable sector in India,
    41.6%, 10.8%, 6.9%, 3.5% & 2.3% of Total credit Exposure in above Respectively.
    As of December 31,2017 top 10 largest performing loans accounted for 2229 Cr representing 43.1% of Total Credit Exposure as of Date.
    Gross NPA were 89 Cr or 1.7% of Total Advances as of December 31,2017 as compared to 72.7 Cr or 1.4% Of Total gross advances as of March 31,2017 & 10 Cr or 0.2% of Gross advances as of March 31,2016.
    As of December 31,2017, 93.9% of Real estate loans from corporate lending business were disbursed in the MMR(Mumbai Metropolitan Region).
    CAR was 31.6% & 33.8% as of December 31,2017 & March 31,2017 respectively.
    As of December 31,2017, Total Credit Exposure
    were *5171 Cr*.
    As of March 31,2017, approx 82.8% & 88.8% of Total Credit Exposure to secured by movable & immovable assets or other forms of collateral.
    As of December 31,2017 & March 31,2017 approx 11.2%, & approx 17.2% respectively of total credit Exposure were provided on Unsecured basis.
    As of December 31,2017
    Networth = 2080 Cr.
    NAV as of December 31,2017 = 264.
    Average cost of Acquisition –
    Indostar Capital – 133.
    Vimal Bhandari – 130.
    Shailesh Shirali – 130.
    Jayant Gunjal – 131.
    Vivek Agarwal – 131.
    Sandeep Baid – 130.
    One Dispute by Shareholder related to share allocation and Notice is sent by him to the company, and Company had Denied all the allegations but Point to be considered.
    As of March 31,2015,2016,2017 & 9MFY18, Gross NPA accounted for 0.6%, 0.2%, 1.4% & 1.7% of Company gross advances while Net NPA accounted for 0.5%, 0.2%, 1.2%, 1.3% of company Net advances.
    NIMs for FY15, FY16, FY17 & 9MFY18 was 6%, 6.5%, 6.8%, & 6.9% respectively &
    ROA was 4.2%, 4.4%, 4.1% & 3.8% respectively, & ROE was 12.3%, 13.6%, 12.2% & 10.9% &
    CAR was 32.6%, 34.2%, 33.8% & 31.6%.

    As of December 31,2017, Top 5 borrowers, Top 10 borrowers & Top 20 borrowers of corporate of corporate lending business accounted for 30.7% , 56.2% & 86% of aggregate corporate lending exposure.
    Total income stood at 720 Cr for FY17, and for 9MFY18 stood at 586 Cr.
    At a PAT of *210* Cr for FY17, and for 9MFY18, PAT of 164 Cr, even Q4FY18, if we take Good numbers, than Full year PAT of *230* Cr,
    And price of *572*, it is asking for *22* times FY18 earnings, with P/B of *2.5* FY18, and NiMs like other players, Asset quality largely same, Less ROE, Cost to income ratio is at 27.6% for 9MFY18,
    & *Total AUM = 5171 Cr*
    And at a price of *572* asking for Market Cap of *5200*, means AUM = Market cap,
    Looks expensive.

    *Peers*

    *L&T Finance*
    Consolidated PAT grown at 40%, for FY18, for Q4FY18 PAT has grown at 28%, High ROE of 15%, Reducing gross and Net NPA,
    Low cost to income ratio,
    Trading at *23* times FY18 earnings, with P/B of 2.5 and NIMs of 7%, low Cost of borrowing of 8.1%, AUM of 66,000 Cr and Market cap of 35,000 cr, Nearest Comparison,and this one looks a buy between *160-170* for *185* and *200*
    For short to medium term,
    And Also good for long term.

    *Capital first* Also trades at 20 times FY18 earnings, with P/B of 2.4, AUM of 27,000 Cr, Pat Growth of 37%, for FY18, Net NPA of 1%, Market cap of 6131 Cr and ROE of 13%.

    *Mas Financial*
    Into SME & Microfinance lending,
    Growing at very fast rate, and Trading at 26 times FY18 earnings, with AUM of 3600 Cr and Market Cap of 3450 Cr, CRAR of 33%, ROA of 4.2%, ROE of 17.7% , PAT Growth of 40%, for 9MFY18.

    *Conclusion*
    Book tilted towards, corporate lending majorily towards real estate lending, plus top 10 borrowers accounting for 43% loan book, it’s risky,
    Plus asking for Similar valuation like *L&T Finance* & other,
    Even with *20* growth asking for *20* times FY19 Earnings, not cheap,Peers growing at *25-30*%,

    Why Promoter existing too much holding,
    Issue size is *1844 Cr* which is large ,

    Expect Fair value in between *510-550*,
    With P/B of 2.3-2.4,

    *Caution*

    Stock can go down much, nothing much and asking for High valuation when peers are available at less and have high quality assets,

    *See the Subscription numbers and take a call for Risky investors*

    *Rest Aviod*

    *Buy L&T Finance between 160-170*
    For *185* and *200* in short to medium term…..
    Also good for long term,
    *Stop loss is *140*

    Company commenced operations in 2011. Average cost of acquisition of promoters and other shareholders is around Rs.130. They will be getting nearly 5 times their investment in this period.
    Isn’t it too much demand in short span.
    It seems to be fully priced on valuation basis also. Many such NBFCs already listed in secondary market.
    What is different in it?

    IndoStar IPO:
    Corporate finance 76%, SME finance 22% share in total loan book. Housing and vehicle finance very less 2%. Housing finance considered as safest. Corporate and SME both are risky.

    As per the sources Hdfc will not come in this month.
    It is expected in first week of June. – fwd

    It is coming at 22.5 PE ratio. 2.3 times of book value. Pricing is very reasonable. Lead Managers fixing the price after considering last 7 issues.(Except Bandan and Lemon all are lists at discount or at issue price). Pricing is OK. Now we have to look how qib and hni participates this issue. It seems good response from qib.

    Seems good for listing and as well short/long term.. Apply!

    As of September 30, 2017, company had 180 employees.

    As of March 31, 2015, 2016 and 2017 and September 30, 2017, the Company‘s Gross NPAs
    accounted for 0.6%, 0.2%, 1.4% and 1.9%, while their Company‘s Net NPAs
    accounted for 0.5%, 0.2%, 1.2% and 1.6% respectively.

    As per Crisil Report, the top four NBFCs in wholesale financing are Piramal Group (includes Piramal Enterprise and Piramal Finance Private), Aditya Birla Finance, Tata Capital Financial Services, and Edelweiss Financial Services. These four players together account for more than half of the overall wholesale financing by NBFCs.

    IndoStar IPO – Financial Information (Basis of Valuation)

    EPS for FY14-15 >>> Rs.21.43 (Page #117 of RHP)
    EPS for FY15-16 >>> Rs.26.41 (Page #117 of RHP)
    EPS for FY16-17 >>> Rs.26.31 (Page #117 of RHP)
    EPS for 9M17-18 >>> Rs.18.82 (Page #117 of RHP)

    RoNW for FY14-15 >>> 11.08% (Page #118 of RHP)
    RoNW for FY15-16 >>> 12.43% (Page #119 of RHP)
    RoNW for FY16-17 >>> 11.60% (Page #119 of RHP)
    RoNW for 9M17-18 >>> 07.90% (Page #119 of RHP)

    NAV as on December 31, 2017 was Rs.263.96 (Page #119 of RHP)

    Peer Group (Page #120 of DRHP):
    L&T Finance Holdings
    Piramal Enterprises
    Aditya Birla Capital
    Capital First
    Shriram Transport Finance Co.
    Sundaram Finance
    Cholamandalam Investment and Finance Co.
    Repco Home Finance

    IndoStar IPO – Schedule (Pg #377 of RHP)
    02nd May – Price Band to be Announced
    08th May – Anchor List
    09th May – Offer Opens
    11th May – Offer Closes
    16th May – Finalisation of Basis of Allotment
    17th May – Unblocking of ASBA
    18th May – Credit to Demat Accounts
    21st May – Listing on NSE & BSE

    IndoStar IPO – Issue Information *(TENTATIVE)*

    Issue Opens on: 09 May 2018
    Issue Closes on: 11 May 2018
    Issue Type: Book Built Issue IPO
    Issue Size: 3,07,69,231 Equity Shares
    Face Value: Rs 10 per Equity Share
    Issue Price: Rs.640 – Rs.650 per Equity Share
    Market Lot: 23 shares
    Listing At: NSE, BSE

    Equity Shares outstanding prior to the Issue = 7,89,01,199 Equity Shares
    Offer for Sale of 2,00,00,000 Equity Shares @650 = Rs.1300 Crores
    Fresh Issue of 1,07,69,231 Equity Shares @650 = Rs.700 Crores
    Equity Shares outstanding after the Issue = 8,96,70,430 Equity Shares

    Category-wise Break up:.
    Anchor – 92,30,769 Shares = 600Crs
    QIB – 61,53,846 Shares = 400Crs
    NII – 46,15,385 Shares = 300Crs
    RII – 1,07,69,231Shares = 700Crs (Lot size: 23 = 4,68,227 Forms)

    Total Issue – 3,07,69,231 Equity Shares = 2,000Crs.

    Subscription required for 1X
    RII = 4,68,227 Forms
    NII = 300Crs

    Interest cost @5%p.a. for 7days = 62.33paise for 1X