(i) Neeraj Swaroop is an Independent Director and Chairperson of the Board. He holds a bachelor’s of technology degree in mechanical engineering from Indian Institute of Technology, Delhi and a post graduate diploma in management from Indian Institute of Management, Ahmedabad. He has been associated with the Company since November 21, 2017. Prior to joining the Company, he was associated with Pond’s (India) Limited, Bank of America, HDFC Bank Limited, Standard Chartered Bank and Singapore Exchange Limited and he is currently a visiting faculty at S.P. Jain Institute of Management & Research, Mumbai. (ii) Aseem Dhru isthe Managing Director and Chief Executive Officer of the Company. He holds a bachelor’s degree in commerce from Gujarat University. He is a member of the Institute of Chartered Accountants of India and has been certified by the Institute of Cost and Works Accountants of India. He has over 25 years of experience in the banking industry and has been associated with the Company since September 28, 2017. Prior to joining the Company, he was associated with HDFC Bank Limited as a group head – business banking working capital & retail agri business, HDFC Securities Limited as managing director and chief executive officer and was a director on the board of HDB Financial Services Limited. (iii) Amol Jain is a Non-Executive Nominee Director of the Company. He holds a bachelor’s of technology degree in electrical engineering from Indian Institute of Technology, Bombay and a post graduate diploma in management from Indian Institute of Management, Ahmedabad. He has been associated with the Company since May 9, 2017. He is part of the senior leadership team at Arpwood Partners Fund I LLP as its co-founder. Prior to co-founding Arpwood Partners Fund I LLP in 2015, Amol was associated with TPG Capital India Private Limited and was part of DSP Merrill Lynch from 1999 to 2005. He has also been a director on the board of Shriram Equipment Finance Limited, Shriram Holdings Madras Private Limited and TPG Wholesale Private Limited (now renamed as Vishal Mega Mart Private Limited)

 

Particulars (in cr)	2021	2022	2023
Net Interest Income	224	252	377
Other Income	37	42	56
Total Income	511	530	740
Operational Cost	115	164	217
Profit before Provisioning	395	365	522
Provisioning	33	36	32
Profit after Provisioning	362	329	490
PAT (Profit After Tax)	85	64	149
No. of Shares (after IPO)	106	106	106

 

Review and Recommendation of SBFC Finance by IZ team is 6/10

1. Introduction and Core Business:

a) SBFC Finance is a systemically important non-deposit taking NBFC-ND-SI. b) Offers Secured MSME Loans and Loans against Gold. c) Primarily serves entrepreneurs, small business owners, self-employed, and working-class individuals.

2. Financial Performance:

a) AUM growth at a CAGR of 44% from Fiscal 2019 to Fiscal 2023. b) Healthy disbursement growth at a CAGR of 40% from Fiscal 2021 to Fiscal 2023. c) Total AUM for the fiscal years 2021, 2022, and 2023 are ₹ 22,213.23 million, ₹ 31,921.81 million, and ₹ 49,428.23 million, respectively.

3. MSME Landscape in India:

a) As of June 20, 2023, only 16.9 million out of an estimated 70 million MSMEs are registered on UDYAM. b) Less than 15% of MSMEs had access to credit by March 2022. c) The credit gap for MSMEs was around ₹ 92 trillion in Fiscal 2023. d) Secured MSME loans between ₹ 0.50 million and ₹ 3.00 million are predicted to grow at e)18%-20% CAGR between 2023 and 2026.

4. Loan Disbursement:

a) Focuses on loan amounts ranging from ₹ 0.50 million to ₹ 3.00 million. b) 87.27% of AUM as of March 31, 2023, was in this ticket size range. c) Average ticket sizes of different loan categories as of March 31, 2023, are ₹ 0.99 million (Secured MSME Loans), ₹ 0.09 million (Loans against Gold), and ₹ 0.69 million (other unsecured loans).

5. Credit Quality and NPAs:

a) Among NBFCs, Gross NPA for Secured MSME Loans was 4.2% in March 2023. b) SBFC Finance had a Gross NPA to AUM ratio of 1.97% for similar loan sizes. c) Gross NPA ratios for the years 2021, 2022, and 2023 were 3.16%, 2.74%, and 2.43%, respectively, and Net NPA ratios were 1.95%, 1.63%, and 1.41%, respectively.

6. Geographic Presence and Diversification:

a) Operates across 120 cities in 16 Indian states and 2 union territories. b) Has 152 branches across India. c) AUM is spread across various regions of India with 30.84% in North, 38.53% in South, and 30.63% in the West and East combined. d). Demonstrates good diversification with no single state contributing more than 17.42% to the AUM. e) No single industry contributes more than 10% to the loan portfolio.

7. Risk Management:

a) Loans have in-house origination and benefit from a comprehensive risk management framework. b) Targets small enterprise borrowers with a monthly income up to ₹ 0.15 million and a CIBIL score above 700. c) Uses direct sourcing model through branch-led efforts, repeat customers, or walk-ins. d) Employs a large sales team to maintain close customer relationships.

8. Valuation of SBFC

After the IPO, the company's total net worth will stand at approximately INR 2700 Cr. With an estimated 105 Cr shares outstanding post-IPO, the book value per share will be INR 25.7. Given the IPO price of INR 57, this translates to a Price-to-Book (P/B) ratio of 2.19x, suggesting a reasonable valuation.

SBFC Finance Limited 103, 1st Floor, C&B Square, Sangam Complex, Andheri Kurla Road, Village Chakala, Andheri (East), Mumbai - 400 059 Phone: 022 6787 5344 Email: complianceofficer@sbfc.com Website: http://www.sbfc.com/