Menu

Equities

Vibhor Steel Tubes IPO Overview

Vibhor Steel Tubes IPO Overview

Vibhor Steel Tubes IPO Overview

IPO Details:

Price Band: ₹141 – ₹151 per share
Lot Size: 99 shares
Cost per Lot: ₹14,949
Issue Size: Approx. ₹72 crore

The offer and objects

➡️The offer includes a fresh issue of up to 4,779,444 equity shares at the upper price band of Rs 151 and 5,118,411 equity shares at the lower price band of Rs 141, totaling Rs 72.17 crore.

➡️The company intends to use the net proceeds from the fresh issue to meet the company’s working capital needs, totaling Rs 62 crore, with the remaining funds allocated for general corporate purposes.

Company Overview

Vibhor Steel Tubes Ltd is engaged in the manufacturing and supply of steel pipes and tubes to various industries in India. The company’s product portfolio includes Mild Steel/Carbon Steel ERW Black and Galvanized Pipes, Hollow Steel Pipes, and Cold Rolled Steel (CR) Strips/Coils.

Manufacturing Units and Workforce

Currently, the company operates two manufacturing units and one warehouse located in Raigad, Maharashtra, and Mahabubnagar, Telangana. The Raigad unit serves as an ideal location for 100% export of the company’s products. As of September 2023, the company employs a total of 636 individuals, including laborers.

Association with Jindal Pipes for 6 Years

The company has entered into a strategic agreement with Jindal Pipes Ltd for a duration of six years to manufacture and supply finished goods under the brand name “Jindal Star.” The agreement stipulates two main terms: 1) a minimum order of 1,00,000 MT per annum and 2) a turnover discount of 2% of the net sales price to Jindal Pipes Limited. This collaboration provides the company with a stable business outlook for the next six years.

Terms and conditions of the Agreement with Jindal Pipes

➡️The selling price will be determined periodically through mutual agreement, taking into consideration the prevailing market prices for the end product. However, it shall never fall below the sum of raw material costs (steel plus consumables) and variable expenses (labor and power).
➡️JPL commits to placing orders with a minimum quantity of 1,00,000 MT per annum to maximize the utilization of Unit I & Unit II capacities of our Company.
➡️In case of any shortfall in off-take by Jindal Pipes Limited or in supply by Vibhor Steel Tubes Limited, the defaulting party will compensate at the rate of Rs. 2,000 per MT for the deficit. This compensation obligation ceases once the minimum order quantity is achieved.
➡️Vibhor Steel Tubes Limited agrees to grant a turnover discount of 2% on the net sales price to Jindal Pipes Limited.
➡️The duration of this agreement is six years from April 01, 2023, with the option for renewal if mutually agreed upon by both parties.

Revenue Concentration Risk – 93% Sales from Jindal Pipes

The company’s revenue heavily relies on its top customer, Jindal Pipes, contributing to 93% of the total revenue for FY23. While this concentration poses a risk, minimum offtake clauses help mitigate potential downsides. Other customers include De Wit Bouwmachines BV and Macro Metal Handelsgesellschaft MBH.

Capacity Utilization stood at 71.6%

Over the past three years, the company has increased its capacity utilization from 41.82% to 71.68%, indicating a growing demand for its products. Despite this improvement, the plants are not operating at full capacity, with a 30% reserve to meet future demand.

Negative Cash Flow Impact on Working Capital

The company reported negative cash flows from its operating activities in H1FY2024 and FY2021. The steel business’s working capital intensity poses a challenge, and insufficient cash flows may adversely affect working capital requirements.

Expansion Plans in Telangana and Odisha

Vibhor Steel Tubes plans to enhance manufacturing and galvanizing capacity at the Telangana plant and establish a new plant in Odisha. The company has added new products to its portfolio, such as crash barriers and square pipes. The total capex for these expansions is approximately Rs 60 crore, funded through a mix of debt and internal accruals.

Peers of Vibhor steel tubes

1.APL Apollo Tubes Limited
2.Hi-Tech Pipes Limited
3.Rama Steel Tubes Limited
4.Goodluck India Limited (listed)

These companies operate in the same industry, manufacturing similar products to Vibhor Steel Tubes. However, it’s important to note that while they are part of the peer group, they are not direct competitors. This is because these companies sell their products in the open market, whereas Vibhor Steel Tubes has a unique business model. Vibhor Steel Tubes exclusively serves one customer, Jindal Pipes Limited, and supplies all finished goods/products on behalf of Jindal Pipes Limited.

 

Particulars Total Income EPS PE ratio ROE
Vibhor steel Tubes 1,114 14.85 22.6
APL Apollo Tubes 16,213 23.15 70.39 21.36
Hi-Tech Pipes 2,388 3.06 27.66 9.01
Goodluck India 3,086 33.31 17.82 14.16
Rama Steel Tubes 1,336 1.22 28.93 10.97

 

Financials and Valuation

For FY2023, consolidated sales increased by 36% to Rs 1113.12 crore. The OPM rose by 50 bps to 4.1%, leading to a 54% increase in OP to Rs 45.59 crore. The FY2023 EPS on post-issue equity is Rs 11.1, and at the upper price band of Rs 151, the P/E works out to be 13.7. Compared to its listed peers, Vibhor Steel Tubes demonstrates competitive financials with an EBITDA margin of 4.2% and ROE of 25.5%.

 

Key Financial Performance FY23 FY22 FY21
Revenue 1,113 818 510
Total Income 1,114 818 511
EBITDA 47 30 20
EBITDA% 4.21% 3.69% 3.90%
PAT 21 11 0.6
PAT% 1.89% 1.39% 0.13%
CFO 7 -34 45
Net Worth 93 72 60
Net Debt 127 106 59
Debt Equity ratio 1.63 1.77 1.23
ROCE% 16.48% 12.09% 9.90%
ROE% 25.51% 17.11% 1.14%

 

Conclusion

Vibhor Steel Tubes Ltd operates in the steel pipes and tubes manufacturing sector, with a strategic collaboration with Jindal Pipes providing a stable revenue stream. While facing a concentration risk with 93% of sales from Jindal Pipes, the company shows positive signs of growth, increased capacity utilization, and expansion plans in Telangana and Odisha. However, negative cash flows and the highly competitive market warrant careful monitoring of its financial performance.

The image added is for representation purposes only

Strategic Partnerships Fuel One97’s Financial Turnaround

Reliance's Strategic Investment Sparks 20% Surge in Alok Industries Stock

Reliance's Strategic Investment Sparks 20% Surge in Alok Industries Stock

Reliance’s Strategic Investment Sparks 20% Surge in Alok Industries Stock

On January 2nd, Alok Industries experienced a significant upswing in its stock, witnessing a remarkable 20% surge to reach its highest level in 52 weeks at Rs 25.80. The driving force behind this surge was the substantial investment made by Reliance Industries Ltd in non-convertible redeemable preferential shares, amounting to a substantial Rs 3,300 crore.

The intraday trading session for Alok Industries was dynamic, with the stock opening at Rs 21.65 and reaching a high of Rs 25.80. The stock also encountered a low of Rs 21 during the session. The closing price settled at the day’s peak of Rs 25.80, representing a notable 20% change from the previous closing figure of Rs 21.50. As of now, the market capitalization for the company stands impressively at Rs 12,852.15 crore.

Trading volumes in the counter saw a significant uptick, with a staggering 11 crore shares changing hands on the exchanges. This heightened activity is indicative of the heightened investor interest in Alok Industries. Furthermore, the stock has demonstrated a substantial 31% increase in the last month, underlining the positive sentiment surrounding the company.

Upon the successful receipt of the substantial subscription money of Rs 3,300 crore from Reliance Industries Limited, the Company promptly allocated 3,300 crore non-convertible redeemable preference shares. These preference shares, carrying a 9% interest rate, were issued at a face value of Rs 1 each for cash at par. The terms and conditions of this allocation were previously approved by the shareholders of the Company through a special resolution passed on December 23, 2023.

At the end of the September quarter, Reliance Industries Limited already held a significant stake in Alok Industries, amounting to 40.01%. In addition, JM Financial Asset Reconstruction Co controlled a noteworthy 34.99%. These ownership structures provide insights into the strategic alliances and interests that have played a pivotal role in shaping Alok Industries’ recent financial landscape.

It’s crucial to delve into Alok Industries’ recent history to understand the context of its financial developments. In pursuit of ambitious expansion goals, the company had undertaken substantial borrowing, accumulating debt up to a staggering Rs 30,000 crore. However, the company faced challenges in meeting its financial obligations, ultimately leading to its classification as one of the 12 stressed units under the amended Insolvency and Bankruptcy Code (IBC). The subsequent declaration of insolvency marked a significant chapter in Alok Industries’ corporate journey.

Alok Industries is a prominent integrated textile company with operational plants located at Vapi in Gujarat and Silvassa, a Union territory near Vapi. The company boasts a diverse and expansive customer base spanning the globe, including global retail brands, importers, private labels, domestic retailers, garment and textile manufacturers, as well as traders. The company’s presence as a popular penny stock, trading near Rs 25, adds another layer of intrigue to its narrative.

Reliance Industries, in its stock exchange notification, emphasized that the acquisition of these preference shares constituted a related party transaction. Importantly, this transaction had received prior approval from the shareholders of Alok Industries and was conducted on an arm’s length basis. It’s noteworthy that neither the promoter nor the promoter group and group companies were directly involved or held interests in this transaction. Equally significant is the disclosure that no governmental or regulatory approvals were required for the completion of this transaction.

In conclusion, the recent developments in Alok Industries’ stock and financial landscape, particularly the strategic investment by Reliance Industries, underscore the intricate dynamics at play in the corporate realm. The company’s journey, from insolvency to attracting substantial investments, reflects the resilience and adaptability required in the ever-evolving business landscape. Investors and industry observers will undoubtedly continue to monitor Alok Industries’ trajectory as it navigates the challenges and opportunities that lie ahead.

The image added is for representation purposes only

Strategic Partnerships Fuel One97’s Financial Turnaround

Aarti Pharmalabs Q2FY24 result updates

API & Intermediates Fuel 58% Growth in Q2FY24 for Aarti Pharmalabs

API & Intermediates Fuel 58% Growth in Q2FY24 for Aarti Pharmalabs

Company Name: Aarti Pharmalabs Ltd | NSE Code: AARTIPHARM | BSE Code: 543748 | 52 Week high/low: 514/235 | CMP: INR 488 | Mcap: INR 4,418 Cr | PE: 23.3

Company Overview:

Aarti Pharmalabs Ltd is a subsidiary of Aarti Industries Ltd, involved in the manufacturing and distribution of pharmaceuticals and chemicals. The company operates in three business verticals: API & Intermediaries, CDMO & CMO Services, and Xanthine derivatives & allied. It is the largest Indian manufacturer of Xanthine Derivatives, widely used in beverages, cosmetics, and pharmaceuticals. The company boasts 150+ products, including 52+ patented files, and operates six manufacturing units in Gujarat and Maharashtra.

Topline dipped due to price reductions in certain products

In the recent quarter, the standalone revenue of the company declined by 11.96% YoY (-0.56% QoQ) to 356 Cr. This dip was attributed to the decrease in prices of certain products. However, the decline in selling prices was offset by an increase in volume and a decrease in raw material costs, resulting in an overall margin improvement across earnings levels.

Q2 EBITDA dips YoY, yet margins expand by 85 bps

The company witnessed an 8.18% YoY decrease in EBITDA, amounting to 74 Cr compared to the previous quarter’s 71 Cr. Surprisingly, the EBITDA margin expanded by 85 bps, reaching 20.72%. This margin growth, despite a drop in EBITDA, was fueled by increased volume and reduced raw material costs. On a QoQ basis, EBITDA increased by 3.19%, driven by lower raw material costs and operating expenditures.

APIs and Intermediates drive impressive 58% growth in Q2

Among the three business verticals, API & Intermediate emerged as the primary growth driver, contributing 58% to the revenue in Q2FY24. The remaining 42% was attributed to other verticals, such as CDMO & CMO Services and Xanthine derivatives & allied. The company foresees a robust growth trajectory in the CDMO / CMO pipeline, maintaining its significance in overall revenue.

Promising Future Outlook: Anticipated Growth Opportunities Ahead

The company is actively progressing on greenfield projects in Atali, Gujarat, expecting completion in H2 of FY 24-25. This project, with a total Capex plan of 350-500 Cr in phase 1, is set to increase capacity and introduce 40+ value-added products annually. Anticipating operating leverage in FY26, the company projects an EBITDA growth of 10-15% in FY24.

Valuation and Key Ratios

As of now, the stock trades at a multiple of 23.3x EPS (TTM) of Rs 20.9, with a market price of 488. The industry PE stands at 33.6x, while the company values the stock at 2.66 times its book value of Rs 183 per share. The EV/EBITDA multiple is at 13.47x, compared to the industry median of 18.62x. The trailing twelve months ROE and ROCE are 13.2% and 16.1%, respectively, with a robust interest coverage ratio of 14.2x, indicating strong solvency.

Q2FY24 Result Update: Standalone

➡️Standalone revenue witnessed an 11.96% YoY decline (-0.56% QoQ) to 356 Cr in Q2FY24 due to a drop in product prices.

➡️Gross profit decreased by 6.41% YoY (-1.48% QoQ) to 165 Cr, with gross margin expanding 275 bps YoY due to lower raw material costs.

➡️EBITDA decreased by 8.18% YoY but grew 3.19% QoQ to 74 Cr, driven by margin expansion. EBITDA margin expanded 85 bps YoY and 75 bps QoQ to 20.72% due to operating leverage.

➡️Operating profit (EBIT) decreased by 12.67% YoY (+2.50% QoQ) to 57 Cr, with EBIT margin expanding by 13 bps YoY and 48 bps QoQ to 16.14%.

➡️PAT decreased by 9.21% YoY (-1.44% QoQ) to 41 Cr, while the PAT margin expanded by 35 bps YoY to 11.73%.

➡️Earnings per share (EPS) for the quarter stood at 4.61 Rs, compared to 4.68 Rs in the previous quarter.

Conclusion

Aarti Pharmalabs Ltd, despite facing a decline in standalone revenue attributed to product price drops, showcased resilience with strategic measures. The focus on API & Intermediate business, upcoming greenfield projects, and favorable margins position the company for future growth. The financial indicators, along with ongoing expansion plans, suggest a promising trajectory, making Aarti Pharmalabs a noteworthy player in the pharmaceutical and chemical industry.

The image added is for representation purposes only

Strategic Partnerships Fuel One97’s Financial Turnaround

LG Balakrishnan Q2FY24 result updates

LG Balakrishnan's Solid Profitability Amid Margin Pressures

LG Balakrishnan’s Solid Profitability Amid Margin Pressures

Company Name: L G Balakrishnan & Bros Ltd | NSE Code: LGBBROSLTD | BSE Code: 500250 | 52 Week high/low: 1,366/607 | CMP: INR 1,315 | Mcap: INR 4,121 Cr | PE: 16.5

Company Overview:

LG Balakrishnan & Bros Ltd specializes in manufacturing chains, sprockets, and metal formed parts for automotive applications. The company operates in two business segments: transmission and metal forming. In the transmission segment, products include chains, sprockets, tensioners, belts, and brake shoes. Metal forming products encompass metal sheet parts, machined components, and wire drawing products.

Q2 Sees Growth in Transmission, Metal Forming Lags

In Q2, the transmission segment exhibited strong performance with a robust 15.64% QoQ revenue growth (+4.47% YoY), while the metal forming segment faced challenges, experiencing a moderate decline of 0.36% QoQ (+8.86% YoY). Overall, standalone revenue witnessed a growth of 12.66% QoQ (+5.17% YoY).

Revenue up, but Year-over-Year margins dip

Despite a 5.17% YoY increase in revenue, margins faced pressure due to a significant rise in raw material costs and operating expenditure by 5.36% and 5.29%, respectively. EBITDA margins dropped by 13 bps YoY, and gross margins decreased by 9 bps YoY and 91 bps QoQ.

37% QoQ PAT Soars: Strong Topline and Operational Efficiency Drive Growth

Profit After Tax (PAT) surged impressively by 37.2% QoQ (+16.72% YoY), driven by robust topline growth and stable interest costs and depreciation. Interest costs remained stable, growing by 0.26% QoQ, while depreciation increased moderately by 0.50%.

Valuation and Key Ratios

The stock currently trades at a multiple of 16.5x Earnings Per Share (EPS) (TTM) of Rs 82, with a market price of 1,315. The industry PE stands at 32.2x, and the company values the stock at 2.81 times its book value of Rs 468 per share. The EV/EBITDA multiple is at 8.63x, compared to the industry median of 13.19x. The trailing twelve months ROE and ROCE are 19% and 24.2%, respectively, with a robust interest coverage ratio of 46.4x, indicating strong solvency.

Q2FY24 Result Update: Standalone

➡️Standalone revenue witnessed a 5.17% YoY growth (+12.66% QoQ) to 573 Cr, driven by robust growth in the Metal Formation segment.

➡️Transmission segment revenue grew by 4.47% YoY (+15.64% QoQ) to 478 Cr, while the metal formation segment surged by 8.86% YoY (-0.3% QoQ) to 95 Cr.

➡️Gross profit increased by 5% YoY (+10.77% QoQ) to 305 Cr, but gross margins dropped by 9 bps YoY and 91 bps QoQ to 53.29%.

➡️EBITDA grew by 4.41% YoY (+19.08% QoQ) to 102 Cr, with EBITDA margin down by 13 bps YoY and up 96 bps QoQ to 17.87% due to operating leverage.

➡️Operating profit (EBIT) increased by 6.52% YoY (+23.74% QoQ) to 85 Cr, with EBIT margin expanding by 19 bps YoY and 133 bps QoQ to 14.84%.

➡️PAT surged by 16.72% YoY (+37.2% QoQ) to 76 Cr, while the PAT margin expanded by 130 bps YoY and 236 bps QoQ to 13.21%.

➡️Earnings per share (EPS) for the quarter stood at 24.11 Rs, compared to 17.57 Rs in the previous quarter.

Conclusion

LG Balakrishnan & Bro’s Ltd demonstrated a mixed performance in Q2, with robust growth in the transmission segment but challenges in metal forming. While revenue showed a positive trend, margins faced pressure due to increased costs. Despite this, the company exhibited strong profitability with a significant surge in Profit After Tax. The valuation metrics and key ratios indicate a solid financial position, suggesting a potential for sustained growth. Investors may closely monitor the company’s strategies to address margin challenges in the metal forming segment.

The image added is for representation purposes only

Strategic Partnerships Fuel One97’s Financial Turnaround

Roto Pumps Q2FY24 result update

Q2FY24 Snapshot: Roto Pump's Stellar Rise in Revenue and Profits

Q2FY24 Snapshot: Roto Pump’s Stellar Rise in Revenue and Profits

Company Name: Roto Pumps Ltd | NSE Code: ROTO | BSE Code: 517500 | 52 Week high/low: 438/214 | CMP: INR 391 | Mcap: INR 1,228 Cr | PE: 30.4

Company Overview:

Roto Pump Ltd is dedicated to the manufacturing of Progressive Cavity Pumps, offering efficient and reliable pumping solutions across diverse industries, including wastewater, sugar, paper, paint, and more. The product portfolio encompasses Progressive Cavity Pumps (PCP), Twin Screws Pumps, and additional Positive Displacement (PD) pumps such as AODD and Gear pumps. The company boasts a global presence, exporting products to 55+ countries and achieving installations of 2,75,000 pumps worldwide.

Q2 Demonstrates Resilient and Impressive Topline Expansion

In the second quarter, the company experienced substantial consolidated revenue growth of 45.06% YoY (+49.48% QoQ), reaching 81.4 Cr. However, a simultaneous increase of 72.44% YoY (+87.28% QoQ) in raw material costs resulted in a gross profit of 49.8 Cr, accompanied by a contraction in gross margin by 600 bps YoY and 780 bps QoQ.

First-half struggles: Cash conversion lags behind expectations

During the first half of the year, the company faced a significant challenge in cash conversion, standing at 60% of the cash profit (EBITDA). Despite reporting an EBITDA earning of 33 Cr in H1FY24, operating cash from activities amounted to only 21 Cr, reflecting a 60% conversion of EBITDA. This indicates a notable decline from the previous year’s cash conversion rate of 98%, primarily attributed to an increase in trade receivables in the first half.

First-Half Gross Debt Sees Decline

In H1FY24, gross debt decreased by 21%, reaching 30 Cr compared to 38 Cr in H1FY23. However, net debt (gross debt-cash) increased by 46.32% in the first half compared to the previous year, standing at 15 Cr. Cash equivalents declined by 47% to 15 Cr in H1FY24 compared to the same period in the previous year.

EBITDA Skyrockets 78% YoY on Strong Margin Growth

In Q2FY24, consolidated EBITDA demonstrated an impressive growth of 78.55% YoY (+63.11% QoQ), reaching 20 Cr. This surge was propelled by margin expansion, with EBITDA margin expanding by 470 bps YoY and 211 bps QoQ to 25.24%, showcasing strong operating leverage. The company’s EBITDA margin surpasses that of its peer companies.

Valuation and Key Ratios

The stock is presently trading at a multiple of 30.4x EPS (TTM) of Rs 12.9, with a market price of 391, and an industry PE at 30.4x. The company values the stock at 1.02 times its book value. The EV/EBITDA multiple stands at 17.8x, while the industry median is at 20.5x. The trailing twelve months ROE and ROCE are 22.4% and 30.4%, respectively, and the interest coverage ratio is a robust 14.9x, indicating strong solvency.

Q2FY24 Result Update: Consolidated

➡️Consolidated revenue grew 45.06% YoY (+49.48% QoQ) to 81 Cr in Q2FY24 vs. 54 Cr in the previous quarter.

➡️Gross profit increased 31.81% YoY (+32.54% QoQ) to 50 Cr, with gross margin dropping 600 bps YoY and 780 bps QoQ due to higher raw material costs.

➡️EBITDA grew 78.55% YoY (+63.11% QoQ) to 20 Cr driven by margin expansion. EBITDA margin expanded 470 bps YoY and 211 bps QoQ to 25.24% led by operating leverage.

➡️Operating profit (EBIT) increased 83.14% YoY (+74.36% QoQ) to 17 Cr, with EBIT margin expanding by 440 bps YoY and 300 bps QoQ to 21.21%.

➡️PAT surged 77.98% YoY (+70.47% QoQ) to 13 Cr, and the PAT margin expanded by 290 bps YoY and 193 bps QoQ to 15.71%.

➡️Earnings per share (EPS) for the quarter stood at 4.07 Rs, compared to 2.39 Rs in the previous quarter.

Conclusion

Roto Pump Ltd demonstrated robust topline growth in Q2FY24, driven by an impressive surge in consolidated revenue and EBITDA. Despite poor cash conversion in the first half, the company showcased resilience with a decline in gross debt and notable margin expansion. The stock’s valuation appears favorable, and strong financial ratios, including ROE and ROCE, underscore the company’s solid performance. Overall, Roto Pump Ltd presents a promising outlook with a strategic focus on diverse industries and a global footprint.

The image added is for representation purposes only

Strategic Partnerships Fuel One97’s Financial Turnaround

Unlocking opportunities: Muthoot Microfin IPO analysis

Unlocking opportunities: Muthoot Microfin IPO analysis

Unlocking opportunities: Muthoot Microfin IPO analysi

Muthoot Microfin Ltd – IPO Note

Price Band: Rs. 277-291

Issue Date: 18th Dec-20th Dec

Recommendation: Apply

Company Overview: 

Muthoot Microfin Limited, a subsidiary of the Muthoot Pappachan Group, is a microfinance institution dedicated to empowering women in rural areas across India. Specializing in micro-loans, the company offers a diverse portfolio of financial products, including group loans for livelihood solutions, individual loans, and life betterment solutions such as mobile phone and solar lighting loans. Additionally, it addresses health and hygiene needs through sanitation improvement loans. Muthoot Microfin Limited also provides secured loans in the form of gold loans and its unique Muthoot Small & Growing Business (MSGB) loans, emphasizing support for small businesses. The company’s focus on social impact is evident in its commitment to fostering economic growth and improving living standards in underserved communities.

Company Profile:

  • Muthoot Microfin Limited is a leading microfinance institution in India, with a strong focus on serving women entrepreneurs in rural areas. The company is a part of the Muthoot Pappachan Group, a diversified conglomerate with a presence in various sectors.
  • Muthoot Microfin is the fourth largest NBFC-MFI in India in terms of gross loan portfolio. The company has a wide reach across 18 states and UTs, with over 1,340 branches and 3.19 million active customers. Muthoot Microfin has a robust IT infrastructure and a focus on digital collections. The company also has a strong presence in Tamil Nadu, with a market share of over 16%.
  • In recent years, Muthoot Microfin has been expanding its operations beyond South India. The company has opened over 700 branches in North, West, and East India, constituting 52.76% of its total branches. This expansion is a key part of Muthoot Microfin’s strategy to become the leading microfinance institution in India.
  • Muthoot Microfin is a well-established and respected company with a strong track record of financial performance. The company is well-positioned to continue to grow and expand in the future.

The Objects of the Issue:

  • Fund existing operations and exciting new initiatives like tech upgrades and geographic reach.
  • Boost capital to meet future needs and ensure growth.
  • Gain stock market visibility and access future capital.
  • Facilitate sale of shares by existing investors.

Outlook and Valuation:

  • Historically concentrated in South India, Muthoot Microfin has recently expanded its operations into North, West, and East India.
  • As of March 31, 2023, the company has 596 branches in North, West, and East India, representing 50.85% of total branches.
  • This expansion strategy is aimed at increasing the company’s footprint and customer base across diverse regions in India.
  • Growth Strategy: The company’s strategy of expanding across various geographies in India is expected to contribute to its ongoing growth in the coming years.
  • Competitive Landscape: According to the Red Herring Prospectus (RHP), Muthoot Microfin identifies Equitas Small Finance Bank Limited, Ujjivan Small Finance Bank Limited, CreditAccess Grameen Limited, and Suryoday Small Finance Bank Limited as some of its listed competitors.
  • Understanding the competitive landscape helps investors assess the market dynamics and positioning of the company.
  • Valuation and Peer Comparison:
    1. The company’s valuation is compared with peers in the microfinance and small finance banking sector.
    2. Peers’ average P/E (Price-to-Earnings) ratio is 18.22x, ranging from 6.33x to 26.67x.
    3. Muthoot Microfin’s P/E multiple, based on post-issue diluted FY23 EPS of Rs.11.54, is 25.23x at the higher price band.
    4. The assessment suggests that, compared to peers, the issue is considered fully priced in or fairly valued.
    5. At the higher price band, Muthoot Microfin’s listing market capitalization is projected to be approximately – Rs.4159.96 crores.
      ISSUE OFFER  
      Price band (INR) 277-291
      Bidding date DEC 18 – DEC 20, 2023
      Total IPO size (Cr) 960
      Fresh issue (Cr) 760
      Offer for sale (Cr) 200
      Market lot 51
      Face value (INR) 10
      Listing on NSE, BSE
      Retail Allocation 35%
      Rating Subscribe

Competitive Strengths:

  • Strong Brand and Market Leadership: Backed by a highly established financial services conglomerate, ensuring trust and brand recognition. Holds a significant market share in India, demonstrating experience and operational expertise.
  • Reliance on rural economies makes the company susceptible to agricultural downturns and economic fluctuations. Fosters income generation and economic activity in rural areas.
  • Focus on underpenetrated regions and product diversification indicates significant growth potential.
  • Aligns with social responsibility goals, potentially attracting ESG-conscious investors.
  • Wide geographical reach with over 1,340 branches, ensuring customer accessibility.
  • In-house technology development facilitates efficient loan disbursement and monitoring.
  • “Mahila Mitra” app promotes convenient payment methods for customers.
  • Offers various loan products, mitigating risk and catering to diverse needs.

Key Strategies:

  • Expand branch network and identify borrowers across India, not just South.
  • Build user-friendly platforms for smooth loan access and service.
  • Offer new loans and leverage referrals to grow customer base.
  • Diversify Funding: Tap new investors beyond traditional channels to fuel expansion.
  • Highlight social impact and invest in talent for sustainable growth.

Key Concerns:

  • Rural Vulnerability: Microfinance primarily serves rural populations, susceptible to agricultural downturns, weather fluctuations, and economic shifts. These external factors can impact borrowers’ repayment capacity and expose the company to loan defaults.
  • Regulatory Risks: The microfinance sector faces evolving regulations, some potentially affecting interest rates, loan sizes, and lending practices. Adapting to these changes without compromising profitability could be challenging.
  • Competition: The microfinance space is increasingly competitive, with established players and new entrants vying for market share. Maintaining a competitive edge in terms of interest rates, customer service, and technology could be costly.
  • High Credit Exposure: Muthoot Microfin’s loan portfolio is concentrated in a specific market segment. This concentration, while offering potential rewards, also exposes the company to higher risks if economic conditions in that segment deteriorate.
  • Customer Risk: Microfinance institutions (MFIs) often serve customers in the lower-income segments. Economic uncertainties or shocks affecting these customers may impact their ability to repay loans, leading to increased default risks.
  • Interest Rate Risk: The microfinance industry is vulnerable to interest rate fluctuations. Changes in interest rates can affect borrowing costs for both the MFI and its customers, influencing repayment dynamics.
  • Non-Performing Assets (NPA) Risk: An increase in non-performing assets or provisions can adversely affect the company’s financial health. This may result from economic downturns, borrower distress, or other factors impacting the repayment capacity of the customer base.
    Company Total income

           (ML)

    EPS P/E NAV Face value/Share
    Muthoot Microfin Limited 14463.44 14.19 20.5 139.15 10
    Peer group       1  
    Equitas Small Finance Bank Limited 48314.64 4.71 17.57 46.44 10
    Ujjivan Small Finance Bank Limited 47541.90 5.88 6.33 20.25 10
    CreditAccess Grameen Limited 35507.90 52.04 26.67 326.89 10
    Spandana Sphoorty Financial Limited 14770.32 1.74 381.72 436.58 10
    Bandhan Bank Limited 183732.50 13.62 17.32 121.58 10
    Suryoday Small Finance Bank Limited 128811 7.39 22.31 149.28 10
    Fusion Micro Finance Limited 17999.70 43.29 12.60 230.74 10
    PARTICULARS

    (In millions)

    FY23 FY22 FY21
    Equity share capital 1401.98 1333.33 1141.71
    Other equity 14856.51 12032.46 7757.19
    Net worth 16258.49 13365.79 8898.90
    Total Borrowings 51230.25 32969.85 25382.26
    Revenue from Operations 12906.45 7286.23 6227.84
    EBIDTA 7884.86 4256.60 3272.17
    PBT 2128.70 647.21 90.55
    Net profit 1638.89 473.98 70.54
    PAT 1639 474 70.4
    Total assets 85292 55915 41839

The image added is for representation purposes only

 

RBI Charts Course for Sustainable Growth: Inflation Control as the Key

Affle India Q2FY24 results update

Record-breaking CPCU Conversions Propel Affle India's 21.06% Revenue Growth

Record-breaking CPCU Conversions Propel Affle India’s 21.06% Revenue Growth

Company Name: Affle India Ltd | NSE Code: AFFLE | BSE Code: 542752 | 52 Week high/low: 1,244/866 | CMP: INR 1,244| Mcap: INR 17,439 Cr | PE: 66

Company Overview:

Affle India is a leading IT company engaged in providing mobile advertisement and software development services. The company operates in two business segments: Consumer Platform, delivering consumer recommendations and conversions through relevant mobile advertising, and Enterprise Platform, enabling offline businesses to go online through app development, O2O commerce, and data analytics. Affle India has a robust global reach in North America, Japan, Korea, and Australia.

Consumer Platform Thrives, Enterprise Platform Faces Challenges

In Q2FY24, the cost per converted user (CPCU) business model drove 92.9% of revenue, with the Consumer Platform segment growing 16.61% YoY. The Enterprise Platform revenue declined by 23.24% YoY, resulting in a standalone revenue surge of 15.51% YoY. The robust growth in the CPCU business model offset the slowdown in the enterprise platform segment during the quarter.

Record-breaking CPCU Conversions Propel Revenue Growth

During the quarter, the CPCU business achieved 72 Mn conversions, compared to 64.7 Mn in the same quarter last year. The average CPCU rate was 55.6 Rs, contributing to robust revenue growth of 21.06% YoY, reaching 400 Cr in Q2FY24.

Resilience Amid Challenges: Impact of Online Gaming and Fintech

Despite a combined impact of about Rs. 250 million from online gaming in India and the Fintech vertical in developed markets, the company delivered its highest revenue and EBITDA ever in this quarter and in the CPCU business. Regulatory changes towards the applicability of GST in the online gaming industry in India caused a pullback effect of about Rs. 110 million.

Valuation and Key Ratios

As of now, the stock trades at a multiple of 66x earnings per share (EPS) (TTM) of Rs 19.8, with a market price of Rs 1,244. The stock is valued at 10.4 times its book value of Rs 120 per share. In terms of EV/EBITDA, the company ranks 4th with a multiple of 46.61x, compared to the industry median of 17.88x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 18.5% and 20.2%, respectively. The interest coverage ratio is robust at 20.2x, indicating the company’s solvency.

Q2FY24 Result Update: Standalone

➡️In Q2FY24, standalone revenue grew 15.51% YoY (-2.41% QoQ) to 134Cr, driven by robust growth in the CPCU business.

➡️Consumer platform segment reported revenue of 131 Cr, growing 16.61% YoY, while the enterprise segment showed a slowdown in revenue by 23.24% YoY, resulting in a 15.51% growth in standalone revenue.

➡️EBITDA surged 25.16% YoY (+20.39% QoQ) to 21 Cr, driven by the consumer platform segment. EBITDA margin improved 120 bps YoY and 300 bps QoQ to 15.86%.

➡️Operating profit (EBIT) increased by 27.59% YoY (+22.83% QoQ) to 19 Cr, with an EBIT margin jumping by 130 bps YoY and 290 bps QoQ to 14.33%.

➡️Profit after tax (PAT) saw a remarkable surge of 22.69% YoY (+16.63% QoQ) to 18 Cr, and the PAT margin expanded by 80 bps YoY and 220 bps QoQ to 13.58%.

➡️Earnings per share (EPS) for the quarter stood at 1.30 Rs, compared to 1.11 Rs in the previous quarter.

Conclusion

Affle India’s Q2FY24 results reflect a strong performance driven by the robust growth in the CPCU business model, offsetting challenges in the enterprise platform segment. Despite external impacts from online gaming and Fintech, the company achieved its highest revenue and EBITDA, showcasing resilience and adaptability. The valuation and key ratios underscore the company’s solid financial standing. Affle India continues to demonstrate its position as a leading player in mobile advertising and software development services.

The image added is for representation purposes only

Strategic Partnerships Fuel One97’s Financial Turnaround

Bharat Dynamics Q2FY24 result updates

BDL Lands Massive Rs 750 Cr Army Missile Order

BDL Lands Massive Rs 750 Cr Army Missile Order

Company Name: Bharat Dynamic Ltd | NSE Code: BDL | BSE Code: 541143 | 52 Week high/low: 1,410/787 | CMP: INR 1,381 | Mcap: INR 25,313 Cr | PE: 59.4

Company Overview:

Bharat Dynamics Ltd is a government entity under the Ministry of Defence, Government of India. The company is actively involved in manufacturing and supplying guided missiles, underwater weapons, airborne products, and other allied defense equipment for the Indian Army. Currently, it operates three manufacturing facilities in Hyderabad, Telangana, Bhanur, and Vishakhapatnam, Andhra Pradesh. Recently, BDL secured a significant supply order of Anti-Tank Guided Missiles (ATGM) worth Rs 750 Cr from the Indian Army.

Robust New Order Book in Q2:

In Q2FY24, Bharat Dynamics Ltd experienced a surge in new orders, totaling Rs 1,659 Cr from April 23 to September 30, 2023. This strengthened the company’s total order book to an impressive Rs 20,766 Cr as of September 30, 2023. Notable orders include the ATGM order (Rs 750 Cr), upgraded version of Akash Missiles (Rs 247 Cr), LBRM (Rs 254 Cr), and ULPGM (Rs 105 Cr).

Robust Sequential Revenue Growth

During Q2FY24, the standalone revenue from operations witnessed remarkable growth, increasing by 106.84% QoQ and 15.15% YoY, reaching Rs 616 Cr. This substantial revenue growth was attributed to the higher order book of Rs 1,659 Cr in Q2FY24. While the Cost of Goods Sold (COGS) rose by 118.41% QoQ and 13.88% YoY to Rs 271 Cr, the gross profit for the quarter surged by 98.55% QoQ and 16.17% YoY, amounting to Rs 344 Cr. The gross margin experienced a YoY increase of 50 basis points but declined by 230 basis points QoQ.

Improved Performance QoQ:

BDL’s Q2FY24 performance was impressive, partially attributed to the realization of some lagged revenue from FY23. Key highlights include a 42.8% YoY increase in EBITDA to INR 1.3 billion, with an EBITDA margin improvement of 422 basis points to 21.8%. Other expenses rose by 41% YoY due to repairs and provisions. Billed receivables increased, offset by a decline in unbilled receivables. Other income rose by 74% YoY to INR 783 million. The order book at end-September 2023 stood at INR 200 billion, indicating a robust book-to-bill ratio of 9.3x.

Valuation and Key Ratios

As of now, the stock trades at a multiple of 59.4x earnings per share (EPS) (TTM) of Rs 23.2, with a market price of Rs 1,381. The stock is valued at 7.47 times its book value of Rs 184 per share. In terms of EV/EBITDA, the company ranks 3rd with a multiple of 33.9x, compared to the industry median of 22.4x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 11.3% and 15.6%, respectively. The interest coverage ratio is robust at 175x, indicating the company’s solvency.

Q2FY24 Result Update: Consolidated

➡️In Q2FY24, standalone revenue grew 15.15% YoY (+106.84% QoQ) to 616 Cr, driven by the strong new order book in the quarter.

➡️Gross profit increased 16.17% YoY (+98.55% QoQ) to 344 Cr, while gross margin dropped 230 bps QoQ (+50 bps YoY) to 55.92%.

➡️EBITDA surged 42.82% YoY (-510.66% QoQ) to 134 Cr, driven by robust growth in topline and margin improvement. EBITDA margin improved 400 bps YoY to 21.77%.

➡️Operating profit (EBIT) increased by 60.75% YoY (-335.44% QoQ) to 116 Cr, with an EBIT margin jumping by 530 bps YoY to 18.94%.

➡️Profit after tax (PAT) saw a remarkable surge of 94.02% YoY (+251.76% QoQ) to 147 Cr, and the PAT margin expanded by 970 bps YoY and 980 bps QoQ to 23.89%.

➡️Earnings per share (EPS) for the quarter stood at 8.04 Rs, compared to 2.28 Rs in the previous quarter.

Conclusion

Bharat Dynamics Ltd demonstrated a robust performance in Q2FY24, marked by substantial revenue growth, a strengthened order book, and improved margins. The company’s strategic positioning in the defense sector, coupled with a solid financial foundation, reflects positively in its valuation metrics. With a significant order pipeline and efficient financial management, BDL remains well-positioned for sustained growth in the defense manufacturing sector.

The image added is for representation purposes only

Strategic Partnerships Fuel One97’s Financial Turnaround

Inox India Limited: Navigating the cryogenic frontier - IPO Insights

Inox India Limited: Navigating the cryogenic frontier - IPO Insights

Inox India Limited: Navigating the cryogenic frontier – IPO Insights
IPO note of Inox India Limited
Price Band: Rs 627-660
Issue Date: 14th Dec-18th Dec
Recommendation: Apply

Company Overview: 

Inox India Limited is a leading manufacturer and supplier of cryogenic equipment, offering a diverse portfolio that includes standard cryogenic tanks, beverage kegs, bespoke technology, equipment, and solutions, as well as large-scale turnkey projects. Their extensive product range caters to various industries such as industrial gases, liquefied natural gas (LNG), green hydrogen, energy, steel, medical and healthcare, chemicals and fertilizers, aviation and aerospace, pharmaceuticals, and construction. From providing solutions for the storage and transportation of cryogenic fluids to contributing to the emerging fields of green hydrogen and LNG, Inox India Limited is committed to delivering innovative and customized cryogenic solutions across a broad spectrum of applications.

Company Profile:

Inox India Limited is a leading manufacturer and supplier of cryogenic equipment, offering a diverse portfolio that includes standard cryogenic tanks, beverage kegs, bespoke technology, equipment, and solutions, as well as large-scale turnkey projects. Their extensive product range caters to various industries such as industrial gases, liquefied natural gas (LNG), green hydrogen, energy, steel, medical and healthcare, chemicals and fertilizers, aviation and aerospace, pharmaceuticals, and construction. From providing solutions for the storage and transportation of cryogenic fluids to contributing to the emerging fields of green hydrogen and LNG, Inox India Limited is committed to delivering innovative and customized cryogenic solutions across a broad spectrum of applications.

The Objects of the Issue:

  • Total Issue Size: Rs. 1459.32 Crore (at the upper price band of Rs. 660 per share)
  • Offer Type: Entirely Offer for Sale (OFS)
  • Number of Shares Offered: 2.21 crore shares
  • Face Value per Share: Rs. 2

Outlook and Valuation:

  • Inox India is the leading manufacturer of cryogenic storage tanks in India, holding a significant market share.
  • The company has a robust order book worth over Rs. 1000 crore, indicating healthy demand for its products.
  • Inox India is debt-free, which strengthens its financial position and provides room for future growth.
  • The Indian gas industry is expected to grow at a CAGR of 10% in the coming years, which could benefit Inox India as a key supplier of storage tanks.
  • Inox India Limited boasts superior EBITDA margins, exceeding 21%, a significant achievement compared to the average among listed capital goods players.
  • The company has consistently delivered a Return on Capital Employed (ROCE) of over 30% in recent years, attributed to strong asset turns ranging from 1.4 to 1.8 times historically.
  • The growing importance of green fuels, specifically liquid hydrogen, and a preference for liquefied natural gas (LNG) over diesel have contributed to robust top-line growth for Inox.
  • The company has witnessed a commendable 14% Compound Annual Growth Rate (CAGR) in revenue over the period FY20-23 and a noteworthy 16% growth in the first half of FY24.
  • Inox’s financial performance aligns closely with listed capital goods players, reflecting its competitive standing in the industry.

    ISSUE OFFER  
    Price band (INR) 627-660
    Bidding date 14th Dec-18th Dec
    Total IPO size (Cr) 1,459.32
    Fresh issue (Cr) NIL
    Offer for sale (Cr) 1,459.32
    Market lot 22
    Face value (INR) 2
    Listing on NSE, BSE
    Retail Allocation 35%

Competitive Strengths:

  • Inox India boasts a commanding market share in the Indian cryogenic storage tank market, exceeding 70%. This translates to strong brand recognition and customer loyalty.
  • They offer a diverse portfolio of tanks catering to various capacities and applications, ranging from small units for medical labs to large facilities for industrial gas storage.
  • Inox India serves a diverse clientele, including leading gas companies, government agencies, and pharmaceutical firms. This diversification mitigates risks associated with relying on a limited number of customers.
  • Inox India Limited attains operational excellence through vertical integration, advanced technological expertise, and an experienced workforce, ensuring superior quality and efficiency in cryogenic equipment manufacturing.
  • Inox India Limited demonstrates financial stability with a history of profitability, consistent revenue growth, a debt-free status enhancing financial flexibility, and a healthy order book reflecting sustained demand and growth potential.

Key Strategies:

Inox India Limited aims to capitalize on opportunities in the LNG and hydrogen sectors within the global clean energy transition, strategically capturing the full value chain across its product lines. The company plans to expand its standard cryogenic and non-cryogenic equipment business into international markets, further broadening its reach. Additionally, Inox aims to grow its large turnkey project business and remains committed to ongoing efforts to enhance operational efficiency and productivity.

Key Concerns:

  • Inox India Limited, despite not owning the name “INOX,” utilizes it as part of its corporate identity under a name license agreement with the Jain family, entailing an annual royalty of 0.25% of consolidated revenues, with potential ad-hoc increases impacting the company’s financials.
  • The company faces vulnerability to cyclical downturns in the global capital expenditure cycle, given its products’ long lifespan of 20-30 years, as a sharp decline in global capex demand could result in diminished demand, particularly in energy, steel, chemicals, fertilizers, aviation, and construction industries.
  • Inox India Limited relies heavily on a limited number of private and public customers and projects for its major revenue streams, making its financial performance susceptible to fluctuations in these key areas.
  • The company’s significant dependence on export sales exposes it to potential challenges in international markets, including geopolitical and economic uncertainties.
  • Adverse shifts in component, raw material, or other input costs may negatively impact the pricing and supply of Inox’s products, potentially affecting its profitability.
  • Given the inherent risks associated with cryogenic gases stored at very low temperatures, any leakage poses health hazards, adding a crucial safety dimension to the company’s operations.
  • Inox India Limited’s exposure to performance guarantees introduces a potential negative impact on its business, emphasizing the importance of managing contractual obligations effectively.

    PARTICULARS FY23 FY22 FY21
    EBIDTA 204 168 135
    EBIDTA Margin (%) 21.2% 21.4% 22.7%
    PBT 205 174 131
    Adjusted PAT 153 130 96
    EPS 16.8 14.4 10.6
    ROCE 38% 32.4% 31.9%
    EV/Sales 6.1 7.6 10
    EV/EBIDTA 29 35.4 44.1
    P/E 39.5 44.3 64.4

The image added is for representation purposes only

 

RBI Charts Course for Sustainable Growth: Inflation Control as the Key

India Shelter Finance Corporation IPO: A dive into the affordable housing champion

India Shelter Finance Corporation IPO: A dive into the affordable housing champion

India Shelter Finance Corporation IPO: A dive into the affordable housing champion
India Shelter Finance Corporation Limited – IPO Note

Price Band: Rs 469-493

Issue Date: 13th Dec-15th Dec

Recommendation: Apply

Company Overview: 

India Shelter Finance Corporation Limited (ISFCL), established in 1998, specializes in housing finance, targeting the self-employed in low and middle-income groups, especially in Tier II and Tier III cities. The company provides various housing finance products, emphasizing loans with ticket sizes below Rs. 10.5 lakhs. With a presence in 15 states and a branch network of 203 as of September 2023, ISFCL focuses on affordable housing, leveraging a scalable technology infrastructure for operational efficiency. The company’s strategic approach includes generating relatively high yields on advances, contributing to financial sustainability and profitability. ISFCL’s mission aligns with promoting homeownership and addressing the specific housing needs of its target demographic.

The Objective of the Issue:

  • ISFCL aimed to raise Rs 1,200 crore through the IPO, with Rs 800 crore through a fresh issue of shares and Rs 400 crore through an offer for sale (OFS) by existing investors.
  • The fresh raised capital will be used to strengthen ISFCL’s capital base and cater to its onward lending requirements, supporting future growth and expansion plans.
  • A portion of the funds may also be utilized for general corporate purposes like debt repayment, working capital needs, and potential acquisitions.

Outlook and Valuation:

  • ISFCL’s robust financial performance, experienced management team, and focus on social impact provide a strong foundation for future growth.
  • The Indian affordable housing market is expected to grow at a healthy pace, driven by government initiatives and rising urbanization.
  • ISFCL’s extensive reach and focus on Tier II and Tier III cities position them well to tap into this market potential.
  • With a loan book standing at Rs. 4,359 Crores as of FY23, ISFCL demonstrates a substantial growth runway given its potential for accelerated expansion. The company has exhibited remarkable growth in Assets Under Management (AUM), achieving a commendable CAGR of 41% from FY21 to FY23. Additionally, ISFCL has delivered a respectable Return on Assets (ROA) of 4.1% in FY23.
  • Despite its robust performance, the company’s valuation, based on Price-to-Book (P/B), indicates a discount compared to peers, standing at 2.6x FY23 post-issue Book Value Per Share (BVPS).
  • Analyzing the company’s Price-to-Book Value (P/BV) of 3.48x and Price-to-Earnings (P/E) ratio of 27.7x, we observe a fair valuation that aligns with its growth prospects and risk profile. This balanced valuation underscores the company’s potential for sustained growth and presents a compelling investment opportunity.
    ISSUE OFFER  
    Price band (INR) Rs 469-493
    Bidding date 13-15 December
    Sector NBFC
    Total IPO size (Cr) 1200
    Fresh issue (Cr) 800
    Offer for sale (Cr) 400
    Market lot 30
    Face value (INR) 5
    Listing on NSE, BSE
    Retail Allocation 35%

Competitive Strengths:

  • Extensive and Diversified Physical Distribution Network with Significant Presence in Tier II and Tier III cities.
  • Targeting this underserved segment aligns with their social mission and creates a loyal customer base.
  • A track record of steady growth in loan portfolio, revenues, and profitability inspires investor confidence.
  • Strong loan book with low non-performing assets (NPAs) minimizes risk and ensures financial stability.
  • Established by the government of India, ISFCL benefits from a stable shareholder base and potential access to cheaper funds.
  • Over 200 branches across 17 states provide a strong physical presence and customer access.
  • Deep knowledge of Tier II and III markets and local lending practices allows for customized solutions.
  • Efficient Technology Adoption: Leverage digital platforms for loan processing and customer service, improving speed and cost-effectiveness.
  • Commitment to affordable housing promotes financial inclusion and poverty alleviation, boosting brand image.
  • Implement green practices and ethical lending policies, further enhancing positive perception.

Key Strategies:

  • Expand and diversify the distribution network to achieve deeper penetration in key states.
  • Strengthen market presence through strategic expansion in targeted regions.
  • Utilize the existing technology stack to achieve scalability.
  • Enhance efficiency and productivity across branches through innovative technological solutions.
  • Diversify the borrowing profile to optimize borrowing costs.
  • Explore a mix of funding sources for financial stability and risk mitigation.
  • Focus on optimizing borrowing costs for improved financial performance.
  • Strategically manage expenses related to borrowing to enhance overall financial efficiency.
  • Invest in initiatives to enhance brand equity in the affordable housing finance sector.
  • Build a strong and reputable brand to foster customer trust and loyalty.
  • Prioritize sustainability initiatives in business practices.

Key Concerns:

  • Economic downturns increase the risk of non-payment or default by borrowers, particularly from the low-income segment.
  • Customers in the low and middle-income strata, especially first-time home loan takers in Tier II and Tier III cities, may face challenges in meeting repayment obligations during economic uncertainties.
  • ISFCL’s customer base comprises 30% salaried and 70% self-employed individuals.
  • Intense competition, especially in the context of expansion into new geographies, may impact ISFCL’s financials in the long term.
  • Differing market dynamics, regulatory landscapes, and customer needs in new geographies may pose challenges.
  • A major proportion of ISFCL’s Assets Under Management (AUM) is concentrated in three states, posing geographic concentration risk.
  • Over-reliance on specific regions increases vulnerability to localized economic conditions.
  • Historical negative cash flows and the potential for future negative cash flows are inherent to ISFCL’s business model.

Comparison with Listed Industry Peers: 

FY23 FIGURES ISFCL Aavas Aptus Home first finance
FY21-23 AUM CAGR (%) 41 22 29 32
AUM (Rs Cr) 4,359 14,167 6738 7198
Yield 14.9% 13.1% 17.1% 13.1%
Spreads 6.6% 5.5% 8.9% 5.7%
Credit cost 0.5% 0.1% 0.5% 0.3%
GNPA 1.1% 0.9% 1.2% 1.6%
ROA 4.1% 3.5% 7.8% 3.9%
ROE 13.4% 14.1% 16.1% 13.5%
P/E 34 28.8 26.7 32.6
NAV 141.38 67.05 413.58 206.48
PARTICULARS FY23 FY22 FY21
Equity share capital 437.65 437.07 429.78
Other equity 11967.63 10324.20 8942.91
Net worth 12405.28 10761.27 9372.69
Total Borrowings 28123.35 18834.11 14090.67
Revenue from Operations 5029.46 3736.16 2745.72
EBIDTA 4188.31 3208.59 2226.3
PBT 2019.52 1669.01 1129.57
Net profit 1553.42 1284.47 873.89

The image added is for representation purposes only

 

RBI Charts Course for Sustainable Growth: Inflation Control as the Key