Spandana Sphoorty Financial Ltd IPO Opens Today: Should you Invest?

Spandana Sphoorty Financial (SSFL) IPO plans to raise INR 1200 crore, includes the offer for sale by the existing investors of aggregate value of Rs.800 crore. The company is a rural-based non-banking financial company -micro finance institutions (NBFC-MFI). The issue comprises of 33 per cent of primary and 67 per cent secondary sale.

Spandana Sphoorty Financial Ltd

The company has delivered good financial performance from 2017 after the company exited the corporate debt restructuring (CDR). The company’s gross AUM has posted growth at a CAGR of 84 per cent and its disbursement has grown by 55% in the same period. At the end of FY19, SSFL’s AUM and disbursement stood at Rs. 4,437 crore and Rs. 4,969.3 crore. The number of borrowers has also risen by a CAGR of 52% in the same period and stands at 2.46 million.

The company currently has 2.46 million borrowers. As of June 30, 2019, the company is operating through 929 branches in India, out of which 149, 149, 136, 111 and 83 branches, are located in Orissa, Madhya Pradesh, Karnataka, Maharashtra and Chhattisgarh, respectively. At the end of FY19, about 20, 19.98, 13.5, 10.8 and 8.70 per cent of the company’s gross AUM has come from Madhya Pradesh, Orissa, Karnataka, Maharashtra and Chhattisgarh, respectively.

 Spandana Sphoorty IPO Details

Issue Open: August 5th, 2019 – August 7th, 2019

Issue Type: Book Built Issue IPO

Issue Price: Rs 853 – Rs 856 Per Equity Share

Issue Size: 14,046,056 Eq Shares of Rs 10 (aggregating up to Rs 1,200.94 Cr)

Minimum Order Quantity: 17 Shares

Equity Shares Offered (Fresh): 4,689,331 Equity Shares of Rs 10 (aggregating up to Rs 400.00 Cr)

Offer For Sale: 9,356,725 Eq Shares of Rs 10 (aggregating up to Rs [.] Cr)

Listing At: BSE,NSE

Listing Date: August 19th June 2019

Should You Invest?

For the FY19, the company’s total revenue has increased to Rs. 1,048.5 crore compared to Rs. 587.3 crore at the end of FY17, which reflects the growth of 78%. The profit before tax in the same period increased at a rate of 67% and stood at Rs. 473.5 crore for FY19. The profit in the same period rose by 66% and was at Rs. 311.9 crore for FY19.

At the higher price band of Rs. 856, the offer is demanding market cap of Rs. 5,485 crore at upper price band, which looks lower than its competitor such as CreditAccess Grameen that demands higher market cap with similar revenue (FY19).  The offer reflects the P/E of approximately 16.04x its FY19 consolidated EPS of Rs. 53.35 on a post-issue equity share capital of Rs. 64.3 crore of face value of Rs. 10 each. Price to book value stands at attractive at 2.71 times.

The company has strong operating performance. Operating Profit/AMA (Average Managed Assets) stood at 10.2%, which is one of the highest in industry. Besides, the company has negligible net non-performing assets (NNPA stands at 0.01% at the end of FY19).

The company intends to open 70 branches this year in order to expand the business. The company also plans to maintain a higher than required capital buffer

The offer seems to be attractively valued, The investors may “subscribe” to Spandana Sphoorty Financial Ltd IPO for long term gains.