Will investing in this auto financing company's IPO be the best ride?
In FY24, the company achieved the highest yield on advances at 23.9 per cent and recorded the second-highest disbursement CAGR of 47.6 per cent from FY22 to FY24 among its peers.
About the issue
Manba Finance Ltd is preparing to launch its Initial Public Offering (IPO) for equity shares. Below are the issue details.
| IPO Details |
| IPO Opening Date |
September 23, 2024 |
| IPO Closing Date |
September 25, 2024 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Rs 10 per equity share |
| IPO Price |
Rs 114 to Rs 120 per equity share |
| Min Order Quantity |
125 shares |
| Listing At |
BSE, NSE |
| Total Issue |
12,570,000 shares of FV Rs 10* |
| (Aggregating up to Rs 150.84 Cr)* |
| Fresh Issue |
12,570,000 shares of FV Rs 10* |
| (Aggregating up to Rs 150.84 Cr)* |
| QIB Shares Offered |
50% of the Offer |
| Retail Shares Offered |
35% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the issue
Considering that the offer is exclusively a fresh issue, it is important to note that the company will directly profit from the offer proceeds. The net proceeds from the fresh issue will be utilised by the company to meet future capital requirements for onward lending.
Promoter holding
Manish Kiritkumar Shah, Nikita Manish Shah, Monil Manish Shah, Manba Investments and Securities Pvt Ltd, Avalon Advisory and Consultant Services Pvt Ltd, Manba Fincorp Pvt Ltd, Manba Infotech LLP and Manish Kiritkumar Shah (HUF) are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 100 per cent in the company.
Company profile
The company, a Non-Banking Financial Company-Base Layer (NBFC-BL), offers financial solutions across various segments including new two-wheelers, three-wheelers, electric two and three-wheelers, used cars, small business loans, and personal loans, with an AUM exceeding Rs 900 crore as of March 31, 2024.
Its target customers primarily consist of salaried individuals and the self-employed. The company provides new vehicle loans with an average ticket size of Rs 80,000 for two-wheeler loans and Rs 1,40,000 for three-wheeler loans.
The company has established strong relationships with over 1,100 dealers, including more than 190 EV dealers, spanning Maharashtra, Gujarat, Rajasthan, Chhattisgarh, Madhya Pradesh, and Uttar Pradesh.
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Financials
| Rs (in crore) |
FY22 |
FY23 |
FY24 |
| Interest Income |
93.98 |
124.96 |
168.36 |
| Total Income |
106.62 |
133.32 |
191.63 |
| Profit before tax |
12.66 |
22.79 |
38.89 |
| Net profit |
9.74 |
16.58 |
31.42 |
The company has demonstrated steady growth in interest income, total income, and profitability over the past few years. Between FY22 and FY24, the company recorded a Compound Annual Growth Rate (CAGR) of 34 per cent in total income and 76 per cent in net profit.
The company recorded the second-highest disbursement CAGR of 47.6 per cent between FY22 and FY24 among its peers. It also ranked third in AUM per branch, standing at Rs 14.41 crore at the close of FY24. Additionally, the company achieved the fastest branch expansion, with a CAGR of 40.3 per cent, growing from 33 branches in FY22 to 65 in FY24, though from a smaller base. In FY24, the company reported the highest yield on advances at 23.9 per cent and the fourth-highest NIM at 9.8 per cent within the peer group.
Valuation and outlook
| Company Name |
P/E |
P/B |
RoE (%) |
RoA (%) |
| Manba Finance Ltd |
14 |
1.72 |
17 |
4 |
| Listed Peers |
| Baid Finserv Ltd |
18 |
1.12 |
8 |
3 |
| Arman Financial Services Ltd |
11 |
2.23 |
30 |
7 |
| MAS Financial Services Ltd |
20 |
2.27 |
15 |
3 |
The issue is priced with a P/BV ratio of 2.25 times, calculated using its Net Asset Value (NAV) of Rs 53.26 as of March 31, 2024. At the upper price cap, it is priced at a P/BV ratio of 1.72 times, considering its post-IPO NAV.
When we calculate the PE ratio for the company by considering the FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 14.
In terms of both valuation and returns, the company has significantly outperformed its listed peers, except for Arman Financial Services Ltd.
It’s important to note that Manba Finance Ltd had one of the highest concentrations in two-wheeler loans, comprising 92 per cent of its AUM in FY24. In contrast, Arman Financial Services Ltd had only 3 per cent of its AUM in two-wheeler loans during the same period, highlighting the difference in business models and target segments. Arman Financial Services Ltd’s AUM is significantly more diversified, making the two companies less comparable in this regard.
The Indian auto industry is poised for significant growth, driven by the country’s large and youthful population, rising disposable incomes, and increasing demand for personal vehicles. With a growing need for auto financing, the company is well-positioned to cater to this expanding market, offering tailored financial solutions to both salaried and self-employed customers. The upcoming festive season is expected to further boost demand, providing a strong tailwind for the industry's continued momentum.
Therefore, we recommend subscribing to the issue with a long-term investment outlook for its promising growth prospects.