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IPO Note: Au Financiers IPO - SMC - IndiaNotes.com
IPO Note: Au Financiers IPO - SMC
SMC | Published: 26 Jun, 2017  | Source : IndiaNotes.com

About the company


Incorporated in 1996, Au Financiers (India) Ltd is Jaipur Rajasthan based non-banking finance company focused on retail segment serving low and middle income individuals and businesses that have limited or no access to formal banking and finance channels. It operates in 3 business lines (i) Vehicle finance (ii) Micro, small and medium enterprises (MSMEs) loans (iii) Small and medium enterprises (SMEs) loans. On December 20, 2016, Au Financiers received RBI license for Small Finance Bank (SFB). With this company is planning to offer a diverse suite of banking products in near future. As of May 31, 2017, company conducted its operations through 269 branches, 121 asset centers, one central processing center and 10 offices. In addition, Company plan to set up an additional 162 branches and seven central processing centers during the financial year 2018.


Company outlook


Au Small Finance Bank Limited is a small finance bank (SFB) that has recently transitioned from a prominent, retail focused non-banking finance company (NBFC), which primarily served low and middle-income individuals and businesses that have limited or no access to formal banking and finance channels. It has received a license from the Reserve Bank of India to set up an SFB on December 20, 2016, it is the only NBFC categorized as an asset finance company to obtain such license. Investors may consider investment in the issue.


Industry outlook


India is the fourth largest economy in the world in terms of purchasing power parity . Against a background of global instability , India registered a growth of 7.6% during the financial year 2016, becoming the fastest growing major economy in the world. Financing needs in India have risen along with economic growth over the past decade. By complementing banks and other financial institutions, NBFCs have played a major role in meeting this need. Going forward, NBFC growth is expected to moderate significantly given increased regulation. While traditional businesses are expected to achieve stable growth, NBFCs are also looking towards niche segments such as SME loans and low cost housing finance for diversification. Low penetration in Tier-II and Tier-III cities, product and process innovation and a continued focus on core businesses will be key growth drivers. Housing finance is expected to grow at 13-14% and 17-18% during the Financial Years 2017 and 2018, respectively , after being impacted by the demonetization move, which has affected housing demand, existing buffer levels built into loan to value, and collections. However, long-term growth in the sector is expected to remain intact as the real estate industry becomes more transparent post demonetization.


Valuation:


Considering the P/E valuation on the upper price band of Rs.358 EPS and P/E of FY2017 are Rs.29.65 and 12.08 multiple respectively and at a lower price band of Rs. 355, P/E multiple is 11.97. Looking at the P/B ratio on the upper price band of Rs.358. , book value and P/B of FY2017 are Rs.70.34 and 5.09 multiple respectively and at a lower price band of Rs. 355 P/B multiple is 5.05. No change in pre and post issue EPS and Book Value as the company is not making fresh issue of capital.

 

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About SMC
SMC Research, founded in 1990, is India’s leading share and stock broker, provides a wide range of financial services and investment solutions. A blend of extensive experience, diverse talent and client focus has made us the 4th largest broking house in India(Source: Dun and Bradstreet, 2008). Over the years, SMC has expanded its operations domestically as well as internationally. Existing network includes regional offices at Mumbai, Kolkata, Chennai, Cochin, Ahmedabad, Jaipur, Hyderabad, Bangalore plus a growing network of 2100+ offices spread across 425 cities/towns in India.


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