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Published on 7/05/2018 5:12:16 PM | Source: Religare Securities Ltd

IPO Note - IndoStar Capital Finance Ltd - Religare Sec

About the Company

Incorporated in 2009, IndoStar Capital Finance Limited is a leading non-banking finance company (NBFC) registered with the Reserve Bank of India as a systemically important non-deposit taking company. It operates in four principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing. It has recently expanded its portfolio to offer vehicle finance and housing finance products.

IndoStar conducts its retail operations through ten branches across Mumbai, Delhi, Chennai, Bengaluru, Hyderabad, Jaipur, Surat, Ahmedabad, Pune and Indore and central support office in Mumbai.

The lenders of the company include, among others, 14 public sector banks, 13 private sector banks, 21 mutual funds and four insurance companies and other financial institutions. The distribution network includes ~548 personnel in its in-house sales team, and ~949 third-party direct sales associates (DSAs) and other third-party intermediaries.

Objects of the Issue

* To carry out Offer For Sale

* To utilize the Net Proceeds from the Fresh Issue towards augmenting its capital base to meet future capital requirements.

Valuation

IndoStar Capital Finance Limited is a leading NBFC with presence in corporate lending, SME lending, vehicle financing and housing financing segments. According to CRISIL, the loan book of NBFCs is expected to post 15% CAGR growth between FY18 and FY19. NBFCs have gained market share at the expense of banks owing to focused lending, widening reach, and resource-raising ability. With slowing corporate demand for loans, banks have shifted their focus to retail assets, thereby increasing competition for NBFCs. However, NBFCs would continue to perform well in the coming years due to key growth drivers like urbanization, easy credit availability, policy initiatives like RERA and affordable housing, increasing penetration in tier 1 and tier 2 cities, etc.

IndoStar has delivered healthy CAGR of 22% and 23.4% on Revenue and Net profit front respectively over FY14-17. With stable asset quality, strong risk management system, experienced management and strong presence across different financing verticals, the company is well placed to remain one of the preferred NBFCs. Going forward, it aims to expand into new geographies, offer new products and maintain its asset quality. At the upper price band of Rs 572, the stock is available at post issue P/BV of ~1.8x.

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