Indostar Capital Finance Limited (ICFL), a leading non-banking finance company (“NBFC”), was established in July 2009. IFCL is managed with the Reserve Bank of India as a systemically important non-deposit taking company. The company is professionally managed and institutionally owned and is primarily engaged in providing bespoke Indian Rupee denominated structured term financing solutions to corporates and loans to small and medium enterprise (“SME”) borrowers in India. The company has recently expanded its portfolio to offer vehicle finance and housing finance products.
Indostar has an advantage in the form of strong capital sponsorship and professional expertise of their promotor, which is a part of the Everstone Group, an India and Southeast Asia focused investor, which was recognized as the Private Equity (PE) firm of the year in India by Private Equity International for 6 consecutive years till the Calendar year 2016.
IFCL operates in four principal lines of business, namely:
• Corporate lending: - The corporate lending business primarily consists of (i) lending to mid-to-large sized corporates in manufacturing, services and infrastructure industries, by way of senior secured debt, structured financing, promoter financing and special situation funding and (ii) lending to real estate developers, mainly for financing project level construction of residential and commercial building projects and take-out of early-stage equity investors.
• SME lending: - The SME lending business primarily involves extending secured loans for business purposes to small and medium size enterprises, including businessmen, traders, manufacturers and selfemployed professionals. These loans are typically secured against completed and largely self-occupied residential and commercial property.
• Vehicle finance: - The vehicle finance business primarily involves providing financing for purchases of used or new commercial vehicles, passenger vehicles and two-wheelers. The vehicle finance operations involve a relatively larger sourcing team as compared to other business lines as it is largely based on the experience of working with customers with a limited credit history and the ability to effectively assess risks associated with financing used vehicles.
• Housing finance: - The housing finance business comprises two business lines, namely (i) affordable housing finance, and (ii) retail housing finance. It operates the housing finance business through its wholly-owned subsidiary Indostar Home Finance Private Limited. The affordable housing finance business line primarily involves loans to the salaried and self-employed customers for housing purposes where the property cost is typically up to Rs. 5.0 million, the carpet area of the unit typically does not exceed 60 square meters and the loan amount is capped at Rs. 3.0 million.
The company has retail operations through 71 branches across India and a central support office in Mumbai. In the SME lending and vehicle and housing finance businesses, branches act as the primary point of sale and assist with the origination of loans, various collection processes and enhancing customer service, while the central support office provides support functions, such as loan processing and credit monitoring.
IFCL maintains a long-term relationship with its lenders which includes 14 public sector banks, 13 private sector banks, 21 mutual funds and 4 insurance companies and other financial institutions.
The total revenues have grown to Rs. 719.9 crores for the FY17 from Rs. 241.6 crores for the FY13 at a CAGR of 31.4% and profit after tax has grown to Rs. 210.8 crores for the FY17 from Rs. 90.1 crores for the FY13 at a CAGR of 23.7%. As of FY15, FY16 and FY17 and 9MFY18, the company’s Gross NPAs accounted for 0.6%, 0.2%, 1.4% and 1.7% of the company’s Gross Advances, while Net NPAs accounted for 0.5%, 0.2%, 1.2% and 1.3% of the company’s Net Advances, respectively. Its average cost of borrowings in the FY15, FY16 and FY17 and 9MFY18 stood 11.9%, 11.1%, 10.3% and 9.1%, respectively.
Issue Structure & Valuation
The proposed Indostar Capital Finance Ltd issue is for an aggregate amount of Rs 700 crores (12,237,762 shares) by fresh issue and Rs. 1144 crores (20,000,000 shares) by way of offer for sale. The shares are being offered to the public at a price range of Rs. 570 per share (lower price band) to Rs 572 per share (upper price band).
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