AU FINANCIERS (INDIA) LIMITED(IPO)

COMPANY OVERVIEW

Au Financiers(India) Limited was incorporated on 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.

Au Financiers operate in 3 business lines:
1. Vehicle finance
2. Micro, small and medium enterprises (MSMEs) loans
3. 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.

Key Timelines of Au Financiers:
• 1996 – Incorporated in Jaipur, Raj
• 2000 – Registered as an NBFC with the RBI
• 2005 – Became a commercial associate of HDFC Bank for originating and servicing vehicle loans
• 2007 – Started MSME loans
• 2011 – Started housing finance
• 2012 – Started SME loans
• 2016 – Received a license from the RBI to set up a ‘small finance bank’ (SFB).

As of December 31, 2016, company had 300 branches spread across 10 states and one union territory in India, with significant presence in the states of Rajasthan, Gujarat, Maharashtra and Madhya Pradesh and employed 6,092 personnel serving 270,692 active loan accounts.

ISSUE DETAILS 

• Issue Open    :   28th June, 2017 
• Issue Closes  :   30th June, 2017
• Issue Type     :   Book Built Issue IPO
• Issue Size       :   53,422,169 Equity Shares 
• Face Value     :   Rs 10/ Equity Shares
• Issue Price     :   Rs.355– Rs.358/ Equity Share
• Valuation       :   1800-1900 Cr.(Approx.)
• Market Lot    :    41 Shares 
• Minimum Order Quantity: 200 Shares and in multiples
• Listing At       :    BSE, NSE

ISSUE OBJECTS

Well unlike others this company has its basic objectives only:

• To achieve the benefits of listing the Equity Shares on the Stock Exchanges.

• To enhance visibility, brand and provide liquidity to its existing shareholders.

COMPANY PROMOTERS

Company’s Promoter are:

1. Mr. Sanjay Agarwal

2. Ms. Jyoti Agarwal

3. Ms. Shakuntala Agarwal

4. Mr. Chiranji Lal Agarwal

COMPETITIVE STRENGTHS

• Diversified Product Portfolio and Revenue Streams

• Customer Centric Organizational Commitment

• Significant Presence in Rural and Semi-Urban Markets with Focus on Low and            Middle Income Customers

• Robust and Comprehensive Credit Assessment and Risk Management Framework

• Access to Diversified Sources of Funding over the Years

 VALUATIONS

As far as Valuations are concerned we may have different perspective of Valuing this IPO. If we see EPS as on 31st March, 2017 which comes to 30.94 but isn’t displaying the true picture as sudden spike in EPS on YoY basis is only due to exceptional gains. So we are considering EPS without exceptional item.

So, the issue has  P/E of 29.93x  at the upper price band and 29.68x on lower price band on standalone basis, and PE on consolidated basis is unavailable as the company has sold off its subsidiary in June.

#Alternatively if we see P/E on taking average EPS on Standalone then we find it @35.87x & 35.64x respectively (Both @ Upper & Lower Price Band).

                                             EARNINGS PER SHARE

INDUSTRY P/B RATIO

INDUSTRY P/E RATIO

OTHER FINANCIAL RATIOS 

PEERS COMPARISON

RoNW

RESTATED STANDALONE FINANCIAL POSITION SUMMARY

RESTATED STANDALONE FINANCIAL PERFORMANCE SUMMARY

ANALYSIS & SUBSCRIPTION SUGGESTIONS BY AUTHOR

What we have seen so far is a unique business model brought inn by this company in 2016 ‘small finance bank’ (SFB) licence it was the first company by then to get this licence from RBI besides this the company has shown CAGR of 34%  which seems promising .

Lets get some points which we should consider before reaching to conclusion:

• Valuations: On individual basis it seems perfectly Valued which limits us to see much of listing gains but comparing this to Industry PE which has the highest point @43x which shows that their is still chances of growth but its own Valuations is the hurdle in listing benefits,

• RoNW/EPS/NAV:  The kind of growth this ratio has shown in RoNW in comparison toits peer group we can see the company for long term investment although EPS/NAV are not that attractive in its peer group,

• NPA’s: Finance sector has been seeing this issue @ larger scale over the past few years although RBI intervention has been their to resolve the issue which is probably gonna solve upto FY 2018-19 largely but what’s interesting about this company is it has least chances of incurring NPA’s due to its business model due to its small financing we shall ignorethe earlier rise in NPA in the company.

• Earnings: Earnings have been consistent which is good for any medium to long term investors.

  What we can conclude here though company is good but due to its perfectly pricing of the issue we may not see much of a listing gains but company is on the other hand can show good growth over two years point of time. For investors who wanna take least risk in this IPO shall hold till last day and first check the over-subscription list if @ any given time issue gets oversubscribe by 18-20 times then shall go for it otherwise better keep distance but i repeat company is good for medium to long term investors.

 

 

Disclaimer: Author may or may not have interest in the issue before getting to conclusion consult your Financial Adviser. The Author shall not be responsible for any kind of loss of gain arising out of any investments.