Manba Finance IPO - Issue Details, Financials, Strengths, Risks, Peer Comparison, Valuation: Anand Rathi

Anand Rathi Report

Manba Finance Ltd. launched its initial public offering today and the offer closes for subscription on Sept. 25.

A NBFC-base layer providing financial solutions for new two wheeler, three wheeler, electric two wheeler, electric three wheeler, used cars, small business loans, and personal loans has fixed the price band in the range of Rs 114 and Rs 120 Apiece, with a face value of Rs 10 each.

The minimum application lot size is 125 shares and the company will likely list on the BSE and the National Stock Exchange on Sept. 30.

The Rs 150.84 crore IPO is an entirely fresh issue of 1.26 crore shares.

Objects of the Issue

• Augmenting the capital base to meet the company’s future capital requirements.

Strengths:

• Established relationships with dealers.

• Ability to expand to new underpenetrated geographies.

• Access to diversified and cost-effective long-term borrowing.

• Technology driven and scalable operating model with quick Turnaround Time (TAT) for loan processing.

• Extensive collections infrastructure and processes leading to maintenance of their Company’s asset quality.

Valuation:

Manba Finance Bank has established relationships with more than 1100 dealers with ability to expand to new underpenetrated geographies (currently present in 66 locations spread across six states in western, central and north India) and a technology drive and scalable operating model with quick Turn Around Time for loan processing (5.30 days as of March 31, 2024).

At the upper price band company is valuing at price/book value of 1.70 times with a market cap of Rs 602.8 crore post issue of equity shares and return on net worth of 15.66%.

We believe that the IPO is fairly priced, hence we recommend a “Subscribe-Long Term” rating to the IPO.

Key Risk:

• Companies business and future prospects could get adversely affected if they are not able to maintain relationships with their dealers from whom they derive significant portion of their new vehicle loans business.

• New Vehicle Loans constitute 97.90% of their AUM. Lack of diversity in their loan products may affect their growth, prospects and financial condition.

• Company may face asset-liability mismatches, which could affect their liquidity and consequently may adversely affect their operations and profitability.

• Their operations could be adversely affected by strikes or increased remuneration demands by their employees or any other kind of disputes with their employees.

• Company have experienced negative cash flows from operating activities in Fiscals 2024 and 2023 and may continue to do so in the future and the same may adversely affect their cash flow requirements, which in turn may adversely affect their ability to operate their business and implement their growth plans, thereby affecting their financial condition.

• Companies business and operations are dependent on their ability to timely access cost effective sources of funding. Any disruption in sources of funding could have an adverse effect on business, results of operations and financial condition.

• Companies operations are concentrated in six states in western, central and north India and any adverse developments in these regions could have an adverse effect on business and results of operations.

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