Established in 1994, SK Finance is a non-deposit taking NBFC that have distribution network across parts of India. The company operated in two verticals; vehicle financing and financing for MSME. As per the report by CRISIL, SK Finance is the fastest growing player in the vehicle financing and MSME financing segments among its peers.
The company offers secured, granular, and retail loans for financing used and new commercial vehicles, cars, tractors, and new two-wheelers. For the nine months ended December 31, 2023, SK FINANCE had the highest used vehicle finance share of 77.41%. SK FINANCE started its MSME lending business in late 2016, offering loans for working capital requirements to mid to low-income customers, primarily self-employed, unbanked individuals in rural and semi-urban areas of India.
SK Finance Limited IPO Details:
| IPO Open Date | Not Available |
| IPO Close Date | Not Available |
| Basis of Allotment | Not Available |
| Listing Date | Not Available |
| Face Value | Rs 1 per share |
| Price | Not Available |
| Lot Size | Not Available |
| Total Issue Size | Up to [●] Equity Shares |
| Aggregating up to ₹22,000.00 million | |
| Fresh Issue | Up to [●] Equity Shares |
| Aggregating up to ₹5,000.00 million | |
| Offer For Sale | Up to [●] Equity Shares |
| Aggregating up to ₹17,000.00 million | |
| Issue Type | Book Built Issue IPO |
| Listing At | BSE & NSE |
| QIB Shares Offered | Not more than 50% of the Net Issue |
| Retail Shares Offered | Not less than 35% of the Net Issue |
| NII (HNI) Shares Offered | Not less than 15% of the Net Issue |
SK Finance Limited IPO Objectives
SK Finance IPO offer comprises of a fresh issue and offer for sale by existing shareholders.
- The selling shareholders would be pairing stake amounting to Rs. 1700 crores.
- The company proposes to utilise the net proceeds from the fresh issue towards the following:
| Particulars | Amount
(in ₹ million) |
| Augmenting capital base to meet future business requirements of
Company towards onward lending |
Rs. 3750 |
| General corporate purposes | [●] |
| Total | [●] |
SK Finance Limited IPO Issue Price & Size
SK Finance Limited IPO issue price is not yet known as the issue date and other details not declared by the company. As of date, only the total issue size of the offer is available, which is Rs. 500 crores of fresh issue and Rs 1700 crores of offer for sale.
SK Finance Limited IPO Launch Date
As of date, only the DRHP has been filed with the SEBI, so no tentative dates has been officially announced by the company through RHP. Once the company files the RHP document, all the necessary dates and price band will be updated.
SK Finance Limited Financial Statements:
| Particulars | As of De 31, 2023 | As of Dec 31, 2022 | FY23 | FY22 | FY21 |
| Revenue from operation | |||||
| Interest income | 11702.6 | 86088608 | 12105.22 | 7722.56 | 6380.88 |
| Fees and commission income | 443.77 | 275.19 | 394.76 | 247.35 | 145.36 |
| Net gain on fair value changes | 93.49 | 139.96 | 210.01 | 143.93 | 129.87 |
| Net gain on de-recognition of financial
instruments under amortised cost category |
847.23 | 188.88 | 317.69 | 29.98 | 72.76 |
| Total revenue from operations | 13087.17 | 9212.36 | 13027.69 | 8143.82 | 6728.57 |
| Other income | 65.09 | 71.56 | 114.73 | 63.05 | 96.35 |
| Total income | 13152.26 | 9283.92 | 13142.41 | 8206.87 | 6824.92 |
| Expenses | |||||
| Finance costs | 5499.16 | 38.22.09 | 5474.8 | 3468.15 | 2970.13 |
| Impairment on financial instruments | 1109.06 | 833.93 | 917.46 | 162.85 | 927.888 |
| Employee benefits expenses | 2768.5 | 2112.44 | 2828.05 | 2049.22 | 1193.4 |
| Depreciation and amortization | 256.8 | 183.7 | 252.03 | 158.14 | 113.33 |
| Other expenses | 710 | 509.77 | 767.98 | 592.48 | 386.02 |
| Total expenses | 10343.52 | 7462.96 | 10240.32 | 6430.84 | 5590.76 |
| Profit for the period/year | 2171.01 | 1388.83 | 2227.86 | 1428.74 | 910.83 |
| As of 9 months
ended Dec 31 |
As at and for the FY ended March 31 | ||||
| Key Performance Indicators | 2023 | 2022 | 2023 | 2022 | 2021 |
| Number of States & UT | 12 | 10 | 10 | 10 | 7 |
| Number of Branches | 535 | 441 | 447 | 423 | 344 |
| Number of MSME Branches | 322 | 224 | 237 | 176 | 118 |
| Number of Employees | 10725 | 8143 | 7438 | 6730 | 5107 |
| AUM (in ₹ million) | 95155.23 | 67159.89 | 73783.42 | 47135.66 | 34171.69 |
| AUM growth (%) | 41.68% | - | 56.53% | 37.94% | - |
| Disbursements (in ₹ million) | 50403.38 | 40594.15 | 56228.52 | 32260.49 | 16340.52 |
| Disbursement Growth (%) | 24.16% | - | 74.30% | 97.43% | - |
| Average ticket size on Disbursement (in ₹ million) | 0.33 | 0.31 | 0.31 | 0.29 | 0.29 |
| Average LTV (%) | 61.96% | 65.07% | 64.45% | 65.64% | 68.06% |
| Product Wise AUM (in terms of Amount in ₹ million) | |||||
| Vehicle Loans | 74248.53 | 55737.32 | 60431.29 | 40898.99 | 30366.47 |
| MSME Loans | 18364.25 | 10199.22 | 11919.87 | 5763.45 | 3642.89 |
| Other Loans | 2542.46 | 1223.35 | 1432.26 | 673.22 | 162.33 |
| Product Wise Disbursement (in terms of Amount in ₹ million) | |||||
| Vehicle Loans | 38724.17 | 33513.21 | 46045.31 | 28528.67 | 14530.78 |
| MSME Loans | 9494.47 | 5881.39 | 8544.14 | 3257.85 | 1717.25 |
| Other Loans | 2184.74 | 1199.54 | 1639.06 | 473.97 | 92.48 |
| AUM per branch (in ₹ million) | 177.86 | 152.29 | 165.06 | 111.43 | 99.34 |
| AUM per employee (in ₹ million | 8.87 | 8.25 | 8.74 | 7 | 6.69 |
| Net Worth (in ₹ million) | 27322.1 | 17415.74 | 18319.34 | 15930.17 | 9691.92 |
| CRAR (%) | 30.46% | 27.12% | 26.10% | 30.42% | 27.67% |
| Total Assets to Net Worth (in Times) | 3.97 | 4.76 | 4.94 | 3.91 | 4.43 |
| Average Cost of borrowings (%) | 7.29% | 6.95% | 9.39% | 8.84% | 10.17% |
| Total Income (in ₹ million) | 13152.26 | 9283.92 | 13142.41 | 8206.87 | 6824.92 |
| Net Interest Income (in ₹ million) | 6203.52 | 4786.24 | 6630.42 | 4254.41 | 3410.75 |
| Net Income (in ₹ million)( | 7653.1 | 5461.83 | 7667.61 | 4738.72 | 3854.79 |
| Profit for the period/year (in ₹ million) | 2171.01 | 1388.83 | 2227.86 | 1428.74 | 910.83 |
| Yield on average Gross Loans (%) | 13.42% | 1392% | 18.71% | 17.43% | 19.00% |
| Spread (%) | 6.13% | 6.97% | 9.33% | 8.55% | 8.84% |
| Interest Margin % | 6.23% | 6.59% | 8.67% | 8.09% | 8.73% |
| Operating Expenditure / Average Total Assets (%) | 3.75% | 3.80% | 5.03% | 5.32% | 4.33% |
| Impairment on financial instruments / Average Total Assets | 1.11% | 1.15% | 1.20% | 0.31% | 2.37% |
| Return on average Total Assets (RoTA) (%) | 2.18% | 1.91% | 2.91% | 2.72% | 2.33% |
| Return on Average Net worth (RoNW) (%) | 9.51% | 8.33% | 13.01% | 11.15% | 9.87% |
| Provision Coverage Ratio on Gross Loans – Stage 3(%) | 43.59% | 30.63% | 32.26% | 28.58% | 52.85% |
| Gross non-performing assets Ratio (%)( | 4.60% | 4.58% | 3.11% | 2.83% | 4.03% |
| Net NPAs to net advances (Net NPA Ratio) (%) | 3.16% | 3.51% | 2.36% | 2.04% | 1.94% |
| Provision Coverage Ratio on Gross NPA (%) | 32.38% | 24.25% | 24.72% | 28.58% | 52.85% |
| Green Funding | 3,334.46 | 2,294.53 | 3,303.57 | 1,802.96 | 250.17 |
| Green Funding Ratio | 8.61% | 6.85% | 7.17% | 6.32% | 1.72% |
| Operating Expenditure / Average Total Assets | 3.75% | 3.87% | 5.03% | 5.32% | 4.33% |
| Operating Expenditure to Net Income Ratio (%) | 48.81% | 51.39% | 50.19% | 59.08% | 43.91% |
| Basic EPS | 17.78 | 11.94 | 19.13 | 12.62 | 9.04 |
| Diluted EPS | 17.55 | 11.69 | 18.79 | 12.41 | 8.95 |
SK Finance Limited IPO Promoters & Shareholding of the Company
There are three promoters of the company
- Rajendra Kumar Setia (Promoter, MD and CEO)
- Yash Setia (Promoter and Director)
- Rajendra Kumar Setia HUF.
As per the DRHP, Promoters in total holds 32.26% of the paid-up equity share capital of Company.
Why Invest in SK Finance Limited IPO?
Strengths
Fastest growing player in the vehicle financing segment
As per facts mentioned in DRHP, SK Fin is the fastest-growing player in the vehicle financing segment. As of Dec 31, 2023, the company had active loan accounts of 330,591 and its vehicle financing vertical account for 78.03% of its total AUM.
Deep sales network
The company has an established brand presence primarily in rural and semi-urban India, and have been growing their footprints to service customers primarily form that segment. As of FY23, semi-urban and rural regions accounted for approx. 29% and 24% share of the overall vehicle financing credit in India. The company as of Dec 31, 2023 has 535 branches across parts of India.
| Region | As of December 31 | As of March 31, | ||||||||
| 2023 | 2022 | 2023 | 2022 | 2021 | ||||||
| No. of Branches | % of Branches | No. of Branches | % of Branches | No. of Branches | % of Branches | No. of Branches | % of Branches | No. of Branches | % of Branches | |
| Urban | 190 | 35.51% | 153 | 34.69% | 158 | 35.35% | 142 | 33.57% | 112 | 32.56% |
| Semi Urban | 247 | 46.17% | 212 | 48.07% | 213 | 47.65% | 204 | 48.23% | 162 | 47.09% |
| Rural | 98 | 18.32% | 76 | 17.23% | 76 | 17.00% | 77 | 18.20% | 70 | 20.35% |
The company fiancé the vehicles through two channels
- Direct channel (on-ground sales teams reporting into its branches)
- Direct Selling Agents (DSAs)
Apart from vehicle financing, company is involved in MSME financing also, which is only done through network of branches.
As of Dec 31, 2023, the company has 10,725 employees, with 6,202 and 1,607 employee’s part of the sales team and collection team. Among the sales team 3,560 employees focus on vehicle financing and 2,642 focuses on MSME financing.
| Sourcing Channel | For 9 months ended Dec 31, | For year ended March 31, | |||
| 2023 | 2022 | 2023 | 2022 | 2021 | |
| % of Total Disbursement | % of Total Disbursement | % of Total Disbursement | % of Total Disbursement | % of Total Disbursement | |
| Direct Channel | 21.75% | 21.69% | 21.67% | 26.65% | 32.69% |
| DSAs | 55.08% | 60.87% | 60.22% | 61.78% | 56.24% |
According to the fled document, the company as of Dec 31, 2023 has 8,853 direct selling agents for its vehicle financing vertical.
Diversified sources of funding
The company has diversified sources of funding and raise capital/ debt from various instruments, including term loans, NCD, overdrafts against FD, etc. They have access to funds from 61 lenders. The company's credit ratings for NCD and commercial paper were "AA-" by ICRA and CARE.
| Product | As of and for the nine months ended December 31, | As of and for the year ended March 31, | |||
| 2023 | 2022 | 2023 | 2022 | 2021 | |
| Debt securities | 17769.2 | 18450.25 | 17149.6 | 14735.79 | 15203.21 |
| Borrowings (other than debt securities) | 61141.2 | 45412.85 | 53281.82 | 30037.82 | 16637.38 |
| Subordinated liabilities | - | 204.06 | - | 203.66 | 402.94 |
| Finance costs | 5499.16 | 3822.09 | 5474.8 | 3468.15 | 2970.13 |
| Average Cost of borrowing (%) | 7.29% | 6.95% | 9.39% | 8.84% | 10.17% |
| Incremental Cost of Borrowings (%) | 9.27% | 9.07% | 9.17% | 8.80% | 9.74% |
Risks:
Primarily focused on used vehicle financing
As can be seen from table below, the company primarily provides finance for used commercial vehicles, cars, and tractors. The used vehicle business can be significantly impacted if the government came up with new rules and regulation seeing rising pollution. The new rules can be in form of factors related to tighter regulation of tailpipe emissions of air pollutants, disposal of vehicle in shorter time frame, etc.
| Product | As of December 31, | As of March 31, | ||||||||
| 2023 | 2022 | 2023 | 2022 | 2021 | ||||||
| AUM | % of vehicle financing vertical AUM | AUM | % of vehicle financing vertical AUM | AUM | % of vehicle financing vertical AUM | AUM | % of vehicle financing vertical AUM | AUM | % of vehicle financing vertical AUM | |
| Used | 57477.84 | 77.41% | 43915.22 | 78.79% | 47518.1 | 78.63% | 33037.85 | 80.78% | 24921.96 | 82.07% |
| New | 16770.69 | 22.59% | 11822.09 | 21.21% | 12913.19 | 21.37% | 7861.14 | 19.22% | 5444.5 | 17.93% |
Majority of business operations involve mid to low-income customers
SK Finance target clients are from rural and semi urban areas. They attract clients of mid to low-income customers, predominantly self-employed, unbanked individuals with limited access to organized lending channels. The ratio of new to credit (NTC) consumer hold significant portion as can be seen from table provided.
| For the nine months ended Dec 31 | For the year ended March 31, | |||||||||
| 2023 | 2022 | 2023 | 2022 | 2021 | ||||||
| Number of NTC customer s | NTC customer as % of total customers | Number of NTC customer s | NTC customer as % of total customer | Number of NTC customer s | NTC customer as % of total customers | Number of NTC customer s | NTC customer as % of total customers | Number of NTC customer s | NTC customer as % of total customers | |
| NTC customers | 49157 | 32.53% | 45156 | 34.09% | 59808 | 33.47% | 36817 | 32.80% | 19114 | 33.38% |
Customers living in rural and semi-urban areas are less financially strong and have no previous credit history than corporate borrowers. This makes them among the first to become financially restricted in the event of an economic downturn.
Inability to recover outstanding amount
The vehicles bought by consumer are hypothecated on the company’s name, so legally 100% of the loans disbursed are secured. In case the customer defaults and company take possession of the (used / new) vehicle, wear and tear during the loan cycle time, deterioration of value over time, inappropriate resale value may not lead them to recover full amount.
The loan-to-value ratios are broken down by category in the following table.
| Portfolio | For 9 months ended Dec 31 | For Fiscals ended Ma 31, | |||
| 2023 | 2022 | 2023 | 2022 | 2021 | |
| CVs (excluding M&HCVs) | 82.37% | 83.11% | 83.11% | 79.43% | 81.20% |
| Tractor | 82.12% | 21.82% | 81.92% | 80.06% | 79.56% |
| Cars | 77.71% | 76.50% | 76.34% | 75.91% | 76.58% |
| Two Wheelers | 81.06% | 80.13% | 79.89% | 79.63% | 80.17% |
AUM concentration amount states
As per the prospectus, 64% of their branches are located in western India's Rajasthan, Madhya Pradesh, and Gujarat. Branches concentration lead to majority of AUM coming from these three states. As can be seen from table below, the concentration was highly skewed to three states earlier. The percentage has come down but the concentration of UAM is still cornered.
| As of December 31, 2023 | As of March 31, 2021 | |
| AUM of our top five states | % of AUM | % of AUM |
| Rajasthan | 51.59% | 65.90% |
| Madhya Pradesh | 13.10% | 10.20% |
| Gujarat | 10.48% | 13.91% |
| Total | 75.07% | 90% |
Sensitivity to interest rate & credit rating
Since they are into lending business, they have to walk on thin rope to yield profit and get healthy margin while giving out loans to customers. If due to economic downturn, customer start to default, which will hit the cash flow and profits directly, which can further dent their credit rating and borrowing cost at company level.
Dependence on Direct selling agents
Company has significant reliance on direct selling agents as majority of total disbursed amount is sourced through DSAs. As can be seen from table below in early nine month of FY23, 55% of total disbursed mount was sourced through selling agents.
| For the nine-months period ended December 31, | For Fiscals ended March 31 | |||
| 2023 | 2022 | 2023 | 2022 | |
| Number of DSAs | 8853 | 7924 | 8075 | 6740 |
| % of total disbursed amount
sourced through DSAs |
55.08% | 60.87% | 60.22% | 61.78% |
SK FINANCE IPO Grey Market Premium
Grey market premium is the premium quoted over the IPO issue price. GMP shows that investors are ready to pay above the upper band of the IPO issue price. GMP is determined in the grey market as per the demand and supply of the shares in the primary market. A grey market is that unofficial ecosystem of unlisted companies' stocks that start trading even before the launch of the IPO to the date of its listing.
Also Read: What is Grey Market Premium in IPO: How is GMP Calculated & Reliable
However, GMP is not a reliable factor, as it keeps fluctuating as per the demand and supply of shares in the primary market. There are numerous factors that affect the stock market in India and individual stock prices of different companies that are already listed and trading in the secondary market. However, for an IPO-bounded company, you can consider the GMP as the speculative listing price of the share
According to various online sources, the Grey Market Premium or GMP of the SK FINANCE is trading around Rs 50 in the grey market. It means shares are trading at the upper band issue price of Rs 50 with a premium in the grey market and may list around the same price.
How to Apply for SK FINANCE IPO?
To apply in SK FINANCE IPO you need to open demat account to hold your allotted shares and a trading account to sell or buy the shares into the secondary market. And not only applying in the IPO, but while buying or selling the shares in the stock market you also need both these types of accounts. Hence, you can apply here at Moneysukh to open a trading and demat account at the lowest brokerage.
Also Read: Features of Best Demat Account with Lowest Brokerage Charges in India
Having both these accounts at Moneysukh, you will get the advantages of the best online trading apps to trade or invest in equities, commodities and currencies. Here you will get the flexibility to choose the best trading platform and advanced trading software like Keev,TradeTron, Quantman, AlgoBulls, and FoxTrader all integrated with TradingView to facilitate the best trading experience.
Also Read: Equity or Commodity which is better for Trading or more Profitable
Moreover, you can also start algo-trading – a high-frequency trading mechanism to choose the best algo-trading platforms and trade with best intraday algo-trading strategy at the lowest brokerage pricing. At Moneysukh you can also get stock recommendations and tips backed with research reports and useful tutorials on the stock market to help the clients understand the stock market in a better way. However, right now to apply for the SK FINANCE IPO you can follow the steps given below.
Steps to Apply for SK FINANCE IPO:
Step 1: When SK FINANCE IPO opens you can bid online.
Step 2: Just go to trade.moneysukh.com and log in with your User ID & password.
Step 3: Now look for the IPO section and click on the SK FINANCE IPO.
Step 4: Here you need to fill in the required details like price, quantity, and so on.
Note: At the time of applying for the IPO, make sure to bid at the cutoff price and then submit your application
Step 5: Now make the required payment and then submit your IPO application successfully.
How to Check SK FINANCE IPO Allotment Status?
Checking the allotment status online is very easy if you have the PAN details and IPO application number. But checking the details of the IPO allotment is possible only when the basis of allotment is arrived. In the case of SK FINANCE IPO, you can also check the allotment status through various online sources.
Also Read: How to check IPO allotment status on NSE, BSE through Moneysukh
And the basis of the allotment is highly dependent on the oversubscription of the IPO. If the IPO is oversubscribed by many folds, then for the investors who applied through the retail category or HNI category, the chances of getting the allotment become very low. Here while applying to such over-demanding IPOs you can follow some tips to improve your chances of getting the allotment in IPO.
Also Read: How to Increase the Chances of IPO Allotment
And when due to oversubscription of IPOs, you don’t get any allotment of shares, then your money will be refunded back into your bank account or fun will be unblocked if you applied through ASBA. However, despite the oversubscribed IPO, if get the allotment then the allocated shares will be transferred into your demat account any time before the date of listing. That you can sell in the secondary market after listing or keep from the long-term investment point of view.
