IPO Size: Rs. 151 cr

• Entirely Fresh Issue for growth capital

Price band: Rs. 114-120 per share

M cap: Rs. 603 cr, implying 25% dilution

IPO Date: Mon 23^rd Sep to Wed 25^th Sep 2024, Listing Mon 30^th Sep 2024

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Vehicle Loan Financier

Manba Finance is an 18 year old Mumbai-based non-deposit taking non-banking finance company-base layer (NBFC-BL) providing vehicle loans, with assets under management (AUM) of Rs. 936 cr as of 31.3.24, in Maharashtra, Gujarat, Rajasthan and Chhattisgarh. Nearly 60% AUM and 90% revenue comprises two-wheeler purchase, with average ticket size of Rs. 80,000. Yet, average yield is 21% pa which looks skeptical and unsustainable.   

Very Poor Underwriting Skills

Due to high yields, net interest margin (NIM) is healthy at 11.2%. However, net nen-performing assets (NPA) of 3.16% is a big drag, highlighting poor underwriting skills, the most vital element for success of any lending business.

As of 31.3.24, net NPA of Rs. 25 cr is close to FY24 full year PAT of Rs. 31 cr, which highlights extremely weak fundamentals. Infact, net NPA of 3.16% as of 31.3.24 is worse than 2.37%, as of 31.3.21. Net NPA is exceptionally high for a secured lending product like vehicle loan, as also, when average industry net NPA for 2W loans is below 1%.

One-time Gain in FY24 Financials

Between FY21 to FY24, AUM grew at a 3 year CAGR of 21%. Just in FY24, before the IPO, AUM growth rose to 48% YoY.

Due to one-time profit on ARC of Rs. 11.25 cr in FY24, RoA jumped to 3.5% in FY24 from 2.5% in FY23. Excluding this, PBT grew 21% YoY to Rs. 28 cr. On a net worth of Rs. 201 cr, total borrowings are at Rs. 755 cr, with an average borrowing cost of 12% p.a. and a credit rating of BBB+, the bottom tier of investment grade credit rating.

Expensive Pricing

Post money book value per share is at Rs. 70, translating into a PBV multiple of 1.7x. This is expensive for company’s small scale of operations, non-diversified book and a poor asset quality. Small NBFC peer Baid Finserv with Rs. 365 cr AUM, 3.4% RoA and 0.4% net NPA is trading at PBV multiple of 1.2x.