MAS Financial Services IPO opens; 7 key things to know: Should you subscribe?

By: | Published: October 6, 2017 9:43 AM

MAS Financial Services Rs 460 crore IPO (initial public offering) is all set to open for subscription today. We take a look at seven important things to know about the public offer before you go for the subscription.

MAS Financial Services is a Gujarat-headquartered NBFC with a presence across six states and the NCT (national capital territory) of Delhi. (Image: Company Website)

MAS Financial Services Rs 460 crore IPO (initial public offering) is all set to open today for subscription. MAS Financial Services is a Gujarat-based NBFC (non-banking financial services company) and is planning to raise Rs 460 crore from the issue of equity shares. The public offer will remain open for three days starting today, 6 October to 10 October. The company has set a  price band of Rs 456-459 per equity share. We take a look at seven important things to know about the public offer before you go for the subscription.

IPO details

The public issue comprises a fresh issue of shares worth up to Rs 233 crore and an offer for sale of up to Rs 227 crore by existing shareholders. In addition, the offer includes a reservation aggregating up to Rs 7 crore for eligible employees. The bids can be made in a lot size of 32 equity shares and in multiple of 32 equity shares thereafter. Besides, the company has undertaken a private placement of 39,90,422 shares for cash consideration aggregating Rs 135 crore. Motilal Oswal Investment Advisors Pvt Ltd is the book running lead manager to the issue. The shares are proposed to be listed on the National Stock Exchange and the Bombay Stock Exchange.

IPO proceeds

The selling shareholders will be entitled to the proceeds of the offer for sale of their respective portions of the offered shares. The company will not receive any proceeds from the Offer for Sale. The company has proposed to utilise the net proceeds from the fresh issue towards augmenting its capital base to meet future capital requirements. “Accordingly, we confirm that there is no requirement for us to make firm arrangements of finance through verifiable means towards at least 75% of the stated means of finance, excluding the amount to be raised from the fresh issue,” company said in DRHP. The net proceeds are currently expected to be deployed in financial years 2018 and 2019.

Anchor Investors

MAS Financial Services raised about Rs 136 crore from anchor investors ahead of its initial share sale offering today. The company would allot over 29.61 lakh equity shares to 15 anchor investors at Rs 459 per equity share, which is the upper end of the price band, MAS Financial Services informed stock exchanges. At this price, the total amount works out to be Rs 135.91 Crore, PTI reported. The anchor investors include Nomura, JP Morgan, Wasatch HDFC Mutual Fund (MF), ICICI Prudential MF, SBI MF, Birla Sun Life MF, DSP Blackrock MF and Reliance MF.

Angel Broking recommends a ‘Subscribe’

“MAS Financial Services (MAS) is a Gujarat based NBFC, which is two decades old. It primarily lends to Micro Enterprises (ME) and SME, which contribute 60% and 23% of its AUM respectively. Company’s business and financing is in five categories i.e. micro-enterprise loan, SME loans, two wheeler loans, commercial vehicle loans and housing loans. Company’s AUM has grown at healthy 33.4% CAGR over FY2013-17 with strong asset quality (GNPA -1.1%, NNPA -0.9%).

High valuations underpinned by high growth potential and profitability: Close peers, Capital First and Shriram City Union Finance are trading at a ~3x FY2017 book, however, both the companies report moderate ROE of 11%. At the upper end of the price band, MAS is valued at 6.85x of FY2017 book value (Pre-IPO) and on a post-dilution basis at 4.1x of Book value. Although valuations are on the higher side, looking at the strong and sustainable growth and ROE prospects of the company, we recommend a ‘Subscribe’ to the issue,” said Jaikishan J Parmar, Research Analyst- Mid-Caps, Angel Broking.

Company profile

The company is a Gujarat-headquartered NBFC with more than two decades of business operations and presence across six states and the NCT (national capital territory) of Delhi. MAS Financial Services’ business and financing products are primarily focused on middle and low-income customer segments, which includes micro-enterprise loans, SME loans; two-wheeler loans; Commercial Vehicle loans and housing loans.

Chairman’s take

Kamlesh Gandhi, founder and CMD, MAS Financial Services said, “In lending business, lenders generally fail because of the quality of assets. However, we don’t just lend but we also act as financial advisors. We have focused on serving the lower and the middle-income group of the society and we have grown at a CAGR of 36 %. We operate through 119 branches and through these branches we cover 3,200 centres”.

Financials

The company reported a rise of 34.81% in the consolidated net profit to Rs 67.42 crore for the financial year ended 31 March 2017 as compared to Rs 50 crore in the previous year. For the year ended March 2017, total revenue of MAS Financial Services was Rs 341.52 crore against Rs 288.7 crore during the same period in the previous year.

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