Manba Finance IPO 2024 – GMP, Financials And More Trade Brains Trade Brains

Manba Finance Company is coming up with its IPO fresh issue of Rs. 150.84 crores. The IPO opens on 23rd September 2024. The issue will close on 25th September 2024 and be listed on the exchange on 30th September 2024. In this article, we will look at the Manba Finance IPO 2024 and analyze its strengths and weaknesses. Keep reading to understand about the company.

Manba Finance IPO 2024 – About the Company

The company was founded in 1998. Manba Finance is a Non-Banking Financial Company-Base Layer providing loans for two-wheelers, three-wheelers, electric vehicles, used cars, small businesses, and personal needs. It operates across six states in India through 66 locations and 29 branches. The company has partnerships with over 1,100 dealers, including 190 EV dealers. Their average ticket size is around Rs. 80,000 for two-wheelers and Rs. 1,40,000 for three-wheeler loans.

The company focuses on quick loan approvals and disbursements, with most loans sanctioned on the same day of application. It targets salaried and self-employed customers, offering customized schemes. The company maintains a robust credit assessment and risk management framework, which has helped manage defaults and non-performing assets effectively.

The company has experienced significant growth, with its Assets Under Management increasing to Rs. 936.85 crore in fiscal year 2024. It has diversified its funding sources and maintains strong credit ratings. The company aims to leverage its existing network to expand its newer product offerings like used car loans, small business loans, and personal loans.

Manba Finance IPO – About the Industry

The NBFC sector in India is growing rapidly, outpacing GDP growth. By the end of fiscal 2024, NBFCs reached Rs. 41.2 lakh crore. From 2019 to 2024, NBFC credit grew at a CAGR of about 11%. CRISIL MI&A expects NBFC credit to grow 15-17% between fiscal 2024 and 2027, driven by retail and MSME loans.

NBFCs have evolved in size, operations, and technology. The sector has seen significant growth in the number of players and business models. Digital advancements have led to the modularization of financial services, especially credit. The retail segment is expected to grow 14-16% from fiscal 2024 to 2027, supporting overall NBFC credit growth.

Two-wheeler sales are projected to improve by 9-10% in fiscal 2025, following 14% growth in fiscal 2024. Rural and semi-urban market recovery will drive motorcycle sales. Electric scooter models are boosting demand. However, volumes in fiscal 2025 are expected to remain about 10% lower than the peak in fiscal 2019 due to significant price hikes.

Manba Finance IPO 2024 – Financial Highlights & Segments

Manba Finance reported a Net Interest Income of Rs. 87.61 crores in FY24, and Rs. 69.54 crores in FY23. Net Profits in FY24 stood at Rs. 31.41 crore, and Rs. 16.58 crore in FY23. Finance costs are the core expense. Some of the other operating expenses include Incentives to Dealers, Employee Benefit expenses, and other expenses. 

Net Interest Margins in FY24 was 11.16% compared to 12.31% in FY23. In FY24, the Basic EPS was Rs. 8.34/share and Rs. 4.40/share in FY23. There is an increase from Rs. 2.59/share in FY22. The EPS jumped more than 2 times from FY22 which shows increasing value for its shareholders.

RoE stood at 15.66% in FY24 compared to 9.84% in FY23. The RoE increase improved due to higher net income and net profits. The Capital to Risk Assets Ratio (CRAR) stood at 25.17% in FY24 compared to 27.02% in FY23, which is higher than the regulatory requirement of 15%. 

The Return on Total Average Assets in FY24 was 3.57% in FY24 which improved from 2.46% in FY23. There is an increasing trend in the returns as profitability is on an upward trajectory. 

Manba Finance recognises its revenue from financing activity. The Total Income bifurcation which includes Two Wheeler contribution of 89.55%, Three Wheeler – 0.61%, Personal Loan – 0.71%, Used Two Wheeler – 0.38%, Small Business Loan – 0.19%, Used Car Loan – 0.02%, Other Operating Income – 8.52% and other income – 0.02% in FY24. 

NNPA (Net Non-Performing Assets) in FY24 stood at 3.16% compared to 3.14% in FY23. Gross Non-Performing Assets stood at 3.95% in FY24, which increased from 3.74% in FY23. The provisional coverage ratio in FY24 is 20% increased from 16% a year ago. The increase in PCR despite an increase in GNPA makes it more financially resilient for the expected loss in the future.

Manba Finance IPO 2024 – Listed Key Players 

The listed peers of Manba Finance are Baid Finserv Limited, Arman Financial Services Limited, and MAS Financial Services Limited.

Compared to its peers, the AUM of Manba is around 936.85 crore which is near to the lower range. The range stood from 365 crores – 10,700 crores with MAS Financial having the highest AUM and Baid Finserv having the lowest among its peers in FY24. The net NPA of Manba is around 3.16% when compared to its peers it stands in the range of 0.31% to 3.16%. Manba is in the higher range among its peers in asset quality. Other companies are near the lower range.  

Arman Financial Services had a high Capital Adequacy Ratio in FY24 of around 62.74% compared to Manba’s 25.17%. The peers ranged from 24% to 62%. Based on its comparison to its peers, Manba has a relatively lower Adequacy Ratio. 

When Arman Financial Services is compared to PAT to Average AUM, Manba fares better than its peers with a 4% margin in FY24. The range stood between 2.89% to 7.58%. Manba is at the mid-range of the margin which suggests there is room for growth. Overall the Manba was on par with the peers and underperformed in some parameters. 

Strengths of the Company

Customer Relations: The company has strong relationships with over 1,100 dealers across six states. Their representatives are present at dealerships to assist customers. They offer quick loan processing, dealer incentives, and marketing support to become the preferred finance company for dealers.

Business Acumen: Manba expands into new markets after careful market analysis. They consider factors like financial literacy, population, dealer networks, and competition. Their growth is primarily volume-led, with consistent average ticket size and yields. They have built an effective system for customer selection and loan monitoring.

Diverse funding: They secure funding from diverse sources, which include banks and financial institutions. The use of various financial instruments helps the company to lower borrowing costs. They have a co-lending arrangement with Muthoot Capital Services Limited. Their average cost of borrowing for fiscal year 2024 was 11.98%.

Tech-enabled services: The company uses technology-driven systems for risk management, loan processing, and collections. They employ cloud-based platforms, marketing automation tools, and in-house developed systems. This technology enables quick loan approvals, better data monitoring, and efficient customer service.

Collection Process: The company maintains asset quality through an extensive collections infrastructure. They have a three-tier collections system: tele-calling, field collection, and legal recovery. Over 80% of monthly collections are received through NACH. Their gross NPA for FY24 was 3.95%.

Weaknesses of the Company

Dependent on the Automobile Industry: The company heavily depends on dealer relationships for new vehicle loans. These relationships are non-exclusive, and dealers may work with competitors. Any disruption in dealer relationships could impact their business, as 89.13% of disbursements came through dealers in FY24.

Loan Diversification: Manba’s loan portfolio lacks diversity. New vehicle loans make up around 97.90% of their total AUM. This concentration in one product segment makes them vulnerable to market shifts in the vehicle finance industry and might limit their growth potential.

Regional Concentration: Their operations are concentrated in six states in western, central, and north India. This geographical concentration might expose them to regional, economic, political, or social disruptions that could affect their financial condition and their business operations.

Seasonal Fluctuations: The company operates in a seasonal industry with higher sales during festive periods. This seasonality can make it difficult to predict sales and maintain consistent revenue growth. They might face challenges in managing increased demand during peak seasons which may affect their borrowing costs.

High Employee Attrition Rate: Manba has a high employee attrition rate, especially in sales and collection teams as they account for more than 60% of the employees. In FY24, the attrition rate for permanent employees was 34%. High turnover can disrupt operations, increase training costs, and potentially affect customer relationships.

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Manba Finance IPO 2024 – GMP

The shares of Manba Finance Ltd’s price in the grey market were trading at a 0% premium as of September 17th, 2024. The shares in Grey Market traded at Rs.120. This gives it a premium of Rs.0 per share over the cap price of Rs. 120. 

Manba Finance IPO – Key IPO Information

Promoters:  Manish Kiritkumar Shah, Nikita Manish Shah, Monil Manish Shah, Manba Investments and Securities Private Limited, Avalon Advisory and Consultant Services Private Limited, Manba Fincorp Private Limited, Manba Infotech LLP and Manish Kiritkumar Shah (HUF).

Book Running Lead Manager: Hem Securities Limited.

Registrar to the Offer: Link Intime India Private Limited.

The Objective of the Issue

To increase their capital base to meet future capital requirements for lending – Rs. 138.77 crore.

Conclusion

Manba Finance Limited is majorly in two-wheeler finance. They are diversified and hold a presence in some of the top states in India. However, their geographical diversification is limited. They need to improve on their asset quality. The growth during the seasonality of the vehicle industry can also vary based on their fund availability.

Competing with traditional finance players is very competitive as many lenders hold the advantage of lower borrowing costs. This can lead to undercutting its competitors by providing lower interest. As India is at the growth stage there is more scope in the vehicle finance industry for everyone to co-exist.  

So what do you think of Manba? Will it be able to improve and increase its sustained growth and presence while competing with its peers? What is your view on this company? Let us know your views in the comments section.

Written by Santhosh

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Manba Finance Company is coming up with its IPO fresh issue of Rs. 150.84 crores. The IPO opens on 23rd September 2024. The issue will close on 25th September 2024 and be listed on the exchange on 30th September 2024. In this article, we will look at the Manba Finance IPO 2024 and analyze its
The post Manba Finance IPO 2024 – GMP, Financials And More appeared first on Trade Brains.   Read MoreFinancials, IPO, Market, ipo 2024, Manba Finance IPO, Manba Finance limited IPO, New IPO 2024, stock market, upcoming ipo, upcoming IPO 2024, Upcoming IPO 2024 India, upcomong IPO 2024 Trade Brains