Money Masters Leasing & Finance Soon To Come Up With An IPO

We have informed investors about many Small & Medium Enterprises’ initial public offerings (IPO) in the past. Money Masters Leasing & Finance (MMLF), which is registered with the RBI to undertake non-banking financial operations, is the latest company to come up with an IPO.

MMLF is going to issue 13.36 lakh fresh equity shares in this offer at a fixed price issue of Rs 15 per share. 80,000 equity shares will be issued to market makers and the remaining 12.56 lakh equity shares will be offered to the public. Currently, the company has 31.58 lakh equity shares. The Lead Manager for this issue is Sobhagya Capital Options.

The Mumbai-based NBFC commenced its operations in 1995. It offers services such as asset finance on hire purchase for assets like auto rickshaws, cars, computers, industrial machinery and equipments. It also provides loan against property. Its main work area is asset finance on hire purchase, which contributes to almost 70% of its revenues. The company mainly caters to the small and medium business enterprises. In addition, it also provides finance to entrepreneurs for start-up businesses.

The company has posted net sales of Rs 1.29 crore in FY12, which is a growth of 14% from Rs 1.12 crore in FY11. The 9MFY13 net sales stood at Rs 1.02 crore. The total expenses declined by 8%in FY12 on a YoY basis, due to reduction in other expenses. Other expenses showed a decrease of 18% to Rs 28 lakh. However, the employee expenses increased by 17% in this period. This reduction in operating expenses has aided the growth of EBITDA by 16% to Rs 73 lakh. The FY11 EBITDA has showed a huge decline of 6% to stand at Rs 12 lakh, which was Rs 78 lakh in FY10. During FY12, the net profit stood at just Rs 11 lakh due to the rise in depreciation cost and tax expenses. This has also hindered the net margin. The operating margin stood at 0.66% for FY12, a 5 basis points increase from that of FY11.

MMFL has proposed to utilise the raised fund to augment its capital base. In future, the company has plans to increase its Asset Financing Operations for cars, computers, industrial machinery etc.

The issue price quoted by the company is Rs 15 per equity share, which will trade at a PE of 61.28x of FY12 EPS Rs 0.24. Whereas, its peer companies like Motilal Oswal Financial Services, India Infoline, Edelweiss Capital and Hasti Finance are currently trading at PEs of 21.7x, 13x, 19.7x and 5x respectively. The offered price by MMFL is quite high as compared to its peer companies.

Further, the company has a very limited area of operations. On the financial front too, the company has posted very low margins. Moreover, the government has tightened the rules for NBFCs, which may create difficulties for the company. It would be better for investors not to subscribe to this issue.