Know Your IPO : Satkar Finlease

Satkar Finlease (SFL), a Delhi based company has filed DRHP to list its equity shares on the platform of BSE SME. The company is offering 75.04 lakh fresh equity shares at a fixed price of Rs 18 per share. In this issue the market maker portion is 3.84 lakh equity shares. The company is looking forward to raise fund of Rs 13.51 crore from this issue. The lead manager for the issue is Guinness Corporate Advisors.

The company was incorporated in the year 1996, as a private company. In May 2013, the company became public. SFL is a registered NBFC with RBI. It offers a range of services which includes hire-purchase finance, lease finance, deferred loans to finance all kind machinery, vehicle finance for personal and commercial vehicles, loan against property/security etc.

In the fiscal year 2013, the company reported a healthy growth in its topline and bottomline. On the income front, company's interest income have grown by 12%, and stood at Rs 61 lakh for FY13. During the said fiscal, SFL reported decline in the operating expenses by 19% to Rs 42 crore. The reduction in expenses is a result of decline in other administrative and selling expenses. This in turn has lead to the boost in the bottomline of the company, which stood at Rs 11.26 lakh in FY13 as against Rs 2.4 lakh in FY12.

SFL plans to utilize the fund raised from the issue to increase its volume in financial activities and brand building. The company will employ Rs 11.9 crore for these requirements and the remaining to general corporate expenses and public issue expenses.

On valuations front, SFL's peer companies such as India Infoline, Sundaram Finance, Motilal Oswal Financial Services and Magma Fincorp are trading at single digit FY13 PE of 5.5x, 7.5x, 9x and 9.8x respectively. Whereas, SFL will trade at a PE of 304x with the offered issue price, which is very expensive as compared to its peers. At present there are so many other NBFC's which are available to investors at a single digit PE.

Though the company has over 15 years of experience in this sector, but there are so many hurdles for the new entrants in NBFC's sector. Looking, to the present scenario where the rupee value has depreciated badly against dollar and the weak economic condition, customers are avoiding loans as the interest rates have gone higher. Considering all these, we recommend investors to stay away from this public issue.