Manba Finance Limited files DRHP with SEBI for IPO

Manba Finance Limited, a NBFC-BL providing financial solutions for Auto loans, Used Cars, Small Business Loans and Personal Loans with an AUM size of more than ₹ 800 crore as on December 31, 2023, has filed its draft red herring prospectus (DRHP) with the market regulator Securities and Exchange Board of India (SEBI) to raise funds through an initial public offering (IPO).

The IPO, with a face value of Rs 10 per equity share, is entirely a fresh issue of up to 12.57 million shares with no offer of sale component.

The issue is being made through the book-building process, wherein not more than 50% of the issue shall be available for allocation on a proportionate basis to qualified institutional buyers, not less than 15% of the issue shall be available for allocation to non-institutional bidders, and not less than 35% of the issue shall be available for allocation to retail individual bidders.

The proceeds from its fresh issuance will be utilized to augmenting the capital base to meet the Company’s future capital requirements towards onward lending and general corporate purposes.

Manba Finance commenced its business operations as an NBFC in 1998 in Mumbai, Maharashtra. From 2009 onwards, it expanded its activities to include vehicle financing and currently operates across 65 locations in five states: Maharashtra, Gujarat, Rajasthan, Chhattisgarh, and Madhya Pradesh. The company primarily serves salaried and self-employed individuals.

The majority of Manba Finance’s loan portfolio, approximately 99%, consists of new vehicle loans, with an average ticket size of around ₹0.80 lakhs. It specializes in providing financial solutions with quick turnaround times for loan approval and disbursement. The company has developed enduring relationships with over 850 dealers, including more than 60 EV dealers, across its operational states.

According to a CRISIL report, Manba Finance held the highest share of two-wheeler loans at 96% as a percentage of AUM at the end of fiscal 2023. It also had the highest AUM per branch at Rs 26.40 crore and experienced the fastest branch growth rate with a CAGR of 31%. In fiscal 2023, it ranked third in terms of yields and fourth in net interest margins (NIMs), with the third-highest Return on Assets (RoA) at 2.2% and the third-lowest credit cost of 0.7%. Regarding asset quality, Manba Finance ranked among the top four financiers, with a Gross Non-Performing Asset (GNPA) ratio of 3.7% in fiscal 2023.

The Thane-based NBFC tailors its offerings to different customer segments and crafts bespoke schemes to attract them. The company’s robust underwriting process has enabled it to manage defaults and maintain a healthy asset quality.

Manba Finance operates with a centralized credit team that remotely reviews loan applications and makes credit decisions based on customer credit data. Over 85% of loans are sanctioned on the same day as the application, relying on factors such as the customer’s cash flows, CIBIL score, and collateral. An in-house collection team focuses on recovering monthly installments from customers.

With a presence in urban, semi-urban, and metropolitan areas across 65 locations, Manba Finance serves surrounding rural regions through 28 branches as of January 31, 2024, spanning across five states.

Manba Finance’s Assets Under Management (AUM) increased from ₹530.11 crore in fiscal 2021 to ₹733.73 crore by the end of the six-month period ending September 30, 2023, with a CAGR of 13.89%, primarily attributed to volume expansion, consistent average ticket size, and steady yields.

According to a CRISIL report, rural income growth significantly influences two-wheeler demand, with motorcycles constituting about 63% of overall two-wheeler volumes and scooters accounting for approximately 30%. The government’s emphasis on financial inclusion, coupled with increasing financial awareness and smartphone penetration, is expected to drive credit services in rural areas. Furthermore, the utilization of alternative data for customer underwriting will aid financiers in serving the informal sectors of society. Urban areas primarily drive scooter demand, which witnessed a faster recovery than the motorcycle segment in fiscal 2023, following the reopening of offices and educational institutions. Between fiscal 2015 and 2020, two-wheeler loan disbursements grew by 19% CAGR, driven by factors such as rising vehicle prices, a shift in consumer preferences towards premium segments, increased loan-to-value ratios, and higher finance penetration.

Manba Finance clocked a profit of Rs 16.58 crore in the financial year FY23, up 70.22% from Rs 9.74 crore in the previous year. Revenue during the year FY23 increased significantly to Rs 133.32 crore from Rs 106.59 crore in the previous year, an increase of 25.07%, primarily due to an increase in interest income.

For the six months ended September 30, 2023, revenue from operations stood at Rs 88.29 crore, and profit after tax stood at Rs 16.80 crore.

Hem Securities Limited is the sole lead manager, and Link Intime India Private Limited is the registrar of the issue.