S K Finance Limited is a NBFC established by Rajendra Kumar Setia in 1994, and is all set for its long-awaited IPO. With the niche space it has managed to occupy for vehicle financing and MSME lending, S K Finance has positioned itself well to reach last-mile financial services in India's underpenetrated areas. S K Finance's upcoming IPO is expected to be a significant event in the Indian financial sector, driven by strong growth, strategic vision, and a well-defined capital utilization plan, providing an in-depth analysis of the company's growth trajectory.
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About S K Finance
Founded in 1994 with a vision to bring about financial inclusion in India's rural and semi-urban locations, S K Finance has been one of the fastest-growing NBFCs of the country. According to the rating agency, CRISIL, the two core segments in which the company functions are:
1. Commercial Vehicle Financing: As of December 2023, S K Finance has the largest market share among its competitors in used vehicle financing, including secured, granular retail loans for used and new commercial vehicles, cars, tractors, and two-wheelers.
2. MSME Finance: In FY 2016, S K Finance initiated its asset-based financing for micro, small, and medium enterprises' working capital needs, primarily for self-employed people in rural and semi-urban areas.
With 535 branches across 11 states and one union territory, and more than 10,725 employees, S K Finance provides bespoke financial services to geographies usually underserved by traditional banking channels.
Fresh Issue and Offer for Sale
The Fresh Issue is aimed at strengthening the company’s financial position and its significant portion of the proceeds amounting ₹375 crores will be allocated to increase the company capital base and enabling it to meet future lending obligations. The remaining funds will be utilized for general corporate purposes, which include enhancing operational efficiencies and promote business growth.
Under the Offer for Sale (OFS), promoter Rajendra Kumar Setia plans to sell shares. Additionally, other key shareholders, such as Norwest Venture Partners and TPG Growth, will also divest parts of their holdings. The total value of the OFS stands at ₹1,700 crore, providing liquidity to existing investors while offering new entrants an opportunity to participate in the company's growth journey.
Shareholding Structure
Before the IPO, the company’s shareholding is highly concentrated:
• Promoter: Rajendra Kumar Setia owns 32.07%.
Major Investors are Norwest Venture Partners (23.88%), TPG Growth (18.04%), and Evolvence India Fund III Ltd.
• Institutional Holders: Massachusetts Institute of Technology (1.65%) and Dc Uno Limited (1.64%).
This concentrated structure reflects a strong alignment of interests among existing stakeholders and ensures continuity post-listing.
Why Invest in S K Finance?
1. Trusted Track Record: The company has decades of experience in vehicle financing and MSME lending with consistent growth and innovation.
2. Economies of Scale: Focusing on rural and semi-urban areas, the company touches a market segment that traditional banks ignore.
3. Strong Financials: The growth in revenue and PAT is consistent, reflecting efficient operations and good risk management.
4. Strategic Vision: The new capital from the IPO will allow the company to scale operations, expand its reach, and strengthen its technological capabilities.
Looking Ahead: The Road to Growth
S K Finance's IPO is not just an opportunity for investors but a testament to the company's journey of empowering rural and semi-urban India. By addressing critical financial needs and delivering innovative solutions, the company has positioned itself as a leader in its sector.
It's an opportunity for investors to be part of a compelling growth story that combines financial prudence, social impact, and a vision for the future. With its solid fundamentals and strategic plans, S K Finance is poised to accelerate its journey in shaping India's financial landscape.
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