This week, SEBI has been in an overdrive of sorts with regards to primary market activities. In the latest weekly update, the regulator took SK Finance IPO out of abeyance status and also issued 5 observations thereby paving way for these IPOs.
According to the latest IPO approval status on the regulator’s site dated 5 August 2024, Jaipur-based lender SK Finance has been taken out of abeyance and the last communication date between SEBI and lead manager for the issue is mentioned as 2 August 2024. Earlier in July 2024, SEBI had put the application of SK Finance in abeyance without citing a reason.
It is not immediately clear as to what transpired between SEBI and Kotak Mahindra Capital Company – the lead manager appointed for the IPO of the shadow lender. Nevertheless, resumption of normal communication is a step in the right direction and may lead to SEBI clearance in the coming months.
SK Finance IPO – Vehicle & SME loans
As per the draft prospectus submitted by the company and its lead manager on 13 May 2024, SK Finance IPO plans to raise as much as INR 2,200 crore through a mix of sale of fresh shares (INR 500 crore) and an offer for sale (OFS, INR 1,700 crore) by existing shareholders. Majority of the fresh funds (INR 375 crore) through the IPO are earmarked for augmenting the company’s capital base.
The company focuses on providing vehicle finance and SME loans and is backed by private equity investors including Norwest Venture Partners, TPG, Evolvence Coinvest. Earlier this year, SK Finance had raised INR 1,328 crore from investors. Motilal Oswal Private Equity invested INR 415 crore for a minority stake in the NBFC.
SK Finance’s growth plan hinges largely on accelerated use of technology and analytics in order to improve efficiency and reduce time to disburse loans. The role of data analytics is going to be specifically important in operations for customer selection, follow-up, lead rationalisation, field assignment and customer retention.
SK Finance IPO will be keenly watched as it belongs to a promising sector of NBFC which has done well for investors. According to data compiled by IPO Central, the NBFC sector witnessed three NBFC IPOs in the last 12 months with average listing-day returns of 24.3%. In general, India’s IPO market continues to do well with 43 listings so far this year. Investors are also enjoying the bull run in primary market offers as these IPOs have delivered average listing pop of 27%.
