Manba Finance IPO analysis

Manba Finance IPO (initial public offering) will open for subscription on September 23, 2024 and close on September 25, 2024. Below is a breakdown of the vehicle financer's strengths, weaknesses and growth prospects to help investors make an informed decision. Manba Finance IPO in a nutshell Quality: Manba Finance reported a three-year average ROE of nearly 11.3 per cent during FY22-24. It also recorded an average gross NPA (non-performing assets) of 4.2 per cent over the same period. Growth: During FY22-24, its AUM (assets under management) and PAT (profit after tax) grew 38 per cent and 80 per cent annually, respectively. Valuation: The stock is valued at a P/E (price-to-earnings) and P/B (price-to-book) ratio of 19.2 and 1.7 times, respectively, compared to its peers' median P/E and P/B of almost 19 and 2 times, respectively. Overview: Growing EV (electric vehicle) penetration, recovery in rural demand for two-wheelers and rising disposable income are expected to help Manba Finance scale up its operations. However, competition from other NBFCs (non-banking financial corporations) and banks poses a threat to Manba Finance's growth prospects. About Manba Finance Incorporated in 1996, Manba Finance is a non-deposit-taking NBFC headquartered in Mumbai. The company provides financing solutions for various vehicle categories, small businesses and personal loans. Two-wheeler loans comprise 86 per cent of its portfolio, and the remaining comprises loans for three-wheelers, electric two-wheelers, electric three-wheelers, used cars, small businesses and personal loans. Presently, Manba Finance has 29 branches spread across six states in central, north and western India, with Gujarat and Maharashtra contributing to almost 90 per cent of its AUM (Rs 937 crore) as of FY24. Strengths of Manba Finance Established relationships with dealers : Manba Finance has long-standing relationships with over 1,100 dealers, which includes more than 190 EV dealers. Having established relationships with such a sizable number of dealers is crucial as they serve as a primary source for generating leads on customers' funding needs. Weaknesses of Manba Finance High dependence on a single product : Around 86 per cent of Manba Finance's portfolio comprises loans for two-wheelers. Given that the demand for two-wheelers is highly cyclical, a slump can significantly affect its financials. High NPAs and low provision : Manba Finance has an NPA of 4.2, which is higher than its peers. Moreover, its provision coverage ratio stood at just 20 per cent in FY24, much lower than its peers. This raises questions about the company's management and asset quality. Manba Finance IPO details Total IPO size (Rs cr) 151 Offer for sale (Rs cr) 0 Fresh issue (Rs cr) 151 Price band (Rs) 114-120 Subscription dates September 23-25, 2024 Purpose of issue Capital expenditure Post-IPO M-cap (Rs cr) 603 Net worth (Rs cr) 351 Promoter holding (%) 75 Price/earnings ratio (P/E) 19.2 Price/book ratio (P/B) 1.7 Financial history Key financials 2Y CAGR (%) FY24 FY23