MAS Financial Services. |
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Issue Details
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Company Profile
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MAS Financial Services Ltd. (MFSL) is a Gujarat-headquartered NBFC. It operates across six states and the NCT of Delhi. Its business and financing products are primarily focused on the middle and low income customer segments. Their service verticals include five principal categories: (i) micro-enterprise loans; (ii) SME loans; (iii) two-wheeler loans; (iv) Commercial Vehicle loans (which include new and used commercial vehicle loans, used car loans and tractor loans); (v) housing loans
Key PromotersThe promoters of the company are:
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OUTLOOKThe company has well-diversified business verticals. The company posted a strong revenue growth a CAGR of 26% from FY-13 - FY-17. At an upper price band of INR. 459, EPS of 16.14, P/E works out to be 28.43x, and its peers like Capital First Limited and Mahindra and Mahindra with P/E at 36.75x and 48.94x respectively along with an Industry P/E at 43.86x, we believe the offer price is fairly priced. Our recommendation is to SUBSCRIBE for the IPO keeping short to medium term horizon as the expected return interval. 
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Investment Rationale
- Track record of consistent growth with quality loan portfolio
- Robust credit assessment and risk management framework
- Access to diversified sources of capital and cost-effective funding
- Diversified product offerings presenting significant growth opportunities
Particulars for the year/period ended (INR Crore)
Objects of Issue
The object of the offer is as under:
- Utilization towards augmenting its capital base to meet future requirements.
Lead Managers
- Motilal Investment Advisors Limited
Product Verticals
- Micro-Enterprise Loans
- Small and Medium Enterprise (SME) Loans
- Two-wheeler Loans
- Commercial Vehicle Loans
- Housing Loans
Micro-Enterprise Loans
The company provides two categories of micro-enterprise loans:
- Loans up to INR. 75,000, typically to self-employed individuals engaged in trading or manufacturing business
- Loans ranging between INR. 75,000 and INR. 300,000, typically to sole proprietors and partnership firms
Small and Medium Enterprise (SME) Loans
The company provides loans up to INR. 50 million to their SME customers, which primarily includes small and medium sized manufacturers, dealers, and service providers engaged in various industries. The SME loan segment includes working capital loans (up to INR. 50 million), loans for machinery and facilities (up to INR. 20 million), and includes loans against property (up to INR. 20 million) and loans extended to housing finance companies. In FY2017 and in the three-month period that ended on June 30, 2017, the average disbursement in the SME loan segment was INR. 5.50 million and INR. 7.95 million, respectively.
Two-wheeler Loans
The company provides two-wheeler loans primarily to farmers, self-employed, and salaried individuals as well as professionals. In FY2017 and in the three-month period ended that on June 30, 2017, the average disbursement in the two-wheeler loan segment was INR. 43,110 and INR. 39,472, respectively.
Commercial Vehicle Loans
The company provides loans up to INR. 700,000 for the purchase of new and used commercial vehicles, used cars as well as tractors. In this segment, the customers primarily include traders and manufacturers (for loading vehicles), travel businesses, and small road transport operators. In FY2017 and in the three-month period that ended on June 30, 2017, the average disbursement in the commercial vehicle loan segment was INR. 149,817 and INR. 184,326, respectively.
Housing Loans
The company provides housing loans to customers for the purchase of new and old houses, construction of houses on owned plots, home improvement, and for the purchase and construction of commercial property.
The company has entered into commercial arrangements with a large number of sourcing intermediaries, including commission based DSAs and revenue sharing arrangements with various dealers and distributors, where part of loan default is guaranteed by such sourcing partners. As of June 30, 2017, it had 332 such sourcing intermediaries for two-wheeler loan segment and 395 such sourcing intermediaries for the commercial vehicle loan segment. As of June 30, 2017, it had entered into arrangements with 55 sourcing intermediaries for the housing loan segment.
Industry Overview
India’s micro, small and medium enterprises (MSMEs) contribute enormously to the country’s economic development. In FY2016, MSMEs accounted for about 45% of the country’s manufacturing output and 40% of the total exports. Further, the sector contributes to the socio-economic development of the country by providing employment in rural and backward areas, thereby reducing regional imbalance.
MSMEs
MSMEs provide about 25% of the country’s employment opportunities. Also, approximately 45% of MSMEs are located in rural areas. MSMEs complement large units as suppliers as well. The RBI defines MSMEs in line with the Micro, Small and Medium Enterprises Development Act, 2006. This definition is based on the investment in plant and machinery. (Source: CRISIL Micro, Small and Medium Enterprises Finance Opinion, 2016 ("CRISIL MSME Opinion, 2016"))
Two-wheeler Financing
According to CRISIL, the disbursements in two-wheeler segments is set to grow at 16-18% CAGR over the next 5 years and the total finance market to touch around INR. 240 billion in FY2021 from around INR. 163 billion in FY2017. The disbursements will go up because of steady underlying sales growth at 9-11% CAGR over the same period and gradual increase in the average selling price. Among segments, scooter sales are likely to grow (at 14-16% CAGR) faster than motorcycle sales, which are likely to post a CAGR of 6-8%.
Greater focus on the rural consumer, newer models with better fuel efficiency, and a wider distribution network in the semi-urban and rural areas will drive scooter sales. Also, finance penetration in scooters is lower than that of motorcycles, which provides ample room for total disbursements growth. (Source: CRISIL Two Wheeler Financing – Disbursements, 2017)
Greater focus on the rural consumer, newer models with better fuel efficiency, and a wider distribution network in the semi-urban and rural areas will drive scooter sales. Also, finance penetration in scooters is lower than that of motorcycles, which provides ample room for total disbursements growth. (Source: CRISIL Two Wheeler Financing – Disbursements, 2017)
Peer Groups
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Prospectus Documents
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First published on 03 Oct, 2017 on stocks94.com.
The recommendation is based on the information available in the Draft Red Herring Prospectus (DRHP) and is not binding on the reader. Stocks94 is not in any way responsible for any loss or profit that may arise based on the recommendation provided on stocks94.com or any other document hosted on stocks94.com.
