IndoStar Capital Finance Ltd- a Mumbai based non-banking finance company- is all set to launch its ₹1,844 crore IPO on May 9. This IndoStar IPO comprises a fresh issue and an Offer-for-Sale (OFS) by promoters.

For those who understand this industry and want to invest, the question here that needs to be addressed – is IndoStar IPO a good investment option? In the time of market volatility, is this IPO an opportunity that investors should not miss?

To find answers to the above questions and to understand if this IPO is a good investment or if it is better to stay away from it, read this article below.

IndoStar IPO Details

Key details about the IPO-
Details Info
Issue Opens on 9th  May 2018
Issue Closes on: 11th May 2018
Refunds 17th May 2018
Credit to Demat Accounts 18th May 2018
Listing Date 21st May 2018
Price Band ₹ 570-572 per share
Face Value ₹ 10 per equity share
Listing on NSE and BSE
Retail Allocation 35%
Minimum Lot Size 26 shares
Minimum Investment Amount ₹ 14,872

Indostar Company Financials

The following table illustrates the important financial figures of the company. These figures are of key importance in the industry in which the company operates. Comparison of these key figures will give insights to the companies relative financial performance and position.

Summary of financial Performance (Restated)

Particulars For the year/period ended (in ₹ millions)
31-Mar-17 31-Mar-16 31-Mar-15 31-Mar-14
Total Revenue 7199.17 6440.5 5280.56 3969.05
Total Expense 3968.77 3508.43 3020.1 2276.59
PAT 2107.95 1916.42 1490.37 1121.32
Basic EPS 28.69 26.75 21.72 16.34
CRAR 33.8%  34.2% 32.6% 41.5%
Net Interest Income 3317.31 2747.54 2074.32 1675.68
Gross NPA 1.4% 0.2% 0.6% 0.8%
Net NPA 1.2% 0.2% 0.5% 0.7%
Net Interest Margin 6.8% 6.5% 6% 6.6%
Interest spread 3.5% 3.3% 2.5% 2.5%
Cost to income 17.8% 16.4% 15.2% 16.8%
Return on Average Equity 12.2% 13.6% 12.3% 10.4%
Return on Average Asset 4.1% 4.4% 4.2% 4.2%

IndoStar Capital Finance Limited Details

About the Company

IndoStar was incorporated as ‘R V Vyapaar Private Limited‘, a private limited company under the Companies Act, 1956. The certificate of incorporation was issued by the Registrar of Companies, West Bengal on July 21, 2009.

The name of this Company was subsequently changed to “IndoStar Capital Finance Private Limited” for business and commercial reasons. This change was pursuant to a special resolution passed by the shareholders of our Company on November 8, 2010.

Thereafter, the Company was converted into a public limited company under the Companies Act, 2013. This was pursuant to a special resolution passed by the shareholders of the Company on April 30, 2014. Consequently, the name of our Company was changed to “IndoStar Capital Finance Limited”.

Also, a fresh certificate of incorporation was issued by the Registrar of Companies, West Bengal on May 28, 2014.

Further, the registered office of the Company was changed to Maharashtra from West Bengal. This was pursuant to a special resolution passed by the shareholders of our Company on February 16, 2015.

IndoStar Registered and Corporate Office

One Indiabulls Center, 20th Floor

Tower 2A, Jupiter Mills Compound

Senapati Bapat Marg, Mumbai 400 013

Maharashtra, India

IndoStar Business Overview

IndoStar Capital Finance Limited is a leading non-banking finance company (NBFC). It is registered with the Reserve Bank of India (RBI) as a systemically important non-deposit taking company.

The company is primarily engaged in providing Indian Rupee denominated structured term financing solutions to corporates. They also extend loans to small and medium enterprise (commonly referred to as SME) borrowers in India.

The company recently expanded its portfolio to offer vehicle finance and housing finance products.

In lieu of the upfront capitalization of their business, domain expertise and focus on customers, experienced management team and vigilant monitoring of their assets, the business has experienced steady growth since the commencement of our operations in 2011.

The company, IndoStar operates in four principal lines of business. These are namely- corporate lending, SME lending, vehicle financing and housing financing.

  1. Corporate lending

  1. SME lending

  1. Vehicle finance

  1. Housing finance

Strengths of IndoStar

Strengths of the company as given in the prospectus are-

  1. Professional and experienced management team
  2. Strong SME lending business
  3. Well-established corporate lending business
  4. High asset quality achieved through robust credit assessment
  5. Well diversified funding profile

Offer Details

Fresh Issue Aggregating up to ₹7000 million
Offer for sale- Up to 2,00,00,000 equity shares
By Promoter Up to 1,85, 08,407 equity shares
By other Shareholder Up to 14,91,593 equity shares

Offer for sale-

Indostar Capital Up to 1,85, 08,407 equity shares
Vimal Bhandari Up to 399,280 equity shares
Shailesh Shirali Up to 243,995 equity shares
Jayant. S. Gunjal Up to 44,658 equity shares
Vivek Agarwall Up to 19,635 equity shares
Sandeep Baid Up to 694,065 equity shares

Use of funds

The proceeds from the Offer for Sale shall be used to pay to the Selling Shareholders, including the Promoter of the company. The company shall not be receiving any proceeds.

The Company intends to use the Net Proceeds of the Fresh Issue for augmenting its capital base to meet future capital requirements.

Indostar IPO Promoter Details

The Promoter of Indostar was incorporated as a private company limited by shares under the laws of Mauritius on October 25, 2010. Its registered office is located at 3rd Floor of Standard Chartered Tower, Bank Street, 19 Cybercity, Ebene 72201, Mauritius.

The principal activity of its Promoter is that of investment holding.

As on the date of this Draft Red Herring Prospectus, Promoter holds 71,102,635 Equity Shares, representing 90.37% of the issued, subscribed and paid-up equity share capital of our Company

The board of directors of the Promoter is:

(1) Alok Oberoi;

(2) Atul Kapur;

(3) Deepak Shahdadpuri;

(4) Lorrance Brooks Entwistle;

(5) Amit Manocha;

(6) Soraj Bissoonauth;

(7) Anisha Poonyth;

(8) Sanjoy Chatterjee; and

(9) Marie Francoise Krin Chin Chung Kee Mew (permanent alternate director to Sanjoy Chatterjee).

Shareholding pattern of the Promoter

Entity/ Person Percentage of equity share capital
Indostar Everstone 42.54%
ACP LIBRA Limited 16.35%
Beacon India Private Equity Fund 10.79%
Everstar Holdings Pte. Ltd. 8.70%
Global Long Short Partners Mauritius I Limited 8.44%
Private Opportunities (Mauritius) I Limited 5.63%
CDIB Capital Investment II Limited 4.65%
Beacon Light Group Limited 2.90%
Total 100%

 The promoters of the company’s Promoter are Indostar Everstone and Everstar Holdings Pte. Ltd.

Book running lead managers for this IPO are-

  1. JM Financial Limited
  2. Kotak Mahindra Capital Company Limited
  3. Morgan Stanley India Company Private Limited
  4. Motilal Oswal Investment Advisors Limited
  5. Nomura Financial Advisory and Securities (India) Private Limited
  6. Link Intime India Private Limited

IPO vs Mutual Funds

In this time of volatile markets as well as volatile IPO listings, mutual funds are a good alternative. They ensure disciplined investing over the long-term. In this process, they enable the investors in unlocking the power of rupee cost averaging, thereby overcoming the uncertainty of market volatility.

Thus, investing in mutual funds is a very practical investment option. It helps in achieving the investors’ financial goals in a timely and systematic manner.

This is more so for those investors who want to invest in the equity market, however, they do not possess the requisite knowledge, know-how and/or time to track and follow the stocks in particular and markets in general.

Many mutual funds invest in IPOs – many times they also invest at a discounted rates that are not available to retail investors.

In a mutual fund, a skilled and trained professional handles all investments for you and therefore, you can benefit from the equity markets without spending too much time gaining the skills needed to understand the markets.

Different Categories of Mutual Funds are as follows:

  • Large Cap Funds– In this type of mutual funds, the investment is made in large-cap companies. These companies are stable, have a proven track record and good ratings. These companies have historically given returns between 12% and 18%. Moderate risk is involved and it is suggested to invest in these funds for more than 4 years.
  • Mid Cap Funds– In this type of mutual funds, the investment is made in mid-cap companies. These companies come after large-cap funds in the hierarchy. These companies have historically given returns between 15% and 20%. The risk is slightly more than large-cap funds. It is suggested to invest in these funds for more than 5 years.
  • Small Cap Funds– In this type of mutual funds, the investment is made in small-cap companies. These companies offer 16-22% return. This category is a high risk- high return one.
  • Balanced Fund– This fund is a combination of equity and debt in its portfolio. Depending on the proportion of investment made in equity and debt, the risk and returns are accordingly determined.

Investment can be made via lump sum investment or through SIP (Systematic Investment Plan) mode in any of these funds categories.

The decision to invest in either an IPO or a particular mutual fund involves risk. An investor should take any investment decision taking into account his investment objective, investment duration and risk-return capacity.

Happy investing!

Disclaimer: the views expressed here are of the author and do not reflect those of Groww.