SEBI Puts SK Finance's IPO Proposal on Hold

9 Jul 2024 , 10:25 AM

The Securities and Exchange Board of India (SEBI) has put the proposed initial public offering (IPO) of vehicle finance and business loan-focused non-bank lender SK Finance in abeyance. SEBI’s website update on Monday indicated that the “issuance of observations has been kept in abeyance” without specifying the reasons behind the decision.

IPO Details

The Jaipur-based SK Finance had filed its preliminary papers with SEBI in May 2024. According to the draft red herring prospectus (DRHP), the IPO comprises a fresh issue of equity shares worth ₹500 Crore and an offer for sale (OFS) of up to ₹1,700 Crore by promoters and investor shareholders.

Key Selling Shareholders

The OFS includes significant sell-offs from various shareholders:

• Norwest Venture Partners X-Mauritius: ₹700 Crore
• TPG Growth IV SF PTE Ltd: ₹700 Crore
• Evolvence Coinvest I: ₹75 Crore
• Evolvence India Fund III Ltd: ₹25 Crore

Additionally, promoters Rajendra Kumar Setia and Rajendra Kumar Setia HUF will sell shares worth ₹180 Crore and ₹20 Crore, respectively.

Utilization of IPO Proceeds

SK Finance plans to use the proceeds from the fresh issue to augment its capital base for future business requirements, primarily for onward lending and general corporate purposes.

SK Finance operates in two primary verticals: vehicle financing and financing for Micro, Small, and Medium Enterprises (MSMEs). As of December 2023, the company has a presence across 11 states and one Union Territory with 535 branches.

A Crisil report highlights that the overall vehicle financing segment in India stood at approximately ₹11.85 lakh Crore in fiscal 2023, growing at a compound annual growth rate (CAGR) of around 11% from fiscal 2019. The report projects that outstanding credit in this segment will grow at a CAGR of 16-18% from fiscal 2023 to fiscal 2027, reaching ₹21 lakh Crore.

Earlier this year, SK Finance raised ₹1,328 Crore from investors, including a significant investment of ₹415 Crore from Motilal Oswal Private Equity for a minority stake in the NBFC.

Kotak Mahindra Capital Company Ltd, Jefferies India Private Ltd, Motilal Oswal Investment Advisors Ltd, and Nomura Financial Advisory and Securities (India) Private Ltd are the book-running lead managers for the issue. The equity shares of SK Finance are proposed to be listed on the NSE and BSE.