SK Finance files DRHP for Rs 2,200 crore IPO

3 May 2024 , 12:26 PM

SK Finance, a non-bank lender specializing in vehicle finance and business loans, has taken a significant step towards expansion by filing preliminary papers with the capital markets regulator Securities and Exchange Board of India (Sebi) for an initial public offering (IPO) to raise ₹2,200 Crore.

According to the draft red herring prospectus (DRHP) filed on Wednesday, the proposed 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.

In the OFS segment, Norwest Venture Partners X-Mauritius and TPG Growth IV SF PTE Ltd plan to offload shares worth ₹700 Crore each, while Evolvence Coinvest I will divest shares amounting to ₹75 Crore and Evolvence India Fund III Ltd will sell shares worth ₹25 Crore. Additionally, promoters Rajendra Kumar Setia and Rajendra Kumar Setia HUF intend to offload shares aggregating to ₹180 Crore and ₹20 Crore, respectively.

The funds raised from the fresh issue will be utilized by SK Finance to enhance its capital base, catering to future business requirements for onward lending and for general corporate purposes.

Operating in two key verticals—vehicle financing and financing for Micro, Small, and Medium Enterprises (MSMEs)—SK Finance has established a robust presence across 11 states and one union territory, boasting 535 branches as of December 2023.

The move comes at a strategic time, with the vehicle financing segment in India witnessing significant growth. According to a Crisil report, the sector stood at around ₹11.85 lakh Crore as of fiscal 2023, with an anticipated compound annual growth rate (CAGR) of 16-18 per cent from fiscal 2023 to fiscal 2027, reaching ₹21 lakh Crore.

Earlier this year, SK Finance secured ₹1,328 Crore from investors, with Motilal Oswal Private Equity injecting ₹415 Crore for a minority stake in the NBFC.

The IPO is being managed by renowned financial institutions including Kotak Mahindra Capital Company Ltd, Jefferies India Private Ltd, Motilal Oswal Investment Advisors Ltd, and Nomura Financial Advisory and Securities (India) Private Ltd, indicating strong investor interest and confidence in SK Finance’s growth trajectory and business model.