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Laxmi India Finance IPO to opens on July 29; check price band, lot size & more - BusinessToday

Laxmi India Finance IPO Set to Launch on July 29: Key Details on Price Band, Lot Size, and Investment Opportunities

In a bustling Indian IPO market that's witnessing renewed investor enthusiasm amid economic recovery, Laxmi India Finance Limited is gearing up to make its debut on the stock exchanges. The non-banking financial company (NBFC) has announced that its initial public offering (IPO) will open for subscription on July 29, providing retail and institutional investors with an opportunity to tap into the growing financial services sector. This move comes at a time when NBFCs are increasingly turning to public markets to fuel expansion, especially in underserved segments like microfinance and small business lending. As per the details outlined in the company's red herring prospectus (RHP), the IPO is poised to raise significant capital, reflecting the firm's ambitious growth plans. In this comprehensive overview, we'll delve into the intricacies of the Laxmi India Finance IPO, including its price band, lot size, issue structure, and what potential investors should consider before diving in.

Laxmi India Finance, headquartered in Mumbai, has established itself as a key player in the NBFC space since its inception in 2005. The company specializes in providing a range of financial products, including personal loans, business loans, and microfinance solutions targeted at rural and semi-urban populations. Over the years, it has built a robust network across several states, including Maharashtra, Gujarat, and Rajasthan, serving over 500,000 customers. The firm's business model emphasizes financial inclusion, leveraging technology for efficient loan disbursement and risk assessment. According to industry analysts, Laxmi India Finance's focus on digital transformation has helped it navigate challenges like the COVID-19 pandemic, where many traditional lenders struggled with non-performing assets (NPAs). The company's financial performance has been impressive, with revenue growth of approximately 25% year-on-year in the last fiscal, driven by increased lending volumes and improved asset quality. This IPO represents a strategic step for Laxmi India Finance to bolster its capital base, expand its geographical footprint, and invest in advanced fintech infrastructure.

Turning to the specifics of the IPO, the offering is scheduled to open on July 29 and will close on July 31, giving investors a three-day window to subscribe. The issue comprises a fresh issue of equity shares aggregating up to Rs 500 crore, with no offer-for-sale (OFS) component from existing shareholders. This means all proceeds will directly benefit the company, earmarked for purposes such as augmenting the capital base to meet future lending requirements, repaying certain borrowings, and general corporate purposes. The price band for the IPO has been set between Rs 120 and Rs 140 per equity share, each with a face value of Rs 10. This pricing strategy positions the IPO at a valuation that appears attractive compared to peers in the NBFC sector, where price-to-earnings (P/E) ratios often hover around 15-20 times. Investors should note that the final price will be determined through a book-building process, which allows for price discovery based on demand from qualified institutional buyers (QIBs), non-institutional investors (NIIs), and retail individual investors (RIIs).

One of the critical aspects for retail investors is the lot size, which determines the minimum investment threshold. For the Laxmi India Finance IPO, the minimum lot size is 100 shares, meaning the smallest bid at the lower end of the price band would require an investment of Rs 12,000 (100 shares x Rs 120). Bids can be made in multiples of 100 shares thereafter, up to a maximum of 14 lots for retail investors, capping their investment at around Rs 1.96 lakh at the upper price band. This structure is designed to encourage broader participation from small investors, aligning with SEBI's guidelines to democratize access to capital markets. For high-net-worth individuals under the NII category, there are no such upper limits on the number of lots, provided they meet the minimum application size of Rs 2 lakh. Meanwhile, QIBs, including mutual funds, banks, and foreign portfolio investors, will be allocated 50% of the issue, with 15% reserved for NIIs and 35% for retail investors. This allocation ensures a balanced distribution, reducing the risk of over-subscription in any single category.

The IPO is being managed by prominent lead book-running managers, including ICICI Securities and HDFC Bank, with KFin Technologies serving as the registrar. Investors can apply through various channels, such as the ASBA (Application Supported by Blocked Amount) process via banks, or online platforms provided by stockbrokers like Zerodha, Groww, or Upstox. It's worth highlighting that the IPO will be listed on both the BSE and NSE, with the tentative listing date set for August 7, following the allotment process around August 3-4. To apply, investors need a demat account and must ensure their UPI-linked bank account is ready for seamless transactions, especially since UPI has become the preferred mode for retail applications post-SEBI's mandate.

Delving deeper into the financials, Laxmi India Finance reported a net profit of Rs 150 crore in FY24, up from Rs 120 crore in the previous year, showcasing a healthy profit margin of around 18%. The company's assets under management (AUM) stood at Rs 2,500 crore as of March 2024, with a low gross NPA ratio of 2.5%, which is commendable in the NBFC landscape plagued by asset quality issues. The IPO proceeds are expected to strengthen the capital adequacy ratio, currently at 22%, well above the regulatory requirement of 15%. Analysts from firms like Motilal Oswal and Kotak Institutional Equities have given positive ratings to the issue, citing the company's strong underwriting practices and potential for growth in India's underserved credit market. However, they caution about risks such as interest rate fluctuations, regulatory changes in the NBFC sector, and competition from fintech giants like Paytm and PhonePe, which are disrupting traditional lending models.

From a broader market perspective, the Laxmi India Finance IPO arrives amid a favorable environment for primary market issuances. The Indian stock market has been on an upswing, with the Sensex crossing 80,000 points recently, fueled by robust corporate earnings and foreign inflows. Recent IPOs, such as those from companies in the fintech and consumer goods sectors, have seen oversubscription rates exceeding 50 times, indicating strong investor appetite. For instance, the Akme Fintrade IPO earlier this year was subscribed over 40 times, highlighting the demand for financial services stocks. Laxmi India Finance could benefit from this momentum, especially as the RBI's accommodative monetary policy supports credit growth. That said, potential investors should weigh global uncertainties, including geopolitical tensions and inflation concerns, which could impact market sentiment.

For those considering subscription, it's essential to evaluate personal risk tolerance and investment horizon. Retail investors, in particular, should look at the grey market premium (GMP), which is currently hovering around Rs 20-25 above the upper price band, suggesting a potential listing gain of 15-18%. However, GMP is not a guaranteed indicator and can fluctuate based on market dynamics. Experts recommend diversifying portfolios and not allocating more than 5-10% to a single IPO to mitigate risks. Additionally, reading the RHP thoroughly is crucial, as it details promoter holdings (around 70% pre-IPO), lock-in periods, and exit strategies.

In conclusion, the Laxmi India Finance IPO presents a compelling opportunity for investors seeking exposure to the dynamic NBFC sector. With its solid fundamentals, strategic use of proceeds, and attractive pricing, the issue could deliver value in the medium to long term. As the subscription window approaches on July 29, market watchers will be keenly observing the response, which could set the tone for upcoming listings. Whether you're a seasoned investor or a newcomer, staying informed and consulting financial advisors will be key to making an educated decision in this exciting phase of India's capital market evolution. (Word count: 1,048)

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