Mas Financial Services IPOMAS Financial Services IPO intends to raise up to Rs. 460 crore, comprising a fresh issue of Rs 233 crore and offer for sale aggregating to  Rs. 227 crore. The Gujarat based  company which is registered as non-banking financial company with the Reserve Bank of India plans to utilize the funds raised to augment its capital base to meet future capital requirements. Mas Financial Services considers itself a specialized financial firm  focused on fulfilling the requirements of lower and middle-income groups of the society spread across urban, semi-urban and rural areas including formal and informal sector.

Mas Financial Services IPO Issue Details
Issue OpensFri,   Oct  6 , 2017
Issue ClosesTue, Oct 10, 2017
Issue SizeFresh Issue of Equity Shares aggregating  to Rs.233 Cr and OFS  aggregating to Rs.227.04 Cr
Total Issue Size ( Rs.)Rs. 460.04 Cr
Price BandRs.456 – 459
Bid Lot32 Equity Shares and multiple thereof
Employee DiscountRs.45/-per Equity Share
Issue Structure : 
QIB50% of the Net offer- Rs.226.52 Cr-4,967,545 Shares
NIB15% of the Net offer -Rs.67.96 Cr – 1,490,263 Shares
Retail35% of the Net offer- Rs.158.56 Cr^ – 3,477,280 Shares)
Applications Required for 1x  Retail Subscription1,08,665
BRLMsMotilal Oswal Investment Advisor
RegistrarLink Intime India Pvt. Ltd.
About Mas Financial Services

Mas Financial Services Limited is a Gujarat based NBFC with over two decades of business operations. Besides Gujarat the company operated across 5 other States and Delhi.

Mas Financial Services has presence in five Business verticals

  • Micro-Enterprise Loans
  • SME Loans
  • Two-Wheeler Loans
  • Commercial Vehicle Loans: This includes new and used commercial vehicle loans, used car loans and tractor loans);
  • Housing Loans operated through their subsidiary – MAS Rural Housing & Mortgage Finance Ltd (“MRHMFL”).
Asset Under Management – Share & Growth    (Rs. In Cr)
AUM -Mar 17 %  Share AUM-Mar13CAGR %
 Amount 
Micro Enterprise Loans1,984.8659.56%650.9832.14%
SME Loan763.8422.92%23.95137.64%
2-Wheeler Loan285.398.56%227.275.86%
Commercial Vehicle122.063.66%110.072.62%
Housing Loan176.435.29%40.9344.09%
Total3,332.58100%1,053.2033.37%
Mas Financial Services AUM

Financials in Brief
Rs. In crore 
Particulars3m Jun 172017201620152014
Revenue from Operations104.02363.75303.45237.43184.22
Revenue Growth (%)19.87%27.81%28.88%
Profit Before Tax36.27106.0478.5161.6849.72
Profit after Tax as restated23.4169.3351.4540.833.09
Net Profit Margin22.51%19.06%16.96%17.18%17.96%
Face Value1010
Equity Share Capital43.9942.96161616
Reserves297.09241.62123.54100.5968.42
Net worth388.55332.05183.01160.06127.89
Long Term Borrowings343.71310.89394.84164.81103.46
Short Term Borrowings908.01767.99741.12745.4550.09
RoNW 6.03%20.65%27.77%24.98%  25.50%
Net Asset Value (Rs.)77.5366.2   
EPS 5.0416.1411.829.127.33
IPO Price459
PE ratio (FY17)28.44
P/BV ratio(FY17)6.93
BV Post Issue122.9
P/BV (post Issue )3.73
Post Issue Equity54.67
EPS – Post Issue12.68
PE ratio (Post Issue) fy1736.19
CAGR Sales 3 yrs25.46%
CAGR NP  3 Yrs44.30%
Market Cap 2509.35
Market Cap/Sales 6.90

Rationale for Investment
  • Mas Financial Services  has exhibited good growth both in topline as well as bottom line in the last four years.
  • Company meets its funding requirements from banks like HDFC Bank, Axis Bank, Union Bank, SIDBI, Union Bank, Central Bank of India etc.
  • Mas Financial Services has  network of 72 branches in major cities of Gujarat, Maharashtra, Rajasthan, Madhya Pradesh, Tamil Nadu & Karnataka, through which over 3200 centers are catered
  • As of September 30, 2016, The Company had more than 530,000 active loan accounts and 3,200 Customer.
  • The Company also has commission based direct sales agents and revenue sharing arrangements with various dealers and distributors where part of loan default is guaranteed by such sourcing partners.
  • Company has developed  extensive operational network in Gujarat and Maharashtra.
  • Mas Financial Services is  also leveraging on the distribution network of partner MFIs, NBFCs, HFCs and franchisees. Loans of about 1800 crore were extended to 98 such institutional borrowers as on June 2017. This helps the company to extending its financial services to the under penetrated states and  segments. Part of a loan default is guaranteed by such sourcing partners or the sourcing intermediaries.
  • Mas Financial Services has been able to put in a good performancee while still keeping NPA’s under check
  • MAS Financial Services: Key Parameters   (in Rs. Crores)
    2015201620173m Jun 17
    Assets under Management (AUM)2099.592699.853332.573451.74
    Growth in AUM(%)44.1728.5923.4414.3
    Disbursements2088.43046.423468.17899.5
    Growth in Disbursements (%)42.6845.8713.843.74
    Net Interest Income132.19167.6620664.32
     Borrowings Cost (%)9.099.219.479.05
    Yield (%)15.9315.1814.8714.65
    Spread (%)6.845.975.45.6
    Net Interest Margin (%)7.827.197.037.58
    Operating Expense / Av. AUM (%)2.682.562.292.08
    Gross NPA (%)0.991.031.061.14
    Net NPAs(%)0.810.890.920.96

Lower growth in AUM and disbursements towards  end of 2017 and Q1Fy18 could be due to conscious decision in wake of Demonetization.


Concerns
  • In a private placement about six months before the IPO, shares worth Rs 135 crore have been allotted at Rs 338.31 per share to Motilal Oswal Financial services.
  • Mas Financial Services  presence is restricted to few states only 
  • Mas Financial Services unsecured loan portfolio stood at Rs 510 crore  at end of June 1027. As seen in recent past loans to ,low income ground are prone to disruption due to major changes particularly those which are government driven.
  • Company is likely to face competition from small finance banks. 
Broad Comparison with Peers
M&M Financial Services Shriram City Union FinanceCapital FirstMAS Financial Services
Reveue (Fy 17) Rs. Cr.6173.914,703.592,772.87363.75
Net Profit400.23584.57238.9269.33
Market/IPO Price419.32043.8741.6459
Book Value113.88762.53229.64122.9
Price / Earnings44.7311.9135.1528.44
Price/Book Valuue3.682.683.233.73
Assessment: Mas Financial Services IPO
  • The company’s gross NPAs are stable and have been in the range of ~1% over last 3 years. The company has been able to maintain these figures even as it has witnessed a 25% CAGR in Revenue and  44% CAGR in Net Profits over the last 3 financial years. 
  • Company’s business and financing products are primarily focused on middle and low income customer segments. Mas Financial Services has exposure to unsecured loan portfolio of  Rs 510.07 crore as on end June 2017 which carries some risks.
  • Its long-term bank loans are rated ‘IND-A Stable Outlook’ by India Rating Agency. Earlier ICRA had withdrawn the rating of [ICRA]A-(positive) (pronounced ICRA A minus with a positive outlook) to the Rs. 743.41 crore long term cash credit facility of MAS Financial Services Limited (MFSL) on request of the company.
  • In addition to its own network, Mas Financial Services has been  considerably  leveraging on the distribution network of partner MFI-NBFCS/NBFCS/HFCs/franchisees to extend its reach. 
  • Similar to ICICI Lombard IPO, A private placement of 3,990,422 equity shares was  Motilal Oswal Financial Services in March/April 2017 at Rs 338.31 per share which is at discount to Mas Financial Services IPO price of  Rs 456-459.
  • The financials and peer analysis indicate  that Mas Financial Services IPO is  priced fully. It can get some leeway due to  good growth in revenues and profits coupled with efforts at diversification into new areas.
  • The presence of PE investors after the IPO lends some degree of confidence.
  • Even though the Mas Financial Services IPO pricing is not too comfortable & giving large chunk of shares to Motilal oswal 6 months back at Rs. 338 raises eyebrows,,  I intend to apply to Mas Financial Services IPO.  My view is also influenced  by good listing of recent IPOs in last few months. However i do not consider this Mas Financial Services IPO as totally low risk investment.