Veritas Finance, a leading non-banking financial company (NBFC) specializing in small business loans for MSMEs (micro, small, and medium enterprises) and self-employed individuals, has filed draft papers with SEBI for a ₹2,800-crore IPO. The IPO consists of:
- Fresh issuance of equity shares worth ₹600 crore.
- Offer-for-sale (OFS) of ₹2,200 crore by existing shareholders.
This IPO marks a significant milestone for the Tamil Nadu-based lender, founded in 2015, as it continues to strengthen its market position in India’s growing MSME lending segment.
Who are the key investors involved in Veritas Finance?
Veritas Finance is backed by prominent private equity firms and institutional investors, including:
- Norwest Venture Partners X – Mauritius: Holding a 21.76% stake, Norwest is the largest shareholder and will sell shares worth ₹550 crore.
- Kedaara Capital Fund II LLP: Holding a 15.2% stake, Kedaara will also sell shares worth ₹550 crore.
- British International Investment Plc: Plans to offload shares worth ₹500 crore.
- Lok Capital Growth Fund: Will sell shares worth ₹425 crore.
Other participating shareholders in the OFS include Growth Catalyst Partners LLC, Vidya Arulmany, P Surendra Pai, Savita S Pai, Sheela Pai Cole, and Moneisha Sharad Gandhi.
How will Veritas Finance utilize the IPO proceeds?
The net proceeds from the ₹600-crore fresh issue will be used to:
- Augment its capital base to support future lending requirements.
- Facilitate onward lending activities, enabling the company to expand its loan book and cater to the rising demand for MSME financing.
Additionally, Veritas Finance may raise up to ₹120 crore in a pre-IPO placement. If completed, this amount will be deducted from the fresh issue component.
How does Veritas Finance compare to its competitors?
Veritas Finance operates in a highly competitive NBFC sector, alongside established players such as:
- Five Star Business Finance
- SBFC Finance
- Aavas Financiers
- Aptus Value Housing Finance
- Cholamandalam Investment and Finance
- Sundaram Finance
Despite the competition, Veritas Finance claims to be the fastest-growing NBFC in terms of AUM (assets under management) growth between FY22 and FY24, with a CAGR of 61.76%.
What are Veritas Finance’s financial highlights?
Veritas Finance has demonstrated robust financial performance, positioning itself as a leading player in the MSME lending market:
| Metric | FY24 | FY23 | April-Sept 2024 |
|---|---|---|---|
| Assets Under Management (AUM) | ₹6,517.2 crore | ₹5,032.1 crore | N/A |
| Loan Disbursements | ₹3,702.43 crore | ₹2,244.5 crore | ₹1,837.9 crore |
| Net Interest Income (NII) | ₹718.1 crore | ₹467.6 crore | ₹450.2 crore |
| Profit After Tax (PAT) | ₹245 crore | ₹176.4 crore | ₹133.1 crore |
The company’s FY24 loan disbursements grew by 65% YoY, while its profit surged by 38.9% YoY to ₹245 crore, reflecting strong operational efficiency.
What makes Veritas Finance a compelling investment?
Several factors contribute to the IPO’s attractiveness:
- Strong Growth Metrics
Veritas Finance has consistently outperformed peers, with rapid growth in loan disbursements and profitability. - Strategic Market Position
The company’s focus on MSMEs and self-employed individuals positions it to capitalize on the rising demand for credit in underserved markets. - Support from Reputable Investors
Backing from Norwest Venture, Kedaara Capital, and British International Investment enhances its credibility and market potential. - Rising Demand for MSME Financing
With MSMEs accounting for a significant portion of India’s GDP, Veritas Finance is well-positioned to benefit from increasing credit needs.
What are the risks associated with the IPO?
While the IPO offers promising growth prospects, investors should consider the following risks:
- High Competition: The NBFC sector is highly competitive, with several established players vying for market share.
- Economic Slowdown: Any macroeconomic downturn could impact MSME loan demand and repayment rates.
- Regulatory Challenges: Changes in NBFC regulations may pose operational challenges.
What do experts say about Veritas Finance’s IPO?
- Sunil Shankar Matkar, Market Analyst:
“Veritas Finance’s robust growth metrics and focus on MSME lending make it a promising investment, but investors should be cautious about potential competition and regulatory risks.” - Brokerage Viewpoint:
“The ₹2,800-crore IPO offers a good mix of growth potential and strategic market presence. Investors with a long-term view should consider this as a promising addition to their portfolio.”
FAQs
What is the size of Veritas Finance’s IPO?
The IPO is valued at ₹2,800 crore, including a fresh equity issuance worth ₹600 crore and an offer-for-sale of ₹2,200 crore.
Who are the major shareholders participating in the IPO?
Key shareholders include Norwest Venture Partners, Kedaara Capital, British International Investment, and Lok Capital Growth Fund.
How will Veritas Finance use the IPO proceeds?
The proceeds from the fresh issue will be used to augment its capital base and support onward lending activities.
What sets Veritas Finance apart from its competitors?
Veritas Finance’s vertically integrated lending model, focus on MSMEs, and rapid growth in AUM make it a unique player in the NBFC sector.
What is Veritas Finance’s financial performance?
In FY24, Veritas Finance reported a profit of ₹245 crore, loan disbursements of ₹3,702.43 crore, and net interest income of ₹718.1 crore.
Should investors participate in the IPO?
Investors with a long-term view can consider participating, as the company’s growth prospects in MSME financing remain strong.
What are the risks associated with the IPO?
Key risks include high competition, regulatory challenges, and economic uncertainties affecting loan demand and repayment.
Who are the lead managers for the Veritas Finance IPO?
The IPO is managed by ICICI Securities, HDFC Bank, Jefferies India, Kotak Mahindra Capital Company, and Nuvama Wealth Management.
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