How Listed NBFC’s are creating value for investors, using technology to capture market opportunity

Recently, Dalal street has witnessed some great value creation through stocks like Niyogin Fintech, Chokhani Securities and Apollo Finvest. These listed entities have returned somewhere between 5-15 times in the last 8-12 months. Fintech industry is witnessing a boom with more than 1500 companies now trying to capture a pie of this Industry which is expanding at a very high pace. 

Most of the PE, VC, Angel investors have exposure to Fintech Players.  Considering that existing Banks are not able to cater to the funding requirements of a major part of the population, the opportunity that these businesses stare at is huge.  

Fintech is scaling on the back of digital economy with key drivers including: 1) Smartphone penetration, 2) 4G network, 3) Infrastructure (JAM etc), 4) adoption to ecommerce. Businesses see the Financing Fintech as a $1tn opportunity in the next 5 years. Fintech businesses in the US and China have been scaling with the online payments reaching 69pc currently, providing these businesses with opportunity to create channel advantage or scale up using advantage to access the customers and data at large.  

Valuations- The disruptive tech universe is currently trading at valuations of 10-15x EV/Revenues, and Price/Book of 7-15 times.   

Niyogin Fintech- The company has been started as a Fintech business post acquisition of a listed NBFC. The company is a SMB focused platform player with an attractive business opportunity. It raised Rs. 235 crores from investors including Ward Ferry, Lucky Investment Managers, Sabre Capital, Alchemy Capital.  The company is trading at a market capitalization of Rs. 1200 crores and 52 weeks low/high has been 17.35/163.3. IDFC Securities has recently initiated coverage on the company with a target price of Rs. 250.   

Apollo Finvest Limited- The company is establishing itself as a tech company, a white labelled Fintech which helps the businesses to offer credit to their customers in their name. They are providing their NBFC license as a service to the partner businesses. They provide financial services through modular API’s and is a pure B2B2X platform. 

The company offers consumer loans, checkout financing, pay later financing, settlement financing and business loans. The company is debt free and has a high net worth of Rs. 20 crores. The company is trading at a market capitalization of Rs. 29 crores. 52 weeks low/high has been 11.13/77.75. This is surely going to be a further multi bagger investment considering growth rate, growth potential, valuations, technology play, white labelled Fintech business, potential to raise funding from PE investors at high valuations.   

Chokhani Securities Limited- This is a listed NBFC, recently acquired by the former CEO of Religare, Sachindra Nath. In the last 6 months, the company has so far raised 1000 crores of capital. Investors include, Samena Capital, SAR group family office, Jaspal Bindra of Centrum, EIP Global, ADV Partners, Newquest Capital Partners, Indgrowth Capital, and PAG. 

This story further lays emphasis on the appetite of investors for the India lending story and to invest in NBFC companies. The company will start its operations in Jan 2019. The current market capitalization of the company is Rs. 350 crores. 52 weeks low/high of the stock is Rs. 24.9/359.9 The disruption companies will command huge valuation multiples on the bourses going forward. Author: Divam Sharma, CA, MBA (ISB), MBF, BCom (Hons)   

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