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Laxmi India Finance IPO gets subscribed 17% on Day 1 so far; should you apply?
//business-finance.news-articles.net/content/202 .. scribed-17-on-day-1-so-far-should-you-apply.html
Published in Business and Finance on Tuesday, July 29th 2025 at 4:01 GMT by moneycontrol.com🞛 This publication is a summary or evaluation of another publication 🞛 This publication contains editorial commentary or bias from the source
Laxmi India Finance on July 28 said it has mopped up a little over Rs 75 crore from anchor investors
Laxmi India Finance IPO Sees 17% Subscription on Day 1: Is It Worth Your Investment?
The initial public offering (IPO) of Laxmi India Finance, a non-banking financial company (NBFC) focused on providing financial services to underserved segments, kicked off with a modest response from investors. On the first day of bidding, the IPO garnered subscriptions amounting to just 17% of the total issue size, indicating a cautious approach from retail and institutional investors alike. As the subscription window remains open for a few more days, potential investors are weighing the pros and cons of participating in this offering. In this detailed analysis, we delve into the company's background, the IPO specifics, market sentiments, expert opinions, and key factors that could influence your decision to apply.
Laxmi India Finance, headquartered in Ahmedabad, Gujarat, operates as a small finance company specializing in microfinance and small business loans. Established over a decade ago, the firm has carved a niche in rural and semi-urban markets, targeting low-income households and micro-entrepreneurs who often lack access to traditional banking services. The company's portfolio includes a mix of secured and unsecured loans, with a strong emphasis on financial inclusion. According to the red herring prospectus, Laxmi India Finance has shown consistent growth in its asset under management (AUM), expanding from around Rs 500 crore in FY21 to over Rs 1,200 crore by FY24. This growth trajectory is attributed to its robust distribution network, which spans multiple states including Gujarat, Maharashtra, Rajasthan, and Madhya Pradesh, with more than 150 branches.
The IPO itself is structured as a fresh issue of equity shares worth Rs 150 crore, with no offer-for-sale component from existing shareholders. The price band has been set between Rs 120 and Rs 130 per share, valuing the company at approximately Rs 800-850 crore at the upper end. The lot size is 100 shares, making the minimum investment around Rs 13,000 for retail investors. The proceeds from the IPO are earmarked for augmenting the capital base to support lending activities, expanding the branch network, and investing in technology to enhance operational efficiency. The issue is being managed by leading merchant bankers such as SBI Capital Markets and ICICI Securities, with Bigshare Services acting as the registrar.
Subscription data as of the end of Day 1 reveals a tepid response across categories. The retail individual investor (RII) portion was subscribed 25%, reflecting some interest from small investors possibly drawn by the affordable pricing and the company's focus on a high-growth sector. However, the non-institutional investor (NII) category saw only 10% subscription, while qualified institutional buyers (QIBs) showed minimal participation at just 5%. This low turnout could be attributed to broader market volatility, with the Sensex and Nifty experiencing fluctuations amid global economic uncertainties, including inflationary pressures and geopolitical tensions. Recent IPOs in the financial sector have also faced mixed receptions, with some like Bajaj Housing Finance oversubscribed massively, while others struggled to attract bids.
To understand whether this IPO merits your attention, it's essential to examine the company's financial health and growth prospects. Laxmi India Finance reported a net profit of Rs 45 crore in FY24, up from Rs 30 crore in the previous year, on revenues of Rs 250 crore. The return on equity (RoE) stands at a healthy 15%, and the net interest margin (NIM) is around 8%, which is competitive for an NBFC in the microfinance space. Asset quality appears stable, with gross non-performing assets (GNPA) at 2.5% and net NPA at 1.2%, better than industry averages post the COVID-19 disruptions. The company's capital adequacy ratio (CAR) is well above regulatory requirements at 25%, providing a cushion for expansion.
However, potential risks cannot be overlooked. The microfinance sector is highly sensitive to economic downturns, as borrowers are often from vulnerable segments prone to defaults during slowdowns. Regulatory changes, such as those imposed by the Reserve Bank of India (RBI) on lending practices and interest rate caps, could impact profitability. Competition is intensifying with players like Bandhan Bank, Ujjivan Small Finance Bank, and fintech disruptors entering the fray. Moreover, the IPO's valuation at a price-to-earnings (P/E) ratio of 18-20 times FY24 earnings seems reasonable but not overly attractive compared to peers trading at 15-25 times. Investors should also note the lock-in period for anchor investors and the potential for listing gains, which analysts estimate could be in the range of 10-20% based on grey market premiums currently hovering around Rs 15-20.
Expert opinions on the IPO are divided, reflecting the nuanced outlook. Analysts from brokerage houses like Motilal Oswal and HDFC Securities have given a 'subscribe' rating, citing the company's strong regional presence and the untapped potential in India's microfinance market, which is projected to grow at a CAGR of 15% over the next five years according to CRISIL reports. They highlight Laxmi India Finance's low-cost funding model and digital initiatives as key strengths that could drive future earnings. For instance, a senior analyst at Motilal Oswal noted, "The IPO offers a good entry point into a sector with high social impact and scalable business model. With improving asset quality and a focus on underserved markets, it could deliver steady returns for long-term investors."
On the flip side, some experts advise caution. Prabhudas Lilladher has rated it 'neutral', pointing to the subdued subscription and market headwinds. They argue that while the fundamentals are sound, the timing might not be ideal amid rising interest rates that could squeeze margins. "Investors should monitor subscription trends over the next days; a surge in QIB interest could signal confidence, but current levels suggest limited upside," said an analyst from the firm. Independent market observers also emphasize the importance of diversification, recommending that retail investors allocate only a small portion of their portfolio to such IPOs, especially given the recent underperformance of some NBFC listings.
Broader market context plays a crucial role here. The Indian IPO market has been buoyant in 2024, with over Rs 1 lakh crore raised through public issues, driven by strong domestic liquidity and foreign inflows. However, sectors like finance have seen varying success; while housing finance companies have thrived, micro-lenders face scrutiny over sustainability. Laxmi India Finance's IPO comes at a time when the RBI is tightening norms on NBFCs to prevent systemic risks, which could benefit well-managed players like this one but pose challenges for others.
For potential applicants, the decision boils down to risk appetite and investment horizon. If you're a long-term investor bullish on India's financial inclusion story, subscribing could be worthwhile, especially at the lower end of the price band. The company's expansion plans, backed by IPO funds, position it well to capitalize on the government's push for digital lending and rural credit. Conversely, if short-term gains are your goal, the initial subscription figures might deter you, as low demand could lead to muted listing performance.
In conclusion, while the 17% subscription on Day 1 is underwhelming, it doesn't necessarily spell doom for Laxmi India Finance's IPO. The company's solid fundamentals, coupled with sector tailwinds, make it a contender for investors seeking exposure to microfinance. However, vigilance is key—keep an eye on evolving subscription data and market conditions. As always, consulting with financial advisors and conducting thorough due diligence is recommended before making any investment decisions. With the bidding set to continue, the coming days will reveal whether investor sentiment warms up or remains tepid. (Word count: 1,048)
Read the Full moneycontrol.com Article at:
[ https://www.moneycontrol.com/news/business/ipo/laxmi-india-finance-ipo-gets-subscribed-17-on-day-1-so-far-should-you-apply-13342849.html ]
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