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Banas Finance RI review (May apply)

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•    BFL is an RBI-registered NBFC-ND engaged in financial servicing. 
•    It has posted good numbers for FY22, but sustainability is a concern.
•    Low promoter's holding and current ASM LT: Stage 1 tag hints caution.
•    Risk seeker/cash surplus investors may park their funds.

Banas Finance Ltd. (BFL) - (erstwhile known as Pioneer Leasing Co. Ltd.) is a Non-Deposit taking Non-Banking Financial Company (NBFC-ND) registered with RBI. It is engaged in a diverse range of products catering to the financial services sector directly and is also engaged in the business of trading.

The main object of the business of the Company is purchasing, leasing, factoring, financing of hire-purchase, leasing of all kinds of plants and machinery, motor vehicles, motor boats, trawlers, launches, ships, vessels, helicopters, aircraft, automobiles, computers or any other equipment that the Company may think fit and to assist in the financing of all and every kind and description of hire purchase or deferred payment or similar transaction and all and every kind and description upon any terms whatsoever and to carry on business as investors and dealers in shares, stocks and securities, capitalists, financiers, concessionaires and to undertake, carry on and execute all kinds of financial, commercial, and trading operations (except banking and insurance business under Banking Regulation Act, 1949, and the Insurance Act, 1938) to make loans both short and long term with the provision of financial software such as computer programme.

In the Financial Year ending March 31, 2021, BFL successfully absorbed and merged Proaim Enterprises Limited (First Transferor Company), Axon Ventures Limited (Second Transferor Company) and Rockon Enterprises Limited (Third Transferor Company), with it. The said merger led to the creation of a single unified lending entity.

To part finance its needs for working capital (Rs. 22.86 cr.), Investment in associate Tilak Ventures Ltd.  (Rs. 16.53 cr.) and general corporate purposes (Rs. 9.29 cr.), BFL is coming out with a rights issue of 24622781 equity shares of Rs. 10 each at a fixed price of Rs. 20 per share to mobilize Rs. 49.25 cr. The company is offering 24 shares for every 25 shares held as of the record date of June 24, 2022. The issue opens for subscription on July 05, 2022, and will close on July 19, 2022. The full amount is to be paid on application by the investors. Post allotment, shares will be listed on BSE. BFL is spending Rs. 0.57 cr. for this RI process.

The issue is solely lead managed by CapitalSquare Advisors Pvt. Ltd. and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue.

Post RI, BFL's current paid-up equity capital of Rs. 25.65 cr. will stand enhanced to Rs. 50.27 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 100.54 cr. 

On the financial performance front, for the last two fiscals, BFL has reported total income/net profits of Rs. 14.47 cr. / Rs. 11.22 cr. (FY21) and Rs. 100.82 cr. / Rs. 69.37 cr. (FY22). Thus it has posted good numbers for FY22 with a quantum jump in the top and bottom lines. The sustainability of such performances going forward raises concern as it is operating in a highly competitive field. However, it is worth noting that its current paid-up equity capital of Rs. 25.65 cr. is supported by free reserves of Rs. 135.83 cr. as of March 31, 2022. 

As per the BSE website, on a quarterly performance basis, for March 2022 ended quarter, it has posted poor performance with a loss of Rs. - (22.07) cr. on a total income of Rs. 2.78 cr. Perhaps due to this, the counter is facing music but currently, it is well operated above RI price to lure investors.  

The offer documents are silent on the company's dividend policy. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

The scrip last closed on cum-right basis at Rs. 28.50 on June 22, 2022, and opened on an ex-rights basis at Rs. 24.35 on June 23, 2022. Since then it has marked high/low of Rs. 29.90 / Rs. 24.35. The scrip last closed at Rs. 28.30 as of July 01, 2022. Based on this quote, its post-RI market cap stands at Rs. 142.27 cr. The scrip has posted the last 52 weeks high/low of Rs. 124.85 / Rs. 5.22. Promoters holding is at 13.26% for the last three quarters. The counter is well operated despite lower promoters' holding. Currently, the scrip is under ASM LT: Stage 1.

Conclusion / Investment Strategy

Though its financial performance for the past two fiscals shows good improvement and it has good reserves as of March 31, 2022, its last 52 weeks' high/low indicates a cause for concern since it has posted a low of Rs. 5.22. As per exchange filings, for March 2022 quarter it posted a big loss. Based on its performance and book value, RI is lucratively priced, but market movement hints at a non-fancy counter. Hence risk seekers/cash surplus investors may consider parking funds with a long-term perspective.

Review By Dilip Davda on July 2, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

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