SEBI Puts Jaipur-Based SK Finance IPO on Hold – Here’s What You Need to Know

The Securities and Exchange Board of India (SEBI) has paused the initial public offering (IPO) of SK Finance, a Jaipur-based non-bank lender that focuses on vehicle finance and business loans. SEBI did not provide specific reasons for this decision, only noting that the “issuance of observations has been kept in abeyance,” according to an update on its website on Monday.

Details of the IPO

SK Finance submitted its initial paperwork to SEBI in May. The proposed IPO includes a fresh issue of equity shares worth ₹500 crore and an offer for sale (OFS) of up to ₹1,700 crore by promoters and investor shareholders. Under the OFS:

• Norwest Venture Partners X-Mauritius and TPG Growth IV SF PTE Ltd plan to sell shares worth ₹700 crore each.
• Evolvence Coinvest I will divest shares amounting to ₹75 crore.
• Evolvence India Fund III Ltd intends to sell shares worth ₹25 crore.
• Promoters Rajendra Kumar Setia and Rajendra Kumar Setia HUF will collectively sell shares worth ₹200 crore.

Purpose of the IPO

The money raised from the fresh issue is intended to strengthen SK Finance’s capital base for future lending activities and general corporate purposes.

Business Overview

SK Finance operates in two main sectors: vehicle financing and financing for Micro, Small, and Medium Enterprises (MSMEs). As of December 2023, it has 535 branches across 11 states and one Union Territory.

Market Context

A report by Crisil indicates that the vehicle financing segment in India was valued at around ₹11.85 lakh crore in fiscal 2023, with an annual growth rate of about 11% from fiscal 2019. The outstanding credit in this segment is expected to grow at a rate of 16-18% annually from fiscal 2023 to fiscal 2027, reaching ₹21 lakh crore.

Recent Funding

Earlier this year, SK Finance raised ₹1,328 crore from investors, including ₹415 crore from Motilal Oswal Private Equity for a minority stake in the company.

IPO Management

Kotak Mahindra Capital Company Ltd, Jefferies India Private Ltd, Motilal Oswal Investment Advisors Ltd, and Nomura Financial Advisory and Securities (India) Private Ltd are the lead managers for the IPO. The shares of SK Finance are planned to be listed on both the NSE and BSE.