Finbud Financial NSE SME IPO review

•    The company is engaged in the business of tailored loan solutions based on agent model as well as digital model.
•    It enjoys leadership with dual model financial services that earns higher commission and margins compared to peers. 
•    The company posted growth in its top and bottom lines for the reported periods.
•    Based on its recent financial data, the issue appears aggressively priced.
•    It is operating in a highly competitive and fragmented segment.
•    Well-informed/cash surplus investors may park moderate funds for medium to long term. 

ABOUT COMPANY:
Finbud Financial Services Ltd. (FFSL) started in 2012 with the goal of creating a retail loan marketplace, Finance Buddha first began operations in Bangalore. Today, it operates across India. The Company has partnered with a wide network of lenders to offer tailored loan solutions that meet diverse customer needs.

FFSL is a prominent retail loan aggregation platform in India that helps people get personal loans, business loans, and home loans from banks and non-banking financial companies. The company acquires customers through a hybrid strategy using digital marketing and through a wide network of external agents to reach out to prospective borrowers. Once the intent of the customer has been established, the company uses its matchmaking capabilities to advise the customer on the best suited product for his/her needs by allowing them to compare prospective loan offers across multiple lending institutions and hand holds them through the entire loan documentation process till the final disbursement. 

The decision to either approve or reject the loan application is with the bank/NBFC and hence the Company doesn’t take any credit risk. Upon loan disbursement the Company earns a commission from the lenders. The service is completely free for the customer and is provided with a seamless end to end journey of loan products from discovery to disbursement. The Company is uniquely differentiated amongst its competitors by being the only major player to have a hybrid business model – conventional lending i.e., Agent channel and Digital Lending i.e., Digital Channel. 

As different customer looks for different kind of solutions, the company is able to provide the nuance of solutioning that the conventional lending model provides and the speed and ease of delivery that the digital lending model provides to consumers. Conventional or Agent business is the primary & initial customer acquisition strategy for the Company, here in this case with its widely distributed agent network the company gets access to a curated audience of customers where a large part of the preliminary checks is already done on the consumers, thus resulting in higher conversion rates and more optimised model for the lender ecosystem. 

Once the data of consumer has been processed on the company’s proprietary tech platform and enriched using proprietary and third-party variables, the same is utilised in the future for cross selling/ up selling the customers through the digital lending ecosystem. This is a key differentiating factor compared to most of its peers who either rely on only conventional lending and thus not having a digital arm allowing them to work on customer lifecycle value management or pure digital players who have a high burn in acquiring the first loan from the customers, and struggle to make margins on the business even after multiple years of existence. This unique laddering approach by FFSL makes it a differentiated player in the loan distribution space in the country.

In simple terms, Finance Buddha’s Agent model focuses on reaching a large number of customers with lower profits per loan, while its digital model focuses on fewer customers but with higher profits. This balanced approach allows the company to grow and stay profitable in the long term. According to the management, its current top line ratio is 85/15 for loan disbursement based on agent model and digital model and they are looking for the ratio of 60/40 within three years which will have better bottom lines dur to rise in high margin digital model. As of July 31, 2025, it had 276 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route IPO of 5048000 equity shares of Rs. 10 each to mobilize Rs. 71.68 cr. at the upper cap. It has announced a price band of Rs. 140 – Rs. 142 per share. The issue opens for subscription on November 06, 2025, and will close on November 10, 2025. The minimum number of shares to be applied is for 2000 shares and in multiples of 1000 shares thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.50% of the post-IPO paid-up capital of the company. From the net proceeds of the IPO, the company will utilize Rs. 20.90 cr. for working capital, Rs. 15.00 cr. for investment in wholly owned subsidiary LTCV Credit Pvt. Ltd., Rs. 17.75 cr. for funding business development and marketing activities, Rs. 4.03 cr. for prepayment/repayment of certain borrowings, and the rest for general corporate purposes. 

The IPO is solely lead managed by SKI Capital Services Ltd., and Skyline Financial Services Pvt. Ltd., is the registrar to the issue. SKI Capital Services Ltd., is also the Market Maker for the company. 

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 13050 – Rs. 89070 per share between March 2016 and September 2024. It has also issued bonus shares in the ratio of 29.86 for 100 in March 2018, and 800 for 1 in December 2024. The average cost of acquisition of shares by the promoters is Rs. 0.28, and Rs. 0.29 per share. Some marquee investors have parked for 1% to 6.5% in the equity of Finbud during 2024. 

Post-IPO, company’s current paid-up equity capital of Rs. 14.00 cr. will stand enhanced to Rs. 19.05 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 270.50 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 135.57 cr. / Rs. 1.83 cr. (FY23), Rs. 190.28 cr. / Rs. 5.66 cr. (FY24), and Rs. 223.50 cr. / Rs. 8.50 cr. (FY25). For 4M of FY26 ended on July 31, 2025, it earned a net profit of Rs. 3.33 cr. on a total income of Rs. 85.82 cr. 

For the last three fiscals, the company has reported an average EPS of Rs. 4.60 and an average RoNW of 32.78%. The issue is priced at a P/BV of 5.06 based on its NAV of Rs. 28.08 as of July 31, 2025, and at a P/BV of 2.44 based on its post-IPO NAV of Rs. 58.26 per share (at the upper cap).

If we attribute FY26 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 27.10. Based on FY25 earnings, the P/E stands at 31.84. The issue relatively appears aggressively priced.

For the reported periods, the company has posted PAT margins of 1.35% (FY23), 2.97% (FY24), 3.81%, (FY25), 3.88% (4M-FY26), and RoCE margins of 24.91%, 49.85%, 32.11%, 12.19%, respectively for the referred periods. 

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post listing, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown My Mudra Fincorp, BLS E-services, PB Fintech as its listed peers. They are currently trading at a P/E of 11.4, 28.7, and 178 (as of October 31, 2025. However, they are not truly comparable on an apple-to-apple basis. This comparison appears to be an eyewash. 

MERCHANT BANKER’S TRACK RECORD:
This is the 5th mandate from SKI Capital in the two fiscals (including the ongoing one).  From the last 4 listings so far, 1 listed at discount and the rest listed with a premium ranging from 28% to 90% on the listing date.