Nisus Finance Services coming with IPO to raise Rs 114.24 crore

Nisus Finance Services Co

• Nisus Finance Services is coming out with an initial public offering (IPO) of 63,46,400 equity shares in a price band Rs 170-180 per equity share.
• The issue will open on December 4, 2024 and will close on December 6, 2024.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 10 and is priced 17.00 times of its face value on the lower side and 18.00 times on the higher side.
• Book running lead manager to the issue is Beeline Capital Advisors.
• Compliance Officer for the issue is Ruksana Istak Khan.

Profile of the company

Nisus Finance Services Co along with its subsidiaries and associate companies is actively engaged in primary two segment; 1) Transaction Advisory Services and 2) Fund and Asset Management. Together with its subsidiaries, stepdown subsidiaries and associates, it operates under the “Nisus Finance Group”/ “NiFCO” brand. The company is mainly engaged in the business of Transaction Advisory services, while its subsidiaries, stepdown subsidiaries, namely Nisus BCD Advisors LLP, Nisus Finance & Investment Managers LLP, Nisus Finance International Advisors IFSC LLP, Nisus Finance Investment Consultancy FZCO and associate company namely Dalmia Nisus Finance Investment Managers LLP which are engaged in Real Estate and Urban Infrastructure Fund and Asset Management. The other subsidiary i.e. Nisus Fincorp Private Limited, an NBFC company is having main object of financing. It has recently invested in an entity named Microsafe Projects LLP as an Associate of the company which is engaged in the business of acquiring residential properties constructed and/or under construction.

Following the success of its Transaction Advisory vertical, the company through its subsidiaries, stepdown subsidiaries and associate Companies diversified its business to include Real Estate and Urban Infrastructure Fund & Asset Management and a Non-Banking Finance Company under “Nisus Finance Group”/ “NiFCO” brand over the past decade. Its Transaction Advisory business requires working closely with its developer partners, to ensure it craft solutions that align with long-term business plan of its advisory clients. It has been assigned “Care AIF 1” grading by Care Analytics & Advisory Private Limited (CareEdge) to one of its scheme i.e. Real Estate Special Opportunities Fund - I which defines the Investment related processes for the scheme are expected to be Excellent.

The company’s fund business relies on research driven approach and consistent ability to capitalise on emerging market trends in the Fund & Asset Management has further enabled it to foster strong relationships across wide range of stakeholders, including asset owners, developers, operators, investors, funds, domestic and global LPs (Limited Partners), buyers, financial institutions, family offices, intermediaries and consultants, industry associations, mass media, and end user forums. The company has a decade-long presence in India and managing an AUM of more than Rs 1000 crore (FY 2024) across real estate and urban infrastructure assets through its managed funds. 

Proceed is being used for:

• Augmenting fund setup, additional licenses, facility management services and fund management infrastructure in IFSC-Gift City (Gandhinagar), DIFC-Dubai (UAE) and FSC-Mauritius
• Fund raising cost, distribution and placement fee to third party distributors or agents in India and/or international markets for creation of pool of funds
• Investment in Subsidiary Company viz. Nisus Fincorp Private Limited (RBI Registered NBFC), for augmenting the capital base
• General corporate purposes

Industry Overview

Alternative Investment Fund (AIF) means any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from sophisticated investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors. AIF does not include funds covered under the SEBI (Mutual Funds) Regulations, 1996, SEBI (Collective Investment Schemes) Regulations, 1999 or any other regulations of the Board to regulate fund management activities. Further, certain exemptions from registration are provided under the AIF Regulations to family trusts set up for the benefit of 'relatives’ as defined under Companies Act, 1956, employee welfare trusts or gratuity trusts set up for the benefit of employees, 'holding companies’ within the meaning of Section 4 of the Companies Act, 1956 etc. The investments made by the AIFs have been led by unlisted equity shares/equity linked instruments/LLP interest. The funds invested 41.4% of the total funds in unlisted equity shares/equity linked instruments/LLP interest followed by 27.9% in debt/securitized debt instruments. 19.6% was invested in listed equity (excluding listed/to be listed on SME exchange). 

From investors point of view, AIFs in real estate are a lucrative option to invest as they provide a diversification across regions, projects and developers. The investors get the option to invest in real estate projects which may generally be out of reach. Also, these funds are managed by experienced and knowledgeable fund managers who have good knowledge about the sector like real estate market. Real estate investing has never been a simple endeavour. Investors have to cope with a variety of issues, including complicated asset management, paperwork and operational difficulties. HNIs wishing to invest in real estate investment themes are finding that real estate-focused AIFs are a great alternative. As in the typical AIF process, the fund managers conduct a strict due diligence for the portfolio companies, offer guidance and manage these investments very actively.

Meanwhile, Real Estate Investment Trusts (REITs) are investment vehicles that enables individuals to invest in real estate without directly owning or managing properties. Introduced in India in 2014 by the Securities and Exchange Board of India (SEBI), REITs have gained traction as a means of channeling investments into income-generating real estate assets including residential, commercial, retail, industrial, and hospitality across the country. REITs offer investors access to a wide range of real estate assets without the need for large amounts of capital or direct property ownership. It also offers investors liquidity, as units can be bought and sold on stock exchanges, providing investors with the ability to adjust their investment portfolios quickly. Furthermore, REITs typically offer attractive dividend yields, making them appealing to income-seeking investors. Additionally, REITs benefit from professional management, which can enhance operational efficiency and potentially improve returns for investors. 

Pros and strengths

Well-established, credible and customer-focused NiFCO brand: The company, NFSC, established in 2013, is recognized for its extensive business interests across various sectors. As the holding company, NFSC, in conjunction with the Nisus Finance Group, has earned the trust of Indian consumers through its performance, consistent investor engagement, accurate representations, analysis backed dealing, successful partnerships, transparency, regulatory compliance, strong client relationships, dedication to creating unique opportunities, market-driven operations and management, capital protection, risk-mitigated returns, and esteemed industry reputation. Its commitment to making ethical decisions that prioritize the best interests of its investors and clients, while aligning with long-term goals, demonstrates a high degree of synchronization.

Diversified business model: The company, NFSC, has evolved from a Transaction Advisory firm into a diversified financial services group actively involved in Real Estate Urban Infrastructure Fund and Asset Management. Its diverse range of services enables it to capitalize on relationships across different sectors. Through its fund management division, it offers its portfolio companies a wider array of strategic partnerships and options for raising capital. The company’s transaction advisory teams source developer partners and facilitate joint ventures with other industry leaders, leveraging synergies to enhance competitiveness, broaden service offerings, and deliver increased value to both clients and investors.

Ability to identify emerging market trends in a timely manner: The company’s strength lies in adeptly identifying trends and crafting investment strategies that enable it to capitalize on long-term developments. This proficiency is rooted in comprehensive research and analysis, leveraging data-driven insights, market intelligence, and industry expertise to identify emerging trends early, even when taking a contrarian view. It translates these identified trends into actionable investment strategies, considering not only current market dynamics but also anticipating future shifts to stay ahead of the curve.

Risks and concerns  

Derive substantial portion of revenue from certain key customers: The company is largely dependent on a finite set of customers and investors in its funds which govern out of AUM size for the fund business. Top ten customers of the company excluding Interest income on investment (i.e. NCD, F.D.) and Short-Term Capital Gain on sale of NCD for the period ended June 30, 2024, for the FY2023-24, FY2022-23 and FY 2021-22 contributed for 56.14%, 78.02%, 53.96% and 84.94% respectively of its Revenue from Operation. The company’s business operations are highly dependent on its certain key investors and the loss of any of its key investor may adversely affect its sales and consequently its business. The loss of one or more of these significant or key investors or a reduction in the amount of business it obtains from them could have an adverse effect on its business, results of operations, financial condition and cash flows.

Limited experience in operating business outside India: The company currently operates certain business outside of India, through its Stepdown subsidiary i.e. Nisus Finance Investment Consultancy FZCO in Dubai. Operating in such jurisdictions presents additional difficulties including: i) It does not have equivalent experience in operating in these jurisdictions to its experience in operating in India, nor do it has the benefit of significant corporate history; ii) Operations in such jurisdictions are subject to different competitive environments and regulatory regimes in respect of which it has less knowledge and expertise; and iii) The customer base in such jurisdictions that may be interested in investment in Indian securities is more limited than in India. Therefore, it may not be able to grow its business outside of India at the same rate as it grows its domestic business, or at all, and it is possible that it finds difficult to maintain its operations in such jurisdictions.

Stiff competition: The company’s business operates in a competitive market and it faces competition from other players in the financing industry. Many of its competitors are large institutions, which may have a larger customer base, funding sources, branch networks and capital base compared to the company. Some of its competitors may be more flexible and better positioned to take advantage of market opportunities. This competition is likely to further intensify as a result of securitization and regulatory changes. Its future success will depend, to a certain extent, on its ability to respond in a timely and effective manner to these competitive pressures.

Outlook

Nisus Finance Services Co offers financial services such as transaction advisory services, fund and asset management, private equity and venture debt and capital solutions to corporate clients. Strong management and distinctive people and culture. It also has prudent governance, risk management, and internal control frameworks. On the concern side, the company is dependent on and derive a substantial portion of its revenue from certain key customers and investors in its funds managed by its subsidiaries that may expose it to liquidity risks, which may adversely affect its business volume, results of operations and financial condition. Moreover, the company’s business is dependent on the Group’s goodwill and ‘Nisus’ brand name. Any change in control of the Group or any other factor affecting the business and reputation of the Group may have a concurrent adverse effect on the Group’s reputation, business and results of operations.

The company is coming out with a maiden IPO of 63,46,400 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 170-180 per equity share. The aggregate size of the offer is around Rs 107.89 crore to Rs 114.24 crore based on lower and upper price band respectively. On performance front, the total revenue from operations for the FY 2023-24 was Rs 4,212.71 lakh as compared to Rs 1,129.95 lakh for the FY 2022-23. PAT increased to Rs 2,287.49 lakhs in FY 2023-24 from Rs 300.05 lakhs in the FY 2022-23. PAT was 54.14% and 26.00% of total Income for the year ended on FY 2023-24 and FY 2022-23 respectively. Increase in margins was mainly due to percentage increase in revenue from operation as compared to percentage increase in employee benefit expense and finance cost being fixed cost in nature.

The company’s commitment to cultivating enduring relationships with developer partners and supporting them throughout their development journeys has been instrumental in fostering strong, ongoing partnerships. Itys dedicated approach to client engagement and its capacity to offer continuous, innovative solutions enable it to establish lasting connections with developers. These deep relationships, in turn, provide it with a competitive edge in attracting deal opportunities and securing transactions. Additionally, its strategy of amalgamation and joint ventures has proven to be a significant driver of its business growth. This approach has facilitated the expansion of larger developers and has provided partnership opportunities to smaller developers, thereby contributing to its overall success.