Navi Technologies Limited – 10 factors before investing

Navi Technologies IPO

Navi Technologies Limited Overview:

SEBI approved the Navi Technologies IPO document. The company filed DRHP on March 10, 2022.  Navi Technologies is coming up with an INR 3350 crores IPO with a face value of INR 10 per equity. There is no offer for sale (OFS) in this public offering. The company was incorporated as ‘‘BAC Acquisitions Private Limited” in Bengaluru, Karnataka, India on December 10, 2018. To become a public company before IPO, the name again changed to “Navi Technologies Limited” on February 15, 2022, and a certificate of change of name was issued by the RoC. The registered and corporate office of Navi Technologies Limited’ is in Koramangala Industrial Layout, Bengaluru 560 095, Karnataka, India.

  • Navi Technologies is a technology-driven financial products and services company in India.
  • The company is one of the leading end-to-end digital ecosystem players.
  • Navi Technologies is into all three non-payments financial service offerings such as lending, insurance, and asset management.
  • The company has been constantly innovating its product. It offers all its products under the brand name “Navi”.

Navi Technologies IPO – focus on niche financial markets

The company offers various financial services direct to customers including personal loans, home loans, general insurance, and mutual funds. Navi Technologies also offers microfinance loans, through a wholly-owned subsidiary, under the “Chaitanya” brand. The company claims to be the fastest disbursal of loan applications in India. The company reaches out to its customers through its “NAVI App”. The company’s products are as follows.

  • Personal Loan – disbursed 481,121 personal loans amounting to ₹22,463.12 million, as of December 31, 2021.
  • Health Insurance – as of December 31, 2021, 61.17% of the health insurance policies sold were approved without any human assistance on the Navi App.
  • Home loan – the company had disbursed home loans across eight cities in India, disbursed 604 loans with an average ticket size of ₹3.86 million.
  • Asset management (AMC) – as of December 31, 2021, the company managed a total AUM of ₹9429 million under mutual funds.
  • Microfinance loans – as of December 31, 2021, the microfinance business had a closing AUM of ₹18,089 million.

Navi Technologies Limited Founders and Leadership team

The company is run by experienced Promoters and a qualified senior management team with significant experience in the business.

Mr. Sachin Bansal is the promoter, chairman, Managing Director, and Chief Executive Officer of the Company since its incorporation. He was one of the promoters of Flipkart. He holds a degree in computer science and engineering from the Indian Institute of Technology, Delhi. He holds 281,725,980 Equity Shares aggregating 97.77% of the issued, subscribed, and paid-up Equity Share capital of the Company.

Mr. Ankit Agarwal is the Executive Director and CFO of the company. He holds a bachelor’s degree in computer science and engineering from the Indian Institute of Technology, Delhi, and a master’s degree in management from the Indian Institute of Management, Ahmedabad. Before this assignment, he worked with Bank of America and Deutsche Bank AG at the senior level.

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Navi Technologies Limited – Revenue and profits

The total income for the nine months ended December 31, 2021, is INR 719.4 Crores. The total income of the company has been growing significantly over the years. The company’s income has grown from INR 170 Crores in FY 2019 to INR 780 Crores in FY 2021. FY 2020 also witnessed a growth in total revenue to reach INR 207 Crores from INR 170 Crores in FY 2019.

However, the company incurred a loss of INR 8 Crores in FY 2020 due to the Covid 19 lockdown.  Besides, the company incurred a profit of INR 71.2 Crores in FY 2021 and INR 2.7 Crores in FY 2019.

Navi Technologies Limited IPO – Valuation Parameters

Navi Technologies Limited has registered a strong debt-equity ratio. However, the debt-to-equity ratio has been increasing over the years. The Net cash flow from operating activities has been negative over the years mentioned. Other parameters such as the return on equity, ROCE, and profit margin do not look strong.  

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All amounts in INR Million except percentages
(Year ended March 31)
Revenue from Operations125.70559.481366.63
Total Income169.522070.167800.17
Profit After Tax for the Year20.69-80.71711.88
Return on Equity3.9%-0.2%1.8%
Return on Capital Employed8.29%0.98%4.92%
Net Debt / Equity0.060.200.43
Earnings Per Share-Diluted (in INR)7.31-2.092.45
Net Cash from Operating Activities-15.94-2724.49-8940.46

Competitors of Navi Technologies Limited

The NBFC – MFIs market in India is highly regulated. There are many players in this segment. Traditional banks and big financial institutes are entering this segment. Bajaj finance Limited, CreditAccess Grameen Ltd, Spandana Sphoorty Financial Ltd, Muthoot Microfin ltd, etc. are major competitors in this segment apart from the banks. Since the Indian economy is expected to grow at around 7 percent per annum for the next 5 to 10 years, there are enough opportunities for NBFCs-MFIs in India.

The mutual fund business in India is in a nascent stage. Looking at the demography of India, this industry is likely to grow significantly in the next 10 years.

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Navi Technologies IPO: Do you invest? 10 factors to know

  • The financial services space in India across the segments including lending, insurance, and mutual fund business is highly underpenetrated. This opens big opportunities for all the NBFC-MFIs and mutual fund businesses.
  • Retail loan AUM is expected to grow around 20% CAGR in the next five years.
  • Health insurance is significantly under-penetrated and could grow at ~16% over the same period.
  • Mutual fund AUM is expected to grow at a CAGR of approximately 17% to reach US$1.0 trillion.
  • Navi Technologies uses technology – Mobile first approach (NAVI App) to drive better customer engagement and experience. The company claims one of the lowest turnaround times amongst lenders in India, in the personal loans category.
  • Innovative End-to-end ownership of product – the Company integrated and owns the entire value chain right from in-house technology to product designing.
  • Strong Promoter track record and experienced management team – co-founder, Promoter, and CEO, Sachin Bansal, is the former chairman and co-founder of Flipkart.
  • Navi Technologies is enhancing product proposition, adjacent lending, and insurance products, based on the behavior and customer actions. That will help customer journeys be more seamless.
  • The company is also planning to explore strategic acquisition opportunities to strengthen the value proposition of the current portfolio and launch new offerings.
  • Promoters are not selling their stake in the company during this IPO. Investing in the company is good for the long-term perspective. Again, it will depend on the price of each equity share that company is coming up with.