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Fedbank Financial Services IPO

22 Nov 2023

Introduction:

In the dynamic landscape of financial markets, Initial Public Offerings (IPOs) are pivotal milestones for both issuing companies and investors. For companies, they allow them to raise finances for their future growth, and for investors, they provide an opportunity to invest in growing companies and seek long-term profits.

One such IPO that has captured the attention of market participants is the Fedbank Financial Services IPO. Belonging to India's constantly evolving financial services sector, the IPO plans to raise approximately Rs. 1092 crores from public investors. This article aims to provide a comprehensive overview of the key aspects surrounding the Fedbank Financial Services IPO to help you make a well-informed investment decision. Keep reading.

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Details of the IPO

Fedbank Financial Services IPO opens for public subscription on Wednesday, 22 November 2023, and closes on Friday, 24 November 2023. It comprises a fresh issue worth Rs. 600 crores and an offer for sale worth Rs. 492.26 crores. The price band for this book-building IPO has been set as Rs. 133 to Rs. 140 per share. As a retail investor, you can apply for a minimum of 107 shares and in multiples thereof.

Refer to the table below for more IPO details:

IPO Date 22 November to 22 November 2023
Basis of Allotment 30-Nov-23
Listing Date 05-Dec-23
Face Value Rs. 10 per share
Price Band Rs. 130 to Rs. 149
Lot Size 107 shares
Total Issue Size 78,018,866 equity shares (Worth Rs. 1092.26 crores)
Fresh Issue 42,857,143 equity shares (Worth Rs. 600 crores)
Offer for Sale 35,161,723 equity shares (Worth Rs. 492.26 crores)
Listing At NSE, BSE

About Fedbank Financial Services Limited

Fedbank Financial Services Limited is a leading Non-Banking Financial Corporation (NBFC) in India promoted by the Federal Bank. The company offers diverse lending products, including housing loans, loans against properties (LAPs), gold loans, and unsecured business loans. The company’s client base largely comprises micro, small, and medium-sized enterprises (MSMEs) and emerging self-employed individuals (ESEIs).

As of 31 March 2023, Fedbank Financial Services Ltd. had 575 branches across 191 districts in India, with a strong presence in Andhra Pradesh, Telangana, and Rajasthan. The company is ranked third among NBFCs with the fastest-growing Assets Under Management (AUM) with a three-year Compound Annual Growth Rate (CAGR) of 33% between the financial years 2020-2023.

Key Strengths of Fedbank Financial Services Limited

Below are the key strengths of Fedbank Financial Services Ltd. as stated in its Draft Red Herring Prospectus (DRHP) filed with the Securities and Exchange Board of India (SEBI):

  • The company has its offices in untapped rural areas with a strong growth potential
  • It offers gold loans and MSME loans at highly competitive interest rates. The borrowing costs are the second-lowest among the peers
  • The NBFC is promoted by the Federal Bank, which brings a degree of trust among the customers
  • A strong focus on offering retail loans with a collateralized lending model. As of March 2023, approximately 86% of outstanding loans were secured against tangible assets
  • Technology-driven company with a scalable business model

Key Risks or Weaknesses Highlighted

Below are the key risks or weaknesses associated with Fedbank Financial Services IPO:

  • Changes in the RBI’s repo rate and lending policies may impact the business
  • MSME loans contribute significantly to the company’s income. This sector is usually exposed to a high degree of risk
  • The company incurs significant operating costs to ensure the safety of its customers’ collateral
  • It has to fulfil the regulatory compliances of the Reserve Bank of India (RBI)
  • The company and its promoters have a few pending litigations against them

Core Financials of the Company

You must analyze the core financials of the issuing company before investing in its IPO. It allows you to determine the potential growth prospects of a company and make informed investment decisions. The financials of Fedbank Financial Services Ltd. paint a positive picture with growing AUM, revenue, and profit for the last three years.

The table below depicts the key financials of Fedbank Financial Services Ltd. for the last three completed financial years:

Particulars Three-month Period Ended June 30, 2023 As of and for FY Ended March 31
    2023 2022 2021
Net Worth 1,415 322 322 290
Assets Under Management 9,434 9,070 6,187 4,862
Revenue From Operations 361 1,179 869 692
Net Interest Income 178 638 474 345
Profit After Tax 54 180 103 62
Net Interest Margins 2% 8% 8% 7%
Net NPA 2% 2% 2% 2%
Earnings Per Share (Diluted) 2 6 3 3
Return on Equity (%) 4% 14% 10% 8%

*Amount in Crores. Source – RHP Dated 16 November 2023 on SEBI website

To conclude

The Fedbank Financial Services IPO offers a unique opportunity for investors to become a part of the growing financial services industry in India. But before investing, you must carefully analyze the issuing company’s financials, investment objective, and multiple other factors.

 

Related Articles:  How to Analyse an IPO | What is IPO Grading? | What is Cut Off Price In IPO Application 

 

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