Fedbank Financial Services Ltd IPO

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IPO Synopsis

Fedbank Financial Services, subsidiary of Federal Bank, has filed preliminary papers with SEBI to raise funds worth Rs.1700 crores.
The IPO consists of a fresh issue of Rs.900 crore and an offer for sale (OFS) of up to 45.71 million shares by its existing shareholders and promoters.
The OFS comprises up to 16.50 million shares by Federal Bank and up to 29.22 million shares by True North Fund VI LLP. Currently, Federal Bank holds a 73.31 percent stake while True North Fund VI LLP has a 25.76 percent stake in FedFina.
ICICI Securities Limited, Equirus Capital Private Limited, IIFL Securities Limited and JM Financial Ltd are the lead managers to the issue.

Objective of the Issue
The proceeds from the issue will be used for augmenting the company’s Tier–I capital base to meet its future capital requirements, arising out of the growth of business and assets.

About Fedbank Financial Services Ltd

FedBank Financial Services Ltd is a retail focused NBFC promoted by The Federal Bank Limited and is the fastest growing gold loan NBFC among the gold loan peer set as of March 31, 2021. The firm has the third fastest AUM growth with a CAGR of 49% between Fiscals 2018 and 2021. It operates on a “twin engine” business model, with two complementary products, namely gold loans and instalment loans to MSMEs and emerging self-employed individuals (“ESEIs”). This business model provides it with the opportunity for growth as well as a countercyclical hedge for disruptions in the Indian economy and the retail loans industry. Headquartered in Mumbai, the firm has presence in 136 districts in 15 states and union territories in India through 463 branches. 
The firm has been rated “AA-” by CARE for its non-convertible debentures (“NCDs") since 2018, and “AA-“ by India Ratings and Research Private Limited for its NCDs and long term bank facility
It also has a “Phygital” door-step model, a combination of digital and physical initiatives, for providing customised services to customers across all of its products.

Profit and Loss

Balance Sheet

Particulars (in Rs. Crores) FY21 FY20 FY19
Revenue 691.8 453.7 253.2
EBITDA 4,173.88 2,763.11 1,725.01
PAT 61.7 39.1 36.1
Particulars (in Rs. Crores) FY21 FY20 FY19
Total Assets 5466.3 4086.2 2150.6
Share Capital 289.9 273.4 230.0
Total Borrowings 4328.1 3217.6 1600.1
Particulars (in Rs. Crores) FY21 FY20 FY19
Net cash generated from / (used in) operating activities -371.23 -1396.92 -444.70
Net cash from / (used in) investing activities -70.53 -68.75 -55.22
Net cash flow from / (used in) financing activities 825.50 1598.85 494.84
Net increase (decrease) in cash and cash equivalents 383.75 133.18 -5.08

Peer Comparison

Name of the Company Total Revenue Basic EPS Nav Rs. per share PE RoNW%
Fedbank Financial Services Limited 697.6 2.19 28.79 NA 7.4%
Aavas Financiers Limited 1105.5 36.86 305.82 77.5 12.0%
Aptus Value Housing 655.2 5.56 40.96 63.08 13.5%
Five Star Business Finance 1051.3 14.01 85.26 NA 15.5%
IIFL Finance 5989.4 20.09 142.37 15.61 14.1%
Manappuram Finance Limited 6374.6 20.4 86.9 7.52 23.5%
Muthoot Finance Limited 11566.4 94.48 392.82 15.14 24.2%
Shriram City Union Finance 6167.9 161.13 1,290.55 11.13 12.65%


The key points are-

Key Points

  • Strengths

    1. Present in large, underpenetrated markets with strong growth potential
    2. “Twin engine” business model ensures growth and risk insulation across economic cycles
    3. Focused on retail loan products with a collateralized lending model targeting individuals and the emerging MSME sector which is difficult to replicate
    4. Strong underwriting capability and presence in select customer segment combined with robust risk management capabilities focused on effective underwriting and collections
    5. Well diversified funding profile with an advantage of lower cost of funds 
    6. Technology driven company with scalable operating model

  • Risks

    1. Disruption in sources of funding for operations and business 
    2. Inability to adequately assess and recover the assessed or full value of collateral, or amounts outstanding under defaulted loans in a timely manner, or at all
    3. It has a huge concentration of loans to emerging self-employed individuals (“ESEI”) and MSMEs, hence possesses the risk of non-payment or default by the borrowers
    4. It is subject to periodic inspection by RBI, thus, any non-compliance with the observations of RBI could adversely affect the business
    5. Unable to maintain the quality of the loan portfolio or manage the growing loan portfolio which may result in significantly larger NPAs and provisions.

How to apply for an IPO?

  • Login to your 5paisa account and select the issue in the current IPO section

  • Enter the number of lots and price at which you wish to apply for

  • Enter your UPI ID and click on submit. With this, your bid will be placed with the exchange

  • You will receive a mandate notification to block funds in your UPI app

  • Approve the mandate request on your UPI and funds will be blocked

FAQs

What is the minimum lot size and investment required for the Fedbank Financial Services Ltd IPO?

Fedbank Financial Services Ltd IPO details are yet to be announced.

What is the price band of the IPO?

Fedbank Financial Services Ltd IPO details are yet to be announced.

When does the Fedbank Financial Services Ltd issue open and close?

Fedbank Financial Services Ltd IPO details are yet to be announced.

What is the size of Fedbank Financial Services Ltd IPO issue?

The IPO consists of a fresh issue of Rs.900 crore and an offer for sale (OFS) of up to 45.71 million shares by its existing shareholders and promoters.

Who are the promoters/key personnels of Fedbank Financial Services Ltd?

Fedbank Financial Services Ltd is promoted by The Federal Bank Ltd.

When will the Fedbank Financial Services Ltd allotment happen?

Fedbank Financial Services Ltd IPO details are yet to be announced.

What is the Fedbank Financial Services Ltd listing date?

Fedbank Financial Services Ltd IPO details are yet to be announced.

Who are the book runners for Fedbank Financial Services Ltd IPO?

ICICI Securities Limited, Equirus Capital Private Limited, IIFL Securities Limited and JM Financial Ltd are the book running lead managers to the issue.

What is the objective of the issue?

The proceeds from the issue will be used for augmenting the company’s Tier–I capital base to meet its future capital requirements, arising out of the growth of business and assets.

How to apply for the Fedbank Financial Services Ltd IPO?

1. Login to your 5paisa account and select the issue in the current IPO section
2. Enter the number of lots and price at which you wish to apply for
3. Enter your UPI ID and click on submit. With this, your bid will be placed with the exchange
4. You will receive a mandate notification to block funds in your UPI app

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