Fedbank Financial Services Ltd IPO

The key points are-

• 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.