Fedbank Financial Services IPO GMP (Grey Market Premium)

Fedbank Financial Services IPO opens on 22-Nov-2023 and closes for subscription on 24-Nov-2023. The stock has a face value of ₹10 per share and the price band for the book building IPO has been set in the band of ₹133 to ₹140 per share. The final price will be discovered within this band. Fedbank Financial Services IPO will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion of Fedbank Financial Services IPO comprises the issue of 4,28,57,143 shares (428.57 lakh shares approximately), which at the upper price band of ₹140 per share translates into fresh issue size of ₹600.00 crore. On the other hand, the offer for sale (OFS) portion of the IPO of Fedbank Financial Services Ltd comprises the sale of 3,51,61,723 shares (351.62 lakh shares), which at the upper price band of ₹140 per share will translate into an offer for sale (OFS) size of ₹492.26 crore.

The OFS selling will be by the promoter shareholders of the company, which is Federal Bank Ltd and one investor shareholder, True North Fund. Since Fedbank Financial Services Ltd is currently 73.09% owned by the promoters, the promoter stake will get diluted to the extent of the fresh issue and the offer for sale to the extent of the promoter portion offered. Thus, the overall IPO of Fedbank Financial Services Ltd will comprise of the issue and sale of 7,80,18,866 shares (780.19 lakh shares approximately), which at the upper price band of ₹140 per share will translate into total IPO issue size of ₹1,092.26 crore. The net proceeds from the IPO fresh issue portion will be utilized for augmenting the Tier 1 capital base (a basic necessity for such NBFCs looking to expand their loan books). The OFS portion is being offered by the promoters (Federal Bank Ltd) and True North Fund, an investor shareholder. The IPO will be lead managed by ICICI Securities, BNP Paribas, Equirus Capital and JM Financial. Link Intime India Private Ltd will be the registrar to the issue.

About the Fedbank Financial Services IPO GMP

The grey market price (GMP) trading normally starts about 4-5 days prior to IPO opening and continues till the listing date. In the case of Fedbank Financial Services Ltd, we already have GMP data for the last 4 days, which should give a reasonable picture of the likely listing. We have not considered previous data, since the price has just been announced.

There are 2 factors that impact the GMP. Firstly, the market conditions have a deep impact on the GMP, especially the liquidity conditions in the market. Secondly, the extent of subscription for the IPO has a deep impact on the GMP as it is indicative of investor interest in the stock. GMP can also technically be in negative, which means the stock would list at a discount to the issue price.

There is one small point to remember here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has been observed to be a good informal gauge of demand and supply for the IPO. Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance of the stock would be.

How has the GMP panned out in last few days

GMP tends to be a good mirror of the real stock story. More than the actual price, it is the GMP trend over time that gives insights about which direction the wind is blowing. Here is a quick GMP summary for Fedbank Financial Services IPO for which the data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around ₹5, but has later drifted lower to ₹0 per share from the second day onwards and that is where it has stayed till today, i.e., 20th November 2023. Fedbank Financial Services IPO price was only announced on last Friday, so the actual GMP may still take some time to manifest the real underlying value. Of course, we have to wait for the actual subscription numbers to flow in after the issue opens for subscription on 22nd November 2023 and also watch the progress, as that would have a very significant impact on the GMP. In the past, stocks which got oversubscribed in the IPO also saw a very robust positive shift in the grey market pricing. For a start, Fedbank Financial Services Ltd has shown moderately strong traction in the grey market.

If you consider the upper end of price band of the Fedbank Financial Services IPO at ₹140, then the likely listing price is being signalled at around ₹148 per share as per the GMP indicator on 20th November 2023. This is dynamic and keeps changing. One data point to track will be the subscription update on the stock as that would chart the GMP course.

The GMP of ₹8 on the upper end of the book built IPO price of ₹140 indicates a listing premium of a modest 5.71% for Fedbank Financial Services Ltd over the IPO issue price. That pre-supposes a listing price of approximately ₹148 per share, when Fedbank Financial Services Ltd lists on 05th December 2023. Of course, these are purely approximations, so you must keep a margin of safety. One needs to observe the trend of GMP closely as that gives the best hints on listing. Look at the time series trend instead of just pure GMP value.

How to apply for the Fedbank Financial Services IPO?

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Fedbank Financial Services Ltd, the minimum lot size is 107 shares with upper band indicative value of ₹14,980. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Fedbank Financial Services Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Also read about Fedbank Financial Services IPO

Quota allocation across IPO investor categories

The company was promoted by Federal Bank Ltd, holding the outstanding shares of Fedbank Financial Services Ltd to the tune of 73.09% of outstanding shares. Currently the promoter (Federal Bank Ltd) holds 73.09% stake in the company, which will get diluted post the IPO. As per the terms of the offer, 50% of the net offer is reserved for the qualified institutional buyers (QIBs), while 35% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors. The stock of Fedbank Financial Services Ltd will be listed on the NSE and on the BSE. The table below captures the gist of the allocation to various categories.

It may be noted here that the Net Offer above refers to the quantity net of employee quota and the reserved quota for the shareholders of its parent Federal Bank Ltd. Employees may get a discount to the IPO price, but that would be communicated separately in the application forms. The anchor portion, will be carved out of the QIB portion and the anchor portion bidding and allocation will happen a day ahead of the actual IPO opening.

The issue opens for subscription on 22nd November 2023 and closes for subscription on 24th November 2023 (both days inclusive). The basis of allotment will be finalized on 30th November 2023 and the refunds will be initiated on 01st December 2023. In addition, the demat credits are expected to happen on 04th December 2023 and the stock is scheduled to list on 05th December 2023 on the NSE and the BSE. It is a mainboard issue so it will be traded in the regular EQ listing on the NSE.