Fedbank Financial Services IPO entails to raise Rs 1,092.26 crores. The issue is combination of fresh issue of 4.29 crore shares aggregating to Rs 600.77 crores and OFS of 3.52 crore shares aggregating to Rs 492.26 crores. Fedbank Financial Services Ltd. is a retail focused non-banking finance company (“NBFC”) promoted by Federal Bank.
| IPO opens | November 22, 2023 |
| IPO Closes | November 24, 2023 |
| IPO Size (Rs.) | ₹1,092.26 Cr |
| IPO Size (shares) | 78,073,810 shares |
| Breakup | Fresh issue ₹600.77 Cr + OFS ₹492.26 Cr |
| Face Value: | ₹ 10/- |
| IPO Price in Rs : | ₹133 to ₹140 |
| Minimum Lot | 107 Shares |
| Listing At | NSE , BSE |
| Anchor & QIB Quota | 50% |
| NII Quota | 15% |
| Retail Quota | 35% |
| Lead Manager | ICICI Securities, Bnp Paribas, Equirus Capital and Jm Financial |
| Registrar | Link Intime |
About Fedbank Financial Services Limited:
- Promoted by The Federal Bank Ltd, Fedbank Financial Services Ltd (“Fedfina”) was incorporated on April 17, 1995. Fedfina is a retail focused non-banking finance company (“NBFC”) has the 2nd and 3rd lowest cost of borrowing among the micro, small and medium enterprises (“MSMEs”), gold loan and MSME & gold loan peer set in India in Fiscal 2023 and 3-months period ended June 30, 2023, respectively.
- As on March 31, 2023, Fedfina had the 3rd fastest AUM growth among NBFCs in the peer set in India with a 3 year CAGR of 33% between Fiscals 2020 and 2023, and the 4th fastest year-on-year AUM growth of 42% for 3-months period ended June 30, 2023.
- The company focuses on catering to the MSMEs and the emerging self-employed individuals (“ESEIs”) sector. They have a well-tailored suite of products targeted to match their customers’ needs, which includes mortgage loans such as housing loans; small ticket loan against property (“LAP”); and medium ticket LAP, unsecured business loans, and gold loans. . Their mortgage loans, gold loans and the unsecured business loans had an AUM of ₹ 4,702.45 crore, ₹ 3,124.17 crore and ₹ 1,487.25 crore, respectively as on June 30, 2023.
- As of June 30, 2023, Fedfina has presence in 17 states and union territories across India with a strong presence in Southern and Western regions of India. As of June 30, 2023, they covered 190 districts in 17 states and union territories in India through 584 branches. Their branches are located in states, such as Andhra Pradesh (including Telangana) and Rajasthan.
- Fedfina also has a “Phygital” doorstep model, a combination of digital and physical initiatives, for providing customized services to their customers across all of their products. This also helps them to constantly remain in touch with their customer.
- The company had 3,732 personnel across 584 branches.
- Anil Kothuri is the MD and CEO of the company.
Financials: Fedbank Financial Services Limited
| Particulars / Rs. In crore | As at Jun’ 30, | As at Mar’ 31, | |||
| Particulars / Rs. Crore | 2023(03) | 2022(03) | 2023(12) | 2022(12) | 2021(12) |
| Net Interest Income | 177.65 | 135.78 | 638.02 | 474.24 | 344.92 |
| Net Interest Margin | 2.05% | 2.22% | 8.99% | 8.92% | 8.00% |
| Revenue from Operations | 361.39 | 247.51 | 1,178.80 | 869.32 | 691.83 |
| Revenue Growth (%) | 46.01% | – | 35.60% | 25.66% | – |
| EBITDA | 244.31 | 165.27 | 757.04 | 523.56 | 417.39 |
| Profit before Tax | 72.06 | 58.00 | 243.02 | 139.21 | 76.93 |
| Net Profit for the period | 53.88 | 43.76 | 180.13 | 103.46 | 61.68 |
| Share Capital | 321.91 | 321.55 | 321.91 | 321.52 | 289.92 |
| Reserves | 1,092.99 | 880.98 | 1,033.77 | 832.00 | 544.81 |
| Net Worth | 1,414.90 | 1,202.53 | 1,355.68 | 1,153.52 | 834.73 |
| EPS – Basic (₹) | 1.67 | 1.36 | 5.60 | 3.32 | 2.19 |
| EPS – Diluted (₹) | 1.67 | 1.36 | 5.59 | 3.31 | 2.18 |
| RONW (%) | 3.81% | 3.64% | 13.29% | 8.97% | 7.39% |
| Net Asset Value (₹) | 43.95 | 37.40 | 42.11 | 35.88 | 28.79 |
| Post issue Share Capital | 368.93 | ||||
| FV | 10.0 | ||||
| IPO price | 140.0 | ||||
| EPS Fy23 | 4.9 | ||||
| PE Fy23 | 28.7 | ||||
| EPS Fy24 (annualized) | 5.8 | ||||
| PE Fy24 (annualized) | 24.0 | ||||
| Market cap in Lacs | 5,165.0 | ||||
| Market cap / Sales | 4.38 | ||||
| Price /BV | 3.19 |
Anchor: Fedbank Financial Services IPO
Fedbank Financial Services raised Rs 324.68 crore from 22 anchor investors by allocating them 2,31,91,374 shares. The anchor investors included names like Societe Generale, Integrated Core Strategies, Marshall Wace Investment Strategies, Goldman Sachs, Segantii India Mauritius, Copthall Mauritius Investment, Citigroup Global Markets etc.
Fedbank Financial Services IPO: Salient Points
- A significant majority of the customers of Fedbank Financial Services belong to the low to middle income group,
- They had the 3rd highest growth in disbursement among the peer set with a 3-year CAGR of 35% between Fiscals 2020 and 2023
- As on March 31, 2023, Fedfina had the 3rd fastest AUM growth among NBFCs in the peer set in India with a 3-year CAGR of 33% between Fiscals 2020 and 2023, and the 4th fastest year-on-year AUM growth of 42% for 3-months period ended June 30, 2023.
- They are one among 5 private banks promoted NBFCs in India. They are the fastest growing gold loan NBFC in India among the peer set as of March 31, 2023, and had the fastest year-on-year growth among gold loan NBFCs in India as of June 30, 2023. As on June 30, 2023, 86.24% of their total Loan Assets are secured against tangible assets, namely gold or customer’s property.
- They have the 2nd and 3rd lowest cost of borrowing among the MSME, gold loan and MSME & gold loan peer set in India in Fiscal 2023 and 3-months period ended June 30, 2023, respectively.
- Fedbank Financial Services was rated “AA-” by CARE for their NCDs since 2022, and “AA-” by India Ratings and Research Pvt Ltd for their NCDs and bank loans since 2018.
- They have over the years secured financing from diversified sources of capital which includes anks, financial institutions, mutual funds and other financial institutions.
- Company has embraced technology in a big way and has company has dedicated micro-sites on the website for each of branches, which are solely for the purpose of customer engagement for branch customers.
- Peers:
| Company | Fedbank Financial | Aptus Value Housing | IIFL Finance | Five-Star Business Fin. | Manappuram Finance | Muthoot Finance | SBFC Finance |
| CMP (Rs.) | 140 | 288 | 580 | 800 | 152 | 1,336 | 90.6 |
| Revenue (In Cr.) | 1,179 | 1,224 | 8,412 | 1,521 | 6,684 | 10,515 | 734 |
| PAT (In Cr.) | 180 | 551 | 1,608 | 604 | 1,500 | 3,474 | 150 |
| NPM | 15.3% | 45.0% | 19.1% | 39.7% | 22.4% | 33.0% | 20.4% |
| P/E | 28.7 | 26 | 13.1 | 33.2 | 6.92 | 14.2 | 53.3 |
| Mcap ( cr.) | 5165 | 14,348 | 22,117 | 23,351 | 12,866 | 53,625 | 9,680 |
| Mcap/sales | 4.4 | 11.7 | 2.6 | 15.4 | 1.9 | 5.1 | 13.2 |
| Price/adj BV | 2.8 | 5.5 | 2.7 | 5.2 | 1.4 | 2.7 | 3.9 |
- It has equal or impressive growth in AUM when compared with its peers.
- On the flip side, its NIMs have gone down in Q1FY24 from FY23 and are a tad lower than its peers.
- The GNPA ratio of Fedbank Financial Services was at 2.26% end June 2023 is higher as compared to peers ( other than Muthooth Finance).
- Fedbank Financial Services IPO is coming at a PE ratio of 28.7x (FY23) and 24x (FY24 annualized ).
- As shown in table earlier, FedFina is being offered at price /Adj BV multiple of 2.8x. THis ratio for peers is Peers Aptus Value Housing Finance- 5.5 times, Five-Star Business Finance 5.2 times, SBFC Finance 3.9 times, Muthoot Finance 2.7 times , IIFL Finance 2.7 times and Manappuram Finance 1.4 times.
- GMP as reported on social media is in single digits.
- Iam neutral on the IPO, but there is less chance that I will apply in Fedbank Financial Services IPO unless response is quite good on Day 3
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.
