The Small Finance Bank aims to build a full-fledged retail franchise in the next 3-5 years as is sets stage to go public on June 28 with its initial public offer (IPO) to raise Rs 1912 crore
Au Small Finance Bank aims to build a full-fledged retail franchise in the next 3-5 years as it sets the stage to go public with an IPO on June 28 to raise Rs 1,912 crore.
We will rebuild our housing loan book, get into trade finance, letter of credit and other related business banking products and grow our digital lending in the vehicle loan space, said Sanjay Agarwal, Chief Executive Officer and Managing Director of the newly formed bank.
Au Finance formally launched its small finance bank operations in April this year after being selected by the Reserve Bank of India in September 2015 as one of the 11 entities to set up such a bank.
Of these, Au Finance will be the third company to sell its shares to the public after Chennai-based microfinance lender Equitas Holdings Ltd and Bengaluru-based Ujjivan Financial Services Ltd launched their IPOs almost a year ago.
"This IPO was more of a necessity than a choice and that’s why the OFS (offer for sale), we don’t need capital," Agarwal said, adding, investors know that a small finance bank is an opportunity and that its secured asset-backed book has increased its market valuation.
The bank has set a price band of Rs 355-358 for its IPO which opens on June 28 and closes on June 30. The company is looking to raise Rs 1,912 crore through the OFS issue of 5.34 crore shares.
At the price band, its shares will be valued at roughly three times its FY16-17 price-to-book (P/B) value. In comparison, the peer firms Equitas and Ujjivan are trading at a P/B of two-to-two-and-a-half times their respective one-year trailing book value.
Au Finance was established in 1996 in Jaipur, Rajasthan as an non-banking finance company (NBFC) and grew in the vehicle finance, micro, small and medium enterprise (MSME) lending and small and medium enterprise (SME) loans.
It has expanded its asset products to include working capital facilities, gold loans, agriculture-related term loans, etc. and is offering liability products such as current accounts, savings accounts and term deposits with savings rate in the range of 5-6.5 percent.
With deposits worth about Rs 600 crore since it started banking operations, Agarwal said, "Our rates are a little better than big banks but not so expensive than other small finance banks. The range is good enough to be sustainable for the next two years."
As of March 31, 2017, Au Finance's gross assets under management grew 30 percent to Rs 10,734 crore and its total disbursements rose 19 percent to Rs 6730.46 crore compared to the previous year. The company has a total of 2.8 lakh active loan accounts.
Agarwal said, it has around 300 branches and will be adding 100 more in unbanked regions and another 125 asset centers totaling about 500 touch points by March 2018. "We have to plan out what model we will look at – be it digital, branch or outlet model."
The small finance bank has an employee base of nearly 10,000 which will be increased by one more thousand by March 2018.Agarwal also plans to tie up with fintech (financial technology) players to completely digitise its two-wheeler and consumer durable finance book. Its challenges remain in building the IT platform, culture of the bank and keeping up with the smooth transition from an NBFC to a bank.