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AU Small Finance Bank weighs Rs 2,000-3,000-crore QIP in FY23; four I-Banks on board

In December 2019, Singapore state investment arm Temasek announced that it had completed the acquisition of a 4.8 percent stake in AU Bank after investing Rs 525 crore. This quantum was part of a total commitment of Rs 1,000 crore made earlier. Later, in March 2021, the firm raised Rs 625 crore through the QIP route and the markets cheered the move which saw a strong reception from sovereign wealth funds, large foreign portfolio investors, life insurance companies and domestic mutual funds

May 24, 2022 / 05:54 AM IST
 
 
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Jaipur-headquartered AU Small Finance Bank is exploring options for a fresh equity fund raise in FY23 via the QIP (qualified institutional placement) route to mop up growth capital and has tapped four investment banks for the proposed transaction, multiple industry sources familiar with the development told Moneycontrol.

If plans fructify, it would be the third equity fund raise by India’s largest SFB (small finance bank) in the last three years.

“The lender has been growing steadily for the past 3-4 years and has maintained asset quality and survived market dislocations, only to emerge stronger. It has scaled up and succeeded in the segment and plans to raise funds going ahead to support business growth,” said one of the persons cited above.

No final call has been taken on the quantum or timing but as of now, the firm is mulling a fundraise in the region of Rs 2,000 crore to Rs 3,000 crore through a QIP in the current fiscal, this person added.

A second person said that ICICI Securities, Morgan Stanley, BofA Securities and Avendus Capital were on board for the potential fund raise.

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“The markets are volatile right now and AU Small Finance, one of the street favourites in the banking pack, needs to be agile to look out for the right window in terms of demand and pricing with respect to the capital raise plans,” he added.

Two other persons confirmed that the SFB (small finance bank) was mulling a fresh equity capital raise in FY23 and had engaged advisors for the same.

All the four persons above spoke to Moneycontrol on the condition of anonymity.

An email query (followed by reminders) sent to AU Small Finance Bank and Morgan Stanley remained unanswered at the time of going to press. This article will be updated as soon as hear from them.  When contacted, BofA Securities, ICICI Securities and Avendus Capital declined to comment.

The AU Bank fund raise saga

In December 2019, Singapore state investment arm Temasek announced that it had completed the acquisition of a 4.8 percent stake in AU Bank after investing Rs 525 crore. This quantum was part of a total commitment of Rs 1,000 crore made earlier.

In March 2021, AU Small Finance Bank raised Rs 625 crore through the QIP route and the markets cheered the move which saw a strong reception from sovereign wealth funds, large foreign portfolio investors, life insurance companies and domestic mutual funds.

AU Bank had announced that it intended to use the net proceeds for supporting the long-term growth aligned to Bank’s internal risk appetite, maintain sufficient headroom over and above the regulatory capital adequacy requirements; and/ or, general corporate requirements or any other purposes.

In an interview to the Business Standard dated April 28, 2022, Sanjay Agarwal, managing director and chief executive officer at AU Small Finance Bank, said that along with 35-40 percent growth YoY in deposits, the lender would grow the asset book at 30 percent and profits by 25 percent YoY for five years.

The interview added that while the lender’s current capital adequacy ratio which stood at 21 percent, was well above the minimum regulatory norms of 15 percent, depending on market conditions, it planned to raise funds in this fiscal to support business growth for two years.

Earlier in the month, AU Small Finance Bank disclosed to the exchanges that it would participate in non–deal roadshows in India and overseas and meet existing and prospective investors between May 4 and May 27.

In April, AU Small Finance Bank said its net profit soared 105 percent to Rs 346 crore in the quarter ended March 2022, supported by lower provisioning for bad loans and improvement in business scenario.
Ashwin Mohan
first published: May 23, 2022 11:25 pm
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