Fedbank Financial Services lists at discount. Should buy, sell or hold?

The lacklustre opening was expected as ahead of the listing, the GMP of Fedbank was wiped out on low investor interest

Fedbank Financial Services had a weak first day on the bourses on November 30, listing at Rs 137.75 on BSE, a 1.6 percent discount to the IPO price of Rs 140. The stock did recover to gain 5.7 percent to hit an intraday high of Rs 148 but squandered the gains to end the day at Rs 140.

The lacklustre opening was expected as ahead of the listing, the grey market premium (GMP) of Fedbank was wiped out on low investor interest. The grey market is an unofficial platform where shares start trading much before the allotment and continue till the listing day. Most investors track the grey market premium to get an idea of the listing price.

Also Read: Fedbank Financial Services lists at 1.6% discount to IPO price

“The lacklustre listing was in line with the pre-listing sentiment, which was dampened by a weak grey market premium and a relatively tepid investor response. Given this subdued listing, we recommend a neutral stance on Fedbank Financial Services,” said Shivani Nyati Head of Wealth at Swastika Investmart.

Fedbank raised Rs 1,092.26 crore via IPO, which comprised a fresh issuance of 4.29 crore shares worth Rs 600.77 crore and an offer for sale (OFS) of 3.51 crore shares worth Rs 492.26 crore at the upper end of the Rs 133-140 price band.

Though Fedbank Financial Services logged the third-fastest AUM growth among its peer and has an edge over them due to access to capital from its promoter Federal Bank, most of the positives are seemingly priced in at a P/BV of 3.3x on the upper price band based on FY23 book value,” Shreyansh Shah, Research Analyst, StoxBox, said. He favours re-considering the company at lower valuations.

The issue was subscribed 2.2 times. Investors bid for 12.3 crore shares against an issue size of 5.6 crore. Retail investors bought 1.82 times their allotted quota of shares, non-institutional investors (NIIs) picked up 1.45 times, while qualified institutional buyers (QIBs) subscribed 3.51 times the portion set aside for them.

Also Read: Tata Tech surges 3-fold from IPO price after bumper listing: Should you buy, sell, or hold?

Federal Bank Fedbank Financial Services (Fedfina) is a Mumbai-based retail-focused non-banking finance company (NBFC) and caters to the MSMEs as well as the emerging self-employed individuals sector. It has a presence in 17 states and union territories.

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