India’s largest small finance bank (SFB) AU Small Finance Bank has approved the launch of a qualified institutional placement (QIP) as it looks to mop up growth capital.
On July 20, the firm’s board had approved the raising of funds by issue of equity shares for an aggregate amount not exceeding Rs 3,000 crore through private placement, QIP, preferential allotment or through a combination thereof or any alternative mode. The official announcement on August 3 did not specify the exact quantum which was sought to be raised.
On May 23, 2022, Moneycontrol was the first to report that the Jaipur-headquartered firm which counts Singaporean investment major Temasek as a shareholder, was mulling a fresh equity fund raise through the QIP route in FY23 and had mandated investment banks ICICI Securities, BofA Securities, Morgan Stanley and Avendus Capital as advisors.
In an intimation to the exchanges, the firm said, “the floor price in respect of the aforesaid Issue, based on the pricing formula as prescribed under Regulation 176(1) of the SEBI ICDR Regulations is Rs. 590.84 per Equity Share. Pursuant to Regulation 176(1) of the SEBI ICDR Regulations, the Bank may offer a discount of not more than 5% on the floor price so calculated for the Issue.”
“A meeting of the Capital Raising Committee of the Bank is scheduled to be held on August 8, 2022, inter alia, to consider and determine the Issue price of Equity Shares,” the firm added.
This is the third equity fund raise by AU Small Finance in the last three years and the lender’s stock price has risen by over seven percent in the last month.
The firm reported a 32 percent jump in net profit for the June quarter at Rs 268 crores on the back of an improvement in net interest income and a sharp dip in provisions. Its assets under management grew 37 percent on a YoY basis to Rs 50,161 crore while deposits rose by 48 percent to Rs 54,631 crore.
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 the 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 with 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 year, 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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
