Fedbank Financial Services IPO: 10 things to know before subscribing to Rs 1,092 crore issue

Fedbank Financial Services IPO aims to raise Rs 1,092.26 crore via the IPO

The initial public offering (IPO) of Fedbank Financial Services is set to open for subscription on November 22. The NBFC aims to raise Rs 1,092.26 crore via the public issue. The anchor book, a part of qualified institutional buyers (QIB), will open for a day on November 21.

Here are 10 key things to know before subscribing to the offer:

1) IPO Dates

The IPO will open for subscription on November 22, 2023, and close on November 24, 2023.

2) Price Band

The price band for the issue has been fixed at Rs 133-140 per share.

3) Offer Details

Fedbank aims to raise Rs 1,092.26 crore via the IPO. The public issue comprises a fresh issuance of 4.29 crore shares worth Rs 600.77 crore by the company, and an offer-for-sale (OFS) of 3.51 crore equity shares worth Rs 492.26 crore at the upper price band by the selling shareholders.

The firm has reserved Rs 10 crore worth of shares in the IPO for its employees who will get these shares at a discount of Rs 10 per share to the final offer price. The public issue excluding the employees' portion is the net issue. Half of the net offer size has been reserved for qualified institutional buyers, 15 percent for high net-worth individuals and the remaining 35 percent for retail investors.

Also Read: Fedbank Financial Services IPO: Financials, shareholding, comparison with peers in 5 charts

4) Objectives of Issue

The Mumbai-based NBFC will utilise the net proceeds from the fresh issue for augmenting its Tier–I capital base to meet future capital requirements, arising out of the growth of the business and assets.

5) Lot Size

Investors can bid for a minimum of 107 equity shares and multiples of 107 after that. Hence the minimum investment by retail investors would be Rs 14,231 (107 (Lot size) x 133 (lower price band)). At the upper end, the bidding amount will increase to Rs 14,980.

6) Company Profile

Federal Bank promoted Fedbank Financial Services (Fedfina) is a retail-focused non-banking finance company (NBFC). It has the 2nd lowest cost of borrowing among the micro, small and medium enterprises (MSMEs). The company focuses on catering to the MSMEs and the emerging self-employed individuals (ESEIs) sector. As of June 30, 2023, Fedfina has a presence in 17 states and union territories across India with a strong presence in Southern and Western regions. They covered 190 districts in 17 states and union territories in India through 584 branches. 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.

7) Financials

Fedbank Financial Services’ net interest income grew 34 percent to Rs 638.02 crore in FY23 from Rs 474.24 crore in FY22. Net interest margin (NIM) also rose slightly to 8.99 percent. Profit after tax jumped 74 percent to Rs 180.13 crore from Rs 103.46 crore in the same period. Assets under management (AUM) grew 46.59 percent in FY23 compared to 27.25 percent in FY22. Return on assets (RoA) stood at 2.31 percent and return on equity (RoE) at 14.36 percent in FY23. Risk-weighted asset capital adequacy ratio was 17.94 percent in FY23 compared to 23.04 percent in FY22.

Also Read: Fedbank Financial Services IPO | Issue opens on November 22, price band at Rs 133-140 per share

8) Lead Managers

The book-running lead managers to the issue are ICICI Securities, BNP Paribas, Equirus Capital Private and JM Financial while Link Intime India is the registrar.

9) Risks

(i) As of June 30, 2023, 93.65 percent of gross AUM was located in Gujarat, Maharashtra, Telangana, Andhra Pradesh, Tamil Nadu, Karnataka, Puducherry and Delhi. The operations are concentrated in six states and two union territories and any adverse developments in these regions could have an adverse effect on business and results of operations.

(ii) The company’s inability to maintain a capital adequacy ratio could adversely affect business, results of operations and financial performance.

(iii) The company has a huge concentration of loans to ESEI and MSME, and as of June 30, 2023, ESEI and MSME comprise 45.22 percent and 64.75 percent of total loan profiles, respectively. The risk of non-payment or default by borrowers may adversely affect the business.

10) Listing Date

The trading of Fedbank Financial Services shares on the bourses will commence with effect from December 5, as per the IPO schedule.