Fedbank Financial Services has announced its plans to open an initial public offer (IPO) from November 22 to November 24, 2023. The IPO price band has been set at ₹133-140 per equity share. Investors will have the opportunity to bid for a minimum of 107 shares, with bids accepted in multiples thereafter.
The company aims to raise a total of ₹1,092 crore through the IPO, with a fresh issue aggregating up to ₹600 crore and an offer for sale promoter Federal Bank and selling shareholder of True North Fund VI LLP I.
Despite potential issues such as the Reserve Bank’s circular increasing risk weights on unsecured lending and negative market sentiment, Fedbank Financial Services remains confident in the success of the IPO. The company’s Managing Director and Chief Executive Officer, Anil Kothuri, expressed optimism during the IPO press conference, indicating that the risk factors will not impact the offering.
The company plans to allocate the net proceeds from the fresh issue to augment its Tier – I capital base, with a focus on meeting future capital requirements relating to the growth of its business and assets. ICICI Securities, BNP Paribas, Equirus Capital Private, and JM Financial will serve as the book running lead managers to the Issue.
Fedbank Financial Services is a retail-focused non-banking finance company (NBFC) and is promoted The Federal Bank. With 584 branches, it focuses on MSME loans, gold loan, and more. The company is currently one of five private bank promoted NBFCs in India.
As of March 31, 2023, Fedbank Financial Services boasts the third fastest assets under management (AUM) growth among NBFCs in India, with a 33% CAGR between FY20 and FY23. Additionally, its AUMs stand at ₹94,34 crore as of the end of June 2023.
The company’s total revenues have also seen significant growth, increasing 37% and 26% in FY23 and FY22, respectively. Furthermore, profit grew 74% and 67% during the same periods, indicating the company’s strong financial performance.
However, like any investment endeavor, the company does acknowledge various risk factors. For instance, 93% of its gross AUMs are concentrated in specific regions of India, including Gujarat, Maharashtra, Telangana, Andhra Pradesh, Tamil Nadu, Karnataka, Puducherry, and Delhi. The company is also exposed to operational risks such as employee negligence, fraud, theft, and embezzlement.
Additionally, the company faces financial risks, including the deterioration of receivables and the possibility of failing to maintain its capital adequacy ratio. The company has undertaken 1,625 criminal proceedings amounting to ₹363 crore, and the promoter has undertaken 61 criminal cases against it, with two material civil litigations amounting to ₹1,601 crore.
Despite these risks, Fedbank Financial Services is optimistic about its IPO, and investors will have the opportunity to participate in the initial public offer from November 22. For more information on IPOs in India, check out articles from reputable websites such as Business Insider.