Last Updated on

in

Written By

Fedbank Financial Services, a Federal Bank affiliate, has filed preliminary documents with SEBI to raise Rs. 1700 crore. The IPO consists of a Rs. 900 crore new issuance and an offer for sale (OFS) of up to 45.71 million shares by the company’s existing shareholders and promoters. Federal Bank may own up to 16.50 million shares in the OFS, while True North Fund VI LLP may hold up to 29.22 million shares. Federal Bank now owns 73.31 percent of FedFina, while True North Fund VI LLP owns 25.76 percent. ICICI Securities Limited, Equirus Capital Private Limited, IIFL Securities Limited, and JM Financial Ltd. are the lead managers on the issue.

FedBank Financial Services Ltd. is the fastest-growing gold loan NBFC among the gold loan peer set as of March 31, 2021, and is promoted by The Federal Bank Limited. With a CAGR of 49% between fiscal years 2018 and 2021, the firm has the third-quickest AUM growth. It follows a “twin engine” business model, offering two complimentary products: gold loans and installment loans to MSMEs and emerging self-employed individuals (“ESEIs“). This business model allows it to thrive while also providing a countercyclical buffer against

interruptions in the Indian economy and retail lending industry. The company, headquartered in Mumbai, has 463 branches in 136 districts across 15 states and union territories in India. Since 2018, the firm has been rated “AA-” by CARE for its non-convertible debentures (“NCDs“) and “AA-” by India Ratings and Research Private Limited for its NCDs and long term bank facility. It also offers a “Phygital” door-step approach, a blend of digital and physical activities, for providing personalised services to consumers across all of its goods.

Objective of the Issue

The proceeds from the issue will be used for augmenting the company’s Tier–I capital base to meet its future capital requirements, arising out of the growth of business and assets.

Fedbank Financial Services Financial Status

Particulars (in Rs. Crores)	FY21	FY20	FY19
Revenue	691.8	453.7	253.2
EBITDA	4,173.88	2,763.11	1,725.01
PAT	61.7	39.1	36.1
Total Assets	5466.3	4086.2	2150.6
Share Capital	289.9	273.4	230.0
Total Borrowings	4328.1	3217.6	1600.1
Net cash generated from / (used in) operating activities	-371.23	-1396.92	-444.70
Net cash from / (used in) investing activities	-70.53	-68.75	-55.22
Net cash flow from / (used in) financing activities	825.50	1598.85	494.84
Net increase (decrease) in cash and cash equivalents	383.75	133.18	-5.08

Fedbank Financial Services Peer Comparison

Name of the Company	Total Revenue	Basic EPS	Nav Rs. per share	PE	RoNW%
Fedbank Financial Services Limited	697.6	2.19	28.79	NA	7.4%
Aavas Financiers Limited	1105.5	36.86	305.82	77.5	12.0%
Aptus Value Housing	655.2	5.56	40.96	63.08	13.5%
Five Star Business Finance	1051.3	14.01	85.26	NA	15.5%
IIFL Finance	5989.4	20.09	142.37	15.61	14.1%
Manappuram Finance Limited	6374.6	20.4	86.9	7.52	23.5%
Muthoot Finance Limited	11566.4	94.48	392.82	15.14	24.2%
Shriram City Union Finance	6167.9	161.13	1,290.55	11.13	12.65%

Fedbank IPO Key Points

Strengths

Present in large, underpenetrated markets with strong growth potential
“Twin engine” business model ensures growth and risk insulation across economic cycles
Focused on retail loan products with a collateralized lending model targeting individuals and the emerging MSME sector which is difficult to replicate
Strong underwriting capability and presence in select customer segment combined with robust risk management capabilities focused on effective underwriting and collections
Well diversified funding profile with an advantage of lower cost of funds
Technology driven company with scalable operating model