Fedbank Financial Services Limited IPO

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1. Market Focus: The company primarily targets the micro, small, and medium enterprises (MSMEs) and emerging self-employed individuals (ESEIs) sector in India. According to a CRISIL Report, this market segment is largely underserved by traditional lending institutions, presenting an opportunity for the company to grow and expand rapidly.

2. Product Suite: The company offers a range of financial products tailored to match the needs of its customers. These products include mortgage loans (housing loans, small ticket loan against property, medium ticket loan against property), unsecured business loans, and gold loans.

3. Growth and Performance: The company has demonstrated impressive growth and performance. It has the second-lowest cost of borrowing among its peers in the MSME, gold loan, and MSME & gold loan sectors in India in Fiscal 2023. It also achieved the third-fastest growth in assets under management (AUM) among NBFCs in its peer group, with a three-year CAGR of 33% between Fiscals 2020 and 2023.

4. Loan Asset Security: The majority of the company’s loan assets (85.98%) are secured against tangible assets, such as gold or customer’s property. This reduces the risk associated with defaults and non-performing assets (NPAs).

5. Financial Ratings: The company has received favorable ratings for its non-convertible debentures (NCDs) and bank loans, which adds to its credibility and trustworthiness in the market.

6. Promoter Backing: The company is promoted by The Federal Bank Limited, which is a well-established and trusted institution. The Federal Bank continues to own more than 51% of the company’s outstanding share capital, providing additional trust and stability.

7. Geographical Presence: The company is headquartered in Mumbai, Maharashtra, and has a presence in 16 states and union territories across India, with a strong focus on the Southern and Western regions. These regions contribute significantly to India’s GDP.

8. Branch Network: The company operates through 575 branches in 191 districts, and it has dedicated micro-sites for each of its branches to engage with customers effectively.

9. “Phygital” Model: The company uses a “Phygital” model, which combines digital and physical initiatives to provide customized services to customers. This approach helps maintain continuous customer engagement and utilizes technology for underwriting.

10. Underwriting Process: The company’s underwriting process combines electronic data and physical information and document collection. It uses APIs to validate information and make creditworthiness determinations. This process has been effective in managing defaults and NPAs.

11. Focus on Employees: The company places a strong emphasis on its employees and has been certified as a “Great Place to Work” for three consecutive years.

12. Mission: The company’s mission is to empower emerging India by providing easy access to loans, with a focus on addressing the loan requirements of underserved customer segments.

Objects of the Fedbank Financial Services Limited IPO:

The company intends to utilize the net proceeds from the issue towards the funding of the following objects: i. Augmenting the company's Tier I capital base to meet the company's future capital requirements, arising from the growth of the business and assets. ii. Meeting offer expenses. The Total number of shares are issues: - i. Fresh Issue is 42,912,087 shares. ii. Offer for Sale is 35,161,723 shares.
DRHP of Fedbank Financial Services Limited IPO
RHP of Fedbank Financial Services Limited IPO

Fedbank Financial Services Limited IPO Details:

Open Date: Nov 22 2023
Close Date: Nov 24 2023
Face Value: ₹ 10 Per Equity Share
Issue Type: Book Built Issue IPO
Issue Size: 1,092.26 Cr.
Lot Size: 107 Shares
Issue Price: ₹ 133 to ₹140 Per Equity Share
Listing At: NSE,BSE
Listing Date: Dec 05 2023

Promoters And Management:

Balakrishnan Krishnamurthy is the Chairman and an Independent Director of the Company. He holds a bachelor’s degree in commerce (honours) from Faculty of Commerce, Osmania University. He is a qualified chartered accountant and company secretary. He has experience in the financial services sector. Currently, he serves as the chairman of Kriscore Financial Advisors Private Limited and director of Kriscore Ventures Private Limited. Previously, he has been associated with Lazard India Private Limited as Managing Director Anil Kothuri is the Managing Director and Chief Executive Officer of the Company. He holds a bachelor’s degree of technology in computer science and engineering from Andhra University and a post-graduate diploma in management from the Indian Institute of Management, Ahmedabad. He has over 28 years of experience across various asset businesses including mortgage, SME financing, auto loans, housing finance and unsecured lending. Prior to joining our Company, he has served at Edelweiss Housing Finance Limited as President, and at Citibank N.A. Shyam Srinivasan is a Non-Executive Director of the Company. He holds a bachelor’s degree in engineering from the Faculty of Engineering, University of Madras and post-graduate diploma in management from the Indian Institute of Management, Calcutta. He currently serves as director of Ageas Federal Life Insurance Company Limited and managing director and chief executive officer of The Federal Bank Limited.

Financials of Fedbank Financial Services Limited IPO:

Particulars ( In Crore )
2021
2022
2023
3M-FY24
Revenue from Operations 692 869 1,179 361
Other Income 6 14 36 6
Total Revenue 698 884 1,215 368
Fees and commission expenses 12 15 23 5
Impairment on financial instruments 71 84 49 11
Employee benefits expenses 132 175 248 69
Other Expenses 65 86 122 39
EBITDA 417 524 772 244
Depreciation & Amortisation 27 37 42 9
Finance Cost 313 348 472 164
EBIT 390 487 731 236
OPM (%) 59.83% 59.25% 63.59% 66.41%
Exceptional Items 0 0 -15 0
PBT 77 139 243 72
Tax 15 36 63 18
PAT 62 103 180 54
NPM (%) 8.84% 11.71% 14.83% 14.65%
No.of Shares 36.89 36.89 36.89 36.89
EPS 1.67 2.80 4.88 1.46

Comparison With Peers:

Name of the Company Revenue (In Crore) PAT (In Crore) EPS ( in Rs) P/E CMP Mcap (In Crore)
Fedbank Financial Services Limited 1,179 180 4.88 28.7 140 5,166
Aptus Value Housing Finance India Ltd 1,093 503 10.10 26.4 292 14,542
IIFL Finance Ltd 8,412 1,608 39.44 13.8 608 23,186
Five-Star Business Finance 1,521 604 20.71 33.2 801 23,369
Manappuram Finance Limited 6,684 1,500 17.67 7.1 156 13,187
Muthoot Finance Limited 10,515 3,474 86.52 14.4 1,346 54,042
SBFC Finance Limited 734 150 1.67 52.5 89.5 9,531
* All the data is as per FY23.

Recommendation on Fedbank Financial Services Limited IPO:

Review and Recommendation of Fedbank Financial Services IPO by IZ team is 4/10 1. Company Overview: FedFina, established in 1995, is a retail-focused NBFC backed by The Federal Bank, catering mainly to MSMEs and self-employed individuals. It offers diverse mortgage loans, unsecured business loans, and gold loans. 2. Financial Performance: Demonstrated robust growth with a CAGR of 33% in AUM between FY2020-FY2023, reaching 42% in Q1FY2024. It operates across 17 states and union territories with 584 branches, majorly in Southern and Western India. 3. Technology and Operations: The company emphasizes technology in underwriting, managing defaults, and NPAs. As of June 2023, 86.24% of loan assets were secured against tangible assets. The company also has a strong physical and digital presence (phygital model) for customer service. 4. IPO Details: The IPO includes a fresh issue to raise Rs 600 crore and an Offer for Sale (OFS) of Rs 467.65-492.26 crore. Post-IPO, promoter shareholding will decrease from 72.3% to 62.4%. 5. Strengths: FedFina is positioned in a largely under-penetrated market with significant growth potential, especially in the self-employed and MSME sectors. It has a multi-channel network, robust underwriting and risk management capabilities, and leverages technology for scalable operations. 6. Weaknesses: Concentrated presence in six states and two union territories, accounting for 93.65% of gross AUM. There is a significant loan concentration towards the self-employed and MSME sectors, and a large portion of customers belong to low to middle-income groups, posing credit risk challenges. 7. Valuation: The EPS for TTM ended June 2023 is Rs 5.2, with P/E ranging from 25.8 to 27.1. The company's ROA and ROE are comparatively lower than some of its peers​. The offering is valued at a price-to-book value (P/BV) ratio of 3.19, reflecting its net asset value (NAV) of Rs. 43.95 as of June 30, 2023. Post-IPO, the valuation adjusts to a P/BV of 2.53, based on a projected NAV of Rs. 55.23 per share. The valuation looks on higher side.

Lead Manager of Fedbank Financial Services Limited IPO:

  1. BNP Paribas
  2. Equirus Capital Private Limited
  3. ICICI Securities Limited
  4. JM Financial Consultants Private Limited

Registrar of Fedbank Financial Services Limited IPO:

  1. Link Intime India Private Limited

Company Address:

Fedbank Financial Services Limited Kanakia Wall Street, A Wing 5th Floor, Unit No. 511 Andheri Kurla Road, Andheri (East) Mumbai 400 093 Phone: +91 22 6852 0601 Email: cs@fedfina.com Website: https://www.fedfina.com/

Discussion on Fedbank Financial Services Limited IPO:

3 Comments

    The federal bank has bunch of Thieves. Major persons such as CEO, VICE PRESIDENT, are involved in cheating case. They showed in the bank statement that they disbursed loan amount fully. But they had disbursed only partial amount. Thus this is cheating. Further there is also misappropriation as there is no evidence to what happens to the money. There is criminal case against them in JMFC 4 KALYAN

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