Fedbank Financial Services IPO: Is It Attractively Valued To Subscribe?
Fedbank Financial Services IPO price band has been fixed in the range of Rs 133 to Rs 140 per equity share.
The Federal Bank Ltd. subsidiary Fedbank Financial Services Ltd.'s initial public offering is scheduled to open on Nov. 22 and the three-day issue will conclude on Nov. 24.
Fedbank Financial Services is a retail-focused NBFC, targeting MSMEs and emerging self-employed individuals.
The IPO's price band has been fixed in the range of Rs 133 to Rs 140 per equity share.
The share sale is a mix of fresh issue of 4.29 crore shares, aggregating to Rs 600.7 crore; and an offer for sale of 3.52 crore shares to the tune of Rs 492.26 crore.
Under the OFS, Federal Bank will offload 54.74 lakh shares, after which its shareholding will come down to 61% from 73%; while True North Fund VI LLP will divest 2.96 crore shares, with its holding falling to 8.5% from 25%.
The company proposes to utilise the net proceeds from the fresh issue towards augmenting tier-I capital base to meet its future capital requirements arising out of the growth of business and assets.
The company has collected Rs 325 crore from anchor investors, ahead of its initial share sale by allotting 2.32 crore equity shares to 22 funds at Rs 140 per piece.
"On the valuation front, the issue is valued at a P/BV (price-to-book value) of 3.3 times on the upper price band, based on the FY23 book value. With most of the positives seemingly priced in, we advise investors to 'Subscribe' to the issue for the benefit of listing gains," said Stoxbox in a note.
The company derives a higher share of loan book from competitive segments like gold (33% mix), medium ticket LAP (25% mix) and unsecured business loans (16% mix).
"FFS has delivered lower ROA in FY23 at 2.3% compared to peer average of 3.4% and thus deserves to trade at a discount. Therefore we recommend ‘neutral’ rating for the issue," said Nirmal Bang in a note.
