MUMBAI - Fedbank Financial Services, based in Mumbai, is set to open its initial public offering (IPO) on November 22, with the goal of raising Rs 1,092.26 crore. The IPO will offer shares priced between Rs 133-140 each and includes both a fresh issuance of stock and an offer for sale (OFS). The company has outlined special pricing options for its employees and has allocated shares for qualified institutional buyers (QIBs), high-net-worth individuals, and retail investors.
The IPO is part of Fedbank's strategy to bolster its Tier-I capital base to support the growth of its assets under management (AUM). This 'Phygital' approach, which blends physical presence with digital capabilities, primarily serves micro, small, and medium enterprises (MSMEs) and emerging socially and economically inclusive segments (ESEIs) in the South and West regions of India.
The public offering will consist of fresh shares worth Rs 600 crore and an OFS of equity shares valued at Rs 492.26 crore at the upper price band. Following the IPO, the promoter's stake is expected to decrease from approximately three-quarters pre-IPO to just over three-fifths, thereby increasing public ownership to over a third.
Financial growth indicators for Fedbank are positive. There has been an increase in net interest income from the fiscal year 2022's figures and a significant profit surge within one year. The net interest margin (NIM) has seen a slight uptick; however, it is important to note that the non-performing asset (NPA) ratio is higher than its industry counterparts at just over one and a half percent. Despite this, asset management experienced a nearly fifty percent year-on-year increase with robust returns on assets and equity reported for FY23.
The anchor book for QIBs opened on Tuesday, ahead of the subscription period which runs from Wednesday through Friday. The deadline for IPO subscriptions is set for Thursday. Fedbank's shares are anticipated to debut on the market on December 5.
ICICI Securities is overseeing the IPO process among other managers, with Link Intime India acting as the registrar. Potential investors should be aware of certain risks associated with Fedbank's operations, including its loan concentration in specific states/UTs and its heavy focus on lending to the MSME/ESEI sectors. These factors could influence business outcomes if defaults increase in these segments.
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