AU Small Finance Bank, one of the ten non-banking financial companies (NBFCs) which had obtained approvals from RBI for setting up a small finance bank (SFB) is offering its shares to public for subscription through an initial public issue (IPO), which opened today June 28, 2017.
The Rs. 1,913 crore IPO of AU Small Finance Bank is purely an offer for sale as the company is not raising any fresh capital through this issue.
The issue will close on Friday (June 30, 2017) and can be applied in lots of 41 shares.
5 things to know about the issue
1. Through this IPO, promoters and investors of AU Small Finance Bank are selling 5.34 crore shares to public. Post this issue, promoter holding in the company will come down to 32.9 per cent from 36 per cent presently.
2. AU Small Finance Bank, formerly known as AU Financiers, started its operations in 1996 as an NBFC. It received a license from the RBI to set up a small finance bank in December 2016 and commenced operations from April this year. It finances mainly assets having revenue generating potential. Its product portfolio mainly includes secured loans like vehicle finance (50 per cent), MSME (30 per cent) and SME (20 per cent). Angel Broking says, all the above segments have "enough scope for growth in India" and hence, AU Small Finance Bank will continue to expand its book in the secured loan space without relying on the unsecured loan space for its growth.
3. AU Small Finance Bank's assets under management (AUM) have grown at a compound annual growth rate (CAGR) of 30 per cent over FY2013-17 to Rs. 10,734 crore. Despite its rapid AUM growth, the company has ensured a strong asset quality with its gross non-performing assets (GNPA) and net non-performing assets as a percentage of total advances remaining at 1.61 per cent and 1.05 per cent respectively at the end of FY2017.
4. AU Small Finance Bank had reported a net profit of Rs. 326 crore on net interest income of Rs. 917 crore in financial year 2017. It net profit has grown at a CAGR of 48 per cent over FY2013-17. AU Small Finance Bank's focused approach towards asset financing and the ability to find out gaps and the underserved sections of the vehicle finance, SME and MSME segments has helped the company in achieving this growth, said Angel Broking.
5. At the upper price band of Rs. 358, AU Small Finance Bank shares are valued at 5.1 times its FY2017 book value of Rs. 70, said Angel Broking. Angel broking says the company has the potential to deliver 30 per cent CAGR growth in net profit over FY2017-19. The brokerage has a "subscribe" rating on the issue. "While the issue is offered at premium valuations, we believe the valuation is justified given the historical track record and strong growth potential the SFB offers," the brokerage said