AU Small Finance Bank Ltd. which was formerly known as AU Financiers Ltd (AUSFB) is a Non-banking Financial Company (NBFC) which was converted into Small Finance Bank. It was established in the year 1996 in Jaipur, Rajasthan. As an NBFC, it was registered with RBI in the year 2000.
It initially served low and middle-income individuals and businesses that have limited or no access to formal banking and finance channels.
The company has created an ideal position with pure asset based financing and its growth story is going to be tremendous. It comes under the list top 10 new small bank licensees and at the 7th position to go in operation as small finance bank.
The company was switched from NBFC to Small Finance Bank (SFB) on 19th April 2017. When the company was NBFC, it operated in 3 business lines i.e. vehicle finance; micro, small and medium enterprises loans; and small and medium enterprises loans.
According to the analysis as on December 31, 2016, the company had 300 branches spread across 10 states and 1 union territory in India, which shows a special presence in the states like Rajasthan, Gujarat, Maharashtra and Madhya Pradesh.
Issue Opens: Jun 28, 2017
Issue Closes: Jun 30, 2017
- Offer for sale of 53,422,169 Equity Shares of Rs 10 aggregating up to Rs [.] Crore
Face Value: Rs 10 per Equity Share
Issue Price: Rs 355- Rs 358 per Equity Share
Market Lot: 41 Shares
Minimum Investment: Rs 14,678/-
Minimum Order Quantity: 41 Shares
Leading Managers: HDFC Securities, ICICI Securities, Motilal Oswal Securities and Citigroup Global Markets.
The company allotted 1.57 crore shares to 34 anchor investors.
Comapay has raised Rs 563 crore ($87 million) from a bunch of anchor investors including the sovereign wealth funds of Singapore and Kuwait.
GIC Pte Ltd and Kuwait Investment Authority as well as US-based private equity firm East Bridge Capital bought 541,000 shares each at the upper end of the Rs 355-358 price band.
Other foreign investors who took part in the anchor allotment include the Master Trust Bank of Japan, Singapore hedge fund Amansa Holdings and investment funds of Nomura, Wells Fargo and HSBC. As many as 13 domestic mutual funds also bought shares.
Objects of the Issue
- To achieve the benefits of listing the Equity Shares on the Stock Exchanges and for the Offer for Sale of 53,422,169 Equity Shares.
- The company expects that listing of the Equity Shares will enhance our visibility and brand and provide liquidity to its existing shareholders.
- The company is expecting to provide a public market for the Equity Shares in India.
- The company will not receive any proceeds from the Offer. All proceeds from the Offer will go to each of the Selling Shareholders, in proportion to its portion of the Offered Shares.
Promoters of the Company
- Sanjay Agarwal
- Jyoti Agarwal
- Shakuntala Agarwal
- Chiranji Lal Agarwal
Financial Details of the Company
- The revenue of Rs 230.6 Crores is generated by the company for the year ended March, 2012 and for the year ended March, 2016 the revenue generated by the company is Rs 694.3 Crores.
- Total profit gained by the company for the year ended March, 2012 is Rs 37.2 Crores and the profit of Rs 247.1 Crores is gained by the company for the year ended March, 2016.
- Its recapitulated basic EPS for the financial year ending March 2016 is Rs 9.34 and the EPS for the past 3 years was Rs 6.94.
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Reasons to invest in this IPO (Positive Points)
- There is constant increase in the profit of the company which is good sign for the company. In the financial year 2016, the profit generated by the company is 23.5%.
- Diversified Product Portfolio and Revenue Streams.
- Customer Centric Organizational Commitment.
- Significant Presence in Rural and Semi-Urban Markets with Focus on Low and Middle Income Customers.
- Robust and Comprehensive Credit Assessment and Risk Management Framework.
- The company had received a license from the RBI to set up Small Finance Bank (SFB). The company is the only NBFC which is selected as an asset finance company to gain the license.
- Access to Diversified Sources of Funding over the Years.
- Experienced Management Team and Qualified Operational Personnel.
- From the past 3 years, the revenue of the company increased by 46% CAGR.
Banking Industry in India
The following chart sets forth branches per 100,000 adults in India in 2014
Reasons not to invest in this IPO (Negative Points)
- Their inability to successfully transition from an NBFC to an SFB may have an adverse effect on their business, results of operations, financial condition and cash flows.
- As an SFB, they will be unable to access some of the sources of funds available to them as an NBFC and their inability to replace such sources of funds in an acceptable and timely manner, or at all, may have an adverse effect on their business, results of operations, financial condition and cash flows.
- Their inability to comply with laws and regulations applicable to an SFB may have an adverse effect on their business, results of operations, financial condition and cash flows.
- If their customers default in their repayment obligations, their business, results of operations, financial condition and cash flows may be adversely affected.
- Their operations are concentrated in western India and any adverse developments in this region could have an adverse effect on their business, results of operations, financial condition and cash flows.
- Any downgrade in their credit ratings could increase their finance costs and adversely affect their business, results of operations, financial condition and cash flows.
- Their inability to manage interest rate risk may adversely affect their business, results of operations, financial condition and cash flows.
- They are in the process of upgrading their information technology systems for their SFB operations and any disruptions in such systems, or breach of data, could adversely affect their operations and reputation.
- They intend to introduce several new products and services as an SFB and they cannot assure you that those products and services will be profitable in the future.
- They significantly depend on their vehicle finance business and any adverse developments in this sector or in the other industries in which our MSME and SME customers operate could adversely affect their business, results of operations, financial condition and cash flows.
- Their inability to leverage their existing customer base, expand their branch network and attract new customers for their SFB operations may adversely affect their business, results of operations, financial condition and cash flows.
- Their operations involve handling significant amounts of cash, making them, susceptible to loss or misappropriation or fraud by their employees.
- Recent global economic conditions have been unprecedented and challenging and continue to affect the Indian market, which may adversely affect their business, financial condition, results of operations and prospects.
- There are outstanding proceedings involving their Company, and certain of their Promoters and the Directors and any adverse outcome in any of these proceedings may adversely affect their profitability and reputation and may have an adverse effect on their business, results of operations, financial condition and cash flows.
- Changing laws, rules and regulations and legal uncertainties, including adverse application of corporate and tax laws, may adversely affect their business, prospects and results of operations.
AU Small Finance Bank placed under RBI’s caution list a day ahead of its IPO.
RBI to monitor the foreign shareholding of the company which is hovering around the permissible limit of 49 percent.
Subscribe for short term ( For listing gain ) only.
Grey market premium
Current Grey market premium is Rs.90/- and Kostak is Rs.700/-
This is the third public issue by a small finance bank in the last 15 months, after Equitas Holdings Ltd and Ujjivan Financial Ltd.
No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here.