Fedbank Financial Services (FedFina), a subsidiary of public sector lender Federal Bank has filed its draft red herring prospectus with the market regulator Securities Exchange Board of India (Sebi) to launch an initial public offering (IPO).
The company is looking to raise around ₹1,700 crore through this issue - ₹900 crore via fresh issue of equity and the remaining ₹800 crore through an offer for sale (OFS) of up to 1.4 crore shares of the firm by existing promoters and shareholders.
Currently, Federal Bank has a 73.31 percent equity in FedFina while True North Fund has a 25.76 percent stake.
As per the draft papers, the OFS comprises up to 1.6 crore shares by Federal Bank, which is 7 percent of its stake in the firm. Meanwhile, 2.9 crore shares will be sold by True North Fund VI LLP in the OFS, around 35 percent of its total stake in the firm.
"Post undertaking the proposed IPO, FedFina would continue to be a subsidiary of our bank,” Federal Bank said.
The proceeds from the issue will be used for augmenting the company’s Tier–I capital base to meet its future capital requirements, arising out of the growth of business and assets, said the draft papers.
“The offer includes a reservation for subscription by eligible employees of our bank and FedFina (as defined in the DRHP) and a reservation for subscription by our Bank’s shareholders (as defined in the DRHP),” Federal Bank said in a stock exchange filing on Sunday.
ICICI Securities Limited, Equirus Capital Private Limited, IIFL Securities Limited and JM Financial are the lead managers to the issue.
The DRHP claims that FedFina is the fastest growing gold loan NBFC in India. Currently, it is present in 15 states across the country with a strong presence in Southern and Western regions. It is a retail-focused NBFC arm of Federal Bank and has over 435 branches across India that offer gold loans, loans against property, business loans, and home loans.
As of September 2021, 86.25 percent of the firm's total loan assets are secured against tangible assets, like gold or a customer’s property.
For FY21, the lender reported anet profit of ₹62 crore as against ₹39 crore in FY20. Meanwhile, its total revenue came in at ₹697 crore. Its net interest income (NII) stood at ₹344.92 crore in FY21 against ₹220.53 crore a year ago. The gross loan book was worth ₹4,627.04 crore in FY21 as compared to ₹3,720.25 crore last year.
"We believe that its long operating history, track record, management expertise and the 'Federal Bank' brand have enabled it to establish a competitive position in the markets it serves and create trust among its customers, lenders, regulators and investors," Federal Bank further said.
