Fedbank Financial Services IPO Day 3: Issue subscribed to 2.20 times on final day, QIB portion booked 3x

The ₹1,092.26 crore IPO of Fedbank Financial Services, a retail-focused non-banking finance company promoted by Federal Bank, has achieved full subscription on the last day of bidding (November 24).

The issue garnered bids for 12,30,13,085 shares against the available 5,59,23,660 shares, resulting in a subscription rate of 2.20 times. The retail segment displayed notable interest, with the subscription rate reaching 1.82 times. Similarly, the employee segment also achieved a subscription rate of 1.34 times, as per the BSE data.

The non-institutional investors (NIIs) and qualified institutional buyers (QIB) segments saw a subscription rates of 1.45 and 3.51 times, respectively, according to the BSE data.

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The price band for the offer has been fixed at ₹133–140 per equity share with a face value of ₹10 each. The quota for retail investors in the Fedbank Financial Services IPO has been fixed at 35% of the net offer. The QIB quota is fixed at 50%, while the quota for NII is reserved at 15%.

Retail investors have the opportunity to submit bids for up to 13 lots, with each lot containing 107 shares. At the upper end of the IPO price band, ₹140, retail investors are required to make a minimum investment of ₹14,980 per lot.

Fedbank Financial Services focuses on MSMEs and the emerging self-employed individuals (ESEIs) sector. According to the CRISIL report, the ESEI and MSME segments are largely unaddressed by lending institutions in India. The company believes that this segment provides them with a sizeable opportunity to rapidly grow and expand further.

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Fedbank Financial Services boasts a unique "Phygital" doorstep model that seamlessly blends digital and physical initiatives. This distinctive approach is designed to deliver tailored services to customers across the entire spectrum of their products. The company in its RHP report stated that this model helps them constantly remain in touch with customers.

It primarily adopts a collateralised lending model, focusing on the retail finance segment, particularly targeting ESEI consumers and the emerging MSME sector. As of June 30, 2023, a significant 86.24% of the company's total loan assets are secured against tangible assets, mainly consisting of customers' gold or property. During the three-month period ending June 30, 2023, the company reported an average ticket size of ₹0.13 million.

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Regarding financials, the NBFC reported a net profit of ₹180.13 crore in FY23 as against a net profit of ₹103.46 crore in FY22 and 61.68 crore in FY21. The net interest income grew by 19.76% to ₹638 crore in FY23, compared to ₹474 crore in FY22, while the net interest margin was 8.99% in FY23, an improvement of 7 basis points over FY22's margin of 8.92%.

The pre-provision operating profit (PPoP) reached ₹307.29 crore in FY23, showing a growth of 38% YoY over FY22's PPoP of ₹223 crore.

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On the asset quality front, its gross non-performing assets (GNPA) ratio stood at 2.03% in FY23 as against 2.23% in FY22. The net non-performing assets (NNPA) ratio improved to 1.59% in FY23 from 1.75% in FY22. The provision coverage ratio (PCR) came in at 22.19% in FY23 from 22.07% in FY22, according to the company's RHP report. 

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