Fedbank Financial Services Limited is a retail focused non-banking finance company ('NBFC') promoted by The Federal Bank Limited. They have the second and third lowest cost of borrowing among the micro, small and medium enterprises ('MSMEs'), gold loan and MSME & gold loan peer set in Bharat in Fiscal 2023 and three-months period ended June 30, 2023, respectively. As on March 31, 2023, they had the third fastest AUM growth among NBFCs in the peer set in Bharat with a three year CAGR of 33% between Fiscals 2020 and 2023, and the fourth fastest year-on-year AUM growth of 42% for three-months period ended June 30, 2023. Company is focused on catering to the MSMEs and the emerging self-employed individuals ('ESEIs') sector. They have a well-tailored suite of products targeted to match the customers' needs, which includes mortgage loans such as housing loans; small ticket loan against property('LAP'); and medium ticket LAP, unsecured business loans, and gold loans. They had the third highest growth in disbursement among the peer set with a three year CAGR of 35% between Fiscals 2020 and 2023. Company is present in 17 states and union territories across Bharat with a strong presence in Southern and Western regions of Bharat. As of June 30, 2023, they covered 190 districts in 17 states and union territories in Bharat through 584 branches. The branches are located in states, such as Andhra Pradesh (including Telangana) and Rajasthan, which have better asset quality than other states as of Fiscal 2023. Additionally, they have dedicated micro-sites on the website for each of the branches, which focus solely on customer engagement for the branch customers. Company also has a 'Phygital' doorstep model, a combination of digital and physical initiatives, for providing customized services to the customers across all of the products. They have entered into an agreement in Fiscal 2020 with a service provider for records management, preservation of documents and related services, valid for period of five years. The Gross NPA was 2.26%, 2.05%, 2.03%, 2.23% and 1.01% for the three-months period ended June 30, 2023 and June 30, 2022, and Fiscals 2023, 2022 and 2021, respectively, and Net NPA was 1.76%, 1.57%, 1.59%, 1.75% and 0.71% for the three-months period ended June 30, 2023 and June 30, 2022, and Fiscals 2023, 2022 and 2021, respectively. As of June 30, 2023, they operated 15 manufacturing facilities across five states in India, majority of which are strategically located in close proximity to the OEM customers. They recently commenced commercial manufacturing operations at the 16th manufacturing facility in Bhiwadi (Rajasthan) in July 2023. They have also been allotted land in Kolar, Karnataka from the relevant regulatory authority, on which they propose to develop a manufacturing facility. In addition, their Joint Venture operates one manufacturing facility in Gurugram, Haryana. As per financial performance, Fedbank Financial Services Limited has posted total income / net profits of Rs 697.56 Cr / Rs 61.68 Cr (FY21), Rs. 883.63 Cr / Rs 103.45 (FY22), Rs 1,214.68 Cr / Rs 180.13 Cr (FY23) and Rs 367.87 Cr / Rs 53.88 Cr (Q1 FY24). So as per previous financials data, company has shown good growth. Company has an average EPS of Rs 4.26 and average RoNW of 10.87% for last three fiscals. Issue is priced at a P/BV of 3.19 as per NAV of 43.95 as on 30.06.23. If we attribute latest earnings of FY22, FY23, TTM and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 49.92, 28.67, 27.15 and 23.96 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, four lead managers are associated with this IPO, and have handled around 159 IPOs in last three fiscals. ICICI Securities Limited : This is 47th IPO from this BRLM. From last 10 IPOs, all opened above issue price or at par on the day of listing. As of now, from last 10 IPOs, all are trading above issue price or at par. (As on 17.11.2023) BNP Paribas : This is 4th IPO from this BRLM. From last 3 IPOs, one opened below issue price and remaining above issue price or at par on the day of listing. As of now, from last 3 IPOs, all are trading above issue price or at par. (As on 17.11.2023) Equirus Capital Private Limited : This is 15th IPO from this BRLM. From last 10 IPOs, one opened below issue price and remaining above issue price or at par on the day of listing. As of now, from last 10 IPOs, all are trading above issue price or at par. (As on 17.11.2023) JM Financial Limited : This is 41st IPO from this BRLM. From last 10 IPOs, all opened above issue price or at par on the day of listing. As of now, from last 10 IPOs, all are trading above issue price or at par. (As on 17.11.2023) As per financials, Fedbank Financial Services Limited has shown good growth, RoNW is 10.87% and P/E is respectively 49.92, 28.67, 27.15 and 23.96 as per FY22, FY23, TTM and annualised FY24 earnings. So, issue looks fully priced. Company is a private bank promoted NBFC. Performance of BRLM is good. So, we give SUBSCRIBE rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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