AU Finance public offer subscribed 54 times

AU Small Finance Bank’s initial public offering (IPO), which closed on Friday, garnered 54 times subscription, with the issue generating bids worth Rs 72,000 crore. The huge response was on the back of encouraging listing for Central Depository Services (CDSL) and investor interest towards non-banking finance companies.
 
The institutional investor portion of the IPO garnered a subscription of 79 times, the high net worth individual (HNI) portion 143 times and retail (individual) investor portion 3.3 times. The IPO attracted more than a million applications.
 
On Thursday, the Reserve Bank allowed foreign institutional investors to also participate in the IPOs, which also buoyed investor sentiment and bids worth Rs 10,500 crore came from foreign investors.             

 

AU Finance’s Rs 1,920-crore IPO entirely comprised secondary sale by the existing investors such as International Finance Corporation, Kedaara Capital, Ourea Holdings and Redwood Investment.
 
AU Finance is the third small finance bank (SFB), after Equitas and Ujjivan, to go in for an IPO. While Equitas and Ujjivan are focused on the microfinance business, AU Finance is the only asset-financing NBFC to receive a SFB licence so far.
 
“AU Finance has evolved from being a mono-line product company to a diversified NBFC, to a small finance bank. As an NBFC, it has been offering three products — vehicle finance, MSME (micro, small and medium enterprises), and SME (small and medium enterprises), primarily to low- and middle-income customers and businesses that have limited or no access to formal banking and finance channels. It is now extending its range to include retail banking products,” said Philip Capital in a note, advising clients to subscribe to the issue.

 
The price band for the AU Finance IPO was Rs 355-358 per share. “At the upper band, the issue is valued at 3.7 times the FY19 adjusted book value. While the valuations look expensive versus peers, we believe strong asset quality and superior execution skills of the management justify it,” said Philip Capital in the note.
 
“Having a strong retail asset book, it shall allow AU Finance to build liabilities with strategic focus on sticky customers and aid in better cross-selling opportunities,” Aditya Birla Money had said in a note.