AU Small Finance Bank IPO: Long Term Subscribe - Hem Securitiess

Hem Securities | July 20, 2010, midnight

Issue Date:28th June-30th June 2017

Price Band: Rs 355-358/Share

Bid Lot   : 41 & in multiples thereof

Face Value:Rs 10/Share

Listing   : BSE, NSE

Offer For Sale: 53,422,169 Eq Sh

Co is a small finance bank (“SFB”) that has recently transi-tioned from a prominent, retail focused non-banking finance company (“NBFC”), which primarily served low and middle-income individuals and businesses that have limited or no ac-cess to formal banking and finance channels. Co received a li-cense from the Reserve Bank of India to set up an SFB on De-cember 20, 2016 and co was the only NBFC categorized as an asset finance company to obtain such license. As an NBFC, co operated in three business lines: vehicle finance; micro, small and medium enterprises (“MSMEs”) loans; and small and me-dium enterprises (“SMEs”) loans. Company commenced opera-tions in 1996 in Jaipur, Rajasthan and was registered as an NBFC with the RBI in 2000. Bank’s asset product offerings in-clude working capital facilities, gold loans, agriculture related term loans, Kisan credit cards for farmers and loans against securities. Co is bringing offer for sale of upto 53,422,169 Equi-ty Shares.

Reasons to "Subscribe"

Bank adopted a strategy of contiguous expansion across re-gions and as of March 31, 2017, bank conducted its operations through 301 NBFC branches spread across 10 states and one union territory in India, with significant presence in the states of Rajasthan, Gujarat, Maharashtra and Madhya Pradesh and employed 8,515 personnel serving 280,349 active loan ac-counts. The credit penetration of Gujarat, Madhya Pradesh and Rajasthan is below average, while the credit penetration of Ma-harashtra is above average (Source: CRISIL Inclusix Report, June 2015), thus offering bank significant growth potential.

As of May 31, 2017, bank conducted its operations through 269 branches, 121 asset centers, one central processing center and 10 offices. In addition, bank plan to set up an additional 162 branches and seven central processing centers during the fi-nancial year 2018.

Bank’s Gross AUM for its vehicle finance business grew from FY’13 to FY’17 at a CAGR of 16.49%, constituting 50.27% of bank’s total Gross AUM as of March 31, 2017. Bank’s Gross AUM for its MSME loans business grew FY13 to FY17 at a CAGR of 54.71%, constituting 29.96% of its total gross AUM as of March 31, 2017. Bank’s Gross AUM for its SME loans business grew from FY13 to FY17 at a CAGR of 77.79%, constituting 19.77% of its total Gross AUM as of March 31, 2017.


At price band of Rs 355-358 bank is bringing the issue at p/b multiple of 5.09x on FY17 book value of Rs 70.34. As fundamentals of this bank sounds good . Hence, we recommend "Long Term Subscribe" on issue.


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