Fedbank Financial Services Ltd (Fedfina), a retail-focused non-bank lender set up by Federal Bank Ltd, is planning a public listing, two people aware of the matter said.
The Kerala-based company is expected to shortly file draft papers for the initial public offering (IPO), which would make it one of India’s few bank-owned non-banking financial companies (NBFCs) that are publicly traded.
In 2018, homegrown private equity fund True North bought a 26% stake in Fedfina for around ₹400 crore.
“Fedfina is working with ICICI Securities, JM Financial and Equirus Capital on the initial public offering. They are likely to file the draft prospectus as early as the end of this month or by next month,” one of the two people cited above said, both of whom spoke on condition of anonymity.
“The initial public offering will be a mix of primary and secondary share sales. Both Federal Bank and True North are likely to sell a small part of their stakes but, largely, it will comprise a fresh issue of shares to raise growth capital for the business. The initial public offer size could be as much as $100-150 million. Fedfina is a retail-focused non-banking financial company and has seen strong growth in segments such as gold loans,” the person added.
Federal Bank and True North did not respond to emails.
Fedfina’s assets under management stood at ₹4,863 crore as of March-end, as per the company’s website, with retail loans comprising 96% of the loan book.
The company reported gross non-performing assets and net non-performing assets of 1.04% and 0.71%, respectively, at the end of fiscal year 2021.
India Ratings and Research said, in a report on 5 April 2021, that Fedfina has started expanding into newer products and geographies.
“The loan against property and construction financing segments, which began operations a few years ago, are yet to become seasoned. The company has expanded its product lines across small ticket LAP (average ticket size of ₹14 lakh), business loans, affordable housing loans and structured finance loans,” according to the report. “However, having grown these books in the past few years, these products are also yet to witness seasoning,” it said.
“As part of its strategy, Fedfina plans to grow two of its core products, i.e., loan against property and gold loans aggressively in the long term, with a near-term focus on gold loans and significant branch expansion as than the parent network in the foreseeable future. This would lead to an improvement in the absolute franchise size and profitability in the long term,” the report added.