India: Federal Bank eyes initial share sale in NBFC unit Fedfina

Photo by Josh Appel on Unsplash

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.

Fedfina, which received its non-banking financial company licence in 2010, has more than 435 branches across the country, offering gold loans, home loans, loans against property (LAP) and business loans.

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.

This article was first published on livemint.com.

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.