Federal Bank's subsidiary Fedfina files IPO papers with SEBI

Given the buoyancy in the stock market amid improving macroeconomic indicators, momentum in the initial public offering (IPO) market seemed to be far from over. Various companies are lined up to hit the capital markets to encash the strong bullish trend in the domestic equity market. Fedbank Financial Services (FedFina), a subsidiary of private lender Federal Bank Ltd, is the latest entrant that has filed a draft red herring prospectus (DRHP) with capital markets regulator SEBI to raise capital via IPO route. Earlier this month, pen maker Flair Writing Industries, National Securities Depository (NSDL), a market infrastructure institution, and Muthoot Microfin, microfinance subsidiary of Muthoot Pappachan Group, also submitted their documents to raise funds through public listing of shares. 

The is the second attempt by FedFina to list its shares on the stock exchanges as the non-banking financial company (NBFC) arm of Federal Bank had submitted offer documents with SEBI last year, but the company pulled out due to unfavourable market conditions. The company has re-filed the document as the earlier regulatory approval for the listing lapsed.

The IPO of FedFina consists of a fresh issue of equity shares of up to ₹750 crore and an offer for sale (OFS) of up to 7.03 crore shares by promoter and existing shareholders. The face value of the equity shares is ₹10.

Under the OFS, Federal Bank will sell 1.64 crore equity shares, while True North Fund VI LLP will offload up to 5.38 crore equity shares.

The company will announce the price band and lot size for the issue after receiving observations from SEBI.

FFSL intends to utilise the net proceeds from the fresh issue towards augmenting Tier 1 capital base to meet its future capital requirements, arising out of the growth of business and assets. A part of the fund will be used towards meeting offer expenses.

ICICI Securities Ltd, BNP Paribas, Equirus Capital Private Limited, and JM Financial Limited are the book running lead managers to the issue.

As per Crisil report, FFSL is one among five private bank promoted NBFCs in India. As on March 31, 2023, FFSL had the third fastest asset under management (AUM) growth among NBFCs in the peer set in India with a three year CAGR of 33% between Fiscals 2020 and 2023.

The report further stated that the company is the fastest growing gold loan NBFC in India among the peer set as of March 31, 2023. As on March 31, 2023, 85.98% of the total loan assets are secured against tangible assets, namely gold or customer’s property.

Last week, pen maker Flair Writing Industries filed its DRHP with the SEBI to raise ₹745 crore via initial public offering (IPO) route. The public issue comprises fresh equity shares of ₹365 crore and offer for sale (OFS) of ₹380 crore by existing shareholders. The price band and the lot size will be decided by the company later.

Earlier this month, National Securities Depository (NSDL), a market infrastructure institution, and Muthoot Microfin, microfinance subsidiary of Muthoot Pappachan Group, also submitted documents to raise funds via the IPO route. 

NSDL, India's first electronic securities depository, on July 7 filed a document with capital market regulator for its IPO, which is completely an offer for sale (OFS) from key investors, including NSE, HDFC Bank, SBI, IDBI Bank, and SUUTI. The company will issue up to 57,260,001 equity shares of face value ₹2 each.

Microfinance company Muthoot Microfin has also proposed to raise up to ₹1,350 crore through the public listing of shares. The IPO will consist of a fresh issue of equity shares worth ₹950 crore and an OFS of ₹400 crore. The capital raised from the fresh issue of equity shares will be used to strengthen the company's capital base in order to meet future capital needs.