Incorporated in 1995, Fedbank Financial Services is a retail-focused non-banking finance company (NBFC) promoted by The Federal Bank. As of 31 March 2023, it is one India’s fastest growing gold loan NBFCs.
The bank caters to MSMEs (Micro, Small and Medium Enterprises) and ESEIs (Emerging Self-Employed Individuals) by providing mortgage loans such as housing loans, small ticket LAP (Loan Against Property), medium ticket LAP, unsecured business loans, and gold loans.
As of 31 March 2023, it has a network of 575 branches spanning 191 districts in 16 states and union territories across India, with a strong presence in Southern and Western regions. Meanwhile, based on a CRISIL report, these states contribute over 75% of India’s GDP as on 31 March 2022.
The bank has been certified as a ‘Great Place to Work’ for three consecutive years and employs 3,570 personnel as of 31 March 2023. It also operates a ‘Phygital’ (physical+digital) doorstep model for providing services, managing operations, and collecting and integrating data.
Between FY21 and FY23, it saw a CAGR rise of 23% in its AUM, 19% in its revenue from operations and 42% in its profit. It is promoted by the Federal Bank, which will continue to own more than 51% of its outstanding shares even after the completion of the offer. Moreover, it operates in the ESEI and MSME segments, which is largely unaddressed by lending institutions in India. All of these could be beneficial for the company.
And now, Fedbank Financial Services Limited is coming out with its initial public offer (IPO). The IPO will be an offer for sale as well as a fresh issue. The money raised through the fresh issue will be utilised to augment the company’s capital base for future requirements. Its shares will be listed on the NSE and the BSE.
Key Highlights
- A retail focused non-banking finance company (NBFC) promoted by The Federal Bank.
- Caters to MSMEs (Micro, Small and Medium Enterprises) and ESEIs (Emerging Self-Employed Individuals).
- CAGR rise of 23% in its AUM, 19% in its revenue from operations and 42% in its profit in the last three fiscal years.
- Provides mortgage loans such as housing loans; small ticket LAP (Loan Against Property), medium ticket LAP, unsecured business loans, and gold loans.
- Network of 575 branches spanning across 191 districts in 16 states and union territories across India as of 31 March 2023. Employs 3,570 personnel as on 31 March 2023.
- Operates a ‘Phygital’ (physical+digital) doorstep model for providing services, managing operations, and collecting and integrating data.
Strengths
- Present in large, underpenetrated markets with a strong potential for growth, the portfolio of MSME loans is expected to grow at a CAGR of 14%-16% between FY23 and FY25.
- Well-diversified funding profile with the advantage of lower cost of funds.
- Operates a difficult to replicate collateralised lending model as 85% of its total loan assets are secured against tangible assets such as gold or property as of 31 March 2023.
- Prudent customer selection and risk management policies, as 86% of its customers have an established credit history, 77% of which have a CIBIL score of 650+ as of 31 March 2023.
- Technology-driven company with an aggregate investment of ₹25 crore in IT and digital systems in the last three years.
Risks and threats
- Subject to periodic inspection by the Reserve Bank of India and operates in a highly regulated industry.
- Affected by volatility in interest rates for both its lending and treasury operations.
- Faces competition from established Indian and foreign commercial banks, NBFCs, HFCs (Housing Finance Companies), small finance banks, lending platforms and private unorganized and informal financiers who principally operate in the local market.
- Operates in a cyclical industry. Hence, in an economic downturn, the company may not be able to grow its business.
You can now apply for the Fedbank Financial Services IPO on Upstox. Click here.