Fedbank Financial Services on Friday said it plans to raise up to Rs 1,092-crore through an initial public offering opening on Nov. 22.
The Reserve Bank's circular increasing the risk weights on unsecured lending will increase the borrowing costs, but the negative market sentiment will not impact the offering, Managing Director and Chief Executive Officer Anil Kothuri told reporters.
Fedfina, a subsidiary of south-based Federal Bank, has set a price band of Rs 133-140 per share for the issue which comes amid a raft of other issuances before the holiday season and the next year's general elections. The issue will open for three days starting Nov. 22.
The offer consists of fresh issue of Rs 600 crore, while the rest is offer for sale under which existing shareholders, including Federal Bank and homegrown private equity fund True North are exiting.
Kothuri said that post issue, Federal Bank's overall holding will come down to 61 per cent from the present 73%, while True North's holding will come down to 8.5 per cent from the present 25%.
The new investors will hold over 31% of shares post-issue. True North had first invested in the company in Nov. 2018 at Rs 42 per share, while the last fund raising by the company was a rights issue in Nov. 2021, when shares were subscribed at Rs 70, Kothuri said.
The overall capital adequacy for the company, which does mortgage and gold lending, will go up to over 25% post-issue from the present 19%, Kothuri said.
At present, about 16% of the overall Rs 9,300 crore loan book is unsecured business loans, and Kothuri said the RBI's revised norms on risk weights will impact the company as borrowing costs may go up.
However, he exuded confidence that it will not impact the IPO as the negative sentiment –shares of a slew of financiers are down today - is for the short term and an IPO investor will buy into the long term potential.
Its chief financial officer C V Ganesh said the company's unsecured lending exposure is not personal loans, which the RBI seems to be looking to curtail, but loans to small business owners done by seeing the cash flow. Therefore, there is a need for greater clarity, he underlined.
The Federal Bank scrip closed 1.40% down at Rs 148 on the BSE on Friday as against a 0.28% correction on the benchmark.
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