Jaipur-based company which got RBI's nod to function as a Small Finance Bank has opened its IPO issue for raising fresh funds from the primary market. The issue opens on June 28, 2017 and ends on June 30,2017. After about 4 players including CDSL, Tejas Networks, GTPL Hathway and Eris LifeSciences, AU is the last company to hit the primary market in June.

Let us know in detail whether the opened issue has something to offer for a retail investor.

Company's Business

The NBFC company recently started operations as a Small Finance Bank catering primarily to individuals who did not had access to basic banking facilities. Before its full-scale functioning as a SFB on April 19, 2017, the company was categorized as a non-deposit accepting asset finance company' (NBFC-ND-AFC) by the RBI.

The company's primary work areas include vehicle finance, SME loans and MSME loans.

Details of the Issue

The issume is an offer for sale or OFS of 5,34,22,169 equity shares by company's promoters and investors. The price band for the issue is decided at Rs. 355-358 per share. The IPO can be subscribed to with a minimum bid size of 41 shares and in multiples of 41 shares thereafter. Listing of the share is proposed on both the major exchanges of the company that include BSE and NSE.

The company also reserves subscription of upto 10 lakh shares by eligible employees. The anchor investors' bidding that opened yesterday saw company raising Rs. 563 crore. 34% of the issue is open for subscription by retail investors.

Managers of the issue include HDFC Bank, ICICI securities, Citigroup Global Markets India and Motilal Oswal Investment Advisors.

Objective

The primary objective is to benefit from listing the stock on the bourses, more so the mopped up funds would not go to the company, instead they would be provided to each of the shareholder and investor selling their equity share in proportion to their offers made.

The objects of the offer are to achieve the benefits of listing equity shares on stock exchanges and for the offer for sale of 53,422,169 equity shares.

Valuations

Though different brokerages, on the back of the company's good financial performance and citing the fact that company ventures in areas not catered to by larger financial institutions, are highly recommending the issue. But on valuations front with five times the FY17 book value, the issue is an expensive offer compared to other listed peers. This means that on listing there will be little room for an upside in the stock.

Conclusion

So, the retail investors can be better off by investing in the stock of AU Small Finance bank upon listing once they see the stock hitting some lows.

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