Federal Bank promoted Fedbank Financial Services has refiled the draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for its IPO.

The proposed IPO includes a fresh issue of shares up to ₹750 crore and an offer-for-sale of of up to seven crore shares by promoters and other existing shareholders. The offer-for-sale comprises sale of up to 1.6 crore shares by promoter Federal Bank, and up to 5.4 crore shares by True North Fund VI LLP.

FedFina had previously filed its draft prospectus in February 2022, which comprised fresh issue of shares up to ₹900 crore and an offer-for-sale of up to 457 lakh shares.

One among five promoted by private banks, the NBFC also know as FedFina, cateers to MSMEs and the emerging self-employed individuals sectors.

The company plans to use the IPO proceeds to augment its tier-I capital base to meet future capital requirements arising out of business and asset growth. A part of the proceeds will also be used to meet offer expenses, it said.

ICICI Securities, BNP Paribas, Equirus Capital, and JM Financial are the Book Running Lead Managers to the issue. 

In Federal Bank’s Q1 earnings call, MD and CEO Shyam Srinivasan had said that the NBFC had filed for its IPO last year and was exploring a capital raise but the plan did not go through because “markets were not that friendly at that point in time”.

He had then said that the NBFC is now again exploring capital raise options, adding that the bank will continue to remain a majority investor as long as regulations permit. The private sector lender holds 74 per cent stake in FedFina.

The NBFC has the second lowest cost of borrowing among its peers that give MSME and gold loans. It had the third fastest AUM growth and fastest gold loan AUM growth among NBFCs in the peer set in FY23, with a three year CAGR (compunded annual growth rate) of 33 per cent. As of March 2023, 85.98 per cent of the loan book was secured.

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