After a stellar listing in July this year, AU Small Finance Bank continues to hog the limelight. The NBFC debuted with a 51% listing gain (issue price of Rs.358) and now trades at Rs.645. Institutional investors like Redwood Investment (belonging to Warburg Pincus), which held 21.03% stake prior to the IPO now holds 15.82% and Amansa Capital has also acquired a 1.22% stake. Labh Investments (ChrysCapital) and Ourea Holdings (Kedaara Capital) are the other major investors.
AU enjoys the rare distinction of being a non-microfinance institution to receive the license for a small finance bank. Headquartered in Rajasthan, AU since its inception has focused on expanding its presence in relatively under-penetrated states. It has grown by focusing on vehicle loans (50% of Gross AUM for FY17), and has steadily ventured into the SME (20%) and MSME segment (30%), which continue to remain a NBFC stronghold.
The firm’s AUM has compounded 33% between FY12-17. The transition from an NBFC to a small finance bank coupled with its expansion plan (it is aiming to increase the number of branches from 301 to 400 by March 2018) is expected to impact its profitability in FY18, but moving forward a wider product portfolio offering (gold loans, business banking, home loans etc) and lower cost of borrowing is expected to restore profitability in FY19.
Promoter holding pre-IPO was 36.03% and for the quarter ended September 2017 stood at 32.87%. Insurance companies, too, have reduced their exposure from 4.7% to 2.76% with SBI Life Insurance’s stake remaining unchanged post IPO at 1.71%. Mutual funds, however, have increased their stake from 2.72% to 6.71% with SBI and Motilal Oswal holding 1.49% and 1.21% respectively.
In recent activity, director Uttam Tibrewal has sold stock worth Rs.36 crore over the past month, paring down his stake to 0.7%. Tibrewal sold 605,000 shares at an average price of Rs.596. CFO Deepak Jain also sold shares worth Rs.17.4 crore in October, bringing his stake down to 0.3%. The NBFC is trading at a price-to-book of 6.3x FY19 estimated earnings. Analysts feel the high valuation is justified given its first mover advantage in its region of operations, improved credit-worthiness assessment ability post-GST and high level of asset collateralisation.