TM

AU Small Finance Bank Ltd

Objects of the issue:
• To achieve the benefits of listing the Equity Shares on the Stock Exchanges
• For the Offer for Sale of 53,422,169 Equity Shares for the selling shareholders

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R e v i re Grade REVIEW
Sco Company Profile: AU Small Finance Bank (AUF) is a Jaipur based small bank
10
6.5/ Above Average that has recently transitioned from a prominent, retail focused non-banking finance
company (NBFC), AU Financiers, primarily serving low and middle income
Review Interpretation individuals and businesses that have limited or no access to formal banking and
Review Score Interpretation finance channels. In December 2016, AU Financiers received the final licence from
Below 4 Below Average/Poor the RBI to start a small finance bank, becoming the seventh entity to do so. It
Between 4 to 6 Average commenced its small bank finance operations (SBF) from April 2017. In addition
Between 6 to 7 Above Average to its vehicle finance, micro, small and medium enterprises (MSMEs) loans, its
Above 7 Investment Grade asset product offerings include working capital facilities, gold loans,
*The above shall be read along with the Disclaimer agriculture related term loans, Kisan credit cards for farmers and loans against
Parameters reviewed are: securities. As of May 31, 2017, the company has 269 branches across 10 states
• Company’s operational efficiency, growth & valuation. and one union territory in India, with significant presence in the states of Rajasthan,
• Sector outlook & peer group comparison. Gujarat, Maharashtra and Madhya Pradesh.
• Management & Corporate Governance
• Broader capital market outlook Strengths:
• Relations with all stakeholders & CSR initiatives
• Diverse product profile and revenue stream with an impressive track record of
Issue Details profitability over the years.
Issue Open Date June 28th, 2017
• The company has significant presence in the rural and semi-urban markets with
Issue Close Date June 30th, 2017
focus on low and middle income customers which encourages repeat customers.
Floor Price (Rs.) 355-358
Face Value 10 Concerns:
Market Lot 41 shares • Over 70% of the Bank's operations are concentrated in Western India while over
Shares Tick Price (Rs) 1 50% of its revenues comes from vehicle financing making it vulnerable to
Issue size (Equity shares) 5,34,22,169 concentration risk.
Issue size (Rs Cr.) 1896.49
• The company will face intense competition from unorganized, small participants
Mcap (approx.) (Rs. Cr) 9978.90
in the market across all business segments and also from established PSU and
% of Equity Dilution 19% (approx)
private banks and other NBFCs.
Market Metrics Outlook: AUF plans to become a retail focussed preferred trusted SFB (small
Company CMP* EPS P/E(x) BV P/B(x) financial bank) offering integrated and tailored solutions to customers . Since its
AUF 355-358 29.65 11.97-12.07 70.35 5.04-5.08 transition to a small finance bank in April 2017, the company has added diverse
Bajaj Finance 1401.25 33.4 41.95 174.6 8.03 range of options including gold loans and agriculture credit to its original portfolio.
Sundaram Fin 1582 44.59 35.48 337.14 4.69 It intends to leverage its existing capabilities as an asset finance NBC, (including
Ujjivan Finance 309.9 17.35 17.86 146.73 2.11 its strong customer base, low cost hub-and-spoke model, strong technology
capabilities and local-know-how in the geographical areas in which it operates to)
Equitas Holding 152.8 0.14 - 49.54 3.08
* Issue Price for AU Small Finance Bank Ltd and CMP as on 23rd June 2017 for others
to aid its growth as an SFB. It is targeting Rs10,000 crore of deposits in the first
year of its operations on the back of a strong consumer base. It intends to continue
Key Financials (Rs. Cr.)
expanding its branch operation network,opening 162 SFB branches during the
Key Financials# FY13 FY14 FY15 FY16 FY 17
financial year 2018, mostly in Western and Northern India spread across rural,
Total Income 413.08 571.32 689.40 1051.95 1430.52 semi-urban and urban markets.
OPM (%) 24.85 19.19 30.07 35.86 35.27
PAT 69.35 72.54 139.45 247.15 842.71 On valuation front, at the issue price of Rs 355-358, the stock is trading at a P/E
Equity 40.47 42.96 44.08 44.08 284.25 of 12.07x (at higher price band) of its FY17 earnings and a P/BV of 5.04 - 5.08x
Reserves 401.39 554.78 722.37 956.58 1715.30 to its FY17 BV of Rs 70.35. The pricing seems to be on the higher side compared
Debt - - - - - to its recently listed peers. While the potential for growth remains high in the long
EPS (Rs.) 2.44 2.55 4.91 8.69 29.65 term, post converting to a small finance bank (SFB), the initial growth and
Net NPA (in %) 0.27 0.62 0.44 0.38 1.05 profitability is likely to remain restricted in the short to medium term. Hence
Book Value (Rs.) 15.65 21.03 26.96 35.20 70.35 investors can wait for the company to be listed and price to be stabilized before
Dividends - - - - - investing for long term.
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