AU Small Finance Bank soars 51% on debut

AU Small Finance Bank saw its stock surge more than 50 per cent on Monday during its stock market debut. Shares of the company ended at ~541, up ~183, or 51 per cent over the issue price of ~358. The stock moved in the range of ~507545 on the BSE. On the NSE, where trading had halted for three hours, the stock touched a high of ~540 and a low of ~523.7. Shares worth ~2,075 crore changed hands on the BSE and another ~178 crore on the NSE.

The spurt in the shares follows huge demand for AU Finance’s shares in its initial public offering (IPO). The ~1,900-crore IPO was subscribed nearly 55 times, with high demand across investor segments, particularly institutional investors.

Market players said there was huge demand from foreign institutional investors (FIIs) after the IPO created investment legroom. Before the IPO, FII holding in the company was at the ceiling of 49 per cent. Sources said after the IPO, the FII shareholding had dropped to 37 per cent.

At its current stock price, AU Finance is valued at nearly five times its adjusted book value. Analysts say even though the company has strong asset quality and superior track record, the stock is expensive compared to its peers. At Monday’s close, AU Finance was valued at ~15,384 crore.

AU Small Finance Bank is a retail-focused non-banking finance company (NBFC). It converted itself into a small finance bank (SFB) in April. It was among the 10 entities that were granted approval by the Reserve Bank of India (RBI) to set up SFBs in September 2015. However, AU is the only asset finance NBFC to receive the SFB licence.

AU Small Finance Bank is the third SFB to be listed, preceded by Equitas Small Finance Bank and Ujjivan Small Finance Bank in the previous year. AU has three major products in its portfolio — vehicle loans, MSME loans and SME loans. Vehicle loans comprised more than half of their assets under management (AUM).

“With an issue size of over ~1,900 crore, it was one of the largest issues to hit the capital markets in calendar year 2017. This issue received an overwhelming response from various categories of investors with an overall subscription of 55 times. This is testimony to the strong corporate governance, transparency, systems and most importantly management team led by Sanjay Agarwal,” said Ajay Saraf, executive director, ICICI Securities, one of the investment banks that handled the IPO along with HDFC Bank, Motilal Oswal Investment Advisors and Citigroup Global Markets India.