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PE-backed AU Small Finance Bank’s IPO sails through on second day

29 June, 2017

The initial public offering (IPO) of private equity-backed AU Small Finance Bank Ltd was fully subscribed on day two on Thursday, with institutional investors joining the action after staying on the sidelines on the first day.

The public issue of 37.69 million shares—excluding the anchor investors’ portion—received bids for nearly 51.4 million shares, or 1.4 times the shares on offer, stock-exchange data showed.

The portion set aside for institutional buyers was subscribed 2.5 times while that for non-institutional investors, such as corporate houses and wealthy individuals, was covered 70%.

The portion reserved for retail investors, whose total bid value cannot exceed Rs 2 lakh, was subscribed 10.7 times. The employee quota was covered 44%.

The IPO had seen a tepid first day, receiving bids for nearly 6.62 million shares, or about 18% of the shares on offer.

The Jaipur-based lender, formerly known as Au Financiers (India) Ltd, is seeking a valuation of around Rs 10,176.18 crore ($1.6 billion) through the IPO that closes on Friday.

The public issue comprises a complete offer-for-sale by private equity firms Warburg Pincus, Kedaara Capital, MYS Holdings Pvt. Ltd, ChyrsCapital Investment Advisors India and International Finance Corporation, apart from its promoters. These shareholders will raise as much as Rs 1,912.51 crore from the sale of 53.42 million shares, representing an 18.79% stake on a post-issue basis, as per the draft prospectus.

Warburg alone will sell roughly 5.21% while IFC will part with a 2.66% stake. ChrysCap, through its investment vehicle Labh Investments Ltd, will sell 3.96% while Kedaara Capital, via its vehicle Ourea Holdings Ltd, will sell 3.64%.

Promoters Sanjay Agarwal and members of the Agarwal family will sell 2.97% stake through the IPO.

On Tuesday, the lender had raised Rs 563 crore ($87 million) from a bunch of anchor investors including the sovereign wealth funds of Singapore and Kuwait, a stock-exchange filing showed. Anchor investors are institutional investors who accept a one-month lock-in period for a sizeable allocation of shares.

This is the third public issue by a small finance bank in the past 15 months, after the IPOs of Equitas Holdings Ltd and Ujjivan Financial Ltd last year.

At the announced price band of Rs 355-358 apiece, AU’s shares will be valued at roughly three times their price-to-book (P/B) value for 2016-17. Equitas and Ujjivan trade at two to two-and-a-half times their respective one-year trailing book value.

AU had filed its draft red herring prospectus for the IPO on 2 February. It received regulatory approval on 22 March.

ICICI Securities Ltd, HDFC Bank Ltd, Motilal Oswal Investment Advisors Pvt. Ltd and Citigroup Global Markets India Pvt. Ltd are financial advisers to the IPO.

The lender has hired AZB & Partners as its legal counsel, whereas the bankers have appointed Shardul Amarchand Mangaldas & Co as their Indian legal counsel and Sidley Austin LLP as their international counsel. The selling shareholders together have appointed law firm Cyril Amarchand Mangaldas as their counsel.

The financial services firm had started operations in 1996 in Jaipur, and got registered as a non-banking financial company in 2000. It was among the 10 firms to receive the RBI’s in-principle approval in 2015 to start a small finance bank.

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PE-backed AU Small Finance Bank’s IPO sails through on second day

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