The IPO (initial public offering) market has emerged as a hit in 2017 with more than Rs 65,000 already been raised from public issues. India has seen some of India’s biggest public offers in 2017 notably from Rs 11,370 IPO of GIC, New India Assurance Rs 9,600 crore and HDFC Standard Life Rs 8,700 crore IPOs. As many as six IPOs were subscribed more than 100 times. Amid the ongoing flurry in the public offers, we take a look at shares of a bank which has doubled in just 5 months of its IPO.
The stock of AU Small Finance Bank has more than doubled the investors’ wealth in a 5-month period after it got listed. Shares of AU Small Finance Bank have risen as much as 99% to Rs 712.85 on NSE. Even on the listing day, the stock of AU Small Finance Bank marked a bumper debut, jumping more than 50% to Rs 544 from its issue price of Rs 358. Shares of AU Small Finance Bank got a bumper listing on stock exchanges on 10 July 2017 after concluding its Rs 1,912.51 crore IPO which was subscribed 53 times in a three-day bidding process from 28 June to 30 June.
We take a look at three reasons which might have helped the shares AU Small Finance Bank to clock a 100% rise in just five months.
Being a niche player in small finance segment, AU Small Finance Bank had operated within rural and semi-urban areas for about 20 years as an NBFC before getting a small finance bank license. Analysts said the company’s proven track record, the quality of its management team, their differentiated approach towards vehicle finance by focusing on retail loans, and staying away from unsecured lending make them stand out.
Earlier last month, AU Small Finance Bank received Reserved Bank of India approval to operate as Scheduled Commercial Bank. Prior to this, AU Small Finance Bank was acting as small finance bank only. After getting upgraded to operate as a scheduled commercial bank, now AU Small Finance Bank will also be able to do borrowing and lending with RBI under LAF (Liquidity Adjustment Facility) and MSF (Marginal Standing Facility).
Mutual fund distribution
Just a couple of weeks ago, AU Small Finance Bank tied up with 11 mutual fund houses to begin mutual fund distribution. The bank has tied up with 11 mutual funds — HDFC Mutual Fund, ICICI Prudential Mutual Fund, Kotak Mutual Fund, Reliance Mutual Fund, SBI Mutual Fund, Aditya Birla Sun Life Mutual Fund, DSP BlackRock Mutual Fund, Axis Mutual Fund, Franklin Templeton Mutual Fund, Motilal Oswal Mutual Fund and Mirae Asset Mutual Fund. “As a bank we would focus on systematic investment plan (SIP) as it imparts financial discipline in the lives of retail investors. It also provides the benefit from the power of compounding and averaging purchase cost, keeping the volatility of the market aside,” Sanjay Agarwal, MD & CEO of AU Small Finance Bank said.
Shares of AU Small Finance Bank rose for the second consecutive session on Tuesday, rising 2.95% to hit a fresh all-time high of Rs 732.4. This was on top of a 3.32% rise on Monday. Within days of getting listed, the market capitalisation of AU Small Finance Bank surpassed the market cap of some of the well-established PSU banks such as IDBI Bank, Union Bank and Bank of India, and even some old private sector banks such as South Indian Bank and Karur Vysya Bank. According to Monday’s closing, the market capitalisation of AU Small Finance Bank stood at Rs 20,312.23 crore.
AU Small Finance Bank received the small finance bank (SFB) license from the Reserve Bank of India on 20 December 2016. It commenced its SFB operations with effect from 19 April 2017. Prior becoming a bank, it was a retail-focused non-banking finance company focused on financing the underbanked segment in rural and semi-urban areas.