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26 October, 2020 10:25 IST
AU Small Finance Bank IPO: Should you subscribe?
Source: IRIS | 28 Jun, 2017, 11.46AM
Rating: NAN / 5 stars.
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AU Small Finance Bank (AUSFB) was one of the ten NBFCs which had obtained approvals from RBI for setting up a small finance bank (SFB). As a NBFC, it has a history of successfully serving the low & middle income individuals and businesses having limited or no access to the formal banking and finance systems.

Angel Broking has recommended 'Subscribe' to IPO of AU Small Finance Bank. Commenting on the investment rationale, the stock broker said, ''At the upper price band of Rs 358 the issue is offered at 5.1x its FY2017 BV. However, AU has reported a strong 48% PAT CAGR over FY2013-17, and we believe it has the potential to deliver 30% PAT CAGR over FY2017-19, and based on our quick estimates on FY2019 BV, the issue is offered at 3.5x. While the issue is offered at premium valuations, we believe the valuation is justified given the historical track record and strong growth potential the SFB offers. Hence, we recommend Subscribe to the issue.''

GEPL Capital said, ''AU Small Finance Bank stands to gain from operating leverage. At a P/B of 5.09xs of FY17 BV. We believe that AU Small Finance Bank. demands a discount to its domestic peers. We assign a Subscribe rating to the IPO.''

Reliance Securities, said, ''Evolution from a DSA of HDFC Bank to a significant retail lending NBFC and outstanding performance track record suggest that AU SFB has the potential to emerge as one of the most successful SFBs in next 3-5 years.  Hence, we expect AU SFB to attract higher valuation premium compared to its peers led by sustainability of high growth in diversified business amid lower assets quality risk. At the upper price band of Rs358, AU SFB market capitalization would stand at Rs 102 billion, which gives it price-to-book multiple of 5.1x on Mar'17 book value and P/E of 31.2x on FY17 profit. We recommend Subscribe to the Issue, as it provides favorable investment opportunity for the long-term investors.''

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