Fedbank Financial Services IPO closes at 2.20 times subscription

Fedbank Financial Services IPO opened on 22nd November 2023 and closed for subscription on 24th November 2023. The stock of Fedbank Financial Services Ltd has a face value of ₹10 per share and the price band for the book building IPO has been set in the band of ₹133 to ₹140 per share. The final price will be discovered within this band. Fedbank Financial Services IPO will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion of Fedbank Financial Services Ltd IPO comprises the issue of 4,28,57,143 shares (428.57 lakh shares approximately), which at the upper price band of ₹140 per share will translate into fresh issue size of ₹600.00 crore. The offer for sale (OFS) portion of the IPO of Fedbank Financial Services Ltd comprises the sale of 3,51,61,723 shares (351.62 lakh shares), which at the upper price band of ₹140 per share will translate into an offer for sale (OFS) size of ₹492.26 crore.

The OFS selling will be by the promoter shareholders of the company, which is Federal Bank Ltd and one investor shareholder, True North Fund. Since Fedbank Financial Services Ltd is currently 73.09% owned by the promoters, the promoter stake will get diluted to the extent of the fresh issue and the offer for sale promoter portion. Thus, the overall IPO of Fedbank Financial Services Ltd will comprise of the issue and sale of 7,80,18,866 shares (780.19 lakh shares approximately), which at the upper price band of ₹140 per share will translate into total IPO issue size of ₹1,092.26 crore. The net proceeds from the IPO fresh issue portion will be utilized for augmenting the Tier 1 capital base (a basic necessity for all financial institutions looking to expand their loan books). The IPO will be lead managed by ICICI Securities, BNP Paribas, Equirus Capital and JM Financial. Link Intime India Private Ltd will be the registrar to the issue.

How subscriptions evolved in the Fedbank Financial Services IPO period?

While the QIB portion and the HNI / NII portion picked up some traction on the last day, the overall journey was quite slow for all the categories of investors. In fact, the QIB portion, and the HNI / NII portion got fully subscribed only on the third and last day of the IPO, while the retail portion got subscribed on the second day of the IPO. None of the categories got subscribed on the first day of the IPO, which is telling about the limited demand for the IPO among the investors. As a result, even the overall IPO saw subscription book filling up just 0.39 times, at the close of the first day of the IPO and the overall IPO also got subscribed on Day-3. The IPO was kept open for a total period of 3 days from November 22, 2023 to November 24, 2023. The table below captures the day-wise progress in IPO subscription.

As can be seen from the above table, the overall IPO got just 2.20 times subscribed at the close of the third and final day of the IPO on 24th November 2023. Here is a quick look at how the various categories saw traction on the last day of the IPO.

• The QIB portion got 0.00 times subscribed at the end of the first day of the IPO. However, on the last day of the IPO, the subscription moved from 0.56X to 3.51X.
   
• The HNI / NII portion got 0.22 times subscribed at the end of the first day of the IPO. However, on the last day of the IPO, the subscription moved from 0.54X to 1.45X.
   
• Retail portion got 0.70 times subscribed at the end of the first day of the IPO. However, on the last day of the IPO, the subscription moved from 1.30X to 1.82X.
   
• The overall IPO got 0.39 times subscribed at the end of the first day of the IPO. However, on last day of the IPO, overall subscription moved from 0.92X to 2.20X.

Rapid update on the overall IPO response

The IPO saw fairly tepid to modest flows on Day-1 and Day-2, with most of the action visible only on Day-3 of the IPO. However, the IPO did close with relatively weak and tepid subscription numbers at the close of Day-3. In fact, the IPO of Fedbank Financial Services Ltd got fully subscribed only on the last day of the IPO itself with full subscription across HNI / NII and QIB categories only happening on the last day and the retail portion getting one-time, subscription on the second day only. As per the combined bid details put out by the BSE at the close of Day-3, Fedbank Financial Services Ltd IPO was subscribed 2.20X overall.

The best demand came from the QIB segment, followed by the retail segment and the HNI / NII segment in that order. However, even otherwise, the overall numbers were below par for such a large and prestigious issue. In fact, the institutional segment and the HNI / NII segments saw very limited traction even on the last day of the IPO. The HNI portion hardly saw any surge in the funding applications and corporate applications on the last day of the IPO, which is the general practice. Retail portion was relatively OK, although it was fully subscribed on Day-2 of the IPO only. However, subsequent traction was limited. Firstly, let us look at the details of overall reservation of shares to different categories of investors.

Having understood the allocation of shares across various categories, Let us look at how the subscription data played out for the IPO at an overall level and at a more granular level.

As of close of 24th November 2023, out of the 559.24 lakh shares on offer in the IPO, Fedbank Financial Services Ltd saw bids for 1,230.13 lakh shares. This implies an overall subscription of 2.20X overall. The granular break-up of subscriptions was in favour of the QIB investors followed by the retail investors and then the HNI / NII investors in that order. QIB bids and NII bids typically gather most of the momentum on the last day, and that was not exactly visible in this issue both in the NII bids and the QIB bids. Both the QIB and the NII bids barely picked up any fresh momentum on the last day of the IPO, which made it a rather disappointing IPO from a subscription standpoint. Here are the details of the category-wise subscription.

Data Source: BSE

Subscription status of QIB Portion

On 21st November 2023, Fedbank Financial Services Ltd completed the bidding for its anchor allocation. There was a robust response as the anchor investors participated through the process of book building. A total of 2,31,91,374 shares were allotted to the anchor investors. The allocation was done at the upper IPO price band of ₹140 per share (including premium of ₹130 per share) which resulted in an overall anchor allocation of ₹324.68 crore. The anchors absorbed 29.69% of the total issue size of ₹1,092.26 crore.

The QIB portion (net of anchor allocation as explained above) had a quota of 153.49 lakh shares of which it has got bids for 538.25 lakh shares at the close of Day-3, implying a subscription ratio of 3.51X for QIBs at the close of Day-3. QIB bids typically get bunched on the last day and while the heavy demand for the anchor placement had given an indication of the institutional appetite for the Fedbank Financial Services Ltd IPO subscription overall, the actual demand did not really turn to be quite robust for the IPO. Despite the size of the IPO, the QIB response was very modest.

Fedbank Financial Services IPO Subscription status of HNI / NII Portion

The HNI portion got subscribed 1.45X (getting applications for 173.05 lakh shares against the quota of 119.28 lakh shares). That is a relatively tepid response at the close of Day-3 largely because this segment normally sees the maximum response bunched on the last day. Bulk of the funded applications and corporate applications, come in on the last day of the IPO, and that was really not visible as the overall HNI / NII portion hardly added to its heft on the last day of the IPO. Apart from the QIB portion, even HNIs saw very limited traction on the last day.

Now the NII/HNI portion is reported in two parts viz. bids below ₹10 lakhs (S-HNI) and bids above ₹10 lakhs (B-HNI). The bids above the ₹10 lakh category (B-HNIs) typically represents most of the major funding customers. If you break up the HNI portion, the above ₹10 lakh bid category got subscribed 1.23X while the below ₹10 lakh bid category (S-HNIs) got subscribed 1.89X. This is just for information and is already part of the overall HNI bids explained in the previous para.

Fedbank Financial Services IPO Subscription status of Retail Individuals

The retail portion was subscribed just 1.82X at the close of Day-3, showing relatively modest appetite. It must be noted that retail allocation is 35% in this IPO. For retail investors; out of the 278.33 lakh shares on offer, valid bids were received for 507.91 lakh shares, which included bids for 434.91 lakh shares at the cut-off price. The IPO is priced in the band of (₹133 to ₹140 per share) and has closed for subscription as of the close of Friday, 24th November 2023.