AU Small Finance Bank IPO Review and Recommendations by various Research / Brokerages is as below.
AUSFB's promoters are proposing to offer the equity shares of the company to the public by way of an IPO. Hence, there will not be any change in the shareholders’ funds.
Hatim Broachwala of Nirmal Bang told us,
While the trailing valuation of 5.1x FY17 P/BV may look expensive after taking a first look, this is a unique model with no exact peers. An important distinguishing factor is that AUSFB is a small finance bank and can raise the deposits to keep its cost of funds low, unlike its peers. Therefore, in the long run the SFB model should do better compared to the NBFC model.
R Sreesankar, Vidhi Shah and Pritesh Bumb of Prabhudas Lilladher said,
AU SFB commenced business as SFB on 19th April, 2017. The transitioning to SFB has offered AU SFB significant growth potential and will help deliver improved performance and return ratios. At the upper band of Rs358, the post money valuation of AU SFB is at 5.3x P/ABV FY17 of ~Rs68 which we believe leaves little scope for any upside in the near term, hence we recommend investors to subscribe to the issue only with a long term investment horizon.
Digant Haria and Bhavik Mehta of ANT IQUE STOCK BROKING said,
Given the strong presence in niche customer segments, AU SFB's profitability will be remain superior to most conventional banks. Despite the migration to SFB, we estimate that AU will report trough RoEs of ~17% in FY18 this will recover to 20% by FY20. This is significantly better than its listed peers which are currently reporting single digit RoEs. As such, valuations at 3.2x book on FY20 are reasonable, and investors can expect strong upside over the next few years.
Reliance Securities Ltd Analyst Ashutosh Kumar Mishra said,
At the upper price band of Rs358, AU SFB market capitalization would stand at Rs102bn, which gives it price-to-book multiple of 5.1x on Mar 2017 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.
Ashika Securities said,
At upper end of the price band( Rs.358), company will have a market cap of Rs.10,176cr. OnFY17, valuation multiples are P/B of 5.1x and adjusted P/E of 30.5x seem to be fully priced in. The High Valuation is justified as the bank is an asset led bank unlike its peers. Thus we investors our investors to SUBSCRIBE for Long Term.
Rishabh Bhargava and Jignesh Shial at Quant Capital has the following recommendation,
AU has announced a price band of Rs 355-358. At upper band, the company is valued at Rs101bn, quoting at ~5.0x P/Book FY17, which is relatively expensive compared to peers like Shriram City Union Finance (SCUF) which is trading at ~3.1x P/Book FY17 numbers. However, considering healthy business momentum, diversified lending book and presence across developed geographies (western India), we recommend SUBSCRIBE to the issue
Aditya Birla Money has the following recommendation,
Owing to secured lending, AUSFB is better positioned for transition to SFB as compared to peers. Having strong retail asset book, it shall allow AUSFB to build liabilities with strategic focus on sticky customers and aid in better cross-selling opportunities. At higher price band of Rs 358, it is valued at 31.2x TTM adj. EPS and 5.3x TTM P/ABV. Recommend SUBSCRIBE rating for listing gains as well as for long term capital gains.
