Fedfina, the non-banking financial arm of Federal BankBSE 0.55 %, is looking to raise Rs 300 crore from private equity investors, and its management has appointed investment bank ICICI Securities to look for buyers.
The company, that is a 100% subsidiary of the Federal Bank, will sell up to 25-30% stake to private equity investors, valuing it at about Rs 1,000 crore, said three people with direct knowledge of the development.
What started off as the distribution arm of the parent bank, Fedfina diversified into gold loans with a dominant presence across south India.“
The parent wants to expand the NBFC beyond the present geographies and will also look at entering consumer durable or white goods financing with the capital it will raise,” said one of the persons with knowledge of the company’s plans. A detailed email query sent to the spokesperson of Fedfina did not elicit any response till the time of going to press.
“The process has just started and ICICI Securities will now reach out to prospective funds,” said another person with knowledge of the deal. Fedfina has 100-plus gold loan branches across Tamil Nadu, Karnataka and Andhra Pradesh and also gives mortgage loans and structured finance (construction funding).
Other than its own loan products, Fedfina is distribution partner for insurers such as IDBI Federal, Bajaj Allianz, and Liberty Videocon.
According to a February 2017 release by Care Ratings, Fedfina reported strong capitalisation levels with CAR of 32.81% (Tier-I CAR – 32.52%) as on March 31, 2016, and CAR of 26.09% (Tier-I CAR- 25.75%) as on September 30, 2016.
“Asset quality is also comfortable with gross non-performing asset (GNPA) and net non-performing asset (NNPA) ratio of 0.39% and 0.31% as on March 31, 2016, and GNPA and NNPA ratio of 0.26% and 0.21%, respectively, as on September 30, 2016,” said the ratings release.
According to the release, the company’s overall profitability showed an improvement with PAT of Rs 12.25 crore on a total income of Rs 89.48 crore in FY16 as against a PAT of Rs 6.34 crore on a total income of Rs 79.23 crore in FY15. The PAT stood at Rs 8.77 crore on a total income of Rs 58.23 crore in first half of FY17.
“Fedfina has limited track record and modest scale of operations which can be witnessed from its loan portfolio size of Rs 798 crore as on September 30, 2016, (Rs 611crore as on March 31, 2016) build over a period of six years which includes 40% of gold loan, 36% of loan against property (LAP) and 24% of wholesale lending,” the release said.
Fedfina also faces the risk of geographic concentration with a total network of 99 branches for gold loan, mainly in southern India which includes Andhra Pradesh, Karnataka, Tamil Nadu and Telangana and eight locations for loan against property and wholesale lending spread, mainly across Gujarat and Maharashtra, it said.
Source: Economic Times