AU SMALL FINANCE BANK

LIMITED

IPO

PRICE BAND : `355- `358

OUR RECOMMENDATION “SUBSCRIBE”

 THE OFFER
Issue Open : 28 Jun 2017 to 30 Jun 2017
»» Issue Type: Book Built Issue IPO

»» Issue Size:
› Offer for Sale of up to 53,422,169 equity shares

»» Face Value: ` 10 Per Equity Share

»» Issue Price: ` 355 - ` 358 Per Equity Share
»» Market Lot: 41 Shares
»» Minimum Order Quantity: 41 Shares
»» Listing At: BSE, NSE
 OBJECT OF THE OFFER

 The objects of the Offer are to achieve the benefits of listing the
Equity Shares on the Stock Exchanges.

 Company expects that listing of the Equity Shares will enhance

visibility and brand and provide liquidity to its existing
shareholders.

 Listing will also provide a public market for the Equity Shares in
India.

 Company will not receive any proceeds from the Offer. All proceeds
from the Offer will go to each of the Selling Shareholders, in
proportion to its portion of the Offered Shares.
 COMPANY OVERVIEW
 AU was launched in 1996 as a retail-focused non-banking finance
company (NBFC) based in Jaipur. It focused on retail segment serving
low and middle income individuals and businesses.

 It operate in 3 business lines: Vehicle finance, Micro, small and

medium enterprises (MSMEs) loans and Small and medium
enterprises (SMEs) loans.

 On December 20, 2016, Au Financiers received RBI license for Small

Finance Bank (SFB). As of May 31, 2017, company has conducted its
operations through 269 branches, 121 asset centers, one central
processing center and 10 offices with significant presence in the
states of Rajasthan, Gujarat, Maharashtra and Madhya Pradesh.

 In addition, company has plan to set up an additional 162 branches

and seven central processing centers during the financial year 2018.
 STRENGTHS
 Diversified Product Portfolio and Revenue
Streams.

 Significant Presence in Rural and Semi-Urban

Markets with Focus on Low and Middle Income
Customers.

 Robust and Comprehensive Credit Assessment

and Risk Management Framework.

 Customer Centric Organizational Commitment.

 STRATEGIES
 Leverage Existing Capabilities and Customer Base.

 Grow Branch Network.

 Leverage Technology to Grow Business.

 Enhance Brand Presence.

 Provide a Comprehensive Suite of Banking Services

 COMPARABLE PEERS
The banking and finance sector in India is highly competitive, with
significant presence of public sector banks and established private
sector banks that have extensive branch networks, as well as
NBFCs, other SFBs, cooperative banks, regional rural banks and
other financial services companies, against which they may be
unable to compete effectively.

Some of the comparable peer group are as follows :-

 Equitas Holdings Limited

 Ujjivan Financial Services Limited
 IndusInd Bank Limited
 Sundaram Finance Limited
 Bajaj Finance Limited
 INDUSTRY OVERVIEW

 Banking is the lifeline of the nation and its people. It has helped in
developing the vital sectors of the economy.

 The high share of RRBs and cooperative banks and significant

proportion of semi-urban and rural lending and deposit base
indicate a huge opportunity for SFBs to capture market share .

 SFBs could capitalize on the limited ability and slower

technological adoption by RRBs and majority of the cooperative
banks to gain market share.
 FINANCIAL PERFORMANCE

 A strategy of contiguous expansion as of March 31, 2017, it

conducted their operations through 269 NBFC branches
spread across 10 states and one union territory in India, with
significant presence in the states of Rajasthan, Gujarat,
Maharashtra and Madhya Pradesh and employed 8,515
personnel serving 280,349 active loan accounts.

 As of March 31, 2017, Total Borrowings were ` 70,709.78

million and average cost of borrowings was 10.13%.

 Total revenue increased by 35.99% to ` 14,305.21 million

for the financial year 2017 from ` 10,519.50 million for the
financial year 2016.
 RISK FOR THE BUSINESS

 Inability to successfully transition from an NBFC to an SFB may

have an adverse effect on business.

 As an SFB, they are unable to access some of the funds that were
available as an NBFC, it may have an adverse effect on business.

 SFB’s operations are concentrated in western India and any

adverse developments in this region could have an adverse effect on
business.

 The existing customers and targeted customer segments are not

receptive to new brand and identity as an SFB.
 CONTINUE…….

 As an SFB, they are required maintain a prescribed cash reserve

ratio, statutory liquidity ratio and minimum capital , which may
have an adverse effect on business.

 SFB utilize the services of certain third parties for operations. Any
deficiency or interruption in their services could affect business.

 Foreign investors are subject to investment restrictions that limit

ability to attract foreign investors, which affect the trading price of
the Equity Shares.
 VALUATION

The strong presence in niche customer segments, AU SFB's

profitability is superior to most conventional banks. Despite the
migration to SFB, its total revenue has increased by 35.99% to
` 14,305.21 million for the financial year 2017 from ` 10,519.50
million for the financial year 2016.

Taking into consideration, its Diversified Product Portfolio and

Revenue Streams and presence in Rural and Semi-Urban Markets
with Focus on Low and Middle Income Customers and plan to set
up an additional 162 branches and 7 central processing centers
during the financial year 2018. We recommend to SUBSCRIBE
for this IPO.
 DISCLAIMERS
This Research Report (hereinafter called report) has been prepared and presented by
RUDRA SHARES & STOCK BROKERS LIMITED, which does not constitute any offer or
advice to sell or does solicitation to buy any securities. The information presented in
this report, are for the intended recipients only. Further, the intended recipients are
advised to exercise restraint in placing any dependence on this report, as the sender,
Rudra Shares & Stock Brokers Limited, neither guarantees the accuracy of any
information contained herein nor assumes any responsibility in relation to losses
arising from the errors of fact, opinion or the dependence placed on the same.

Despite the information in this document has been previewed on the basis of publicly
available information, internal data , personal views of the research analyst(s)and
other reliable sources, believed to be true, we do not represent it as accurate, complete
or exhaustive. It should not be relied on as such, as this document is for general
guidance only. Besides this, the research analyst(s) are bound by stringent internal
regulations and legal and statutory requirements of the Securities and Exchange
Board of India( SEBI) and the analysts' compensation was, is, or will be not directly or
indirectly related with the other companies and/or entities of Rudra Shares & Stock
Brokers Ltd and have no bearing whatsoever on any recommendation, that they have
given in the research report
 Rudra Shares & Stock Brokers Ltd or any of its affiliates/group companies shall not be
in any way responsible for any such loss or damage that may arise to any person from
any inadvertent error in the information contained in this report. Rudra Shares &
Stock Brokers Ltd has not independently verified all the information, which has been
obtained by the company for analysis purpose, from publicly available media or other
sources believed to be reliable. Accordingly, we neither testify nor make any
representation or warranty, express or implied, of the accuracy, contents or data
contained within this document. Rudra Share & Stock Brokers Ltd and its affiliates are
engaged in investment advisory, stock broking, retail & HNI and other financial
services. Details of affiliates are available on our website i.e. www.rudrashares.com.

We hereby declare, that the information herein may change any time due to the
volatile market conditions, therefore, it is advised to use own discretion and judgment
while entering into any transactions, whatsoever.
Individuals employed as research analyst by Rudra Shares & Stock Brokers Ltd or their
associates are not allowed to deal or trade in securities, within thirty days before and
five days after the publication of a research report as prescribed under SEBI Research
Analyst Regulations.
 Subject to the restrictions mentioned in above paragraph, we and our
affiliates, officers, directors, employees and their relative may: (a) from
time to time, have long or short positions acting as a principal in, and buy
or sell the securities or derivatives thereof, of Company mentioned herein
or (b) be engaged in any other transaction involving such securities and
earn brokerage or profits.