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IPO Note: Au Financiers IPO - HDFC Securities -
IPO Note: Au Financiers IPO - HDFC Securities
HDFC Sec | Published: 28 Jun, 2017  | Source :

Background & Operations:

AU Small Finance Bank (AUSFB) has recently transitioned from a prominent, retail focused non-banking finance company (NBFC), which primarily served low and middleincome individuals and businesses that have limited or no access to formal banking and finance channels. It received a license from the Reserve Bank of India to set up an SFB on December 20, 2016 and was the only NBFC categorized as an asset finance company to obtain such license. It commenced SFB operations with effect from April 19, 2017. Prior to such date, it was categorized as a “Systemically Important, NonDeposit Accepting Asset Finance Company” (NBFCND-AFC) by the RBI.

AUSFB had commenced operations in 1996 in Jaipur, Rajasthan and was registered as an NBFC with the RBI in 2000. In 2005, it became a commercial associate of HDFC Bank for originating and servicing vehicle loans which assisted the company in the implementation of various processes and systems. It expanded its product portfolio to include MSME loans in 2007, housing finance in 2011 (sold in 2016) and SME loans in 2012, to cater to the evolving needs of customers. As an NBFC, AUSFB operated in three business lines: vehicle finance; micro, small and medium enterprises (MSME) loans; and small and medium enterprises (SME) loans.

As it commenced its SFB operations, it has expanded and strengthened its business model to offer working capital facilities, gold loans, agriculture related term loans, Kisan credit cards for farmers and loans against securities. The liability product offerings include current accounts, savings accounts, term deposits, recurring deposits and collections and payments solutions for MSME and SME customers. It is leveraging on its asset-based lending strengths, NBFC customer base and cost efficient, technology driven hub and spoke branch operating model to successfully operate as a SFB.

The vehicle finance business extends loans for the purchase of new and pre-owned vehicles and for refinancing of vehicles, which are primarily used for revenue generating activities with a tenure of upto five years. MSME business extends loans to MSMEs primarily for business expansion, working capital and the purchase of equipment while SME loans business extends loans to several types of small and medium sized businesses. The average ticket size for the three business segments in 2017 were Rs 3.4 lakhs, Rs 10.8 lakhs and Rs 2.2 cr respectively with 98.99% of the receivables secured. AUSFB has adopted a strategy of contiguous expansion across regions and as of May 31, 2017, its operation were conducted through 269 branches, 121 asset centers, one central processing center and 10 offices. In addition, it plans to set up an additional 162 branches and seven central processing centers during the financial year 2018.


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