Temasek holdings picks up 4.82% stake in AU Bank pegging its valuation at Rs 20,000 cr
It took 45 days for Temasek, a Singapore government holding, to woo and pick up a less-than 5% equity stake in the AU Small Finance Bank and give it a capital boost of Rs 1,000 crore. This is a giant leap for a small finance bank launched in 2017 following the Reserve Bank of India’s approval and one that reaffirms its overall valuation past Rs 20,000-crore mark.
Ten applicants got the go-ahead from the RBI for starting banking operations last year. AU has outstripped some of the promising ventures in its first year of active banking pursuit. This includes The Equitas Holdings public limited, Chennai, trading just above Rs 150 on the National Stock Exchange and the Ujjivan Financial Services Private Limited, Bengaluru, (Rs 390). In comparison, the AU Bank shares closed at a high of more than 712 rupees a share on the NSE.
The banking major headquartered in Jaipur confirmed the capital infusion by the Singapore-based investment firm that has holdings in an incredibly vast range of sectors including in Singapore Airlines, Standard Chartered and the Alibaba Group. Temasek’s India portfolio has crossed the 10 Billion dollar mark with diverse investments in banking firms, insurance companies and e-commerce platforms like Snapdeal. AU Bank is the 6th bank in which the Singapore government’s holding firm has picked up equity as a part of its global strategy aimed at “generational investment”.
Sources in the AU Bank claimed that Temasek’s decision to take the primary route for capital investment speaks of the confidence the global investment firm with a portfolio valuation of 275 billion Singapore dollars has vested in the fledgling bank. Temasek has so far picked up varying stakes in promising firms, but mostly from the secondary market. “For AU, they have chosen a primary route to pick up 4.82% stake, which was first approved by the Board of Directors and subsequently ratified by the shareholders,” a source involved in the decision making told dna.
Its other shareholders include premier institutions like IFC, Warburg Pincus, Chrys Capital and Kedaara Capital. The Rs 1913-crore IPO last year was a complete Offer-for-Sale with no infusion in bank.
So, what attracted Temasek to AU Bank?
“There are established banks which took 3 years to reach the milestone of 300 plus branches which we have managed in less than a year,” a company official said. AU Bank had expanded its branch network to over 500 touch points, including 306 bank branches and 292 ATMs operational across 11 states.
Its Assets Under Management (AUM) growth rallied to the 50% mark while it mobilised Rs 8,000 crore deposit in fiscal ending 2018 in the very first year of operations.
The Singapore-based investor spent 45 days evaluating the bank’s prospects guided by its core investment policy hinged around growing middle income populations which AU finances and the emerging champions who have the potential to disrupt the industry. To top that, the books showed a consistent return of up to 35% over the last 5 years.
Sanjay Agarwal, MD and CEO of AU Bank said the capital raised will strengthen the bank’s presence in both the digital and the physical marketplace. “This fund will allow us to remain sufficiently capitalized in the near term, as we continue striving towards achieving a 30-35% growth target per annum. We welcome Temasek to AU Bank.”
‘Zero unsecured Loans’: There are zero unsecured loans, claims the bank, where most of the other small finance banks have roots in micro-financing where disbursements without collateral are not uncommon. At a time when major banks are floundering under the weight of Non-performing Assets, 100% secured loan base is an obvious tick mark for a banking firm. It touched over a million plus under-banked and unbanked customers, prior to becoming a bank in April 2017.
Customer-oriented approach: Sources involved in day-to-day operations with the bank said that innovative consumer centric decisions did the trick for AU Bank where other competitors are finding it difficult to stay out of red. “The first thing we did was to remove the quarterly interest clause and disburse monthly interest to our customers,” a company official said. The company claims its “any-time banking” approach helped retain their customers and expand their footprints in other states. “Whether it is withdrawing money, operating locker, or getting a draft prepared, there are no restricted hours for banking activities,” the official added.
About Temasek
It’s a Singapore-govt holding With portfolios in diverse sectors including Singapore Airlines, Standard Chartered and the Alibaba Group. AU is 6th Indian Bank it has invested in. The firm also has a stake in Snapdeal.
Rs 712* AU Bank
Rs 390 Ujjivan Financial
Rs 150 Equitas Holdings
*Value per share/NSE
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