Utkarsh Small Finance Bank IPO: All You Need To Know
Utkarsh Small Finance Bank is looking to raise up to a total of Rs 500 crore via the issuance of fresh equity shares.
Utkarsh Small Finance Bank Ltd. will launch its initial public offering on Wednesday and the offer will remain open till Friday.
The private lender is looking at raising up to a total of Rs 500 crore via issue of fresh equity shares. Utkarsh Small Finance Bank's IPO involves no offer for sale from existing investors.
Issue Details
Issue opens: July 12.
Issue closes: July 14.
Total issue size: Up to Rs 500 crore.
Face value: Rs 10 per equity share.
Offer for sale: Nil.
Price band: Rs 23-25.
Lot size: 600 equity shares.
Listing: NSE, BSE.
Shareholding Pattern
Utkarsh Small Finance Bank's promoter entity—Utkarsh CoreInvest Ltd.—owns 84.75% of the total pre-issue paid-up equity share capital in the bank.
The shareholding includes one equity share each held by Govind Singh, Revati Govind Singh, Trilok Nath Shukla, Ashwani Kumar, Rahul Dey and Raghvendra Singh, as nominees on behalf of the bank's promoter entity.
As of July 6, the top 10 shareholders in the promoter entity were as follows:
Business
Utkarsh Small Finance Bank's promoter entity—Utkarsh CoreInvest—commenced operations as an NBFC in FY10, focused around providing micro loans to borrowers in Uttar Pradesh and Bihar.
The promoter entity received the Reserve Bank of India's in-principle nod to establish a small finance bank in FY16, following which it incorporated Utkarsh Small Finance Bank as a wholly-owned subsidiary on April 30, 2016.
Headquartered in Varanasi, the bank held a loan book of Rs 13,957 crore as of FY23 and had a deposit base of Rs 13,710 crore during the same period. The lender's gross non-performing asset ratio stood at 3.23% as of FY23 and the net NPA ratio was 0.39%.
The bank offers micro loans, including joint liability group loans and individual loans. It also offers retail unsecured loans—such as business loans and personal loans—and loans against property.
Other loans offered by the bank include:
Short-term and long-term loan facilities to small and medium enterprises, mid and large corporates and institutional clients.
Housing loans with a focus on affordable housing.
Commercial vehicle and construction equipment loans.
Gold loans.
The bank's net profit for FY23 stood at Rs 404 crore, which is a substantial rise from its FY22 figure of Rs 61 crore. In FY21, the bank's net profit was Rs 111.8 crore.
Use Of Proceeds
According to the RBI regulations, SFBs are required to list their equity shares on stock exchanges within three years of reaching a net worth of Rs 500 crore.
Utkarsh Small Finance Bank has proposed to utilise the net proceeds from the IPO towards augmenting its tier–1 capital base in order to meet its future capital requirements. The proceeds will also be used towards meeting the expenses incurred for the IPO.
Peer Comparison
Utkarsh Small Finance Bank's publicly listed peers include AU Small Finance Bank, Ujjivan Small Finance Bank, Equitas Small Finance Bank and Suryoday Small Finance Bank.
A comparison of Utkarsh Small Finance Bank's financials with some of its listed peers is as follows:
Risk Factors
Some of the risk factors enumerated by Utkarsh Small Finance Bank in its red herring prospectus include:
With about 31% of its gross loan portfolio concentrated in Uttar Pradesh and 26% in Bihar, Utkarsh Small Finance Bank's business could be negatively impacted by a regional economic slowdown or natural calamity.
The bank is dependent on a limited number of customers for a substantial portion of its deposits. The top 20 account for over 21% of its deposit base as of March 2023.
At over Rs 2 crore, the bank’s bulk deposits alone accounted for 48.6% of its overall deposit base.
In the preceding year from the date of the red herring prospectus, the bank had issued equity shares at a price that may be lower than the issue price.
A majority of the bank's loans—including its micro-banking loan portfolio—are unsecured and not supported by any collateral. Availability of collateral may have helped ensure repayment of the loans. Unsecured loans accounted for nearly 67% of the bank's portfolio as of March 2023.
