Akash Jha
Introduction
The last small finance bank to make its debut on the secondary market was Utkarsh Small Finance Bank in July 2023. By listing at a premium of roughly 52%, it generated spectacular returns for its backers. Another small finance bank IPO, ESAF Small Finance Bank IPO, will hit the D-street on Friday, 3 November 2023 as we enter the penultimate month of this year.
A household name in the banking industry of India is ESAF Small Finance Bank. The bank has become well-known for its commitment to helping the underprivileged gain access to banking services. Explore the financials, strengths, weaknesses, issue size, projected listing date, and other facts of the ESAF Small Finance Bank IPO by reading on.
An Overview of ESAF Small Finance Bank
ESAF Small Finance Bank is a microfinance institution in India that caters to the needs of the country’s rural poor who lack access to traditional banking services. Debit cards, credit cards, mobile banking, microloans, MSME loans, retail loans, financial institution loans, and agricultural loans are all part of the bank’s offerings. South India, particularly the states of Tamil Nadu and Kerela, is where the majority of these services are provided.
As of 30 June 2023, ESAF Small Finance Bank has an extensive branch and ATM network consisting of 700 locations. Additionally, the bank has 767 customer care centers, 22 business correspondents, 2116 banking agents, 525 business facilitators, and 559 automated teller machines. More than 7.15 million Indians in 21 states and 2 union territories can take advantage of the service.
Key Strengths of the Company
ESAF Small Finance Bank identified many positives in its Draft Red Herring Prospectus (DRHP) filed with the Securities and Exchange Board of India (SEBI). They are as follows:
- It has a thorough understanding of its target audience, which is India’s unbanked or underbanked populace.
- It has emerged as a key player in the microloan market.
- Banking franchise presence in both rural and semi-urban locations
- The technology-driven business model has boosted expansion and penetration.
- With customer-centric products and a strong support system, it is able to keep the majority of its clients.
Key Risks or Weaknesses Highlighted
ESAF Small Finance Bank has the following risks or vulnerabilities (as mentioned in the DRHP):
- Most of India’s economic activity is located in the southern states of Kerala and Tamil Nadu. The company needs to expand into new areas.
- The Reserve Bank of India (RBI) mandates its compliance. This compromises its capability to operate on its own.
- Non-Performing Asset (NPA) can be a problem. Loss of income owing to unpaid bills from clients.
- Repo rate rises and other policy moves by the RBI carry risks.
Core Financials of the Compan
The financials of a business can be examined for clues as to how successful it will be in the future. Here are the headline numbers for the last three full fiscal years at ESAF Small Finance Bank IPO. Information is as published on the SEBI website in the RHP dated October 28, 2023:
| Particulars | Three-month Period Ended June 30, 2023 | As of and for FY Ended March 31 | ||
| 2023 | 2022 | 2021 | ||
| Share Capital | 449 | 449 | 449 | 449 |
| Net Worth | 1,839 | 1,709 | 1,407 | 1,352 |
| Assets Under Management | 17,204 | 16,331 | 12.341 | 8,426 |
| Total Income | 992 | 3,142 | 2,148 | 1,768 |
| Net Interest Income | 585 | 1,836 | 1,147 | 922 |
| Profit After Tax | 130 | 302 | 55 | 105 |
| Net Interest Margins | 3.10% | 11% | 9% | 9% |
| Net NPA | 0.80% | 1.10% | 3.90% | 3.90% |
| Earnings Per Share (Diluted) | 2.9 | 6.7 | 1.2 | 2.5 |
| Return on Average Assets | 0.6 | 1.6 | 0.4 | 1 |
*Amount in Crores
The accompanying table shows that the company has had consistent growth over the past three fiscal years. Income, however, has been highly inconsistent on account of interest rate swings and nonperforming assets. In the coming years, the company will be a major player if it can keep its NPAs under control and expand into new markets.
Details of the IPO
On Friday, November 3, 2023, the public subscription period for shares of ESAF Small Finance Bank will commence, and on Tuesday, November 7, 2023, it will close. There would be a new share issue of Rs. 390.70 cr and a secondary sale of Rs. 72.30 cr in this transaction. Details about the IPO are listed in the table below.
| IPO Date | 3 November to 7 November 2023 |
| Basis of Allotment | 10-Nov-23 |
| Listing Date | 16-Nov-23 |
| Face Value | Rs. 10 per share |
| Price Band | Rs. 57 to Rs. 60 |
| Lot Size | 250 shares |
| Total Issue Size | Rs. 463 crores |
| Offer for Sale | Rs. 72.30 crores |
| Fresh Issue | Rs. 390.70 crores |
| Listing At | NSE, BSE |
Also read :- Top Stock Picks: Diwali Muhurat Trading 2023
To conclude
In India, ESAF Small Finance Bank is a household name. But before investing in an IPO, make sure you undertake thorough research and consult a financial expert.
