ESAF Small Finance Bank IPO: ESAF Small Finance Bank’s initial public offering (IPO) commenced today, with the subscription period running until November 7. The price band for the IPO is set at ₹57 to ₹60 per equity share, and the lot size is 250 equity shares, with multiples of 250 thereafter. The IPO has reserved shares for various categories of investors, including Qualified Institutional Buyers (QIBs), Non-Institutional Investors (NIIs), and Retail Investors. Furthermore, eligible employees can avail a discount of ₹5 per equity share when participating in the employee reserve portion.
ESAF Small Finance Bank IPO: On November 2, the company raised ₹135.15 crores from anchor investors by allocating 2,25,24,998 equity shares at ₹60 per share. A mix of foreign and domestic institutions, such as BNP Paribas Arbitrage, Copthall Mauritius, and several insurance companies, participated in the anchor allocation.
The ESAF Small Finance Bank IPO comprises a fresh issuance of equity shares worth ₹390.7 crore by the company, in addition to an offer-for-sale (OFS) of equity shares worth ₹72.3 crore by three shareholders. The bank intends to raise ₹463 crore from the IPO.
In the OFS, promoter ESAF Financial Holdings will sell shares valued at ₹49.26 crore, while PNB MetLife India Insurance Company and Bajaj Allianz Life Insurance Company will offload shares worth ₹23.04 crore. The net proceeds from the fresh issue are slated for enhancing the Tier-I capital base to meet future capital requirements.
The book-running lead managers for the ESAF Small Finance Bank IPO include ICICI Securities, DAM Capital Advisors, and Nuvama Wealth Management. The IPO registrar is Link Intime India.
As of 13:06 IST on the first day, the ESAF Small Finance Bank IPO has garnered 1.74 times subscription. The retail investors portion has been subscribed 1.98 times, the NII portion 2.44 times, and the QIB portion 90%. Additionally, the employee portion witnessed a subscription of 1.01 times, according to data available at BSE.
The tentative listing date for ESAF Small Finance Bank is November 16, with the IPO allotment date set for November 10, subject to any changes based on the adoption of T+3 norms.
The gray market premium (GMP) for the ESAF Small Finance Bank IPO is currently at +22, similar to the previous session. This suggests that the shares are trading at a premium of ₹22 in the gray market, indicating a potential listing price of ₹82 per share, which is 36.67% higher than the IPO price of ₹60.
In an IPO review by BP Equities Pvt Ltd, the brokerage highlighted that the market presents a significant opportunity for small finance banks (SFBs), especially those with a background in microfinance. ESAF Small Finance Bank, the fifth-largest SFB in India by AUM as of June 30, 2023, has demonstrated rapid growth with the highest AUM CAGR of 39% over the FY2021-23 period. The bank boasts a strong capital adequacy ratio of 20.6% as of June 30, 2023, and the best asset quality among comparable peers in the market as of the same date.
LKP Securities Ltd: “At the higher price band of ₹60, the stock is valued at 1.46 times the Price to Book Value per Share (P/BVPS) with a current book value per share of ₹40.92. Given the impressive return ratios and the fiscal year 2023 Return on Assets (ROA) and Return on Equity (ROE) of 1.6% and 19.4% respectively, we believe that ESAF Small Finance Bank Limited is a compelling investment. Therefore, we recommend a ‘Subscribe’ rating.”
BP Equities Pvt Ltd: “Based on our analysis, as of June 30, 2023, ESAF Small Finance Bank had the strongest asset quality among its peers, with a capital adequacy ratio of 20.6%. This ratio, which assesses capital in relation to risk-weighted assets and current liabilities, will be further improved by the use of the net proceeds from the fresh equity share issue to reinforce its Tier-I capital base. With the current Price to Book Value (P/BV) multiple of 1.6x, we believe the company is attractively valued and recommend investors to ‘Subscribe’ from a medium to long-term perspective.”
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