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ESAF Small Finance Bank IPO: Check Issue Size, Date and Price Band

03 Nov 2023

Introduction

The last small finance bank to make its debut in the secondary market was Utkarsh Small Finance Bank in July 2023. It provided stellar returns to investors by listing at around 52% premium. As we move into the penultimate month of this year, another small finance bank IPO – ESAF Small Finance Bank IPO – is set to hit the D-street on Friday, 3 November 2023.

ESAF Small Finance Bank is a well-known name in India’s banking sector. With its mission to promote financial inclusion and empower the less privileged, the bank has made a rich name for itself. Continue reading to explore the details of the ESAF Small Finance Bank IPO, including the issuing company’s financials, strengths, weaknesses, issue size, proposed listing date, and more.

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An Overview of ESAF Small Finance Bank

ESAF Small Finance Bank is a small banking and lending institution in India focusing on the unbanked or under-banked population, especially in rural areas. The bank’s product portfolio consists of debit cards, credit cards, mobile banking, microloans, MSME loans, retail loans, loans to financial institutions, and agricultural loans. The services are mainly concentrated in South India, specifically Tamil Nadu and Kerela.

As of 30 June 2023, ESAF Small Finance Bank boasts a robust network of 700 banking branches, 767 customer support centres, 22 business correspondents, 2116 banking agents, 525 business facilitators, and 559 ATMs. The services are accessible to over 7.15 million customers spread across 21 states and two union territories in India.

Key Strengths of the Company

ESAF Small Finance Bank has highlighted several strengths in its Draft Red Herring Prospectus (DRHP) filed with the Securities and Exchange Board of India (SEBI). They are as follows:

  • It has a deep understanding of its target group, i.e., the unbanked or under-banked population of India
  • It has emerged as one of the leading players in the microloan segment
  • Presence in both rural and semi-urban areas as a banking franchise
  • The technology-driven business model has accelerated growth and penetration
  • Boasts a rapidly growing retail deposit portfolio
  • Ability to retain most of its customers through customer-centric products and a robust support system

Key Risks or Weaknesses Highlighted

Below are the key risks or weaknesses associated with ESAF Small Finance Bank (as highlighted in the DRHP):

  • Business is highly concentrated in South India, particularly Kerela and Tamil Nadu. There is a need for geographic expansion of the business
  • It has to fulfil the regulatory requirements of the Reserve Bank of India (RBI). This impacts its ability to function independently
  • Non-Performing Asset (NPA) can be a headache. The inability to recover dues from customers can affect the revenue
  • Subject to risks associated with repo rate hikes and other policy changes by the RBI

Core Financials of the Company

Analyzing the financials of a company can give you an idea of its future growth potential. The table below portrays the key financials of ESAF Small Finance Bank IPO for the last three completed financial years. All details are as per the RHP dated 28 October 2023 on the SEBI website:

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

As you can see in the table above, the company has posted steady growth over the last three financial years. However, profits have been erratic mainly due to interest-rate fluctuations and NPAs. If the company can control the NPAs and focus on geographic expansion, it can be a force to reckon with in the upcoming years.

Details of the IPO

ESAF Small Finance Bank IPO will open for public subscription on Friday, 3 November 2023, and closes on Tuesday, 7 November 2023. The offering comprises a fresh issue of shares worth Rs. 390.70 crores and an offer for sale worth Rs. 72.30 crores. Refer to the table below for more IPO details:

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

To conclude

ESAF Small Finance Bank is a significant name in India’s banking sector. But before investing in its IPO, make sure you conduct thorough research and consult a financial advisor. Motilal Oswal facilitates seamless IPO investments through a 3-in-1 Demat account.

 

Related Articles:  How to Analyse an IPO | What is IPO Grading? | What is Cut Off Price In IPO Application 

 

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