ESAF Small Finance Bank IPO Review - Issue Date, Price, GMP, Subscription, Allotment, Lot Size, and Details

The ESAF Small Finance Bank IPO, valued at Rs 463.00 crores, comprises a fresh issue of 6.51 crore shares worth Rs 390.70 crores and an offer for sale of 1.2 crore shares totaling Rs 72.30 crores.

The bidding phase for ESAF Small Finance Bank IPO commenced on November 3, 2023, concluding on November 7, 2023. Final allotment results were determined by November 8, 2023. Subsequently, the shares were officially listed on both the BSE and NSE exchanges on November 10, 2023.

The price band for ESAF Small Finance Bank IPO ranges from ₹57 to ₹60 per share. Retail investors need to invest a minimum of ₹15,000, with a minimum lot size of 250 shares per application. For sNII, the minimum investment is ₹210,000, equivalent to 14 lots (3,500 shares), while for bNII, it is ₹1,005,000, corresponding to 67 lots (16,750 shares).

The matter involves setting aside a maximum of 2,283,653 shares for employees, with an offer price discounted by Rs 5 compared to the issue price. ICICI Securities Limited, Dam Capital Advisors Ltd (formerly known as Idfc Securities Ltd), and Nuvama Wealth Management Limited serve as the book running lead managers for the ESAF Small Finance Bank IPO. Meanwhile, Link Intime India Private Ltd has been appointed as the registrar for the issue.

Objective of IPO.

Offer For Sale”: - Rs. 72 Cr.

Fresh Issue”: - Rs. 390.7 Cr.

The Net Proceeds are proposed to be utilized towards augmentation of the Bank's Tier-I capital base to meet the Bank's future capital requirements which are expected to arise out of growth in the Bank's assets, primarily the Bank's loans/advances and investment portfolio and to ensure compliance with regulatory requirements on capital adequacy prescribed by the RBI from time to time.

ESAF Small Finance Bank IPO Details

IPO Date November 03, 2023 to November 07, 2023
Listing Date November 10, 2023
Face Value 10
Price 57-60
Lot Size 250 shares
Total Issue Size 463
Fresh Issue 65,116,667 shares (aggregating up to ₹390.70 Cr)
Offer for Sale 12,050,000 shares of ₹10 (aggregating up to ₹72.30 Cr)
Issue Type Book Built Issue IPO
Listing At NSE, BSE
Share holding pre issue 449,473,798
Share holding post issue 514,779,858

ESAF Small Finance Bank IPO Lot Size

Application Lots Shares Amount
Retail (Min) 1 250 ₹15,000
Retail (Max) 13 3250 ₹195,000
S-HNI (Min) 14 3,500 ₹210,000
S-HNI (Max) 66 16,500 ₹990,000
B-HNI (Min) 67 16,750 ₹1,005,000

ESAF Small Finance Bank IPO Timeline (Tentative Schedule)

IPO Open Date Friday, November 3, 2023
IPO Close Date Tuesday, November 7, 2023
Basis of Allotment Wednesday, November 8, 2023
Initiation of Refunds Wednesday, November 8, 2023
Credit of Shares to Demat Thursday, November 9, 2023
Listing Date Friday, November 10, 2023
Cut-off time for UPI mandate confirmation 5 PM on November 7, 2023

ESAF Small Finance Bank IPO Reservation

Investor Category Shares Offered Reservation %
Anchor Investor Shares Offered 22,524,998 (29.11%) NA
QIB Shares Offered 15,016,669 (19.41%) N/A
NII (HNI) Shares Offered 11,262,500 (14.56%)
bNII > ₹10L 7,508,333 (9.70%) 2,145
sNII < ₹10L 3,754,167 (4.85%) 1,072
Retail Shares Offered 26,279,167 (33.97%) 105,116
Employee Shares Offered 2,283,653 (2.95%) N/A
otal Shares Offered 77,366,987 (100%)

ESAF Small Finance Bank IPO Promoter Holding

Share Holding Pre Issue 74%
Share Holding Post Issue 59%

ESAF Small Finance Bank IPO Subscription Status

Investor Category Shares Offered Shares Bid For No oF Times Subscribed

About ESAF Small Finance Bank Limited

A small finance bank with a focus on unbanked and under-banked customer segments with network of 700 banking outlets (including 59 business correspondent-operated banking outlets), 767 customer service centers (which are operated by our business correspondents), 22 business correspondents, 2,116 banking agents, 525 business facilitators and 559 ATMs spread across 21 states and two union territories, serving 7.15 million customers as at June 30, 2023

Primary products

Advances (asset products): - (a) Micro Loans, which comprises Microfinance Loans and Other Micro Loans; (b) retail loans, which includes gold loans, mortgages, personal loans, and vehicle loans; (c) MSME loans; (d) loans to financial institutions; and (e) agricultural loans.

Deposits (liability products): - Our liability products comprise current accounts, savings accounts, term deposits and recurring deposits.

Services: - safety deposit lockers, foreign currency exchange, giving our customers access to the Bharat Bill Payment System, money transfer services and Aadhaar Seva Kendra services distribution of third-party life and general insurance policies and Government pension products.

The “ESAF” brand was built over 27+ years, beginning in 1995 when ESAF Foundation started its micro loan activities. After acquiring the busine ss of EFHPL, the company has been able to leverage the strength of the “ESAF” brand to grow deposits as a small finance bank on March 10, 2017.

Milestone:

  • Successful adoption of e-signatures for Micro Loan disbursals.
  • Digital platforms,
  • Internet banking portal
  • Mobile banking platform
  • SMS alerts
  • Bill payments
  • RuPay branded ATM cum debit cards
  • Digitalizing Account opening process.

In order to promote financial inclusion, the Indian banking industry has seen several changes in recent years. NBFCs, such as Bandhan and IDFC, received permission to set up universal banks. Also, a few microfinance companies, a local area banks and an NBFC as well as one urban co-operating bank have received permission to set up small finance banks (SFBs). The RBI awarded SFB licences to 12 players keeping in with the government’s focus on financial inclusion and inclusive banking.

The SFB’ AUM is estimated to have clocked 29% CAGR from March 31, 2018 to June 30, 2023. Top 3 SFBs accounted for ~60% of the aggregate AUM as of June 30, 2023, up from 55% as of March 31, 2017 indicating the rising concentration and expansion of players within the SFBs. In Fiscals 2021 and 2022, new loan origination remained low as SFBs turned cautious and selective in disbursals due to the pandemic. However, as economy revived and business operations normalised, SFBs’ AUM witnessed strong growth post pandemic. As of June 30, 2023, SFB AUM is estimated to have crossed ₹1,900 billion. It is expected that SFB’s AUM to grow at ~22-24% CAGR between June 30, 2023 and March 31, 2025, as most of the SFBs have completed the transition phase and are likely to benefit from their operating leverage.

SFBs have a significant growth potential as most of them were functioning as NBFCs/MFIs previously. Immediately after commencement of their operation, all SFBs focused on increasing their deposit base.

Their overall deposit base doubled to around ₹375 billion as of March 31, 2019. Further, the proportion of CASA deposits is estimated to have shot up from nearly ~20% as of March 31, 2020 to ~36% as of June 30, 2023. The increase could be attributed to the higher interest rates they offer and the increase in their branch network. SFBs’ deposit to grow at 40-45% CAGR over June 2023 and March 2025 as players focus on popularizing convenient banking habits to cover the last mile and widen financial inclusion by deepening their penetration in untapped geographies.

Risk Analysis.

  1. The company does not have presence in top 10 states for Microfinance Loans advances under management (Bihar, Uttar Pradesh, West Bengal, Odisha or Rajasthan) and most underpenetrated states (Jammu and Kashmir, Himachal Pradesh, and Manipur).
  2. The company is required to maintain a minimum cash reserve ratio & statutory liquidity ratio.
  3. non-convertible debentures are listed on Bombay Stock Exchange Limited (BSE)
  4. The company faces challenges in our rural–focused Microfinance Loan business, including the high cost of reaching customers, potential customers’ lack of financial and product awareness and vulnerability of household’s income to local developments, which could adversely affect our business, financial condition, results of operations and cash flows.
  5. The company is subject to stringent regulatory requirements and prudential norms.
  6. As at June 30, 2023 and March 31, 2023, 2022 and 2021, current accounts and savings accounts (“CASA”) ratio to total deposits (“CASA Ratio”) was 18.22%, 21.39%, 22.84% and 19.42%, respectively,
  7. As of June 30, 2023, and March 31, 2023, as well as in 2022 and 2021, 74.70%, 75.04%, 81.16%, and 84.80%, respectively, of the total advances managed by ESAF Small Finance Bank consisted of microloans. A decrease in demand for these microloans could potentially have a negative impact on the bank's business, financial health, and cash flows.
  8. As of June 30, 2023, and March 31, 2023, 2022, and 2021, 75.15%, 75.35%, 83.59%, and 85.50% of the advances were unsecured. If the bank cannot recover these advances promptly, it may adversely affect its financial condition, results, and cash flow.
  9. ESAF Small Finance Bank primarily operates in South India, specifically in Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Telangana, and the Union Territory of Puducherry. Any negative changes in the economy of South India could adversely affect the bank's financial situation and cash flows.
  10. As of March 31, 2023, the bank failed to meet 17 of the 272 Risk-Based Supervision (RBS) Tranche III requirements. Penalties imposed by the Reserve Bank of India (RBI) for this noncompliance could harm the bank's reputation, financial condition, and cash flows.
  11. Additionally, two of the bank's selling shareholders, PNB MetLife and Bajaj Allianz, have faced orders and penalties from the Insurance Regulatory and Development Authority of India (IRDAI) and the Securities and Exchange Board of India (SEBI).
  12. The bank must establish a reserve fund by transferring at least 25% of the annual profit disclosed in the profit and loss account before declaring any dividends.
  13. As of June 30, 2023, and March 31, 2023, 2022 and 2021, the gross non-performing advances (NPAs) as a percentage of gross advances were 1.65%, 2.49%, 7.83%, and 6.70%, respectively. Ineffective control over the level of gross NPAs or an inability to improve the Provision Coverage Ratio could adversely affect the bank's business, financial condition, and cash flows.
  14. The bank, along with its promoters, is involved in several significant legal proceedings, including 862 criminal proceedings, with a total amount involved of Rs. 7.89 crores. Any unfavorable developments in these cases could potentially harm the bank's reputation, business, and cash flow.

ESAF Small Finance Bank Limited Financial Information (Restated Consolidated)

Amount in (Rs. Crore)

Period Ended 30 Jun 2023 31 Mar 2023 31 Mar 2022 31 Mar 2021
Reserve of Surplus 1,389.62 1,259.66 957.32 902.59
Total Assets 20,795.94 20,223.66 17,707.56 12,338.65
Total Borrowings 2,739.13 3,354.20 2,952.83 1,694.00
Fixed Assets 187.256 187.927 159.475 138.512
Cash 886.814 767.049 1511.904 1819.126
Net Borrowing 1852.311 2587.146 1440.929 -125.126
Revenue 991.78 3,141.57 2,147.51 1,768.42
EBITDA - - - -
PAT 129.96 302.33 54.73 105.40
EPS 2.89 6.73 1.22 2.46

Key Performance Indicator

KPI Values
EPS Pre IPO (Rs.) 6.73
EPS Post IPO (Rs.) -
P/E Pre IPO 8.94
P/E Post IPO 5.94
ROE -
ROCE -
P/BV -
Debt/Equity -
RoNW 17.69%

ESAF Small Finance Bank Limited IPO Peer Comparison

Company Name EPS ROCE ROE P/E (x) P/Bv Debt/Equity RoNW (%)
Suryoday Small Finance Bank Ltd 18.3 9.30% 5.03% 8.80 1.07 5.01 9.30%
CreditAccess Grameen Ltd 85.3 12.1% 17.8% 16.7 3.87 3.05 12.1%
Spandana Sphoorty Financial Ltd 65 5.97% 0.41% 12.6 1.76 2.28 5.97%
Bandhan Bank Ltd 18.5 6.67% 11.9% 9.79 1.5 6.78 6.67%
Ujjivan Small Finance Bank Ltd 6.45 10.6% 33.3% 6.97 2.22 7.08 10.6%
Equitas Small Finance Bank Ltd 6.98 8.04% 12.2% 13.5 2.01 5.50 8.04%
ESAF Small Finance Bank Limited 6.73 - - 8.94 - - 17.69%
ESAF Small Finance Bank Limited Contact Details

ESAF Small Finance Bank Limited
Building No. VII/83/8,
ESAF Bhavan, Thrissur-Palakkad National Highway,
Mannuthy, Thrissur 680 651
Phone: +91 487 7123 907
Email: investor.relations@esafbank.com
Websitehttps://www.esafbank.com/

ESAF Small Finance Bank IPO Registrar and Lead Manager(s)

Link Intime India Pvt. Ltd.

Address: C - 101,  1st Floor,  247  Park  L.B.S. Marg,  Vikhroli  West, 

Mumbai  400 083, Maharashtra, India

Phone: +91-22-4918 6270
Email: esaf.ipo@damcapital.in
Websitehttps://linkintime.co.in/initial_offer/public-issues.html

ESAF Small Finance Bank IPO Review

ESAF Small Finance Bank Ltd. (ESFBL) targets unbanked and under-banked customers, focusing on rural and semi-urban areas. As of June 30, 2023, 62.97% of its advances and 71.71% of its outlets were in these areas. Financially, it showed a mixed performance over the past three years, with a notable increase in FY23. Q1 FY24 saw a net profit of Rs. 129.96 cr. The IPO is priced attractively at a P/BV of 1.47 based on NAV of Rs. 40.92. No dividends were declared. ESFBL, known for its southern presence, offers potential for medium to long-term rewards, appealing to investors.

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