Utkarsh Small Finance Bank IPO: All you need to know
Utkarsh Small Finance Bank IPO: All you need to know
Utkarsh Small Finance Bank plans to launch its Initial Public Offer (IPO) which will be available for subscription from 12 to 14th July 2023. It is looking to raise Rs 500 crores from the primary market.
Utkarsh Small Finance Bank Overview:
Utkarsh Core Invest Limited formed Utkarsh Small Finance Bank (SFB) Limited as a fully-owned subsidiary on April 30, 2016. The newly formed SFB experienced remarkable growth in its Assets Under Management (AUM) in Fiscal 2019 and Fiscal 2022. Among SFBs with AUM exceeding Rs. 50 billion, Utkarsh recorded the second-fastest growth rate, showcasing its rapid expansion in a relatively short period.
As of FY23, the bank boasted a network of 830 Banking Outlets across 26 States and Union Territories in India, covering 253 districts.
The company provides a wide range of products and services:
- Housing loans with a focus on affordable housing.
- Retail loans, consist of unsecured loans like personal and business loans, as well as secured loans such as loans against property.
- Wholesale lending, offering both long-term and short-term loan facilities to SMEs, medium and large corporates, and institutional clients.
- Micro-banking loans, which encompass individual loans and joint liability group loans.
- Gold loans.
- Commercial construction and vehicle equipment loans.
Banking Industry overview:
The Indian banking industry has witnessed various changes in recent years to promote financial inclusion. In line with the government's emphasis on financial inclusion and inclusive banking, the Reserve Bank of India (RBI) granted Small Finance Bank (SFB) licenses to 12 entities. SFBs primarily target the low-income segment and offer a comprehensive suite of products tailored to their needs. Unlike Non-Banking Financial Companies (NBFCs) that focus on specific products, SFBs have the opportunity to expand both vertically and horizontally. From Fiscal 2016 to 2022, small finance banks' Assets Under Management (AUM) achieved a compound annual growth rate (CAGR) of 26%.
Utkarsh Small Finance Bank IPO Details:
Utkarsh Small Finance Bank has set the price range for its upcoming initial public offering (IPO) at Rs 23-25 per share.
|Issue Price||Rs 23-25 Per Share|
|Lot Size:||600 Shares|
|Opening Date||July 12th, 2023|
|Closing Date||July 14th, 2023|
|Bases of Allotment||July 19th, 2023|
|Listing Date||July 24th, 2023|
|Utkarsh Small Finance Bank IPO Reservation|
|Qualified Institutional Buyers||Not less than 75% of the offer|
|Non Institutional Investors||15% of the Net Issue|
|Retail Share Offer||10% of the Net Issue|
(Source : DRHP)
ICICI Securities and Kotak Mahindra Capital Company have been appointed as the book-running lead managers for the Utkarsh Small Finance Bank IPO, while Kfin Technologies will serve as the registrar to the issue. The shares of the bank are expected to be listed on both the BSE and NSE, with a tentative listing date of July 24, which falls on a Monday.
Objective of issue:
The bank plans to utilize the net proceeds from the IPO for the following objectives:
- Strengthening its Tier-1 capital base to fulfill future capital requirements.
- Covering the expenses associated with the issuance process.
|Particulars||31st March 2023 (Rs, in million)||31st March 2022 (Rs, in million)|
|Reserves and Surplus||11,044||6,768|
The deposits have increased from Rs 100,741.83 Million in March 2022 to Rs 137,101.40 Million in March 2023, which has shown a significant increase of 36.09%.
Similarly, advances of the bank have also increased from Rs 102,281.47 million in March 2022 to Rs 130,687.65 million in March 2023, with a significant increase of 27.77% indicating high-interest income for the bank and growth in the overall performance of the bank.
In terms of revenue, the bank has experienced a significant growth in total revenue, rising from Rs. 20,336.46 million in FY22 to Rs. 28,042.86 million in FY23, with a significant increase of 38%. Moreover, the bank's Net profits have also seen a notable increase, going up from Rs. 614.62 million in FY22 to Rs. 4045.02 million in FY23, with a significant increase of 558% over the past year.
|Key Performance Indicator||Value|
|Earnings Per Share (ESP)||4.52|
|Return on Net Worth||20.22%|
Strengths of the Utkarsh Small Finance Bank:
- The bank possesses a deep comprehension of the microfinance sector and boasts a robust presence in rural and semi-urban areas.
- Utkarsh SFB with operations across 26 states and Union Territories with 830 banking outlets and 15,424 employees as of March 2023 had a 3.59 million customer base majorly located in rural and semi-urban areas primarily in Bihar and Uttar Pradesh.
- The bank has implemented a superior risk management system and maintains a high standard of asset quality.
- One of the notable strengths of the bank lies in its ability to provide products and services at an affordable cost. In Fiscal 2023, the bank achieved the lowest cost-to-income ratio among small finance banks with a Gross Loan Portfolio exceeding 60 billion.
- Utkarsh Core Invest Limited, the company's promoter, has secured investments from several institutional investors, such as British International Investment PLC, RBL Bank Limited, HDFC Life Insurance Company Limited, and HDFC Ergo General Insurance Company Limited. These partnerships are expected to enhance the bank's credibility and reputation.
Risk of Utkarsh Small Finance Bank:
- Compliance with extensive regulations is crucial for Utkarsh Small Finance Bank as any failure to adhere to them can have negative implications on the bank's business and operations.
- The bank's net interest margins could be adversely impacted if there is volatility in interest rates or if the bank is unable to effectively manage interest rate risk.
- The customers of the bank are concentrated in the states of Bihar and UP.
Competitors of Utkarsh Small Finance Bank:
Utkarsh SFB and other players end of fiscal year 2022:
What is Utkarsh SFB Ltd’s Initial Public Offering?
Utkarsh Small Finance Bank has filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for an initial public offering (IPO) worth over Rs. 500 crore. The IPO will consist of 200 million fresh equity shares, each valued at Rs. 2.50.
What will be the IPO lot size for Utkarsh Small Finance Bank?
Each lot of Utkarsh Small Finance Bank Limited's initial public offering (IPO) consists of 600 shares. This means that investors who want to participate in the IPO must buy a minimum of 600 shares.
When will allotments for the Utkarsh Small Finance Bank Limited IPO become available?
The allotment of Utkarsh Small Finance Bank Limited's initial public offering (IPO) will be finalized by Wednesday, July 19, 2023. This means that investors will know by Wednesday whether or not they have been allotted shares in the IPO.
Which exchanges will Utkarsh Small Finance Bank Limited list on?
Utkarsh Small Finance Bank Limited shares will be listed on both BSE as well as the National Stock Exchange (NSE).
How will I get my Utkarsh Small Finance Bank Limited stock?
Following allotment, the Utkarsh Small Finance Bank Limited shares will be credited to the Demat account.
Can I use one PAN to submit multiple applications for the public issue of Utkarsh Small Finance Bank Limited?
You cannot use the same PAN number to make multiple applications for an initial public offering (IPO). This is a rule set by the Securities and Exchange Board of India (SEBI) to ensure that the allotment of shares is done in a fair and transparent manner.
Is it necessary to give immediate approval to a UPI mandate request?
It is best to approve a UPI mandate request as soon as you receive it. This will ensure that your funds are blocked for the IPO application and that you are eligible to participate in the IPO. If you do not approve the mandate request, your funds will not be blocked and you will not be able to participate in the IPO.
Who owns Utkarsh Small Finance Bank Limited?
Govind Singh is the Managing Director and CEO of Utkarsh Small Finance Bank Limited. He is also the founder of the bank.
What are the expected listing gains for the Utkarsh Small Finance Bank Limited IPO?
The listing gains of an IPO are difficult to predict, but there are a few factors that can influence them. These include:
- The overall market sentiment on the day of listing.
- The demand and supply of the shares in the secondary market.
- The interest of high-net-worth investors (HNIs).
If the market is bullish on the day of listing, the shares of the IPO are likely to be listed at a premium. However, if the market is bearish, the shares may be listed at a discount.