IPO Synopsis
IPO synopsis:
ESAF Small Finance Bank filed its DRHP worth Rs.997.78 crore with SEBI. The IPO consists of a fresh issue worth Rs.800 crore and an offer for sale worth around Rs.197.78 crore by its various shareholders. In the OFS, PNB Metlife will offload shares worth Rs.21.33 crore, Bajaj Allianz Life will offload shares worth Rs.17.46 crore, the promoter will offload shares worth Rs.150 crore and PI Ventures is planning on selling shares worth Rs.8.73 crore while John Chakola will offload shares worth Rs.26 lakh. The company is also considering a pre-IPO placement of Rs.300 crore, which will reduce the same amount from the fresh issue.
The book running lead managers to the issue are Axis Capital, Edelweiss Financial Services, IIFL Securities and ICICI Securities. The net proceeds are to be used for augmentation of bank’s Tier-I capital base in order to meet the bank’s future capital requirements. The promoters of the bank are ESAF Financial Holdings and Kadambelil Paul Thomas, who hold a 69.40% stake in the bank, currently.
About ESAF Small Finance Bank Ltd
Incorporated in 2016 in Thrissur, ESAF Small Finance Bank is one of the leading small finance bank in terms of AUM CAGR, client base etc. Along with serving the underserved and unserved population, ESAF also distributes third party life and general insurance, government pension products, serves NRI customers by offering NRE and NRO bank accounts. NRI deposits were brought into operation in June 2018 and the total deposits from NRIs stood at 16.98% and 10.83% at 30 September 2019 and 31 March 2019, respectively.
As of November 30, 2019, the bank has 403 branches, 38 ultra small branches and they serve around 3.73 million customers. And as of 31 May 2021, the bank had 550 branches, 327 ATMs, 421 customer service centres, 12 business correspondents and 158 banking agents, spread across 21 states and 2 union territories. The amount of customers served also increased to 4.68 million customers.
ESAF Small Finance Bank Ltd Financial Status
Financials:
|
Particulars (In Rs cr) |
Q2 ended 30 September, 2019 |
FY19 |
FY18 |
FY17 |
|
Total Income |
728.87 |
1140.78 |
698.69 |
48.21 |
|
PAT |
92.44 |
24.06 |
90.28 |
26.99 |
|
EPS |
2.16 |
2.37 |
0.89 |
0.07 |
|
Particulars (In Rs cr) |
Q2 ended 30 September, 2019 |
FY19 |
FY18 |
FY17 |
|
Total Assets |
8554.5 |
7058.4 |
4725.3 |
2937.71 |
|
Total Borrowings |
1337.49 |
1702.36 |
1674.65 |
2052.84 |
|
Equity Share Capital |
427.79 |
427.79 |
311.94 |
301.56 |
|
Particulars (In Rs cr) |
Q2 ended 30 September, 2019 |
Q2 ended 30 September, 2018 |
FY19 |
FY18 |
|
Interest earned |
660.68 |
472.25 |
1031.63 |
596.83 |
|
Net Profit |
92.44 |
24.06 |
90.28 |
26.99 |
|
Provisions and Contingencies |
60.362 |
94.09 |
138.83 |
50.6 |
|
Operating profit |
152.8 |
181.15 |
229.1 |
77.6 |
|
ROE % |
9.85 |
4.78 |
13.86 |
9.33 |
|
ROA % |
1.17 |
0.45 |
1.52 |
0.73 |
|
Average Total Assets |
7868.45 |
5391.55 |
5947.79 |
3700.3 |
Peer comparison:
|
Bank |
RoE |
Total Income (In Rs bn) |
PAT |
Capital Adequacy ratio |
GNPA % |
|
AU SFB |
22.30% |
57.5 |
1,171 |
23.40% |
2.70% |
|
Equitas SFB |
12.70% |
36.1 |
384.2 |
24.20% |
3.70% |
|
Ujjivan SFB |
0.30% |
31.2 |
8.3 |
26.40% |
7.00% |
|
Jana SFB |
7.80% |
27.3 |
84.3 |
19.30% |
- |
|
Utkarsh SFB |
9.40% |
17.3 |
111.8 |
21.90% |
3.70% |
|
ESAF SFB |
8.70% |
17.7 |
105.4 |
24.20% |
6.70% |
|
Fincare SFB |
11.80% |
13.8 |
113.1 |
29.50% |
3.46% |
|
Capital SFB |
9.50% |
5.6 |
40.8 |
19.80% |
2.08% |
|
Suryoday SFB |
0.90% |
8.8 |
11.9 |
51.50% |
9.40% |
|
North East SFB |
1.90% |
3.1 |
7.2 |
21.22% |
11.58% |
The Key points are-
IPO Key Points
-
Strengths
1. The company is very experienced in the microfinance segment and their roots can be traced back to 1995, and this has allowed them to further expand their business outside of Kerela
2. Even during the pandemic, the bank maintained a collection efficiency of 94% which is remarkable
3. The company has a strong rural and semi-urban presence and they have devoted their time and effort in order to understand the households in those regions and provide better services to them
4. They have the fastest growing retail deposits. It accounted for 95.11% of the total deposits of the bank
-
Risks
1. A large share of the advances given are unsecured in nature and if the bank is not able to recover these advances in time or at all, then the financials of the company will be adversely affected
2. An increase in the operating income without a proportionate increase in the total income by the bank will negatively affect the cash flows of the bank
3. If the independent business correspondents are promoting the competitor’s microfinance loans of the competitors of ESAF small finance bank, there is nothing that the bank can do against that but it will effect the operations and financials of the bank
4. If the level of NPAs increase beyond the provisioning coverage, and the provisions cannot be increased further, it will materially affect the operations of the bank
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-
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