IPO Synopsis
IPO Synopsis
Utkarsh Small Finance Bank has filed a DRHP worth over Rs.1,350 crore, with SEBI. The issue consists of a fresh issue worth Rs.750 crore and an offer for sale of equity shares worth around Rs.600 crore. The bank is considered a pre-IPO placement of Rs.250 crore which will be deducted from the amount of fresh issue. The book running lead managers to the issue are IIFL Securities, Kotak Mahindra Capital Company and ICICI Securities.
Objectives of the company
The main objective is to augment the bank’s Tier 1 capital base to meet their future capital requirements.
About Utkarsh Small Finance Bank Ltd
Headquartered in Varanasi, Utkarsh SFB is among the leading SFBs in the country in terms of ROA and they had the highest return on equity among the SFBs in the country, in FY20. Their main focus is to provide microfinance to underserved or unserved segments of Uttar Pradesh and Bihar. On October 7, 2015 UCL received RBIs approval to become an SFB and soon they were incorporated as Utkarsh Small Finance Bank.
They are present in 18 states and union territories and have 528 banking outlets. As of 30 September 2020, they also have 8,729 employees and 2.74 million customers. 27.08% of the baking outlets are located in Unbanked Rural Centers.
The bank has started using technology to their advantage thorough internet banking and mobile banking. As of 30 September 2020, 4,244 employees uses handheld devices and they onboarded around 23,070 savings account customers.
Utkarsh Small Finance Bank Ltd Financial Status
Financials
|
Particulars (In Rs cr) |
Q3 ended September, 2020 |
FY20 |
FY19 |
FY18 |
|
Total Income |
835.19 |
1406.2 |
958.25 |
544.75 |
|
PAT |
77.87 |
186.74 |
110.86 |
(77.42) |
|
EPS (In Rs) |
1.03 |
2.49 |
1.62 |
(2.13) |
|
Particulars |
Q3 ended September, 2020 |
FY20 |
FY19 |
FY18 |
|
Total Assets |
10,494.9 |
9,404.3 |
6,238.8 |
4,493.9 |
|
Total Borrowings |
2,809.2 |
2,675 |
1,429.7 |
1,788.8 |
|
Equity Share Capital |
759.3 |
759.3 |
737 |
470 |
Key Metrics
|
Particulars (In Rs cr except %) |
Q3 ended September, 2020 |
FY20 |
FY19 |
FY18 |
|
Deposits |
5969.2 |
5235.2 |
3791.38 |
2193.8 |
|
Credit to Deposit ratio |
110.68% |
119.99% |
123.13% |
141.38% |
|
Net Interest Margin |
8.64% |
10.13% |
10.78% |
8.21% |
|
Operating Profit |
104.33 |
250.41 |
166.72 |
(109.87) |
|
ROA |
1.52% |
2.51% |
2.21% |
(2.38%) |
|
CASA ratio |
14.46% |
13.5% |
10.01% |
5.31% |
|
Provision Coverage ratio |
100.34% |
95.64% |
97.49% |
83.79% |
|
Cost to Income ratio |
52.41% |
57.63% |
57.07% |
79.23% |
|
Gross NPA |
0.64% |
0.71% |
1.39% |
1.85% |
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% |
|
Northeast SFB |
1.90% |
3.1 |
7.2 |
21.22% |
11.58% |
The key Points are-
IPO Key Points
-
Strengths
1. The bank has an in depth understanding of the microfinance segment and have a strong rural and semi urban franchisee
2. They have rapidly growing deposits and their total deposits have risen at a CAGR of 54.48% from FY18 to FY21
3. Utkarsh SFB is spread across 18 states and union territories and covers 179 districts in rural and semi urban areas
4. They have a superior risk management process and a good asset quality
-
Risks
1. Utkarsh Small Finance Bank is subject to high amounts of regulation which if not followed will have adverse effects on the business and operations
2. Volatility in interest rate risk or the inability to manage the interest rate risk will negatively affect the net interest margins of the bank
3. The customers of the bank are concentrated in the states of Bihar and UP
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