IPO Synopsis
IPO Synopsis
Fincare Small Finance Bank has filed its DRHP with SEBI worth Rs.1,330 crore. The issue consists of a fresh issue worth Rs.330 crore and an offer for sale of equity shares worth around Rs.1,000 crore.
They are also considering a pre-IPO placement of Rs.200 crore, which will be decreased from the amount of fresh issue. The book running lead managers to the issue are ICICI Securities, IIFL Securities, Axis Capital Ltd and SBI Capital Markets.
Objectives of the issue
The main objective of the offer is to use the net proceeds for the augmentation of the bank’s Tier 1 capital base in order to meet their future capital requirements.
About Fincare Small Finance Bank Ltd
This bank started its business in Bangalore, four years ago and has risen from a microfinance institution to a small finance bank. They are a digital-first bank which focuses on unbanked and underbanked customers in rural and semi-urban areas in India. In terms of advances, Fincare SFB is the highest growing SFB over FY18 to FY20.
They have an enviable network of 528 banking outlets, 219 business correspondents and 108 ATMs. They are also spread across 16 states and 38,809 villages, reaching around 2.7 million customers as of 31 December 2020. As of 31 December 2020, the bank had around 2.68 million deposit accounts. They have 8,114 employees as of the same period. Fincare SFB’s marquee investors include True North Fund V LLP, Wagner Limited, Tata Opportunities Fund, LeapFrog Investments, SIDBI, Kotak Mahindra Life Insurance and Edelweiss Tokio Life Insurance.
They have an experienced and committed digital team of 84 members, which comprises of product managers, designers, engineers and developers, who are responsible for conceptualizing, developing and implementing digital solutions. Fincare SFB’s MD & CEO and CFO both have experience in the financial services industry and have worked with the Fincare group for the last nine years and 12 years, respectively. The bank also has a strong and experienced management team consisting of a 20-member leadership team in addition to an executive management team comprising over 30 members.
Fincare Small Finance Bank Ltd Financial Status
Financials
|
Particulars (In Rs cr) |
Q3 ended 31st December, 2020 |
FY20 |
FY19 |
FY18 |
|
Total Income |
998.30 |
1215.72 |
674.88 |
350.5 |
|
PAT |
103.93 |
143.45 |
101.98 |
(97.55) |
|
EPS (In Rs) |
16.34 |
24.43 |
22.41 |
(26.04) |
|
Particulars (In Rs cr) |
Q3 ended 31st December, 2020 |
FY20 |
FY19 |
FY18 |
|
Total Assets |
7,623.3 |
7,116.2 |
4,171.7 |
2,274.11 |
|
Total Borrowings |
1,062 |
1,368.12 |
1,283 |
1,068.97 |
|
Equity Share Capital |
63.1 |
63.1 |
56.44 |
37.5 |
|
Particulars (In Rs cr except%) |
Q3 ended 31st December, 2020 |
FY20 |
FY19 |
FY18 |
|
Disbursement |
2,782.3 |
4,949.7 |
3,221 |
2,066.7 |
|
ROE (%) |
10.75 |
18.41 |
22 |
24.76 |
|
ROA (%) |
1.38 |
2.52 |
3.4 |
5.68 |
|
Cost to Income ratio (%) |
57.73 |
58.19 |
74 |
87.15 |
|
GNPA (%) |
3.46 |
0.92 |
1.29 |
1.05 |
|
Total Deposits |
5,276.6 |
4,653.4 |
2,043.2 |
727 |
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% |
IPO Key Points
-
Strengths
1. The bank focuses on financial inclusion which is driven by digital banking, and they have adopted a large-scale digital solution which will help customers more efficiently
2. As of 31 December 2020, 92% of their customers were from the rural sector and they are planning on expanding further into the rural and semi-urban areas
3. They have a multi-channel distribution which consists of both brick-and-mortar banking outlets and online/digital banking outlets
4. Fincare SFB’s MD & CEO and CFO both have experience in the financial services industry and have worked with the Fincare group for the last nine years and 12 years, respectively
5. In terms of advances, Fincare SFB is the highest growing SFB over FY18 to FY20 -
Risks
1. As the bank is relatively new, it might be difficult to evaluate and judge the business operations
2. Their microloan business is relatively risky as 40% of the borrowers are first time borrowers
3. A significant portion of their banking outlets are located in Tamil Nadu, Gujarat, Karnataka and Madhya Pradesh
4. Risks associated with rural economics are inherent in this business
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