ESAF Small Finance Bank IPO: All You Need To Know
The proceeds will be used to bolster Tier-I capital base, support future capital needs & expand lending activities.
ESAF Small Finance Bank is set to launch its initial public offering on Nov. 3. The IPO issue will close on Nov. 7.
The Kerala-based bank is seeking to secure a total of Rs 463 crore in funding. It plans to generate Rs 390.7 crore through the issuance of fresh equity shares, while the remaining amount will be acquired through an offer for sale. The other selling shareholders are PNB Metlife and Bajaj Allianz Life Insurance.
The company plans to utilise the proceeds towards augmentation of their Tier-1 capital base and increasing its onward lending business. Raising of funds also helps them to ensure compliance with regulatory requirements on capital adequacy.
IPO Details
Issue opens: Nov. 3
Issue closes: Nov. 7
Fresh issue size: Rs 390.7 crore
OFS size: Rs 72.3 crore
Total issue size: Rs 463 crore
Price band: Rs 57–60 per share
Lot size: 250 shares
Face value: Rs 10 per share
Listing: BSE and NSE
The company has not undertaken any pre-IPO placement.
Business
ESAF provides micro, retail and corporate banking, para-banking activities like debit cards, and third-party financial distribution, in addition to Treasury and permitted foreign exchange business. ESAF commenced their business in March 2017 and was included in the second schedule to the RBI Act in November 2018.
The lender predominantly focuses on unbanked and underbanked segments, especially in rural and semi-urban centers. As of June, 63% of their gross advances and 71.7% of their branches were dedicated to customers from these centres.
The bank's assets under management have nearly doubled between March 2021 and 2023 and stand at Rs 17,204 crore as of the first quarter.
The lender has 700 banking outlets and 767 customer service centres across 21 states and 2 union territories, with 62% of their banking outlets being in southern India.
Use Of Proceeds
The net proceeds will be used to bolster the bank's Tier-I capital base, support future capital needs, expand its lending and investment activities, and ensure compliance with the RBI's capital-adequacy regulations.
Risk Factors
The bank's business is highly concentrated in Kerala and Tamil Nadu. Customers in these two states account for 66% of their total gross advances and 83% of their total deposits.
As of June, 75% of their advances (net of provisions) were unsecured advances. As of March, the lender was in non-compliance with 17 out of the 272 risk-based supervision tranche III requirements. Any imposition of penalties from the RBI can adversely impact their business.
As of June, 75% of their advances under management were micro loans. Any decrease in demand for micro loans could affect their business. Business is highly dependent on correspondents, which have sourced or serviced about 75% of their gross advances as of June.
The bank has been seeing an increasing attrition rate over the past three fiscals, and it stood at 24% in 2022–23.
Watch IPO Adda with ESAF Small Finance Bank management
