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HDFC Securities Retail Research
The initial public offering of Utkarsh Small Finance Bank will open for subscription on July 12 and closes on July 14. The private lender is looking at raising up to a total of Rs 500 crore via issue of fresh equity shares.
The company's shares will be listed on both the exchanges.
Objects of Issue:
Bank proposes to utilise the net proceeds from the Issue towards augmenting its tier–I capital base to meet its future capital requirements. Further, the proceeds from the Issue will also be used towards meeting the expenses in relation to the Issue. Additionally, it expects to receive the benefits of listing the equity shares on the stock exchanges.
Business Strategy:
Utkarsh Small Finance Bank's primary focus will be to continue to diversify its asset portfolio. It intends to leverage its wide base of existing customers in the unserved and underserved segments by developing a range of asset products based on their vintage and credit worthiness to create sustainable livelihood.
Therefore, it intends to extend the offering from JLG loans to individual loans to micro enterprise loans, affordable housing loans and other new products. It will also seek to increase visibility and penetration of its other assets products to achieve a well-diversified lending book along with a continued focus on financial inclusion.
Key Concerns
Utkarsh Small Finance Bank is subject to inspections by regulatory authorities, including by the Reserve Bank of India. Non-compliance with RBI inspection/ observations or other regulatory requirements or any adverse observations from such regulators may have a material adverse effect on its business, financial condition, results of operation or cash flows.
A significant portion of advances in the microbanking segment are towards customers located in the states of Bihar and Uttar Pradesh, and any adverse changes in the conditions affecting the region can adversely impact the business, financial condition, results of operations and cash flows.
Non-convertible debentures are listed on BSE and in the past, there were certain inadvertent delays by Utkarsh Small Finance Bank in making certain disclosures and regulatory filings to BSE under the listing regulations.
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