Sunday, December 10, 2023

ESAF Small Finance Bank IPO opens on Friday. What GMP signals ahead of subscription?

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The initial public offer (IPO) of ESAF Small Finance Bank will open for subscription on November 2 and close on November 7. The company has fixed a price band of Rs 57-60 for the public offer.Ahead of the issue opening, the company’s shares are commanding a premium of Rs 9 in the unlisted market.

The anchor investors’ allocation will be done later today.The Rs 463-crore IPO includes a fresh equity issue of Rs 391 crore and an offer for sale (OFS) of Rs 72 crore. Investors can bid for a minimum of 250 shares and in multiples thereafter.

Under the OFS, promoter selling shareholder ESAF Financial Holdings will offload a stake worth Rs 49 crore and other selling shareholders PNB MetLife and Bajaj Allianz Life make up for the remaining OFS portion.

About 50% of the issue is reserved for qualified institutional buyers, 15% for non-institutional investors and the rest 35% for retail investors.

The proceeds from the fresh issue will be used towards augmenting the Bank’s Tier– I capital base to meet its future capital requirements.As a small finance bank, ESAF requires at least 75% of its adjusted net bank credit to be allocated to priority sectors. Their business model revolves around responsible banking principles, offering customer-centric products and services through innovative technology applications.

ESAF SFB’s asset products include micro loans, retail loans, MSME loans, loans to financial institutions, and agricultural loans. As of March 2023, 62.84% of the lender’s gross advances were directed towards customers in rural and semi-urban areas, and 71.71% of their banking outlets were located in these regions.

Between FY21-23, the Bank’s assets under management (AUM) grew to Rs 16,331, with a CAGR of 39.22%, the highest among their peers according to the CRISIL report.

ICICI Securities, DAM Capital Advisors, and Nuvama Wealth Management are the book-running lead managers and Link Intime India is the registrar of the offer.

The equity shares are proposed to be listed on BSE and NSE.

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