Utkarsh Small Finance Bank IPO opens for subscription today, GMP soars 64%; should you subscribe?

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Utkarsh Small Finance Bank IPO: Lender Utkarsh Small Finance Bank’s Rs 500-crore IPO opens for subscription today, 12 July. The public offer is entirely a fresh issue of 20 crore shares. Utkarsh Small Finance Bank promoter Utkarsh CoreInvest will hold a 69.28% stake in the firm following the listing. The bank has set the price band for the IPO at Rs 23-25 per equity share. Utkarsh Small Finance Bank shares’ grey market premium soared 64% on Wednesday, commanding a premium of Rs 16 over upper end of the IPO price, implying a listing price of Rs 41 per share.

Ahead of the issue opening, Utkarsh Small Finance Bank raised Rs 222.75 crore from 20 anchor investors on 11 July. The IPO will close for subscription on 14 July. The date of allotment of units is projected to be 19 July, following which, the issue is expected to list on the bourses on 24 July.

Utkarsh Small Finance Bank (USFB) is a small finance bank which offers asset products such as micro-banking loans, retail loans, wholesale lending, housing loans, commercial vehicle/construction equipment loans, and gold loans. USFB also offers savings accounts, current accounts, term/recurring deposit accounts, non-credit offerings comprising ATM-cum-debit cards, bill payment systems, distributed third-party point-of-sales terminals, mutual funds and insurance products. 

Should you apply for the Utkarsh Small Finance Bank IPO?

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“USFB is one of the leading small finance banks and has posted average financial performance. SFB’s future prospects hinge on the monetary policy of RBI and the Government of India. The sustainability of current margins remains a major concern. Though the issue appears lucratively priced based on FY23 performance. Management’s sound understanding of microfinance segment and presence in rural and semi-urban areas and growing deposits with focus on retail deposits to drive growth. At the upper price band of Rs.25/-, stock is priced at 1.12x its FY23 book value (based on fully diluted post issue equity). We recommend subscribing to the issue from a long term perspective.”

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“USFB is in constant efforts to improve its business with deeper insights into customer trends, and develop customized products for its customer segments. It intends to further the growth through diversification of product offerings, customer segments and geography supported by technology, process and data analytics. With improvement in NIMS’s and NPA’s in declining trend over the last three years, growth in earnings remains strong. On FY23 financials, the IPO is valued at 6.8x P/E and 1.1 times P/BV, we recommend SUBSCRIBE to this issue for the long term.”

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“The Bank operates in 26 states with a total of 830 banking outlets, and 27.35% of their banking outlets are located in Unbanked Rural centres (URCs). The Bank offers a wide range of Products, and caters to customers located primarily in Unbanked & Under banked areas. The Bank has almost 4 million customers majorly located in rural & semi-urban areas primarily in the state of Bihar, Uttar Pradesh, etc. The Bank in FY23 recorded more than Rs 60 billion Gross Loan Portfolio amongst SFGs. The Bank in the RHP writes: it aims to maintain a capital adequacy capitalization position above the regulatory threshold. According to the RHP, The Bank has not raised any Bridged Loan from any other Bank or Financial Institute. The Bank has growing deposits with a focus over Retail Deposits. Apply for Listing Gain as well as for Long Term Investment.”


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