Utkarsh Small Finance Bank Ltd IPO - Date, Review, Valuation & GMP

Utkarsh Small Finance Bank Limited - Complete Overview

Established in 2016, Utkarsh Small Finance Bank Limited is an Indian SFB that has achieved remarkable growth in its AUM between the fiscal years 2019 and 2022, ranking as the second fastest among SFBs with AUM exceeding ?50 billion.

The bank offers a comprehensive range of financial products and services tailored to address the specific needs of various customer segments, considering factors such as income profiles and available securities. Their major services encompass Accounts and Deposits, Cards, Insurance and Investments, Loans, and Ways to Bank.

To expand their liabilities franchise, Utkarsh Small Finance Bank aims to focus on newer geographies, targeting the top 100 cities in terms of overall deposits, while also catering to metropolitan and urban areas by promoting savings accounts and other deposit products.

Customers of Utkarsh Small Finance Bank can enjoy a range of beneficial features, such as the convenience of a Top-up/Balance Transfer facility, a simplified documentation process for hassle-free transactions, the flexibility to obtain loans up to ?50 crores with repayment periods of up to 30 years, and streamlined eligibility criteria designed to cater to the needs of both salaried and self-employed individuals.

With operations spread across India, the bank has established a wide presence in 26 states and union territories, boasting 830 Banking Outlets and a workforce of 15,424 employees as of March 31, 2023.

 

What does the company do? 

Utkarsh Small Finance Bank Limited, an Indian SFB, provides a wide array of financial products and services that are carefully designed to cater to the unique requirements of diverse customer segments. 

 

 

Company Products

 The company offers a diverse array of financial services, including Accounts and Deposits, Cards, Insurance and Investments, Loans, and Ways to Bank. Additionally, they provide a range of asset products, such as Microbanking loans, retail loans, wholesale lending, housing loans, commercial vehicle/construction equipment loans, and gold loans.

 

IPO Overview

Utkarsh Small Finance Bank Limited's upcoming IPO is expected to be listed on the share market on July 24, 2023. Utkarsh Small Finance Bank's share price range for the IPO at Rs. 23 to Rs. 25 per share. The IPO Date is scheduled from July 12 to July 14, 2023.

The total issue size for the IPO is 200,000,000 shares, amounting to Rs. 500.00 Crores. The company has strategically allocated 10% of the total issue size to retail investors, 75% to institutional investors, and 15% to non-institutional investors.

In terms of lot size, 1 lot of the IPO consists of 600 shares, priced at Rs 15,000. Retail investors can bid for a minimum of 1 lot and a maximum of 13 lots.

 

Utkarsh Small Finance Bank Limited IPO timetable (Tentative) 

EVENTS	DATE
IPO Opening Date	12 JULY 2023
IPO Closing Date	14 JULY 2023
IPO Allotment Date	19 JULY 2023
Refund initiation	20 JULY 2023
IPO Listing Date	24 JULY 2023

 

Utkarsh Small Finance Bank Limited IPO Details

IPO Opening & Closing Date	12 July 2023 to 14 July 2023
Face Value	Rs. 10 per share
Issue Price	Rs. 23 to Rs. 25 Per share
Lot Size	600 Shares
Price of 1 Lot	Rs 15,000
Issue Size	200,000,000 Shares  (aggregating up to Rs. 500 Cr)
Offer for Sale	NA
Fresh Issue	200,000,000 Shares  (aggregating up to Rs. 500 Cr)
Listing at	BSE, NSE
Issue Type	Book Built Issue IPO
Registrar	Kfin Technologies Ltd.

 

Utkarsh Small Finance Bank Limited IPO Lot Details

Minimum Lot Investment (Retail)	1 Lot
Maximum Lot Investment (Retail)	13 Lot
Minimum Lot Investment (HNI)	14 Lot
Maximum Lot Investment (HNI)	66 Lot

 

Utkarsh Small Finance Bank Limited IPO Reservation

Institution Portion	75%
Non-institution Portion	15%
Retail Portion	10%

 

Company Financial

Amount in Crores

Period	FY 21	FY 22	FY 23
Total Assets	12137.91	15063.77	19117.54
Total Revenue	1705.84	2033.65	2804.29
Net Profit	111.82	61.46	404.50
Net Worth	1368.35	1572.30	2000.32
Reserve & Surplus	520.02	676.78	1104.42
Total Borrowings	2607.83	2571.94	2349.48

 

The Balance sheet of the company

Amount in Millions

Particular	31 March 2023	31 March 2022	31 March 2021
Capital & Liabilities
Capital	8,959.05	8,955.22	8,483.34
Reserve & Surplus	11,044.16	6,767.75	5,200.19
Deposits	1,37,101.40	1,00,741.83	75,075.68
Borrowings	23,494.75	25,719.35	26,078.25
Other Liabilities and Provision	10,576.06	8,453.55	6,541.66
Total	1,91,175.42	1,50,637.70	1,21,379.12
Assets
Cash and Balance with RBI	11,920.57	5,338.97	2,749.38
Balance with banks and money at call and short notice	13,243.06	13,377.52	8,948.78
Investment	28,594.22	23,479.24	23,139.35
Advances	1,30,687.66	1,02,281.47	82,168.58
Fixed Asset	3,033.24	2,865.34	1,811.71
Other Asset	3,696.67	3,295.16	2,561.32
Total	1,91,175.42	1,50,637.70	1,21,379.12
Contingent Liabilities	3,416.05	564.19	620.73
Bills for Collection	-	-	-

 

Key Metrics of the Company

(Amount in Millions, Except Percentage)

Metrics	FY 21	FY 22	FY23
Gross Loan Portfolio	84,156.60	106,307.25	139,571.08
Disbursements	59,140.08	90,462.79	124,428.94
Deposits	75,075.68	100,741.83	137,101.40
Credit to Deposit Ratio	109.45%	101.53%	95.32%
Capital & Reserves	13,683.53	15,722.97	20,003.21
Net Interest Income	8,392.46	10,608.51	15,290.31
Net Interest Margin	8.20%	8.75%	9.57%
Profit Before Taxes	1,514.36	797.13	5,358.14
Net Profit for the Year	1,118.15	614.62	4,045.02
Return on Average Assets	1.05%	0.48%	2.42%
Return on Average Equity	9.99%	4.14%	22.84%
Average Yield	15.46%	15.24%	15.67%
Cost of Funds	8.27%	7.47%	6.96%
CASA+Retail Term Deposit	57.51%	59.64%	61.55%
CASA Ratio	17.68%	22.37%	20.89%
Provision Coverage Ratio	80.42%	78.14%	95.78%

 

Information related to depositors

(Amount in Millions)

Particulars	FY 21	FY 22	FY23
Top 5 Depositors	9,090.41	13,660.00	12,780.00
Top 10 Depositors	13,864.70	20,371.80	19,652.87
Top 20 Depositors	20,262.81	28,952.70	28,840.73
Bulk Depositors	31,900.58	31,900.58	52,712.72

 

Objective of the Issue

The bank intends to utilize the net proceeds from the issue to strengthen its Tier-1 capital base, ensuring it is well-positioned to meet its future capital needs. Additionally, the funds raised from the issue will be allocated towards covering the expenses associated with the offering.

 

Promoters and Management of Utkarsh Small Finance Bank Limited

Utkarsh Small Finance Bank benefits from a proficient and skilled team of promoters. The bank is supported by prominent individuals in the industry, including Mr Gopalasamudram Srinivasaraghavan Sundararajan, Mr Atul, Mr Aditya Deepak Parekh, Mr Thirunellayi Kesavan Ramesh Ramanathan, and Mr Ashwani Kumar, who bring extensive experience and expertise to the organization.

Pre-issue Promoters Holding	84.75%
Post-issue Promoters Holding	69.28%

 

Peer Comparison

Utkarsh Small Finance Bank operates within a fiercely competitive market, encountering numerous competitors. As per the Utkarsh Small Finance Bank Limited DRHP, the bank faces significant competition from the following key players in the industry.

Name of the Company	Total Income (Rs. in million)	P/E	P/B	EPS (Basic) (Rs.)
Utkarsh Small Finance Bank Limited	28,042.86	6.78	-	4.52
Equitas Small Finance Bank Limited	48,314.64	19.61	1.97	4.71
Ujjivan Small Finance Bank Limited	47,541.90	6.93	2.01	5.88
Credit Access Grameen Limited	35,507.90	24.13	3.82	52.04
Spandana Sphoorty Financial Limited	14,770.32	403.33	1.61	1.74
Bandhan Bank Limited	183,732.50	16.51	1.85	13.62
AU Small Finance Bank Limited	92,398.73	35.36	4.67	21.86
Suryoday Small Finance Bank Limited	12,811.00	22.90	1.12	7.32
Fusion Micro Finance Limited	17,999.70	13.50	2.52	43.29

 

IPO's Valuations

Utkarsh Small Finance Bank is set to launch its IPO, with the shares being offered in a price range of Rs. 23 to Rs. 25 per share while having a face value of Rs. 10 per share. The company's EPS is reported to be Rs. 4.52 per share, RoNW of 20.22%, NAV of Rs. 22.33 per share, and market capitalization of Rs. 2739.76 crores

 

Dividend Policy

The bank has not distributed any dividends in the past, and the future ability to do so, is subject to factors such as earnings, financial condition, working capital requirements, capital expenditures, etc. In a meeting held on February 16, 2021, the bank approved and implemented a dividend policy, which was subsequently amended on July 28, 2022. 

 

IPO's Strengths

• Strong presence in rural and semi-urban areas.
• Focus on growing deposits, particularly in the retail segment.
• Achieving stable growth through cost-efficient operational performance.
• Possessing a diversified distribution network, providing ample cross-selling opportunities.
• Offering a wide range of deposit products, including salary accounts, savings accounts, current accounts, recurring and fixed deposits, as well as locker facilities.
• Boasting 830 Banking Outlets spread across 26 States and Union Territories in India.

 

IPO Weaknesses

• Show cause notice received from SEBI for alleged non-compliance in relation to the public offering of securities, potentially leading to penalties.
• Operational and credit risks are present, which could result in NPAs. An increase in Gross NPAs can impact the bank's financial condition.
• Promoters involved in legal proceedings, and any negative developments could have significant adverse effects on the business, reputation, and cash flows.
• Need to ensure compliance with the monetary policy of RBI and the Government of India.
• Concerns about the sustainability of current margins in the future. 

 

 

IPO GMP

Utkarsh small finance bank IPO GMP today stands at Rs.14. This suggests that the IPO may potentially list at approximately Rs. 39 per share, considering that the upper end of the price band is set at Rs. 25.

 

Conclusion 

Utkarsh Small Finance Bank Limited, a prominent SFB in India, has showcased commendable financial growth over the years and possesses optimistic prospects for the future. However, the company's future trajectory is contingent upon the monetary policy of the RBI and the Government of India. Although the IPO's issue price presents an appealing opportunity for potential investors, it is advisable to conduct a thorough analysis to make an informed decision before investing.

 

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To Read the Prospectus of the Company Click Here to Download the DRHP

 

 

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