The initial share sale of Kerala-headquartered ESAF Small Finance Bank will open for public subscription on Friday, November 3. The three-day bidding process will conclude on November 7 and the anchor investors' allocation will be done later in the day.

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Ahead of the issue opening, shares of ESAF Small Finance Bank were commanding a premium of ₹10 in the unlisted market today, market analysts say.

It is to be noted that grey market premiums are just an indicator as to how the company's shares are stacked up in the unlisted market and are subject to change rapidly.

Price band, lot size and other details

ESAF SFB has fixed a price band for its maiden public offer at ₹57-60 per share, and investors can bid for a minimum of 250 equity shares and in multiples thereafter.

The small finance bank is aiming to mop up ₹463 crore from the IPO at the upper end of the price band.

"At higher price band (₹60), the stock is valued at 1.46( times P/BVPS (price-book value per share) with current book value per share of ₹40.92. Factoring the superlative return ratios, FY23 ROA/ROE of 1.6%/19.4%, we believe that ESAF Small Finance Bank Limited is worth subscribing," said analysts at LKP Securities.

The offer includes a fresh equity issue of ₹391 crore and an offer for sale (OFS) of ₹72 crore by the selling shareholders. Under the OFS, promoter selling shareholder ESAF Financial Holdings will offload stake worth ₹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 IPO also includes a reservation of ₹12.5 crore worth of shares for the bank's employees, who will get those shares at a discount of ₹5 each on the final issue price.

Proceeds from the fresh issue will be used towards augmenting the Bank’s Tier– I capital base to meet its future capital requirements and general corporate purposes.

Company profile

Promoted by ESAF Financial Holdings, ESAF Small Finance Bank was incorporated on May 5, 2016. While their operations are spread out across India, their business is concentrated in South India, particularly in the states of Kerala and Tamil Nadu.

The bank was granted the RBI’s final approval to carry on business as an SFB, on November 18, 2016. The 'ESAF' brand has been built over more than 27 years, beginning in 1995 when ESAF Foundation started its micro loan activities.

The company has focus on unbanked and under-banked customer segments, especially in rural and semi-urban centres. ESAF's gross advances to their customers in rural and semi-urban centres combined accounted for 62.97% of the gross advances and 71.71% of the banking outlets were located in rural and semi-urban centres combined, as of June 30, 2023.

ESAF SFB's net profit for the June FY24 quarter rose 22.6% to ₹130 crore and net interest income surged by 30.5% to ₹585.5 crore, compared to corresponding period of last year.

Their primary products are advances asset products and deposits liability products. As at June 30, 2023, their retail deposits were ₹13,977.27 crore, which accounted for 89.28% of their total deposits.

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

The equity shares of the company will be listed on the BSE and the NSE.

First Published:Nov 2, 2023 12:40 PM IST