Kerala-headquartered ESAF Small Finance Bank made it Dalal Street debut on Friday, November 10. The stock listed at a premium of 20% over its IPO (initial public offer) price of ₹60. ESAF shares made its debut at ₹71 on the National Stock Exchange (NSE), a premium of 18.33%, while the stock was listed at a premium of 19.8% at ₹71.90 on the BSE.

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ESAF's primary offering had witnessed a strong response from the investors, with overall subscription at 73.15 times. The category for qualified institutional bidders (QIBs) was booked a whopping 173.52 times, while the portion reserved for non-institutional investors saw robust 84.37 times bidding. The quota set aside for retail investors and employees was subscribed 16.97 times and 4.36 times, respectively.

Last heard, shares of ESAF Small Finance Bank were commanding a premium of ₹16 in the unlisted market today, indicating a listing premium of 27%.

The grey market is an unofficial platform wherein IPO shares can be bought and sold till the listing. Most investors track the grey market premium (GMP) of a stock to get an idea of the listing price.

"While ESAF Small Finance Bank is still a relatively young company, it has quickly established itself as a major player in the microloan segment. The company has a strong presence in southern India, with a growing retail deposit portfolio. Its financial performance has been impressive, with consistent growth in top- and bottom-line numbers," said Shivani Nyati, Head of Wealth at Swastika Investmart.

Nyati recommended investors who had applied for the public offering for a listing premium to maintain their stop loss at ₹60 and wait for further upside. Those who have a medium- to long-term perspective can also hold the stock, the analyst said.

Shreyansh Shah of StoxBox expected the stock to list at a premium of around 30%. “Considering the bank’s focus on high potential rural and semi-urban centres, customer-centric product offerings and high customer retention which ensures repetitive business, we remain positive on the company’s outlook."

The lender sold its shares in the range of ₹57-60 apiece for its maiden public offer. ESAF aims to raise ₹463 crore from the issue at the upper end of the price band.

The IPO comprises of 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.

The funds raised from the IPO will be used towards augmenting the bank’s Tier– I capital base to meet its future capital requirements and general corporate purposes.

ESAF's net profit for the June FY24 quarter rose 22.6% to ₹130 crore and net interest income grew 30.5% to ₹585.5 crore as against the corresponding period of last fiscal.

The lender had the best asset quality among compared peers as of June 30, 2023. ESAF SFB gross net performing assets (GNPA) stood at 1.65%, AU Small Finance Bank at 1.76%, while Equitas SFB and Ujjivan SFB had slightly higher GNPA figures at 2.75% and 2.62%, respectively. Jana SFB reported a GNPA of 2.9%, and Utkarsh SFB’s GNPA was at 3.13%.

ESAF focuses on providing loans to rural and semi-urban customers, providing financial solutions such as micro loans, retail loans, MSME loans, loans to financial institutions and agricultural loans.

ICICI Securities, DAM Capital Advisors and Nuvama Wealth Management acted as the book-running lead managers to the offer, while Link Intime India was the registrar. The equity shares of the lender will list on the BSE and the NSE.

First Published:Nov 10, 2023 8:52 AM IST