ESAF Small Finance Bank IPO Details

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ESAF Small Finance Bank has a background marked by over 25 years of helping in the small finance sector. Their business technique depends on the standards of accountable banking, with attention on client-driven items and administrations conveyed using innovation and technology. Mr Thomas is the founder of the ESAF Society; He formed the society focusing on development of the microenterprises, community health and community development. Checkout ESAF Small Finance Bank IPO Date, price, size, GMP and more details.

The Company has 550 workplaces, 421 customer service centres, 12 business correspondents, 158 financial delegates, and 327 ATMs has been reported on May 31, 2021. The ESAF Small Finance Bank has a wide customer base. It serves over 4.68 million customers in 21 states and 2 Union Territories. They seek a triple primary concern impact through a social business approach that spotlights individuals, the climate, and wealth. The Company aims to be India’s eminent social Bank, providing equitable opportunities.

The asset of the ESAF Small Finance Bank comprises of retail loans, microloans, corporate loans, MSME and agricultural loans. The liability of their business operation includes savings accounts, current accounts, recurring deposits and fixed deposits. The company also serve NRI customers and offer the facility of NRE and NRO saving accounts along with fixed deposits and regular deposits.

ESAF SMALL FINANCE BANK IPO DETAILS:

ESAF Small Finance Bank, settled in Kerala, has submitted its DRHP to SEBI for approval of its IPO of 997.78 Crore on July 24, 2021. The IPO consists of a new issue of 800.00 Crore and an OFS of up to 197.78 Crore worth equity shares from promoters and promoters’ groups. According to the underlying outline, the firm might ponder offering equity shares on a private placement basis for cash consideration, collecting up to INR 3 billion as a pre-IPO placement. The bank received INR 1.62 billion in April. It was allotted through a preferential offering. The offer was of 21.8 million equity shares at INR 75 each. It marked a deal of 5% stake in the Company.

From the IPO and in the OFS Segment, the Promoter will be selling Rs 150 crore worth of shares, PNB MetLife India Insurance Company will be offloading shares worth Rs 21.33 crore. The other shareholders will also be offloading their share. PI Ventures LLP Rs 8.73 crore, Bajaj Allianz Life Insurance Company Rs 17.46 crore, and John Chakola will be selling shares worth Rs 0.26 crore.

IPO Opening Date 
IPO Closing Date 
Issue TypeBook Building Type
Face ValueRs.10/ Equity Share
IPO Price 
Market Lot 
Min Order Quantity 
Listing AtBSE, NSE
Issue Size997.78 Cr.
Fresh Issue800.00 Cr.
Offer for Sale197.78 Cr.
Basis of Allotment Date 
Initiation of Refunds 
Credit of Shares to Demat Account 
IPO Listing Date 
Basis of Allotment% Of the Allotment
Qualified Institutional Buyer50
Non-Institutional Investor15
Retail35

OBJECTS OF THE IPO ISSUE:

  • Prepayment of all the loans of the Company which will be availed on a consolidated basis. 
  • To meet corporate targets. 
  • To fund the working capital requirement.
  • The Bank proposes to utilize the Net Proceeds from the Fresh Issue towards augmenting their Bank’s Tier – 1 capital base to meet their Bank’s future capital requirements.

BASIS OF THE IPO OFFER:

  • The Bank has a profound mastery of the microfinance area, which has permitted them to grow their business outside their local territory of Kerala. 
  • Banking establishment with a solid provincial and semi-metropolitan presence. 
  • Retail deposit portfolio that is quickly expanding and has a low fixation hazard. 
  • Client driven arrangements and systems, just as other non-financial services for MicroLoan customers, have assisted them with building solid client connections. 
  • The company has a Technology-driven model incorporated with an advanced information technology platform.
  • Experienced individuals from the Board of Directors and senior administration positions.

STRENGTHS AND GROWTH ASPECTS OF ESAF SMALL FINANCE BANK IPO:

  • ESAF Small Finance Bank is one of the most emerging and leading small finance banks in India. The parameters of consideration are: CAGR , net interest margin, client base size, total deposit, yield on advances, assets under management CAGR, loan portfolio concentration in rural and semi-urban areas. It also operates for the ratio of microloan advances to gross advances.
  • The Company has a strong focus on leveraging technology to deliver products and services.
  • Increase in the scale of operations with diversification in terms of geography & products while maintaining good asset quality and capital adequacy levels
  • The experience of promoter and management team of ESAF Small Finance Bank.
  • The Company is also engaged in third-party life and general insurance policies. They also hold government pension products and point of sales terminals. The bank also provides foreign exchange services. The services include currency exchange which is been carried out in the form of outward and inward remittances.
  • The bank has Comfortable capitalization levels Bank’s CAR and Tier 1 CAR. It was at 24.03% and 20.99% as of March 31, 2020. Total CAR was 21.04% as of December 31, 2020. The decline in CAR during FY21 was due to growth in net advances. The net advances are Rs.7,717 crore against Rs.6,548 crore. 
  • The Bank’s tangible net worth was Rs.1,073 crore as of March 31, 2020. It was due to the Significant growth in AUM. Though the share of MFI loans remained high, the Bank’s AUM increased by 37% in FY20. It was Rs.6,818 crore as of March 31, 2020.
  • In FY21, the AUM grew by 15%. It was reported around Rs.7,820 Crores.
  • The Bank is planning to venture into new products. These include corporate loans, loans against property, business loans, gold loans, etc. However, their core business of the microfinance loan book was at 93% of the AUM in FY21, March.
  • The Bank has also disbursed Covid-care loan policy in FY21. The reported outstanding Covid-care loan was at Rs.532 crore. 
  • The Bank marked a significant improvement in deposits in FY20 and FY2. The Bank’s resource profile consisted of deposits, borrowings and sub-debts at 85%, 10% and 2%, respectively. 
  • The total deposits grew by 63% during FY20. They were around Rs.7,028 crore as of March 31, 2020. In FY21, deposits increased by 23% on a YOY basis. The stakes were at Rs.8,651 crore. 
  • The Bank’s CASA was at 13.66% in FY20 compared to 13.55% in FY19. It improved to 15.07% in September 2020. 
  • The operating expenses of the Company slightly improved to 7.28% in FY20 from 7.71% in FY19. Similarly, the Credit cost is calculated as % average total assets, reduced to 0.83% in FY20 from 1.99% in FY19. 
  • ROTA parameter of the Bank improved to 2.31% in FY20 compared to 1.53% in FY19. A decline in credit cost supported it. 
  • In the first nine months of FY21, the PAT was Rs.62 crore on a total income of Rs.1,336 crore. The NIM of the Bank declined to 9.03% during the same period. It was due to the interest reversal of 90+DPD accounts.
  • The PPOP/total average assets ratio was at 4.54% in the first nine months of FY21, while it was around 2.32% in FY20. However, PAT declined in the same tenure on account of an increase in provisioning to Rs.297 crore due to the impact of Covid-19 on the asset quality of the Bank. 
  • ESAF Small Finance Bank has set a target to double their loan book to ₹30,000 crores, from ₹17,425 crores in FY21.
  • The Bank also improved its provision coverage ratio in FY21. It helped them to secure its balance sheet. The ratio was at 93.45%, against 81.53% in FY20.
  • To attain the higher business target, the Bank will be opening 65 more branches after adding 96 units in FY20. It will make their network to 550 branches.
  • Among the peers of the Company, they achieved the second-largest deposit growth in FY19 to FY21. The Company also recorded the highest share of retail deposits in terms of the per cent of overall deposits in March 2021. It was around 97.74%.

THREATS AND WEAKNESS OF ESAF SMALL FINANCE BANK IPO:

  • Coronavirus has had and may keep on contrarily affecting the ESAF Small Finance Bank. 
  • Over the last three years, more than 85% of the advances were unsecured.
  • The Bank has a high dependency on EMASCO and their business correspondent for promotion, sourcing, and securing the Micro-loans. 
  • The organization is presently dependent on microloans, and any negative aspect in the microfinance area may contrarily affect them. 
  • A huge amount of their loans are still unsecured. The business might endure if they can’t recover these advances in an ideal or reliable manner. 
  • The competitive nature of the other companies in the Small Finance Bank Sector
  • They have considerable operational expenditures, and an ascent in these costs without an equivalent income expansion will affect their business. 
  • They are limited by severe administrative and prudential principles. In case they can’t meet their prerequisites, it might adversely affect their business. 
  • The instability in the Interest rate might affect them, making their Net Interest Margin drop and contrarily affecting their business. 
  • Organization and the promoters of the Company are associated with various legal processes, the result of which may contrarily affect their organization. 
  • Their Promoter is right now the subject of criminal proceedings. 
  • The RBI might force various fines if they neglect to meet with the commitment to list the Equity Shares on Exchange by July 31, 2021. 
  • It may contrarily affect their business if they can’t get finance on reasonable terms and at competitive prices when they require it.
  • The Bank is in a critical position to improve its asset quality indicators. It is due to credit risks associated with the marginal credit profile of borrowers. 
  • The major regional concentration of loan portfolio and AUM concentrated in Kerala with 58%. It shows the heavy dependency of the Bank in Kerala. The top two states constitute 79% of the overall portfolio. The Bank needs to work on the expansion project to increase their revenue in the other states.
 
ParticularsFor the year/period ended ( in Cr.)
31-Mar-2131-Mar-2031-Mar-19
Total Assets12,338.659,469.977,058.41
Total Revenue1,767.281,546.441,140.79
Profit After Tax105.40190.3990.28

Basic and Diluted Earnings Per Share (EPS)

Financial PeriodBasic EPS (in INR)Diluted EPS (in INR)
Financial Year 20192.372.37
Financial Year 20204.454.45
Financial Year 20212.462.46
Performance RatiosAs on March 21As on March 20
    ROA (%)0.972.30
   ROE (%)8.6519.25
   ROCE (%)8.2713.36
   EV/Net Sales (x)1.311.15
   EV/Core EBITDA (x)5.155.02
   EV/EBIT (x)2.602.01
   EV/CE (x)0.170.17
   Core Operating Income Growth (%)16.33-100.00
   Operating Profit Growth (%)-42.61-17.03
   Net Profit Growth (%)-44.64110.88
   BVPS Growth (%)18.700.00
   Advances Growth (%)24.74-100.00
   EPS Growth (%)-47.31110.88

PROMOTERS OF ESAF SMALL FINANCE BANK IPO:

The promoters of the Company are:

  • Mr Kadambelil Paul Thomas
  • ESAF Financial Holdings Private Limited

K.P. Thomas and his family own only a 6% stake in the Bank. ESAF Financial Holdings hold the majority stake of 68% equity. It is majority-owned by many cooperatives. The rest of the Company’s stake is held by institutions like Bajaj Alliance Life, PNB MetLife and ICICIL Lombard. Lulu Group chairman MA Yuzuf Ali, private equity player PI Ventures and Muthoot Finance are other renowned stakeholders in the Company.

Pre-Issue Share Holding69.40%
Post Issue Share Holding

ESAF SMALL FINANCE BANK CONTACT DETAILS:

ESAF Small Finance Bank

ESAF Small Finance Bank Limited

 Building No. VII/83/8, ESAF Bhavan, Thrissur-Palakkad National Highway,

 Mannuthy, Thrissur 680 651, Kerala, India

 Telephone: +91 487 7123 907

 E-mail: investor.relations@esafbank.com

 Website: www.esafbank.com

ESAF SFB IPO REGISTRAR:

Link Intime India Private Limited

 C-101, 1st Floor, 247 Park, Lal Bahadur Shastri Marg,

 Vikhroli (West) Mumbai 400 083 Maharashtra

 Tel: (+91 22) 4918 6200

 E-mail: esaf.ipo@linkintime.co.in

 Website: www.linkintime.co.in

ESAF SFB IPO LEAD MANAGER(S):

  • Axis Capital Limited
  • Edelweiss Financial Services Limited
  • ICICI Securities Limited
  • IIFL Securities Limited
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