Utkarsh Small Finance Bank IPO Review: All You Need To Know

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Utkarsh Small Finance Bank IPO
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Utkarsh Small Finance Bank was established as a small finance bank with its headquarters in Varanasi. It was set up in 2009 with the mission to engage the low-pay bunch monetarily; over time, it has arrived at new statures today. The Macro-Finance Firm was changed into a bank, which started on 30 April 2016. The bank applied for a financial permit to the RBI, and they got the approval of the license by RBI on 25 November 2016. They intend to focus on people from roots other than the proper financial and banking sector to set up their own SME financial Services. In this article, we take a closer look at the Utkarsh Small Finance Bank IPO Review and its possible future prospects.

Their emphasis is on offering various types of services. It includes process and solution cantered, innovation empowered, and individuals focused. The company believes in bringing about solid, adaptable and reasonable foundations that work with financial change for Small-Scale Financial Services. They have a drive called Utkarsh Welfare Foundation, which works in proficiency in the financial and banking sector. It also incorporates wellbeing drives.

Their endeavours were recognized with the Scorch, Gold – 2016 Award, CIMSME’s MSME Banking Excellence Award, Mix Star- Socially Transparent and Responsible Award and Microfinance India Organization of the Year in 2019 for Small and Medium Category Award. The bank’s goal is ‘Ummed’ – which gives customers the desire to satisfy their objectives and needs. They have extended their administrations to 112 regions in 18 States and Union Territories throughout the long term. Today they brag a demographic of over 1.5 million fulfilled clients with 558 financial outlets, managing a portfolio of Rs. 8,416 crores.

OBJECTS OF THE IPO ISSUE:

  • Prepayment of all the loans of the company. It will be availed on a consolidated basis. 
  • To meet corporate targets. 
  • To fund the working capital requirement.

UTKARSH SMALL FINANCE BANK IPO DETAILS:

Utkarsh Small Finance Bank filled up its DRHP to float its IPO in the market. The bank is on the line of getting approval from SEBI. The total IPO Issue Size is ₹1350 crore. The IPO involves a new issue of up to ₹750 crores and an OFS proposal by its promoters Utkarsh Coreinvest Ltd. Through OFS; the company intends to collect up to ₹600 crores.

The company also said that it might consider a pre-IPO subscription of up to ₹250 crores after counsels with the venture banks dealing with the offer deal. The funds that have been collected from the issue will be used towards the increase of the Tier-I capital base to fulfil their future capital prerequisites. Check Day by Day IPO Subscription Details (Live Status)

IPO Opening DateIn 2021
Issue TypeBook Building Type Issue
Face Value10/ Equity Share
Listing AtBSE, NSE
Issue Size1350 crores
Fresh Issue750 crores
Offer for Sale600 crores
IPO Price 
Market Lot 
Min Order Quantity 
IPO Close DateIn 2021
Basis of Allotment DateIn 2021
Initiation of RefundsIn 2021
The Credit of Shares to Demat AccountIn 2021
IPO Listing DateIn 2021

Basis of the IPO Allotment:

Type% Of Offer
Qualified Institutional Buyer75
Non-Institutional Investor15
Retail10

STRENGTHS AND GROWTH OF UTKARSH SMALL FINANCE BANK IPO:

  • The bank has a strong liquidity profile and financial flexibility. 
  • The liquidity profile is enhanced by the availability and exposure from financial institutions. It also has exposure to the large share of non-callable deposits.
  • Utkarsh Small Finance Bank Limited’s have an experienced management team. 
  • The bank has a solid investor base and adequate systems and processes, which have helped it scale up its operations. 
  • The bank has developed an excellent junior line of management for its operations in various areas. It includes liabilities, IT, risk, operations, compliance, treasury etc.
  • Utkarsh Small Finance Bank is looking to scale up its portfolio further while diversifying its asset mix and improving the asset quality. It is also focusing on maintaining a prudent capitalization profile and strengthen its retail deposit franchise. 
  • With the commencement of banking operations, USFB launched various products such as loans to micro, small and medium enterprises (MSMEs), housing loans, construction equipment and commercial vehicles (CE/CV), etc. 
  • The bank issued its structural liquidity statement in FY21. It did not have any cumulative mismatches for the period. It signifies the strong financials of the company.
  • The pace of growth of the bank has been higher than its internal capital generation; It has been raising equity to maintain its working capitalization prerequisites. In FY2021, the bank increased equity by Rs. Two hundred forty crores from different investors. Now the IPO is all set to float in the market. It would help its capitalization profile for supporting its growth plans. 
  • The company has the ability to onboard borrowers. They have a good credit history, recruit and retain employees while scaling up its operations. 
  • Ability to diversify the product mix and increase the retail deposit base – USFB reported good traction in deposits in FY2021 while reporting a growth of 43%. 
  • Various analysts expect the bank profitability metrics will improve in the coming years. It had declined in FY2021 because of Covid-19.

WEAKNESS AND THREATS OF UTKARSH SMALL FINANCE BANK IPO:

  • Utkarsh Small Finance Bank already stated that its NPAs might increase because of several factors, including increased competition, adverse effects on the business. The other elements are the results of operations of borrowers, a rise in unemployment and a sharp and sustained rise in interest rate.
  • Some concerns regarding slow industrial and business growth, changes in customer behaviour, demographic patterns and political influences can also impact the operation of their business.
  • The bank always needs to follow the central and state government regulations for their functioning. 
  • Challenges brought by COVID19 pandemic. These include the moderation in growth, the adverse impact on the asset quality. Given the challenges, the gross NPA and net NPAs NNPA increased to 3.84% and 1.33%, from 0.71% and 0.18%, respectively. This increase was recorded in FY21 itself.
  • Geographically concentrated microfinance operations. Though the company is expanding its reach but still 2/3rd part of its business comes from 3 states Bihar, Uttar Pradesh and Jharkhand only.
  • The risks is always associated with the unsecured microfinance loans, the marginal borrower profile. These are susceptible to income shocks, the political and operational risks for the microfinance business.

FINANCIAL TRENDS OF UTKARSH SMALL FINANCE BANK IPO:

  • Utkarsh Small Finance Bank registered a compound annual growth rate (CAGR) of around 60% from FY2017 to FY2020. However, the growth moderated to 26% in FY2021 owing to Covid-19-induced disruptions.
  • As of September 2020, its CRAR was 24.87%, where Tier I capital stands at 19%
  • In FY2020, the company’s total income was ₹1,406.24 crore against ₹958.25 crores in FY2019.
  • Net profit for the same period was ₹186.74 crores against ₹110.87 crores.
  • The Provisions conducted by the bank were at ₹163.55 crores in FY2020 against ₹136.05 crores in FY2019.
  • Till September 2020, the total deposits of Utkarsh Small Finance Bank stood at ₹5,969.30 crores; for the same tenure, the advances were ₹6,606.58 crores. 
  • Its gross non-performing assets, also known as NPA, were at 0.64%.
  • Till September 2020, the provision coverage ratio of the bank was at 101.99%.
  • The bank’s funding profile remains well-diversified, with good traction in deposit mobilization in FY2021. T
  • The total deposits increased by 43% in FY2021 to Rs. 7,508 crores.
  • The bank offers deposits, microfinance loans, MSME loans, affordable housing loans and corporate loans. 
  • The company’s portfolio is Rs. 8,416 crores in FY21, with microfinance loans accounting for 84% of the total portfolio.
  • For liabilities, the bank had a deposit base of Rs. 7,508 crores in FY2021.
  • The liquidity coverage ratio was at 168% in March 2021and 257% in December 2020. It was calculated taking on an average daily basis.
  • It has a large customer base in semi-urban and rural areas of Bihar, Uttar Pradesh, and Jharkhand. It contributes to 41.91%, 27.32%, and 6.74% of the total gross loan portfolio.
  • The share of the current account-savings account, CASA, was at 17% in FY2021.
  • The share of new products on the asset side was at 16% as of March 2021. It improved from 10% registered in the previous year.
  • USFB collection efficiency had been improving in recent quarters. It was reported at 97.6% for March 2021. In December 2020, it was 91.1%.
  • USFB registered a net profit of Rs. 112 crores in FY2021. It accounts for a return of 1.04% on the average assets of the bank. 
  • With deterioration in the asset quality parameter, the bank’s solvency, also known as net NPA per net worth, increased to 7.95% from 1.09% in a single year. 
  • The company also has restructured loans amounting to Rs. 284 crores.
  • Their net interest margin declined to 8.13% in FY2021 from 9.68% in FY2020. It was due to negative book liquidity, the decline in business volumes and the reversal of interest income.
  • Due to lower administrative costs, the operating expenses moderated to 5.06% in FY2021 from 6.09% in FY2020.
Utkarsh Small Finance Bank LimitedFY2020FY2021
Profit after tax (Rs. crore)187112
Net worth (Rs. crore)1,0201,368
Net Loan book (Rs. crore)6,2828,217
Total assets (Rs. crore)9,40412,138
Return on average assets (%)2.39%1.04%
Return on average net worth (%)20.84%9.37%
Gross NPA (%)0.71%3.84%
Net NPA (%)0.18%1.33%
Solvency (Net NPA/Net worth)1.09%7.95%
Gearing (times)7.997.60
CRAR (%)22.19%21.88%
ParameterIn FY20IN FY19
ROA (%)2.391.74
ROE (%)20.8415.85
ROCE (%)14.0613.57
Operating Profit Growth (%)42.5232.87
Net Profit Growth (%)98.90248.99
Credit/Deposits (%)119.99123.13
Total Income (in crores)1406.24939.09
Interest Earned (in crores)1307.69881.04
Profit After Tax (in crores)186.7493.89
Total Reserves (in crores)260.2335.71

PROMOTERS:

The leading Promoter of the firm is Utkarsh Coreinvest Limited. The Varanasi-headquartered lender has issued 2.22 Crores fresh equity in FY19-20 to its promoter firm Utkarsh CoreInvest Limited at Rs. 27 per share. Mr Govind Singh, who was earlier the business head of micro banking at ICICI Bank, is the Key Promoter at the Utkarsh Small Finance Bank.

CDC Group is Utkarsh CoreInvest Limited’s largest shareholder. The other shareholders are Faering Capital, RBL Bank, International Finance Corporation, Aavishkaar Goodwell, Norwegian Microfinance Initiative and ResponsAbility. 

Pre-Issue Share Holding100%
Post Issue Share Holding

Also Read : List of Mainboard IPO’s in India.
Also Read : List of Upcoming SME IPO’s in India.

CONTACT DETAILS

UTKARSH SMALL FINANCE BANK LIMITED

S-24/1-2, First Floor, Mahavir Nagar, Orderly Bazar,

Varanasi, 221 002, Uttar Pradesh, India;

Tel: +91 542 250 0596

E-mail: shareholders@utkarsh.bank

Website: https://www.utkarsh.bank

IPO REGISTRAR

KFin Technologies Private Limited
Selenium Tower-B, Plot 31 & 32, Gachibowli
Financial District, Nanakramguda, Serilingampally
Hyderabad 500 032
Telangana, India
Tel: +91 40 6716 2222
E-mail: utkarsh.ipo@kfintech.com
Website: www.kfintech.com

LEAD MANAGER(S)

  • ICICI Securities Limited
  • IIFL Securities Limited
  • Kotak Mahindra Capital Company Limited

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