ESAF Small Finance Bank LTD. IPO: Review, GMP & Valuation

ESAF Small Finance Bank Limited - Complete Overview

ESAF Small Finance Bank Limited, established in 1992, specializes in delivering banking and lending services to underserved customer segments, with a particular emphasis on rural and semi-urban regions. They are primarily centered in India, with a particular focus on South India, notably in  Kerala and Tamil Nadu . As of June 30, 2023, a significant portion of the company’s loan portfolio, 62.97%, is dedicated to customers in these areas, complemented by the strategic placement of 71.71% of its branches. 

 

What does the company do?

The ESAF Small Finance Bank which is considered as one of the leading small finance banks today in India is scheduled to open its IPO on November 3 aiming to raise Rs. 463 crores. ESAF Small Finance Bank Limited is a small finance bank dedicated to serving unbanked and under-banked customers, particularly in rural and semi-urban regions. In 2023 itself the company recorded revenues of Rs. 3,142 crores, which is a  substantial increase from the amount Rs. 2,148 crores which was in 2022. The price range of the IPO is fixed between Rs. 57 and Rs. 60 per Equity Share, and the IPO will be listed on both BSE and NSE.

ESAF’s core product offerings encompass:

i. Micro Loans, including microfinance and other microloans
ii. Retail Loans, such as gold loans, mortgages, personal loans, and vehicle loans
iii. MSME Loans
iv. Loans to financial institutions
v. Agricultural Loans

They have a banking of 700 banking outlets, including 59 businesses which are correspondent-operated outlets, as well as 767 customer service centers, ESAF Small Finance Bank serves a customer base of 7.15 million individuals as of June 30, 2023.

 

 

Objectives of the IPO

The bank intends to use the net proceeds from the new issue to strengthen its Tier-I capital base, ensuring it can meet future capital needs.

 

ESAF Small Finance Bank Limited IPO timetable (Tentative)

Events	Date
IPO Opening Date	3 November 2023
IPO Closing Date	7 November 2023
IPO Allotment Date	12 November 2023
Refund initiation	13 November 2023
IPO Listing Date	16 November 2023

 

ESAF Small Finance Bank Limited IPO Details 

IPO Opening & Closing Date	3 November to 7 November 2023
Face value	Rs. 10 per Share
Issue Price	Rs. 57 to Rs. 60 per Share
Lot Size	250 Shares
Price of 1 lot	Rs. 14,904
Issue Size	77,166,667 Shares (aggregating up to Rs. 463.00 Cr)
Offer for Sale	12,050,000 Shares of Rs. 10 (aggregating up to Rs. 72.30 Cr)
Fresh Issue	65,116,667 Shares (aggregating up to Rs. 390.7 Cr)
Listing at	BSE, NSE
Issue Type	Book Built Issue IPO
Registrar	Link Intime India Pvt. Ltd.

 

ESAF 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)	67 Lot

 

 

ESAF Small Finance Bank Limited IPO Reservation 

Institutional share Portion	50%
Non-institutional share Portion (HNI)	15%
Retail share Portion	35%

 

Company Financial

Amount in Crore

Period	31 Mar 2023	31 Mar 2022	31 Mar 2021
Total Assets	20,223.66	17,707.56	12,338.65
Total Revenue	3142	2148	1784
PAT	302.33	54.73	105.40
Liabilities	20,223.66	17,707.56	12,338.65
Investment	4,888.53	4,070.30	1,932.07
Total Borrowings	3,354.20	2,952.83	1,694

 

Promoters and Management of ESAF Small Finance Bank Limited

The Promoters of our Bank are Kadambelil Paul Thomas and ESAF Financial Holdings Private Limited.

Pre-issue Promoter Shareholding	74.43%
Post-issue Promoter Shareholding	62.64%

 

Peer Comparison

Some of the listed industry peers include Suryoday Small Finance Bank Limited, CreditAccess Grameen Limited, Spandana Sphoorty Financial Limited, Bandhan Bank Limited, Ujjivan Small Finance Bank Limited, and Equitas Small Finance Bank Limited.

Below are the listed peers :

Name of the Company	Total revenue	P/E	EPS (Basic)
Esaf small finance bank limited	31,415.72	8.9	6.73
Suryoday SFB	12,811.00	22.39	7.32
Credit Access Grameen	35,507.90	26.81	52.04
Spandana Sphoorty Fin	14,770.32	471.38	1.74
Bandhan Bank	183,732.50	16.55	13.62
Ujjivan SFB	47,541.90	9.81	5.87

 

IPO Strengths

• The company really knows how to do microloans, and that’s helping it grow.
• They really want to be good at banking in the rural and semi-urban areas.
• They are getting more money from people putting their savings in the bank.
• The company makes sure customers like them by giving them special products and services.
• They use a lot of technology and the internet to run their business.

 

IPO Risks

• They have a lot of loans without guarantees, and if people don't pay them back, it's bad for business.
• The Reserve Bank of India can give them trouble with fines and punishments.
• Most of the company's business is in Kerala and Tamil Nadu.
• It's hard for them to find customers because it’s expensive, and people don't always know about their products. Local problems can also hurt them.
• They don't do much business in Bihar, Uttar Pradesh, West Bengal, Odisha, or Rajasthan, even though these places are good for microloans.
• Not getting money back from loans can become one of the major problems for a company.

 

IPO's Valuations

To evaluate the IPO valuation, we can utilize the data furnished in the company's DRHP. The price range of the IPO is fixed between Rs. 57 and Rs. 60 per Equity Share and its EPS is Rs. 6.73  Considering the issue price, the company's Price/earnings ratio (P/E) ratio is currently at 8.9

 

 

Dividend Policy

The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects

 

IPO GMP Today

The Latest GMP of ESAF Small Finance Bank IPO is Rs. 20.

 

Conclusion 

To sum it up as a conclusion, the ESAF Small Finance Bank IPO offers an exciting chance for investors to join in the expansion of a bank that has a prominent presence in rural and semi-urban regions . It also has future  commitment to financial inclusion. We will suggest before investing, it’s crucial to thoroughly review the IPO prospectus and seek advice from financial professionals to make well-informed choices.

 

 

Finowings IPO Analysis

Hope you enjoyed the Finowings IPO Analysis. We tried our best to give every required detail about the company that you should know before applying to the IPO. 

You must consult your financial advisor before making any financial decisions. 

To Apply for the IPO, Click Here.

 

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

 

 

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