IPO listed on 10 Nov'23
ESAF Small Finance Bank Ltd
Minimum Investment
₹ 15,000 / 250 shares
Grey market premium
₹ 22 (37% premium)
Issue price
₹ 60
Listing price
₹ 72
Listing gains
12 (20%)
Listing on
Nov 10, 2023
Our Verdict:
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- ESAF Small Finance Bank showcases strong financials and sound management. Its 20.6% capital adequacy ratio indicates financial strength, and notable improvement in asset quality point to solid risk control. The robust growth in retail deposits also reflects the bank's established presence in the market and steady expansion.
- From a valuation perspective too, the IPO seems attractively priced, with a P/E ratio of 6x on FY24's projected earnings and a P/BV ratio of 1.6. Additionally, the grey market premium (GMP) for the IPO suggests a premium listing.
- Considering all these factors, investors may consider subscribing to this issue from a medium-to-long term perspective.
About the company
Founded in
5 May'16
Managing director
Kadambelil Paul Thomas
- ESAF Small Finance Bank Limited specializes in serving the unbanked and under-banked demographics, predominantly in rural and semi-urban areas.
- The bank offers a range of primary services, which include advances like Micro Loans, Retail Loans, MSME Loans, Loans to Financial Institutions, and Agricultural Loans. On the liability side, they offer products such as current accounts, savings accounts, fixed deposits, and recurring deposits.
- In addition, they cater to non-resident Indians by providing NRE and NRO current and savings accounts, as well as fixed and recurring deposits.
STRENGTHS
- Strong Financial Performance: From FY21 to FY23, ESAF displayed remarkable growth, with a 33% CAGR in Total Income and a 69% CAGR in Net Profit.
- Notable AUM Growth: Between FY21 and FY23, the Assets under Management (AUM) saw significant growth, with a CAGR of 39%, reaching Rs 16,331 crore in FY23.
- Enhanced Asset Quality: ESAF witnessed a marked improvement in its asset quality. The Gross NPA (non-performing asset) decreased from 7.8% in FY22 to 2.5% in FY23, and the Net NPA reduced from 3.9% to 1.1% during the same timeframe.
- Healthy Return Metrics: In FY23, the Return on Net Worth stood at an impressive 17.7%, surpassing many competitors. The Return on Assets also saw a significant rise from 0.4% in FY22 to 1.6% in FY23.
- Expanding Retail Deposit Base: Total deposits grew from Rs 8,999 crore in FY21 to Rs 14,666 crore in FY23, marking a 28% CAGR. Retail Deposits also increased from Rs 8,796 crore to Rs 13,323 crore during this period, with a 23% CAGR.
RISK FACTORS
- Geographic Concentration: The bank is predominantly active in South India, particularly in Kerala and Tamil Nadu, where over 62% of its branches and 73% of its loans are concentrated. Economic challenges in this region could adversely affect the bank's financials and operations.
- High Attrition Rate: Employee turnover has escalated, rising from 13.03% in FY21 to 24.07% in FY23. Increasing attrition may force the bank to increase wages to retain talent, potentially straining its finances and operations.
- Unsecured Advances: Around 75% of the bank's loans are unsecured as of June 30, 2023. Any recovery issues could negatively impact its financial condition and operations.
- Regulatory Non-Compliance: The bank failed to comply with 17 out of 272 RBS Tranche III directives as of March 31, 2023. Potential RBI penalties for these infractions could harm the bank's reputation, operations, and financial performance.
Issue details
Issue type
Mainstream
Issue size
₹ 463 crore
Fresh Issue
₹ 390.70 crore
OFS
₹ 72.30 crore
Price range
₹ 57 - 60
Lot size
250 shares
Issue Objective
The proceeds from the fresh issue are proposed to be utilized towards augmenting the bank's Tier-I capital base.
Dates
Bidding open
3 Nov'23
Bidding close
7 Nov'23
Allotment date
8 Nov'23
Refund date
9 Nov'23
Listing
10 Nov'23
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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