Suryoday Small Finance Bank IPO Review – Should you Invest?

Suryoday Small Finance Bank IPO Review – Should you SubscribeSuryoday Small Finance Bank IPO Review

Chennai  based Suryoday Small Finance Bank IPO would open for subscription on 17th March, 2021. Suryoday Small Finance Bank is one of the leading Small Finance Bank in India. Suryoday SFB IPO News has been buzzing for some time now. Suryoday small finance bank generated strong revenue and margin growth in the last 3 years and 9 months. Should you invest in Suryoday Small Finance Bank IPO? In this article we would provide Suryoday Small Finance Bank IPO dates, IPO Price band, market lot, reasons to invest, risk factors, IPO Price valuations and final review whether one should invest or avoid.

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About Suryoday Small Finance Bank India Limited

Suryoday Small Finance Bank (SSFB) is the leading small finance bank in India in comparison with net interest margins, ROA, yields, deposit growth and lowest cost-to-income ratio among small finance banks in India.

Over the years, the bank has diversified its loan portfolio to include non-micro banking, loans thereby reducing its dependence on micro banking business.

As of December 31, 2020, its customer base was 1.44 million and employee base comprised 4,770 employees and operated 554 Banking Outlets including 153 Unbanked Rural Centers. They have set up 661 customer service points (CS) as an additional service or touch points during April 1, 2020 and January 31, 2021 and intend to continue to expand its reach through the CSP model.

Bank have arrangements with various payment banks in India and have been able to leverage its relationship with such payment banks to grow its deposit base. Its distribution network also comprises ATMs, phone banking, mobile banking, tablet banking, unified payment interface, CSPs, and internet banking services.

Bank operations are predominantly in urban and semi-urban locations due to greater income earning capabilities and employment opportunities in such areas compared with rural regions. The bank currently offers a variety of asset and liability products and services designed for inclusive finance and general banking customers.

Its asset products consist of inclusive finance portfolio, commercial vehicle loans, affordable housing loans, micro business loans, unsecured micro and small enterprise and small and medium enterprise loans, secured business loans, financial intermediary group loans and other loans. Gross Loan Portfolio has grown at a CAGR of 46.98% from Rs  17,177.84 Mn as of March 31, 2018 to Rs 37,108.42 mn as of March 31, 2020 and was Rs 39,082.29 mn as of December 31, 2020.

Suryoday Small Finance Bank competitive strengths

1) Customer centric approach with a focus on financial inclusion

2) Diversified asset portfolio with a focus on retail operations

3) Fast evolving granular deposit franchise

4) Leveraging emerging technologies to enhance digital footprint

5) Strong credit processes and robust risk management framework

6) Track record of strong financial performance and cost efficient operations

7) Multiple distribution channels

8) Experienced leadership team, professional management and strong corporate governance.

Suryoday Small Finance Bank IPO Dates, Price Band and Issue Details

IPO Opening Date 17-Mar-21
IPO Closing Date 19-Mar-21
Issue Type Book Built Issue IPO
Face Value Rs 10 per equity share
IPO Price band Rs 303 to 305 per equity share
Market Lot 49 Shares
Min Order Quantity 49 Shares
Listing at BSE and NSE
Issue Size Total Rs 582.3 Crores
i) Fresh issue – 248.58 Crores
ii) OFS – 333.76 Crores

Note: Suryoday Small Finance Bank IPO Price Band is confirmed now as per latest news.

Download Suryoday Small Finance Bank IPO DRHP

Download Suryoday Small Finance Bank IPO RHP

Objects of issue

Here are the objects of the IPO issue.

1) Offer for Sale (OFS) – In this, selling shares, holders would sell their shareholding and company would not get any proceeds from this issue.

2) Bank proposes to utilize the Net Proceeds from the Fresh Issue towards augmenting Bank’s Tier – 1 capital base to meet Bank’s future capital requirements.

3) Bank expects to receive the benefits of listing the Equity Shares on the Stock Exchanges.

Who are the company promoters?

Baskar Babu Ramachandran, P. Surendra Pai, P. S. Jagdish and G. V. Alankara are the promoters of the bank.

Company Financial Performance

Here are the revenue and profit details in the last 3 years and 9 months.

For the year / Period ending Total Revenues (Rs in Millions) Profits after tax
(Rs in Millions)
Profit %
Mar-2018 3,249.2 618.5 19.0%
Mar-2019 5,970.2 1,286.2 21.5%
Mar-2020 8,541.3 2,048.3 24.0%
9 Months ending Dec-20 6,892.7 2,596.9 37.7%

Its EPS for FY2020 is Rs 13.3 and last 3 years average EPS is Rs 11.33.

Why to invest in this IPO?

Here are a few reasons to invest.

1) Suryoday Small Finance Bank is one of leading small finance banks in India.

2) Bank has generated strong revenue growth in the last 3 year and 9 months.

3) Bank margins have improved year on year in the last 3 years and 9 months.

Risk Factors of investing in this IPO

1) Covid-19 and its continuing impact is unpredictable and can have an impact on bank’s financial performance

2) Bank significantly depend on advances to inclusive finance customers. Any adverse development in micro finance sector can heavily impact its business

3) Like any other bank, even this small finance bank is subject to stringent regulatory requirements. Its inability to comply to laws can affect bank performance

4) Bank and its directors are involved in certain legal proceedings, any adverse development can impact the business and reputation of the bank

5) Bank comes under SFB licensing guidelines. Noncompliance can lead to penalties from RBI

6) Bank business is vulnerable to interest rate risk. Any volatility in interest rates and its inability to manage it can impact bank business

7) It has limited operating history as a small finance bank. Growth cannot be measured with such small operating history

8) Banks are exposed to credit risks and may result in an increase in NPAs. If the bank is unable to control NPAs, it would affect the business and financial condition

9) A significant portion of its advances is towards customers from Tamilnadu, Maharastra and Odisha. Any adverse changes in these states can impact bank financial condition and results of operations

10) For complete internal and external risk factors, you can refer the RHP of the company

Suryoday Small Finance Bank IPO Dates / Time Table / IPO Schedule

Offer Open 17-Mar-21
Offer close 19-Mar-21
Finalization of Allotment 24-Mar-21
Initiation of Refunds 24-Mar-21
Credit to Demat Account 25-Mar-21
IPO Shares Listing Date 30-Mar-21

How to apply this IPO?

You can login to your demat account, visit IPO section and click on the IPO link of Suryoday Small Finance Bank Limited. You can then enter minimum lot quantity and price band and then submit.

IPO Price Valuations

Suryoday Small Finance Bank IPO Price band is Rs 303 to Rs 305.

1) On the upper price band of Rs 305 and EPS of Rs 13.3 for FY20, the P/E ratio works out to be 23x.

2) For the last 3 years average EPS of Rs 11.33, the P/E ratio is 27x.

3) If we annualize last 9 months EPS for FY21 P/E works out to be 38x.

4) Means, the company asking price of Rs 305 of the upper price band in the P/E range of 23x to 38x.

5) There are listed peers like AU Small Finance Bank trading at P/E 48x (Highest) and Ujjivan Small Finance Bank at P/E 16x (Lowest) and the industry average is 25x. Hence Suryoday Small Finance Bank share price of Rs 305 at P/E of 23x to 38x is fully priced.

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Suryoday Small Finance Bank IPO Review – Should you invest?

Suryoday Small Finance Bank is the leading small finance bank in India.

It generated strong revenue growth in the last 3 years and 9 months.

Its margins are improving year on year in the last 3 years and 9 months.

Suryoday Small Finance Bank IPO price is fully priced.

High risk investors can invest in this IPO for medium to long term. Considering the bull run, such IPO’s can give handsome listing gains too.

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Suresh KP

One comment

  1. Suryoday small finance bank ipo is good for long term investment. Even grey market premium is currently trading at 80 Rupees per share.

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