Utkarsh Small Finance Bank IPO would open for subscription on 12th July, 2023. It had significant growth in the amount of loans it has given out between 2019 and 2023, making it the third fastest-growing bank compared to its peers. Utkarsh Small Finance Price Band is Rs 23 to Rs 25 and investors might be thinking it is low priced. In this article we would provide Utkarsh Small Finance Bank IPO Details, Financials, Objects of the IPO, Valuation, Review and Conclusion.
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Utkarsh Small Finance Bank IPO Details
We have used Utkarsh Small Finance Bank RHP as source data for this review and analysis. Here are the IPO details.
| IPO Opening Date | 12-Jul-23 |
| IPO Closing Date | 14-Jul-23 |
| IPO Listing Date | 24-Jul-23 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 10 per equity share |
| IPO Price band | Rs 23 to Rs 25 per equity share |
| Lot Size | 600 Shares |
| Min Order Quantity | 600 Shares |
| Listing at | BSE and NSE |
| Total Issue Size | Rs. 500 Crores |
| QIB shares offered | Not less than 75% of the offer |
| NII/HNI shares offered | Not more than 15% of the offer |
| Retail shares offered | Not more than 10% of the offer |
About Utkarsh Small Finance Bank Limited
It is small finance bank (SFB) in India and achieved impressive growth in its Gross Loan Portfolio between Fiscal 2019 and Fiscal 2023, ranking third among SFBs with a portfolio exceeding Rs 60 billion.
Utkarsh CoreInvest Limited, the bank’s promoter, started as a microfinance-focused non-banking financial company (NBFC) in 2010, catering to underserved areas in Uttar Pradesh and Bihar. The bank’s headquarters are in Varanasi, Uttar Pradesh, and it has strategically expanded its SFB operations in states where Utkarsh CoreInvest had prior microfinance experience. The bank received the RBI License in 2016, allowing it to establish and operate as an SFB.
As of March 31, 2023, Utkarsh SFB operates across 26 states and union territories, with 830 banking outlets and 15,424 employees. The majority of its banking outlets are located in rural and semi-urban areas, surpassing the regulatory requirement of 25% for SFBs. With a customer base of 3.59 million, the bank focuses on rural and semi-urban regions, particularly in Bihar and Uttar Pradesh, where it has a strong asset quality and moderate credit penetration.
To reduce its reliance on microfinance, Utkarsh SFB has diversified its product portfolio to include non-micro banking loans. The bank offers various financial products and services tailored to different customer segments, including microbanking loans, retail loans, wholesale lending, housing loans, commercial vehicle loans, and gold loans. On the liabilities side, it provides savings accounts, current accounts, and different types of term and recurring deposit accounts. The bank also offers non-credit services such as ATM-cum-debit cards, bill payment systems, and distribution of third-party products.
Utkarsh Small Finance Bank Limited Financials
Here are the financials of the company.
In summary, the company’s total assets and total revenue have been steadily increasing, while the profit after tax showed a temporary decline before recovering and achieving higher profitability in the last fiscal year.
| Financial Year ending / Period ending (Amt in Crores) | ||||
| Particulars | FY20 | FY21 | FY22 | FY23 |
|---|---|---|---|---|
| Total Assets | 9,404.3 | 12,137.9 | 15,063.8 | 19,117.5 |
| Total Revenue | 1,406.2 | 1,705.8 | 2,033.7 | 2,804.3 |
| Profit After Tax | 186.7 | 111.8 | 61.5 | 404.5 |
| Profit % | 13.28% | 6.56% | 3.02% | 14.42% |
What are the Objects of the IPO?
Bank proposes to utilize the Net Proceeds from the Issue towards augmenting its Tier – 1 capital base to meet its future capital requirements. Additionally, the proceeds from the Issue will also be used towards meeting the expenses.
Utkarsh Small Finance Bank IPO Promoter holding would reduce from 84.75% to 69.28% post listing.
How is Utkarsh Small Finance Bank’s IPO Price Valuation?
The IPO price band is Rs 23 to 25 per share.
- Furthermore, if we consider last year FY23 EPS of Rs 4.51, P/E ratio works out to be 6x.
- Similarly, if we consider Last 3 Years Weighted EPS of Rs 2.73, P/E ratio works out to be 9x.
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Additionally, it is important to note that Spandana Spoorthy Financial Limited is trading at the highest P/E of 400x among listed peers, while Ujjivan Small Finance Bank Limited has the lowest P/E of 7x. The industry average P/E is also 7x. Therefore, considering the IPO price band at a P/E of 6x to 9x, it can be regarded as reasonably priced.
What is Utkarsh Small Finance Bank IPO GMP now?
There are numerous messages circulating over social media claiming that the grey market premium is between Rs 25 to Rs 30, representing an almost 100% premium. However, according to reliable sources, the GMP today is reported to be between Rs 4 to Rs 5 per share.
What are Utkarsh Small Finance Bank IPO Dates?
| IPO Opens on | Wednesday, 12 July 2023 |
| IPO Closes on | Friday, 14 July 2023 |
| Basis of Allotment | Wednesday, 19 July 2023 |
| Initiation of Refunds | Thursday, 20 July 2023 |
| Credit of Shares to Demat | Friday, 21 July 2023 |
| Listing Date | Monday, 24 July 2023 |
| Cut-off time for UPI mandate confirmation | 5 PM on Jul 14, 2023 |
Positive Factors to invest in Utkarsh Small Finance Bank IPO
1) Company has sound understanding of microfinance segment and presence in rural and semi-urban areas.
2) Company have strong growth in deposits with focus on retail deposits. Its deposits increased from Rs 75,058 Mn as of Mar-21 to Rs 137,101 Mn as of Mar-23.
3) This small finance bank has a diversified distribution network with significant cross-selling opportunities. They have an extensive physical network of Banking Outlets and as of March 31, 2023, we had 830 Banking Outlets across 26 States and Union Territories covering 253 districts in India of which 522 Banking Outlets were located in rural and semi-urban areas (combined)
4) Company had strong revenue growth in the last 4 years. Its revenues grew from Rs 1,406 Crores in FY20 to Rs 2,804 Crores in FY23.
5) The IPO price is reasonably priced compared to its peers.
Risk or Negative Factors in Utkarsh Small Finance Bank IPO
1) Bank margins declined between FY20 to FY22, these have improved in FY23. One need to watch whether such improved margins would sustain in future.
2) Company is subject to inspections by regulatory authorities including an RBI. Non compliance with RBI inspection or observations may have an adverse impact on company business.
3) The RBI has debarred the bank’s previous statutory auditors from undertaking audit assignments for a period of 2 years.
4) Bank’s significant portion of the advances in the microbanking segment is towards customers in Bihar and Uttar Pradesh. Any adverse changes in these 2 states can impact the bank’s business.
5) Company had delays in providing certain disclosures for NCD listing and filed a settlement application with SEBI.
6) Bank’s deposits are from a limited number of customers. Any loss of such customers can have material impact and affect its deposit portfolio.
7) It has a high proportion of bulk deposits. Any partial or full withdrawal of such deposits from such customers could adversely affect its business.
Utkarsh Small Finance Bank IPO Review – Conclusion
Is Utkarsh Small Finance Bank Initial Public Offering good or bad for investment?
This IPO has both positive and negative factors for investors to consider.
It is the fastest growing small finance bank in terms of AUM in the last few years. Its deposits have grown significantly during FY20 to FY23. Utkarsh Small Finance Bank had sustained growth in the loan book. We could see all these positive factors reflecting on the strong revenue growth between FY20 to FY23. The issue price is reasonably priced and grey market premium also shows 20% to 30% premium.
On the other side, company margins have declined during FY20 to FY22, but shown improvement in FY23. One need to wait and watch whether such improved margins would sustain in future. Its customers in Bihar and Uttar Pradesh account for a significant portion of the advances, and limited customers from Maharashtra, NCT of Delhi, UP, and Haryana contribute to the bulk of its deposits. While the RHP indicates a diversified network, it remains limited
High risk investors who understand all these risk factors can invest in this IPO from medium to long term perspective.
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FAQ’s on Utkarsh Small Finance Bank IPO
When is Utkarsh Small Finance Bank IPO launch date?
This IPO would open on 12th July and closes on 14th July, 2023
What is Utkarsh small finance bank ipo gmp today?
The GMP is being traded between Rs 4 to Rs 5 per share.
Is Utkarsh small finance bank ipo price is high?
Considering that the IPO Price is at P/E of 6x to 9x, the IPO it is reasonably priced.
What is Utkarsh Small Finance Bank IPO Size?
This IPO Size is Rs 500 Crores which is entirely a fresh issue.
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good analysis. Instead of applying directly for all such ipo’s, retail investors can consider SIP investment in Edelweiss ipo fund which will benefit them and they can book profits @ regular intervals. For example, you have entered this fund rs.10/- & nav gone to 15 u can withdraw from the fund rs.5/-alone . I am following this strategy profitably.
It might not always work that way. e.g. In last 2 weeks, this fund generated 4% annualised returns. Making quick bucks with mutual funds may not always work. But I agree that that could be another option to invest directly in IPOs