ESAF Small Finance Bank IPO opens today: Should you subscribe to Rs 463 crore issue?

The price band for the issue has been fixed at Rs 57-60 per share

ESAF Small Finance Bank’s Rs 463 crore IPO opened for subscription on November 3. The price band for the issue, which will close on November 7, has been fixed at Rs 57-60 per share. Several analysts have assigned a ‘Subscribe’ rating to the issue owing to superlative return ratios and growing retail deposits.

The public offer comprises a fresh issue of 6.51 crore shares worth Rs 390.7 crore and an offer-for-sale of 1.2 crore shares worth Rs 72.3 crore. The promoters of ESAF Small Finance Bank are Kadambelil Paul Thomas and ESAF Financial Holdings Private Limited.

Also Read: ESAF Small Finance Bank IPO: 10 things to know before subscribing to Rs 463 crore issue

On the financial front, ESAF Small Finance Bank’s net profit jumped 452 percent to Rs 302.33 crore in the financial year ended March 2023 compared to Rs 54.73 crore in the year-ago period. Net interest income during the year increased by 60 percent on-year to Rs 1,836.3 crore, with deposits rising 14.4 percent to Rs 14,665.6 crore and disbursements increasing 23 percent to Rs 14,690.6 crore compared to the previous year. On the asset quality front, gross non-performing assets fell by 451 bps on-year to 1.65 percent and net NPA dropped 297 bps YoY to 0.81 percent at the end of the June FY24 quarter.

Should you subscribe to ESAF Small Finance Bank’s IPO?

Swastika Investmart: Subscribe

The issue is coming at a P/BV of 1.5x, which seems fairly priced. “Thus, considering the valuation and better performance in terms of its CIR, NNPA, and NIM, we give a subscribe rating toESAF Small Finance Bank IPO,” said Shivani Nyati, Head of Wealth, Swastika Investmart Ltd.

LKP Research: Subscribe

“Factoring the superlative return ratios, FY23 ROA/ROE of 1.6%/19.4%, we believe that ESAF Small Finance Bank Limited is worth subscribing. Thus we recommend to ‘Subscribe’,” said analysts at LKP Research.

Also Read: ESAF Small Finance Bank IPO: Financials, shareholding, comparison with peers in 5 charts

Hem Securities: Long-Term Subscribe

The company’s understanding of the microloan segment has enabled it to grow its business outside of Kerala. “The company’s main focus is on rural and semi-urban banking franchises along with a growing retail deposits portfolio & customer connections driven by its customer-centric products and processes and other non-financial services for Micro Loan Customers. We recommend “Long Term Subscribe” on the issue,” said analysts at Hem Securities.

Stoxbox: Subscribe

As the lender will utilise the net proceeds of the fresh equity shares issue to augment its Tier-I capital base, its capital adequacy will enhance and lead to a stable leverage position. “At the current P/BV multiple of 1.6x, we believe the company is attractively valued and advise investors to “Subscribe” from a medium to long-term perspective,” said analysts at Stoxbox.

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