The demand for ESAF Small Finance Bank IPO remained strong even on November 7, the final day of bidding, as the offer was subscribed 73.15 times with bids at 422.29 crore equity shares against issue size of 5.77 crore shares.
Qualified institutional buyers were at the forefront of supporting the issue, buying 173.52 times the allotted quota, while the parts set aside for high networth individuals and retail investors were subscribed 84.37 times and 16.97 times, respectively.
Employees, who have a reservation of Rs 12.5 crore worth of shares in the IPO, have bid 4.36 times that reserved portion. They will get these shares at a discount of Rs 5 per share to the final issue price.
The price band for the offer, which opens on November 3, is Rs 57-60 per share.
The Kerala-headquartered small finance bank aims to raise Rs 463 crore via public issue comprising a fresh issuance of shares worth Rs 390.7 crore, and an offer-for-sale (OFS) of Rs 72.30 crore worth of shares by selling shareholders.
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Promoter ESAF Financial Holdings, and investors PNB MetLife India Insurance Company, and Bajaj Allianz Life Insurance Company are the selling shareholders in the OFS.
A day before the issue opening, on November 2, ESAF had mopped up Rs 135.15 crore from several anchor investors including Alchemie Ventures Fund, Kotak Mahindra Life Insurance Company, BNP Paribas Arbitrage, Copthall Mauritius Investment, Founders Collective Fund, and ICICI Prudential Life Insurance.
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The fund raising via fresh issue will be utilised mainly for augmenting its Tier–I capital base to meet future capital requirements, and for increasing its business, which is primarily onward lending.
Its IPO shares maintained the grey market premium of 33 percent over the upper price band given the healthy financial performance, improving asset quality and reasonable valuations, analysts said on condition of anonymity.
"ESAF, the small finance bank specialising in microfinance loans, serving the southern part of the country, is priced at a price-to-book-value of 1.38x on post issue adjusted book value per share (at the upper price band of Rs 60 per share), which is available at discount to its peers' average price-to-book-value of 2.3x," Choice Broking said.
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Going forward, the brokerage expects ESAF's loan growth to remain strong, leading to an increase in the bank's profitability across all parameters.
Motilal Oswal also believes the ESAF enjoys a healthy market share in the south with robust financials and healthy return ratios. "The issue is priced at 1.8x FY23 BV (on fully diluted basis), which seems comfortable. Given the current buoyancy in the micro finance sector, we believe that ESAF is attractively priced."
ESAF is expected to finalise the basis of allotment of IPO shares and transfer of shares to eligible investors by November 9, while the trading in equity shares is expected to commence with effect from November 10, sources told Moneycontrol.
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