ESAF Small Finance to debut on November 10: Stock may list at 25-30% premium to IPO price

ESAF Small Finance Bank IPO was subscribed 73.15 times with bids at 422.29 crore equity shares against an issue size of 5.77 crore shares

ESAF Small Finance Bank stock may list at a premium of 25-30 percent over the IPO price on November 10, according to analysts. The offer received a strong response from investors and now the stock is expected to open somewhere between Rs 75-80 against the issue price of Rs 60 owing to the company’s decent financial performance and solid subscription figures.

The offer was subscribed 73.15 times with bids at 422.29 crore equity shares against an issue size of 5.77 crore shares. Qualified institutional buyers (QIBs) were at the forefront of supporting the issue, buying 173.52 times the allotted quota, while the portions set aside for highnet worth individuals (HNIs) and retail investors were subscribed 84.37 times and 16.97 times, respectively.

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Prashanth Tapse, Senior VP Research at Mehta Equities expects a healthy listing gain in the range of 25-30 percent on the back of investor-friendly pricing and reasonable IPO valuations compared to peers.

“We believe there are a lot of unbanked opportunities in under-banked customer segments, especially in rural and semi-urban centres wherein ESAF SFB has a stronghold in south India,” said Tapse.

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.

ESAF Small Finance Bank shares are trading at a premium of Rs 18 in the grey market. Shivani Nyati, Head of Wealth, Swastika Investmart expects the stock to list at a 30 percent premium, around Rs 78.

“While ESAF Small Finance Bank has a strong presence in Southern India, with a growing retail deposit portfolio. Its financial performance has been impressive, with consistent top- and bottom-line numbers growth,” said Nyati.

Through the IPO, the small finance bank raised Rs 463 crore. The proceeds from the issue will be utilised for augmenting the bank's Tier–I capital base to meet future capital requirements and for increasing business, which is primarily onward lending. The price band for the issue, which opened on November 3 and closed on November 7, was fixed at Rs 57-60 per share.

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Shreyansh Shah, Research Analyst, StoxBox, also expects the stock to list at a premium of around 30 percent. “Considering the bank’s focus on high potential rural and semi-urban centres, customer-centric product offerings and high customer retention which ensures repetitive business, we remain positive on the company’s outlook,” said Shah.

ESAF Small Finance Bank provide loans to rural and semi-urban customers. The bank's products consist of micro, retail, agricultural and MSME loans and loans to financial institutions. The bank has a network of 700 banking outlets (including 59 business correspondent-operated banking outlets), 767 customer service centres and 559 ATMs spread across 21 states and two union territories.

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