Utkarsh Small Finance Bank refiled for IPO to fulfil RBI’s regulatory requirements

Utkarsh Small Finance Bank revives its maiden public issue.

Utkarsh Small Finance Bank had withdrawn its Rs 1,350-crore initial public offering (IPO) in 2021 due to Covid-19 disruption. The IPO, which also had a Rs 600-crore offer for sale component, was dropped after deliberations between the management and existing investors as it was felt that the OFS would primarily benefit the holding company rather than individual investors, said Govind Singh, MD and CEO of the bank in a pre-IPO conversation with Moneycontrol.

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The primary objective was to raise growth capital, which holds significant importance, said the Chief Executive Officer.

On the decision to come up with an IPO again, the management said this is driven by multiple factors. Firstly, the RBI requires all banks, including Utkarsh Small Finance Bank, to list within three years once their net worth surpasses Rs 500 crores. This timeframe has already passed, and hence the RBI has urged the bank for the listing process.

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Secondly, and perhaps more importantly, raising growth capital is crucial. As it serves as the raw material for any financial services company. Having sufficient tier 1 capital is essential to execute the bank’s growth plans effectively and achieve the same level of success accomplished in the past.

Earlier, the Varanasi-based lender had filed its draft paper in July 2021 to raise Rs 1,350 which included a fresh issue worth Rs 750 crore and offer-for-sale (OFS) of Rs 600 crore by promoter Utkarsh Coreinvest. The bank re-filed DRHP with Sebi for Rs 500 crore-IPO.

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Presently, Utkarsh Small Finance Bank’s issue proceeds will be utilised to augment its tier 1 capital base to meet future capital requirements. The lender had kicked-off its operations in fiscal year 2009-10 as a non-banking financial company, mainly in Uttar Pradesh and Bihar.

The IPO which opens for subscription on July 12 will close on July 14th. The price band for the IPO is Rs 23 to Rs 25 per share. The minimum bid lot is 600 shares.