Utkarsh Small Finance Bank shares list at 60% premium over IPO price

Shares of Utkarsh Small Finance Bank made a stellar debut on the domestic bourses on July 21, two days prior to scheduled listing date, which was in line with the Street estimates. The share price of Varanasi-based small scale bank was listed at ₹40 per share on the NSE, a premium of 40% against the IPO price band of ₹25 per share. On the BSE, the bank shares opened higher at ₹39.95 against the issue price. In contrast, the BSE Sensex was trading 426 points lower at 67,145 mark, and the NSE Nifty was down 126 points at 19,853 level. 

Ahead of listing, Utkarsh Small Finance Bank shares were commanding a premium of ₹15 in the grey market, which indicated a solid listing gain of around 50-60%. Most analysts have recommended investors to subscribe to the Utkarsh SFB IPO over attractive valuations compared to peers, strong growth potential, and promising industry outlook.

The ₹500-crore initial public offer (IPO) of Utkarsh Small Finance Bank garnered strong response from investors, thanks to its reasonable valuation and bullish sentiment in the primary as well as secondary markets. The issue was subscribed nearly 102 times, the second highest this year after Ideaforge Technologies, which was booked 106 times.

As per the BSE data, the issue received bids for over 1,226 crore shares as compared to 12.05 shares on the offer. The quota reserved for qualified institutional buyers (QIBs) was booked nearly 125 times, while the non-institutional investors (NIIs) category subscribed 81.6 times. The portion for retail investors attracted 71.4 times bid, while the quota reserved for employees was booked 16.35 times, the data showed. The small finance bank had reserved up to 75% of the issue for QIBs, up to 15% for NIIs, and remaining 10% for retail investors.

The three-day IPO of the small scale bank opened for subscription between July 12-14, which was completely a fresh issue of equity shares. It had set the price band at ₹23-25 per share and lot size was 600 shares and in multiples of 600 shares thereafter. This means, the minimum investment amount for retail investors was ₹15,000 for one lot and the maximum investment was ₹1.95 lakh for 13 lots.

The bank intends to use IPO proceeds to augment its Tier-1 capital base to meet its future capital requirements. A part of the capital will also be used towards meeting the expenses in relation to the issue.

Incorporated in 2016, Utkarsh Small Finance Bank (USFB) is a small finance bank with a pan-India presence, having operations across 26 states and union territories in India as of March 31, 2023. The promoter, Utkarsh CoreInvest commenced operations as an NBFC in 2010 and was focused on providing microfinance to unserved and underserved segments and in particular in the states of Uttar Pradesh and Bihar. In October 2015, Utkarsh CoreInvest received the RBI approval to establish an SFB, following which it incorporated Utkarsh Small Finance Bank as a wholly-owned subsidiary on April 30, 2016.

In the last three fiscals, USFB registered continued growth in its total income at ₹1,705.84 crore in FY21, ₹2,033.65 crore in FY22, and ₹2,804.29 crore in FY23. The net profit stood at ₹111.82 crore in FY21, ₹61.46 crore in FY22, and ₹404.50 crore in FY23. On the asset quality front, the net NPAs for the last three years stood at 1.33%, 2.31%, and 0.39%, respectively.

Headquartered in Varanasi, the bank has a strong presence in the rural and semi-urban geographies with a network of 830 branches, 287 ATMs, and 546 micro ATMs. It has assets under management (AUM) of ₹5,000 crore and was the second fastest-growing SFB in India in the financial year 2019 and FY22. The bank offers loans up to ₹50 crores with a maximum tenure of up to 30 years. 

The recent IPOs such as Senco Gold and Ideaforge have managed to garner strong response from the market, which reflects a growing appetite for Indian equities amongst the QIBs as well as retailer investors. The secondary market has seen a remarkable rally in the last one month, with BSE Sensex and Nifty50 rising more than 5.5% and hitting their respective all-time highs.

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