Subsidiary IPO: Utkarsh CoreInvest’s
The first public offering of Utkarsh Small Finance Bank Ltd. It’s promoter Utkarsh coreInvest share is available in the unlisted space
The private lender intends to offer new equity shares to raise up to Rs 500 crore in total. There will be no offers to sell shares from current investors in the IPO of Utkarsh Small Finance Bank.
Issue Details
- Issue opens: July 12.
- Issue closes: July 14.
- Total issue size: Up to Rs 500 crore.
- Face value: Rs 10 per equity share.
- Offer for sale: Nil.
- Price band: Rs 23-25.
- Lot size: 600 equity shares.
- Listing: NSE, BSE.
Share Holding
The promoter company of Utkarsh Small Finance Bank, Utkarsh CoreInvest Ltd., is the owner of 84.75% of the bank’s whole pre-issue paid-up equity share capital.
Utkarsh CoreInvests share price has performed really well in the unlisted market. Utkarsh CoreInvests share price has increased from Rs.149/sh to Rs.220/sh in the span of 1 year.
As nominees on behalf of the bank’s promoter entity, Govind Singh, Revati Govind Singh, Trilok Nath Shukla, Ashwani Kumar, Rahul Dey, and Raghvendra Singh each hold one equity share in the company.
Utkarsh CoreInvest Limited’s Shareholding Pattern
| Entity | Percentage of equity shareholding |
|---|---|
| British International Investment PLC | 13.94% |
| RBL Bank Limited | 9.86% |
| NMI Frontier Fund KS | 7.82% |
| Faering Capital India Evolving FUND II | 7.78% |
| Hero Enterprise Partner Ventures | 4.92% |
| responsAbility Participations Mauritius | 4.92% |
| Shriram Life Insurance Company Limited | 4.90% |
| Small Industries Development Bank of India (SIDBI) | 4.32% |
| ICICI Prudential Life Insurance Company Limited | 4.22% |
| Aavishkaar Goodwell India Microfinance Development Company II Limited | 4.07% |
Business
The promoter company of Utkarsh Small Finance Bank, Utkarsh CoreInvest, started operating as an NBFC in FY10, with a focus on offering microloans to borrowers in Uttar Pradesh and Bihar.
The promoter firm acquired in-principle approval from the Reserve Bank of India to launch a small finance bank in FY16, and on April 30, 2016, it incorporated Utkarsh Small Finance Bank as a wholly-owned subsidiary.
The bank, which has its main office in Varanasi, had a deposit base of Rs 13,710 crore and a loan book worth Rs 13,957 crore as of FY23. As of FY23, the institution has a gross non-performing asset ratio of 3.23% and a net NPA ratio of 0.39%.
The bank provides joint liability group loans, individual loans, and microloans. It also offers retail unsecured loans—such as business loans and personal loans—and loans against property.
The bank also provides the following loans:
- Facilities for short- and long-term loans to institutional clients, mid- and large-sized corporations, and small- and medium-sized businesses.
- loans for homes with an emphasis on affordable housing.
- Loans for construction machinery and vehicles.
Gold loans
The bank’s net profit for FY23 was Rs 404 crore, a significant increase from Rs 61 crore for FY22. The bank’s net profit for FY21 was Rs. 111.8 crore.
Use Of Proceeds
SFBs must list their equity shares on stock markets within three years of establishing a net value of Rs 500 crore, per RBI norms.
In order to satisfy its future capital requirements, Utkarsh Small Finance Bank has recommended using the net proceeds from the IPO to increase its tier-1 capital base. The funds will also be utilised to cover the costs associated with the IPO.
Utkarsh Small Finance Bank’s Financials
| Particulars | FY21 | FY22 | FY23 |
| Net NPA Ratio | 1.33% | 2.31% | 0.39% |
| Gross NPA Ratio | 3.75% | 6.10% | 3.23% |
| Net Profit | 112 | 61 | 404 |
| Net Interest Income | 839 | 1,060 | 1,529 |
| Deposits | 7,507 | 10,074 | 13,710 |
| Advances | 8,216 | 10,228 | 13,068 |
Peer evaluation
AU Small Finance Bank, Ujjivan Small Finance Bank, Equitas Small Finance Bank, and Suryoday Small Finance Bank are some of the publicly listed competitors of Utkarsh Small Finance Bank.
The following chart compares Utkarsh Small Finance Bank’s financial results to those of some of its listed competitors:
| Particulars | Utkarsh SFB | AU SFB | Equitas SFB | Suryoday SFB | Ujjivan SFB |
| Net Profit | 404 | 1,428 | 573 | 78 | 1,099 |
| Net Interest Income | 1,529 | 4,425 | 2,544 | 747 | 2,697 |
| Gross NPA Ratio (%) | 3.23% | 1.66% | 2.76% | 3.10% | 2.88% |
| Net NPA Ratio (%) | 0.39% | 0.42% | 1.21% | 1.50% | 0.04% |
| Advances | 13,068 | 59,158 | 25,798 | 6,114 | 21,289 |
| Deposits | 13,710 | 69,365 | 25,380 | 5,167 | 25,537 |
Risk Elements
In its red herring prospectus, Utkarsh Small Finance Bank lists a number of risk factors, some of which are:
- A regional economic downturn or natural disaster could have a detrimental effect on the business of Utkarsh Small Finance Bank because around 31% of its gross loan portfolio is concentrated in Uttar Pradesh and 26% in Bihar.
- A sizable amount of the bank’s deposits are reliant on a small group of clients. By March 2023, the top 20 accounted for more than 21% of the total deposit base.
- The bank’s bulk deposits alone made up approximately Rs 2 crore, or 48.6% of its total deposit base.
- In the preceding year from the date of the red herring prospectus, the bank had issued equity shares at a price that may be lower than the issue price.
- A majority of the bank’s loans—including its micro-banking loan portfolio—are unsecured and not supported by any collateral. Availability of collateral may have helped ensure repayment of the loans. Unsecured loans accounted for nearly 67% of the bank’s portfolio as of March 2023.
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