Among the five key IPOs opening for subscription in the week starting on 15 March, one of them is Suryoday SFB. In India there are very few listed small finance banks with AU Small Finance Bank and Equitas Small Finance Bank among them. However, this area of micro finance is a huge growth area and investors are already beginning to seriously look at this space. It is at this juncture that the Suryoday SFB is opening its public issue of shares.
Key terms of the Suryoday Small Finance BankIPO
Suryoday Small Finance Bank will issue 1.094 crore shares by way of by way of offer for sale (OFS) and 81.50 lakh shares by way of fresh issue. Overall, the company will issue 1.909 crore share leading to a total issue size of Rs.582.34 crore at the upper end of the band.
|Key IPO Details||Particulars||Key IPO Dates||Particulars|
|Nature of issue||Book Building||Issue Opens on||17-Mar-2021|
|Face value of share||Rs.10 per share||Issue Closes on||19-Mar-2021|
|IPO Price Band||Rs.303 – Rs.305||Basis of Allotment date||24-Mar-2021|
|Market Lot||49 shares||Refund Initiation date||24-Mar-2021|
|Retail Investment limit||13 Lots (637 shares)||Credit to Demat||25-Mar-2021|
|Fresh Issue Size||Rs.248.58 crore||IPO Listing date||30-Mar-2021|
|Offer for Sale Size||Rs.333.76 crore||QIB Allocation||50%|
|Total IPO Size||Rs.582.34 crore||Retail Allocation||35%|
|Listing on||BSE and NSE||Non-Institutional – HNI||15%|
|Post Issue MCAP||Rs.3,237 crore||Promoters Pre / Post||30.35% / 28.02%|
Data Source: IPO Filings
How does the company propose to utilize the funds raised?
The OFS portion will not come into the company so the total funds coming into the company would only be to the extent of Rs.248.58 crore. These funds will be utilized in the following avenues.
- The main purpose of the issue is to augment the Tier-1 capital of the bank so as to give heft to the balance sheet and also to ensure that capital adequacy reduces risk.
- The company will also be using part of the funds raised for general corporate and regular expenditure purposes.
Overview of Suryoday Small Finance Bank
Suryoday is one of the top SFBs in India if looked at from the perspective of the net interest margins and other profitability parameters. It has been in the area of financial inclusion and that is a big business opportunity as it taps the opportunity at the bottom of the pyramid. Suryoday SFB commenced operations only in 2009 and today it has a customer base of 14.40 lakh customers, and operates across 554 banking outlets across India including 153 unbanked rural centres.
Between 2018 and 2021, the gross loan portfolio of the SFB has grown at a CAGR of 47% and the deposits have grown at a CAGR of 95% during this same period. While retail deposits are very high at 73%, its share of CASA is very low as most of its funding comes from longer term deposits.
Is there an investment case for Suryoday Small Finance Bank?
The company has some fundamental factors going for it.
- Its gross NPAs at 0.78% and net NPAs at 0.33% are among the lowest in the business and that is likely to reduce the pressure of provisions and encourage growth.
- Net Interest margin or NIM is down from 12.3% in FY19 to 8.49% in FY20. However, even at 8.49%, the NIMs are among the best in the segment.
- The bank has adopted an omni-channel approach as it leverages banking outlets, phone banking tablet banking, mobile banking, ATMs and CSPs to reach out to customers.
- The founder is a former senior banker at HDFC Bank and bring the conservative credit culture to the model.
- The bank is valued at a P/E of just above 21, which is better than most peers in the SFB space. That should attract investors, with a medium to long term perspective.