The initial public offering (IPO) of ESAF Small Finance Bank continued to see a strong response from the investors during the second day of the bidding process. The issue kicked-off for bidding on Friday, November 3.
ESAF Small Finance Bank is selling its shares in the price band of Rs 57-60 apiece with a lot size of 250 equity shares and its multiples thereafter. The Kerala-based private lender is looking to raise Rs 463 crore via IPO route, which includes an offer-for-sale (OFS) portion of up to 6.51 crore equity shares by selling shareholders and fresh issue of Rs 72.30 crore.
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According to the data, the investors made bids for 24,55,91,000 equity shares, or 4.25 times, compared to the 5,77,28,408 equity shares offered for the subscription by 12.00 noon on Monday, November 6. The three-day bidding for the issue will conclude on Tuesday, November 7.
The portion reserved for retail investors was subscribed 4.58 times, while the allocation for non-institutional investors (NIIs) saw a subscription of 8.46 times. The allocation for employees was 1.61. However, the quota set aside for qualified institutional bidders (QIBs) was booked 93 per cent as of the same time.
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Incorporated in 1992, ESAF Small Finance Bank, majorly focuses on providing loans to rural and semi-urban customers, providing financial solutions such as micro loans, retail loans, MSME loans, loans to financial institutions and agricultural loans to the customers.
Brokerage firms tracking the IPO are mostly positive on the issue and have a subscribe rating to it. Analysts are positive on its attractive valuations, growing business and strong hold in the south Indian market. However, some suggest microlending and limited business in North India as a concern.
“We believe the issue is priced effectively and has room for upside. We recommend to ‘subscribe’ to the issue given its healthy asset quality, strong presence in rural and semi-urban markets, focus on growing AUM book and experienced management, said IndSec Research.
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The business is valued at an FY23 Post issue P/BV multiple of 1.4 times and 1.5 times at the lower and upper price band respectively. The IPO looks fairly valued across various valuation parameters when compared with its peers. Investors can ‘subscribe’ to the issue for a long-term investment perspective, said SBICap Securities.
ESAF Small Finance Bank raised Rs 135.15 crore from 11 anchor investors as it allocated 2,25,24,998 shares at Rs 60 per equity share on Thursday. DAM Capital Advisors, ICICI Securities and Nuvama Wealth Management are the lead managers to the issue, while Link Intime India has been appointed as the registrar to the issue. Shares of the lender will be listed at both BSE and NSE.
Religare Broking is ‘neutral’ on the stock. It sees limited operations in South India with lower presence in North India., Hike in RBI’s interest rate will result in compression of NIMs from current levels and Increase in stress on assets specially on small ticket items will affect the future cash flows which will lead to increase in NPA, as the key risks to the issue.
