Utkarsh Small Finance Bank, based in Varanasi, announces its ₹500 crore IPO, set to open on July 12 and close on July 14. Anchor investors can begin bidding from July 11.
Utkarsh Small Finance Bank IPO Details
Utkarsh Small Finance Bank, headquartered in Varanasi, Uttar Pradesh, is preparing to launch its initial public offering (IPO) to the public. The IPO is scheduled to open for subscription on July 12 and will conclude on July 14. Prior to the public subscription, anchor investors will have the opportunity to participate in an auction on July 11. The bank expects the allotment of shares to take place on July 19, with the shares being credited to the demat accounts of allottees on July 20. The listing of the bank’s stock on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) is expected to occur on July 24.
The IPO of Utkarsh Small Finance Bank consists solely of a fresh issue of equity shares, with the aim of raising approximately Rs 500 crore. This capital infusion will be utilised to strengthen the bank’s tier I capital base, ensuring it meets the future capital requirements as it continues to expand its operations. As of March 2024, the bank’s tier-1 capital base stood at Rs 1,844.82 crore, equivalent to 18.25 percent of its risk-weighted assets.
The book running lead managers for the IPO are ICICI Securities Ltd and Kotak Mahindra Capital Company Ltd, while KFin Technologies Ltd has been appointed as the registrar to the issue.
Background and Operations of Utkarsh Small Finance Bank
Utkarsh Small Finance Bank was incorporated in 2016 and began its banking operations in 2017. The bank primarily caters to customers in rural and semi-urban areas, focusing on providing financial services to underserved and economically disadvantaged sections of society.
It offers a comprehensive range of deposit products, including savings accounts, salary accounts, current accounts, recurring deposits, fixed deposits, and locker facilities. With a customer-centric approach, the bank aims to provide convenient and accessible banking services to its customer base.
As of March 2024, Utkarsh Small Finance Bank operates in 26 states and Union Territories across India. It has established a strong network of 830 banking outlets, serving approximately 3.59 million customers. The bank has strategically expanded its presence in states such as Bihar, Uttar Pradesh, and Jharkhand, where it leverages the prior microfinance experience of its parent company, Utkarsh CoreInvest Limited. With a dedicated workforce of 15,424 employees, the bank has been able to effectively serve its customer base and contribute to financial inclusion in these regions.
The bank has witnessed significant growth in its financial performance over the years. In the fiscal year 2022-2023, Utkarsh Small Finance Bank reported a net profit of Rs 404.50 crore, compared to Rs 61.46 crore in the previous year. This substantial growth in profitability can be attributed to the bank’s focused approach, expanding customer base, and robust asset portfolio. The bank’s total income for the fiscal year stood at Rs 2,804.29 crore, reflecting its ability to generate sustainable revenue streams.
Previous IPO Plans and Revised Offering
Utkarsh Small Finance Bank had initially planned to raise Rs 1,350 crore through its IPO. In July 2021, the bank filed a draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI), proposing a new issue worth Rs 750 crore and an offer for sale (OFS) for Rs 600 crore by its promoter, Utkarsh CoreInvest Limited. However, in August 2022, the bank decided to revise its IPO plans and filed amended draft papers with SEBI.
The revised offering reduced the issue size by 63 percent to raise Rs 500 crore solely through a fresh issue of equity shares. The decision to scale down the IPO size may have been influenced by various factors, including market conditions and the bank’s capital requirements.
The revised IPO size reflects the bank’s strategy to ensure an optimal capital infusion while maintaining a strong capital base to support its future growth plans. By raising Rs 500 crore through the IPO, Utkarsh Small Finance Bank aims to enhance its tier I capital, which plays a crucial role in maintaining the bank’s financial stability and meeting regulatory requirements.
As the Indian banking sector continues to grow and evolve, Utkarsh Small Finance Bank is well-positioned to leverage its strengths and contribute to the country’s economic development.
Financial Highlights and Asset Portfolio
Utkarsh Small Finance Bank has demonstrated a commendable financial performance, characterised by robust growth and improving asset quality. The bank’s gross loan portfolio witnessed significant growth, increasing from Rs 10,630.73 crore in the previous fiscal year to Rs 13,957.11 crore in FY23. This expansion can be attributed to the bank’s focus on lending to micro, small, and medium-sized enterprises (MSMEs), as well as retail and individual borrowers.
In addition, Utkarsh Small Finance Bank experienced a substantial increase in its total deposits, which rose to Rs 13,710.14 crore in FY23 from Rs 10,074.18 crore in the previous year. This growth in deposits reflects the confidence and trust placed by customers in the bank’s services.
Furthermore, the bank’s asset quality has shown remarkable improvement. The gross non-performing assets (NPA) ratio reduced to 3.75 percent in FY23, compared to 6.1 percent in the previous fiscal year. Similarly, the net NPA ratio declined to 1.33 percent from 2.31 percent. This improvement is indicative of the bank’s effective risk management practices and proactive measures taken to address asset quality concerns.
The positive financial performance of Utkarsh Small Finance Bank positions it as a promising investment opportunity for potential investors. The bank’s strong presence in rural and semi-urban areas, along with its diversified product portfolio and focus on financial inclusion, allows it to tap into underserved segments of the population.
In conclusion, the upcoming IPO of Utkarsh Small Finance Bank offers investors the opportunity to participate in the bank’s growth story and contribute to its mission of financial inclusion. With its focus on underserved regions, strong financial performance, and commitment to customer-centric banking, the bank is poised for continued success in the evolving Indian banking landscape.
