ESAF Small Finance Bank IPO subscribed 73x as QIBs rush in

• ESAF Small Finance Bank received bumper interest from institutional investors.
• The company has raised ₹135.15 crore from anchor investors ahead of its IPO.
• It intends to use proceeds to augment tier11 capital base, future capex and more.

The ₹463 crore ESAF Small Finance Bank’s initial public offer (IPO) was subscribed 73 times on Tuesday.

Qualified institutional buyers (QIBs) showed outsized interest in the issue, as their quote was subscribed a whopping 173 times. It also received good interest from institutional investors (NIIs) as this portion was subscribed 84 times.

Retail quota was also subscribed by around 17 times the shares on offer. The IPO has fixed a price band of ₹57-₹60 per equity share.

It has raised ₹135.15 crore from anchor investors, like BNP Paribas Arbitrage, Kotak Mahindra Life Insurance, Edelweiss Tokio Life Insurance, ICICI Prudential Life Insurance and more.

The issue comprises a fresh issue of ₹390.7 crore and an offer for sale (OFS) of up to ₹72.3 crore. The bank intends to use proceeds from the fresh issue towards augmenting its tier – 1 capital base to meet its future capital requirements; and general corporate purposes.

Type of investor	No of times subscribed
Qualified Institutional Buyers	173.52
Non-institutional Investors	84.37
Retail	16.97
Total	73.15

Source: BSE

ESAF SFB has 700 banking outlets, 559 ATMs across 21 states and two union territories. Its primary products include advances and deposits. It mainly focuses on rural and semi-urban banking franchises. It provides MSME loans, agricultural loan business and retail loan business.

Its deposits grew from ₹89,994.26 million to ₹146,656.25 million between FY21-23 registering a compounded annual growth rate (CAGR) of 27.66%. Its CASA ratio dropped from 22.84% in FY22 to 21.39% in FY23.

Its gross NPA (non performing assets) and net NPA stood at 2.49% and 1.13% respectively in Q1FY24. Despite having a nationwide presence, the bank's primary business operations are concentrated in South India, specifically in the states of Kerala and Tamil Nadu.

“As of now, its operations are limited to South India with a lower presence in North India. Hike in RBI’s interest rate will result in compression of NIMs (net interest margins) from current levels. Increase in stress on assets specially on small ticket items will affect the future cash flows which will lead to increase in NPA,” said a report by Religare elucidating its key risks.