Utkarsh SFB IPO subscribed 24.5x on third day of bidding so far, issue closes today

The Rs 500-crore initial public offering (IPO) of Utkarsh Small Finance Bank (SFB) continued to witness a strong demand from the investors on the third and final day of the bidding. The issue was subscribed 4.73 times on the first day of bidding, while ended the day two with 16.20 times subscription.

Utkarsh Small Finance Bank is selling its shares in the range of Rs 23-25 apiece during the three-day bidding process, which concludes on Friday, July 14. The issue is entirely a fresh sale of 20 crore equity shares and investors can make a bid of a minimum of 600 equity shares and its multiples thereafter.
 

According to the data from the BSE, the investors made bids for 2,94,86,98,800 equity shares, or 24.46 times, compared to the 12,05,43,477, equity shares offered for the subscription by 12.15 pm on Friday, July 14, 2023. The bidding was led by retail and NII investors, with QIBs joining the party.

The quota for retail investors was booked 50.79 times, whereas the allocation for non-institutional bidders (NIIs) fetched 43.28 times bids. The portion for employees was subscribed 12.05 times cent, while qualified institutional bidders' allocation was subscribed 6.51 times.

Incorporated in 2016, Utkarsh Small Finance Bank is a small finance bank in India, which recorded the second fastest AUM growth in the years financial year 2018-19 and financial year 2021-2022. The private lender has an asset under management (AUM) of more than 6,000 crore.

Varanasi-headquartered Utkarsh Small Finance Bank has operations across 26 states and Union Territories with 830 banking outlets and 15,424 employees as of March 31, 2023. It had a 3.59 million customer base majorly located in rural and semi-urban areas primarily in Bihar and Uttar Pradesh.

Majority of the brokerage firms are positive on the issue and suggest subscribing to it on a long-term basis, citing its attractive pricing, strong balance sheet and sound business fundamentals. However, a select analyst has flagged geographical concentration as the key threat to its business.

The bank leverages the use of advanced and cost effective technology to drive its operations, thereby leading to best in class operating performance. At upper price band, IPO is priced at a P/E of 5.5 times and P/BV of 2.0 times based on FY23 with ROA of 2.4 per cent, said IDBI Capital with a 'subscribe for long-term' recommendation for the issue.

"At the higher price band, the stock is valued at 1.8 times P/BVPS with current book value per share of Rs 18. Factoring the superlative return ratios, FY23 ROAA and ROAE of 2.42 per cent and 22.84 per cent, respectively. We believe that Utkarsh Small Finance Bank is worth subscribing," said LKP Securities in its IPO note.

Utkarsh SFB allocated 8.91 crore equity shares to 20 anchor investors at an issue price of Rs 25 apiece to garner Rs 222.75 crore. SBI Mutual Fund, ICICI Prudential, Kotak Mahindra Trustee, Aditya Birla Sun Life Trustee, Goldman Sachs, SBI Life Insurance, Edelweiss Trusteeship, Founders Collective Fund and AG Dynamics Funds participated in the anchor book.
 

Considering the FY23 BVPS of Rs 22.82 on a post issue basis, the company is going to list at a P/B of 1.10 times with a market cap of Rs 2,739.8 crore, whereas its peers namely Equitas SFB, Ujjivan SFB, AU SFB and CreditAccess Grameen are trading at a P/B of 2.71 times, 2.02 times, 6.28 times and 3.89 times, respectively, said Marwadi Financial Services.

"We assign 'subscribe' rating to this IPO as the company has stable growth with cost efficient operational performance and diversified distribution network with significant cross-selling opportunities. Also, it is available at reasonable valuation as compared to its peers," it added.

ICICI Securities and Kotak Mahindra Capital Company are the book running lead managers to the issue, while Kfin Technologies has been appointed as the registrar to the issue. Shares of the lender will be listed on both BSE and NSE with July 24 (Monday) as the tentative date of listing.


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