GMP, subscription status, review, and further information on the ESAF Small Finance Bank initial public offering. Use it or not?

GMP, subscription status, review, and further information on the ESAF Small Finance Bank initial public offering. Use it or not?

Today, Friday, November 3, is the opening day for subscriptions to the ESAF Small Finance Bank IPO. It ends on Tuesday, November 7. The price range for the initial public offering (IPO) of ESAF Small Finance Bank is set at ₹57 to ₹60 per equity share, with a face value of ₹10. A lot of 250 equity shares, and each subsequent multiple of 250 equity shares, is the size of an ESAF Small Finance Bank lot.

The ESAF Small Finance Bank IPO has set aside a maximum of 50% of the shares for qualified institutional buyers (QIB), a minimum of 15% for non-institutional investors (NII), and a minimum of 35% for retail investors. When bidding in the employee reserve part, qualifying workers will get a discount of ₹5 per equity share.

An IPO for ESAF Small Finance Bank took place on Thursday, November 2, and raised ₹135.15 crores from anchor investors. The exchanges were notified by the firm that 2,25,24,998 equity shares, valued at ₹60 each, had been allotted.

Among the international and local organizations that participated in the anchor were BNP Paribas Arbitrage, Copthall Mauritius, Founders Collective Fund, ACM Global VCC Fund, Kotak Mahindra Life Insurance, Edelweiss Tokyo Life Insurance, ICICI Prudential Life Insurance, SBI General Life Insurance, Ananta Capital Ventures Fund, Astorne Capital VCC, alongside Alchemie Ventures Fund.

Details of the ESAF Small Finance Bank IPO

In the ESAF Bank IPO, the business will issue new equity shares valued at ₹390.7 crore, and three shareholders will put up equity shares for sale (OFS) totaling ₹72.3 crore. Through the IPO, the business hopes to raise ₹463 crore.

Promoter ESAF Financial Holdings will sell shares valued at ₹49.26 crore in the OFS, while shares valued at ₹23.04 crore would be offloaded by PNB MetLife India Insurance Company as well as Bajaj Allianz Life Insurance Company.

In order to satisfy future capital needs, the bank plans to use the net proceeds from the new issuance to strengthen its Tier-I capital basis.

ICICI Securities, DAM Capital Advisors, and Nuvama Wealth Management are the book-running lead managers for the ESAF Small Finance Bank IPO, while Link Intime India is the IPO registrar.

Status of ESAF Small Finance Bank's IPO subscription

Day 1 of the ESAF Small Finance Bank IPO had 1.74 times as many subscriptions as at 13:06 IST. According to statistics available at BSE, the retail investor component of the ESAF Small Finance Bank IPO was subscribed 1.98 times, the NII portion was purchased 2.44 times, the qualified institutional buyer (QIB) portion was booked 90%, and the employee portion was subscribed 1.01 times. 

Dates of ESAF Small Finance Bank's IPO

Provisional The IPO date for ESAF Small Finance Bank is set for Thursday, November 16. Friday, November 10 has been designated as the IPO allotment date for ESAF Small Finance Bank. In the event that the firm adopts T+3 regulations, the dates will also change. 

ESAF Small Finance Bank's current IPO GMP

Like the previous session, the ESAF Small Finance Bank IPO GMP or grey market premium is +22 today. This suggests that, according to investorgain.com, the price of ESAF Small Finance Bank shares were trading at a premium of ₹22 on Friday on the grey market.

A 36.67% increase over the IPO price of ₹60, or ₹82 per share, was suggested as the expected listing price of ESAF Small Finance Bank shares, taking into account the top end of the IPO pricing range and the existing premium in the grey market.

A "grey market premium" denotes the willingness of investors to part with more money than the issue price.

BP Equities Pvt Ltd.'s Review of the ESAF Small Finance Bank IPO

The brokerage said in its research that non-banking financial firms (NBFCs) like Bandhan and IDFC have been given permission to open universal banks. Additionally, a few microfinance companies, an NBFC, a local area bank, and one urban co-operating bank have all been given permission to form small financing banks. As of March 31, 2023, the rural sector represents 8–9% of all outstanding credit, a negligible amount considering its greater GDP contribution of 47%. This means that there is a big market potential for small financing banks (SFBs) and other market players. SFBs have a history in microfinance, which enables them to manage regional stakeholders and maintain operational performance.

By AUM, ESAF SFB ranked seventh among SFBs in India as of June 30, 2023. During the FY2021-23 timeframe, ESAF had the quickest AUM CAGR of 39% among the SFBs. As of June 30, 2023, the SFB has the strongest asset quality among similar peers with a capital adequacy ratio of 20.6%, which is the ratio of capital to risk-weighted assets and current liabilities. 

The lender will improve its capital adequacy and achieve a stable leverage position by using the net proceeds of the new equity share offering to supplement its Tier-I capital base. We think the firm is reasonably priced at the current P/BV multiple of 1.6x, and we encourage investors to "Subscribe" from a medium- to long-term viewpoint," the brokerage said.

Securities Ltd., LKP

With a current book value per share of ₹40.92, the stock is valued at 1.46(x) P/BVPS at the upper price range of ₹60. Considering the exceptional return ratios—FY23 ROA/ROE of 1.6%/19.4%—we think it makes sense to subscribe to ESAF Small Finance Bank Limited. Therefore, we advise you to SUBSCRIBE," the brokerage said. 

BP Equities Ptc., Inc. 

With a capital adequacy ratio of 20.6% as of June 30, 2023, SFB has the best asset quality among similar peers, according to the brokerage's study. Capital to risk-weighted assets and current liabilities is measured by this ratio. By adding to its Tier-I capital base with the net proceeds of the new equity share sale, the lender will increase its capital adequacy and establish a stable leverage position.

The brokerage said, "We think the company is attractively valued at the current P/BV multiple of 1.6x and advise investors to "Subscribe" from a medium to long-term perspective."