ESAF Small Finance Bank Limited is a Kerala-based small finance bank (SBF) that focuses on unbanked and under-served Indian customers. Its focus primarily relies on providing easy access to loans in rural and partially urbanised areas. It follows a triple-bottom-line impact business strategy focusing on people, the planet and prosperity.
The small finance bank firmly believes that its social, economic and environmental outcomes are responsible for creating synergies. These, in turn, have an amplified impact on the stakeholders.
ESAF has announced recently that it will float its IPO for subscription from November 3 2023 till November 7 2023. It is a book-built issue of Rs. 463 crores which includes fresh issues of Rs. 390 crores and an offer for sale of Rs. 72.30 crores.
Table of Content
IPO Details
Refer to the following table for all the necessary details regarding the upcoming ESAF Small Finance Bank Limited IPO:
| IPO Subscription Period | From November 3 2023 to November 7 2023 |
| Listing Date | Thursday, November 16 2023 |
| Price Band | Rs. 57 to Rs. 60 per share |
| Face Value | Rs. 10 each share |
| Lot Size | 250 equity shares |
| Total Issue Size | Shares totalling up to Rs. 463 crore (approximately) |
| Fresh Issue | Shares totalling up to Rs. 390.70 crore (approximately) |
| Offer for Sale | Shares totalling up to Rs. 72.30 crore (approximately) |
| Type of Issue | Book Built IPO |
| Listing on Exchanges | NSE, BSE |
| Share Holding before Issuance | 449,473,798 |
| Share Holding after Issuance | NA |
Also Read: IPO investment strategy
About the Company
ESAF Small Finance Bank Limited started its journey as an NGO in 1992 with a revolutionary mission of holistic and sustainable transformation of the poor and marginalised.
After careful evaluation of its significant contribution to rural and neglected segments, the Reserve Bank of India offered an in-principal licence to ESAF Microfinance and Investments Pvt. Ltd. to start a Small Finance Bank in October 2015.
Today, ESAF SFB has a customer base of 5.6 million and it has been possible through its innovative objective of “Fighting the Partiality of Prosperity” that aims to strengthen the people at the bottommost of the society. The company has experienced excellent growth and as of March 31 2022, it has an employee base of approximately 4,100.
In 2023, the company refiled its DRHP. It includes an offer for sale of about Rs. 142.30 crore which is inclusive of Rs. 119.26 crore by ESAF Financial Holdings Private Ltd, up to Rs. 10.37 crore by Bajaj Allianz Life Insurance Company Ltd. and up to Rs. 12.67 crore by PNB MetLife India Insurance Company Ltd.
The small finance bank is launching the IPO through a building process. For qualified institutional buyers, up to 50% of the net offer will be available for allocation on the basis of proportionate sharing. Also, a minimum of 15% and 35% of the net offer will be available for non-institutional and retail individual bidders, respectively.
IPO Tentative Table
ESAF Small Finance Bank Limited IPO will be open for subscription from November 3 2023. Here are some tentative dates for the IPO for the potential investors:
| Anchor Allocation Date | NA |
| IPO Opening Date | Friday, November 3, 2023 |
| IPO Closing Date | Tuesday, November 7, 2023 |
| UPI Mandate Confirmation Cut-Off Date | 5 PM on November 7, 2023 |
| Allotment Basis | Friday, November 10, 2023 |
| Initiation of Refunds | Monday, November 13, 2023 |
| Listing Date | Thursday, November 16, 2023 |
| Share Credit into Demat | Wednesday, November 15, 2023 |
IPO Lot Size
Find below the ESAF Small Finance Bank Limited IPO lot size details:
[11:03 AM] Suraj Mishra6
| Application | Lots | Shares | Amount |
| Retail (min) | 1 | 250 | Rs. 15,000 |
| Retail (max) | 13 | 3,250 | Rs. 1,95,000 |
| S-HNI (min) | 14 | 3,500 | Rs. 2,10,000 |
| S-HNI (max) | 66 | 16,500 | Rs. 9,90,000 |
| B-HNI (min) | 67 | 16,750 | Rs. 10,05,000 |
Company Financials
The following table lays down the financial details of ESAF Small Finance Bank Limited.
| Parameters as Per the Year Ending On | 31st March, 2023 | 31st March, 2022 | 31st March, 2021 |
| Total Assets | 2,02,236.57 | 1,77,075.64 | 1,23,386.52 |
| Total Liabilities* | 1,85,256.79 | 1,43,504.35 | 1,10,306.75 |
| Total Expenses | 28,392.39 | 20,927.76 | 16,630.25 |
| Total Revenue | 4,060.45 | 738.50 | 1,413.73 |
| Profit After Tax | 7,664.24 | 15,112.79 | 18,187.95 |
| EBITDA | 6,274.35 | 2,205.64 | 2,849.61 |
| Earnings Per Share (Basic and Diluted) | 6.73 | 1.22 | 2.46 |
*Average balance (Non-GAPP metric)
Strength
Here are the strengths of the company to make an informed decision:
- There have been several new product launches by ESAF since April 1 2017 and the company aims to diversify its business more.
- The company has a deep understanding of the micro-loan segment of the market. This has been advantageous in expanding its business outside of our hometown, Kerala.
- The bank has a strong customer base in rural and semi-rural areas. As per the latest data on March 31 2023, 57.53% of its customers belong to these areas as well and 62.87% of its gross advances are accounted for by these customers.
- The company has witnessed a rapidly growing retail deposit portfolio with low concentration risk. It has the 4th highest deposit growth among its peers as of March 31 2023.
Risk Involved
Along with the strengths, ESAF also has some risk factors involved. Here are some of them:
- As its business is significantly dependent on micro-loans, any adversity in that sector has the potential to have a negative impact on the business and finances.
- A large portion of this bank’s advances are unsecured. Hence, failing to recover them promptly can result in a negative impact on its financial condition and cash flow.
- As the company’s non-convertible debentures are listed on BSE, any failure in compliance with the rules and regulations regarding the same can result in penalties or similar actions.
- Lately, there have been continuous technological advancements in the financial sector. Failing to keep at par with these can result in poor performance of its products and services and lose the interest of its customer base.
Also Read: Benefits of Investing in IPO
Outlook & Valuation
Regarding financial results, ESFBL reported total income/net profit of Rs. 1768.42 cr. / Rs. 105.40 cr. (FY21), Rs. 2147.51 cr. / Rs. 54.73 cr. (FY22), and Rs. 3141.57 cr. / Rs. 302.33 cr. (FY23). With a total revenue of Rs. 991.78 cr, it made a net profit of Rs. 129.96 cr during the first quarter of FY24, which concluded on June 30, 2023. It has reported an average EPS of Rs. 4.17 and an average RoNW of 11.44% for the previous three fiscal years. According to its NAV of Rs. 40.92 as of June 30, 2023, and according to its post-IPO NAV of Rs. 43.32 per share (at the upper cap), the issue is valued at a P/BV of 1.47 and 1.39, respectively. As per the offer document, the company has shown Suryoday SFB, CreditAccess Grameen, Spandana Sphoorty Fin., Bandhan Bank, Ujjivan SFB, and Equitas SFB as their listed peers. They are trading at a P/E of 14.02, 21.47, 18.69, 13.61, 7.92, and 13.62 (As of October 31, 2023). The asking price is at a P/E of 5.94 if we base our calculations on the company’s fully diluted equity capital after its IPO and the FY24 annualised earnings. As a result, the issue is reasonably priced.
Summary
ESAF Small Finance Bank is one of the most significant small finance banks in India attributing to various factors – net interest margin, the yield on advances, size of clientele, total deposit CAGR, AUM, the ratio between gross and microloan advances and loan portfolio concentration in semi-urban and rural areas. Thus, its upcoming IPO on 3rd November is one to watch out for.
Also Read: How To Apply For An IPO?
Frequently Asked Questions
In 2021, ESAF SBF successfully filed for an IPO of Rs. 998 crore, including a fresh issue of Rs. 800 crore and an OFS of Rs. 198 crore. This year, its issue size is Rs. 629 crore.
The bank intends to use the proceeds from its fresh issue to increase its Tier-1 capital base, which would help it meet future requirements.
The promoter- ESAF Financial Holdings and shareholders- Bajaj Allianz Life Insurance Company and PNB Metlife India Insurance Company are the entities participating in the OFS.
ESAF Small Finance Bank IPO will be open for subscription from November 3 2023 till November 7 2023.
Nuvama Wealth Management, DAM Capital Advisors and ICICI Securities are the merchant banks for this IPO.
