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ESAF Small Finance Bank plans to float IPO in FY21

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Mumbai: Kerala-based ESAF Small Finance Bank plans launching an initial public offering (IPO) of 976 crore in fiscal 2021, said Paul Thomas, managing director and chief executive officer of the bank. For the IPO, the lender hopes to get an approval from market regulator Securities and Exchange Board of India (SEBI) by next month, he added. The bank had filed draft red herring prospectus (DRHP) in January.

“We are not planning (the issue) before March. The (SEBI) approval should come before March. We will have to meet RBI’s requirement of bringing down promoter shareholding by July 2021. We haven’t firmed up the time,” said Thomas.

The IPO will include fresh issue worth 800 crore and offer for sale (OFS) of 176 crore and will enable the bank to reduce its promoter shareholding, which is currently at 78%. The bank also has the provision for pre-IPO placement of up to 300 crore. Thomas said the bank could look at other strategic ways to reduce promoter stake after the IPO.

Through the OFS route, 150 crore will be subscribed by the holding company and 26 crore by two shareholders of the bank–Bajaj Allianz and PI Ventures–as the lender plans a partial exit. With the OFS, the two shareholders at the holding company level–SIDBI Venture Capital Ltd and Diya Vikas Capital Pvt Ltd–plan a partial exit.

Investment banks ICICI Securities, Axis Capital Ltd, IIFL Securities Ltd, and Edelweiss Financial Services are advisers for ESAF share sale.

ESAF has 450 branches across 17 states, with most concentrated in Kerala, Tamil Nadu and Karnataka. Though 96% of its book is microfinance loans, the bank started offering gold loans and two-wheeler loans last year.

ESAF’s total income rose 37% year-on-year to about 728.87 crore during April-September 2019. Profit jumped nearly threefold to 92.43 crore from a year ago. In terms of asset quality, the bank’s gross non-performing assets (NPAs) to total advances was at 1.76% for the six months ended September, compared to 3.37% in the same period last year. The bank’s capital adequacy ratio was at 25.69% as of September.

ESAF’s plans to go public after Ujjivan Small Finance Bank made a stellar stock market debut in December. Shares of the bank were subscribed more than 165 times—the highest among all IPOs in 2019. In this category, Equitas Small Finance Bank also filed its draft prospectus with SEBI on 16 December for a 1,000-crore IPO.

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