ESAF Small Finance Bank | ESAF SFB IPO Review

ESAF Small Finance Bank IPO is looking to raise Rs 463 crore via IPO route, which consists of a fresh issue size of Fresh issue of ₹390.70 Cr + OFS ₹72.30 Cr. ESAF Small Finance Bank Ltd. (ESFBL) is a South India centric small finance bank with a focus on unbanked and under-banked customer segments.

IPO opensNovember 3, 2023
IPO ClosesNov 7, 2023
IPO Size (Rs.)₹463.00 C
IPO Size (shares)77,166,667 shares
BreakupFresh issue of ₹390.70 Cr + OFS ₹72.30 Cr
Face Value:₹ 10/-
IPO Price in Rs :₹57 to ₹60
Minimum Lot250 Shares
Listing AtNSE , BSE
Anchor & QIB Quota50%
NII Quota15%
Retail Quota35%
 Lead ManagerNuvama Wealth Management, Dam Capital Advisors, ICICI Securities
RegistrarLink Intime


  • ESAF Small Finance Bank is a small finance bank with a focus on unbanked and under-banked customer segments, especially in rural and semi-urban centres.
  • As at June 30, 2023, their gross advances to their customers in rural and semi-urban centres accounted for 62.97% of the gross advances.
  • ~ 72% of their banking outlets were located in rural and semi-urban centres.
  • Their advances comprise:
    • • Micro Loans, which comprises Microfinance Loans and Other Micro Loans;
    • •Retail Loans, which includes Gold Loans, Mortgages, Personal Loans, and Vehicle Loans;
    • • MSME Loans;
    • • Loans to Financial Institutions; and
    • • Agricultural Loans.
  • The bank has a network of 700 banking locations (including 59 business correspondent-operated banking locations), 767 customer service centers , 22 business correspondent partners, 2,116 banking agents, 525 business facilitators, and 559 ATMs.
  • Though concentration is largely inn south, these are spread across 21 states and two union territories, catering to 7.15 million customers as of June 30, 2023.
  • The Promoters of Bank are Kadambelil Paul Thomas and ESAF Financial Holdings Private Limited.

Financials: ESAF Small Finance Bank

Particulars / Rs. In crore2023(03)2022(03)2023(12)2022(12)2021(12)
Interest Earned898.75690.312,853.661,939.931,641.17
Interest Earned Growth (%)30.20%47.10%18.20%
EBITDA as stated245.96193.9627.44220.56284.96
Net Profit for the period129.96105.97302.3354.73105.4
Share Capital449.47449.47449.47449.47449.47
Net Worth1,839.091,512.761,709.131,406.801,352.06
EPS – Diluted (₹)2.892.356.711.222.46
RONW (%)7.07%7.00%17.69%3.89%7.80%
Net Asset Value- Basic (₹)40.9233.6638.0331.330.08
Post issue Share Capital514.6    
IPO price60.0    
EPS Fy235.9    
PE Fy2310.2    
EPS Fy24 (annualized)10.1    
PE Fy24  (annualized)5.9    
Market cap in Lacs3,087.6    
Price / BV1.39    

Anchor: ESAF Small Finance Bank IPO

ESAF SFB IPO: Salient Points

  • The promoters holds 74.43% Share Holding which shall stand Post Issue 62.64%.
  • •It has focus on rural and semi-urban areas with banking franchise in these accounting for 70% of ESAF SFB 700 banking outlets are located in semi-urban and rural areas.
  • Out of ESAF SFB (AUM) of around Rs. 17,204 crore, 75% are unsecured micro-finance loans, 16% retail loans (gold, vehicle etc. ) and balance other loans.
  • Significant portion of the bank’s operations is concentrated in South India, with 62.43% of banking outlets in south and his region and 87% of ESAF’ SFB business is generated from southern states with Kerala accounting for a major share (43%) followed by 22% from Tamil Nadu and remaining 22% from Karnataka, Telangana, Andhra and Puducherry.
  • The focus of Bank is on unbanked and under-banked customer segments.
  • Peers:
CompanyFVCMP(₹)Sales (₹ Cr.)PAT (₹ Cr.)NPMP/ERONW%P/BVMcap (cr)Mcap/sales
ESAF SFB10603,141.57302.339.6%,087.61.0
Suryoday SFB101551,281.101189.2%1422.391.11,6501.3
Ujjivan SFB Ltd1053.84,754.191,10023.1%8.49.812.7110,5322.2
Equitas SFB1097.84,831.4657411.9%14.621.512.16109172.3
  • The Bank has been expanding to new geographies. In Fiscal 2021, they expanded their operations to Meghalaya, Uttar Pradesh, Haryana, Tripura and Chandigarh,.
  • The Retail Deposits increased from ₹8,796.38 crore as at March 31, 2021 to ₹13,323 crore as at March 31, 2023, representing a CAGR of 23.07%.
  • They have deep understanding of the microfinance segment, as of June 30, 2023, ESAF SFB had over 0.33 crore customers with Micro Loans, the majority of whom were women.
  • ESAF SFB has better cost-to-income ratio at 56% for Q1FY2024 as against the 59% average for peer SFBs.
  • OFS portion is Rs. 72 cr (16%) by the promoter ESAF Financial Holdings and PNB Metflife and Bajaj Allianz . The insurance firms are not making complete exit and their 8.6% combined stake will to drop to 6.8%
  • This is ESAF Small Finance Bank third attempt at IPO. The earlier two SEBI permissions expired.
  • ESAF SFB IPO, OFS size has been reduced by half , further the fresh issue size has been trimmed by 20% from DRHP.
  • ESAF SFB IPO is coming at a PE ratio of 10.2x (FY23) and 5.9x (FY24 annualized on Q1FY24 results).
  • The offer is at a P/BV of 1.39.
  • I intend to apply in ESAF SFB IPO. It appears attractively priced to me as SFBs with large Microfinance portfolio such as Utkarsh SFB, Ujjivan SFB and Equitas SFB trading at aournd P/BV of 2 or more compared to P/BV of 1.39 of ESAF SFB.
  • GMP as reported on social media is around Rs. 18-20.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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