Suryoday Small Finance Bank IPO comprises fresh issuance of 81,50,000 equity shares and an offer for sale (OFS) of up to 1,09,43,070 equity scrips by existing shareholders. The IPO aggregating to Rs. 581 crore opens between 17th Mar to 19th Mar 2021. The offer for sale is by 8 financial investors. The IPO is due to mandatory listing under SFB guidelines.
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Suryoday Small Finance Bank IPO Details:
| Issue opens | 17th March 2021 |
| Issue closes | 19th March, 2021 |
| Issue Details | Issue of Equity Shares upto 19,093,070 Equity Shares |
| (Fresh Issue 8,150,000 Equity Shares and Ofs 10,943,070 Equity Shares) | |
| Issue Size (₹ Cr) | ₹ 577 Cr – ₹ 581 Cr |
| Price Band | ₹ 303 – 305 |
| Bid Lot | 49 Shares |
| Issue Structure : | |
| QIB | 50% of the net offer |
| NIB | 15% of the net offer |
| Retail | 35% of offer ( ~ 6,507,575 Equity Shares, ₹ 198 Cr) |
| Appls for 1x retail | 132807 |
| BRLMs | Axis Capital, ICICI Securities, IIFL Securities, SBI Capital Markets |
| Registrar | KFin Technologies Pvt. Ltd. |
Updates & Indicative Time Table:
- ANCHOR ISSUE: IPO bound Suryoday Small Finance Bank raised about over ₹170 crore from anchor investors. The anchor investors include Axis Mutual Fund, IDFC Mutual Fund, SBI Life Insurance Company Ltd, Integrated Core Strategies Asia Pte Ltd, Aditya Birla Sunlife Insurance Company, ICICI Lombard General Insurance Company, ICICI Prudential Life Insurance Company, Goldman Sachs (Singapore) Pte and India Max Investment Fund Ltd.
About Suryoday Small Finance Bank
- The company started as a micro finance institution in 2009
- It got and transformed into a SFB in Jan 2017,
- Suryoday Small Finance Bank operates 554 banking outlets.
- Three fourth of these outlets are concentrated in Maharashtra, Tamil Nadu, Odisha and Karnataka.
- It has a deposit base of more than ₹2,800 crore and a gross loan portfolio of around ₹3,800 crore.
- The 3,800 cr loan book comprising 70% micro loans, 9% CV and 6% affordable housing loans.
- The bank has over 20 institutional investors which includes institutional investors, development funds, and private equity investors.
Suryoday Small Finance Bank IPO: Financials
| Particulars / Rs. Cr | 9mFY21 | 9mFY20 | FY20 | FY19 | FY18 |
| Interest Earned | 624.35 | 563.22 | 766.69 | 530.11 | 286.88 |
| Interest Earned Growth (%) | 10.85% | – | 44.63% | 84.78% | – |
| EBITDA as stated | 79.91 | 183.36 | 164.16 | 148.32 | 22.5 |
| Profit Before Tax | 70.06 | 178.36 | 154.38 | 142.72 | 17.84 |
| Net Profit for the period | 54.87 | 126.68 | 111.2 | 90.4 | 11.49 |
| Net Profit (% )as stated | 8.79% | 22.49% | 14.50% | 17.05% | 4.01% |
| Net Interest Margin (%) | 8.49%# | 12.30%# | 11.92% | 12.80% | 10.40% |
| Gross NPAs | 0.78% | 2.78% | 2.79% | 1.81% | 3.54% |
| Net NPAs | 0.33% | 0.52% | 0.57% | 0.44% | 1.86% |
| Equity Share Capital | 89.19 | 86.31 | 86.59 | 81.58 | 67.5 |
| Reserves as stated | 1,101.78 | 989 | 979.64 | 798.78 | 470.99 |
| Net worth as stated | 1,190.96 | 1,075.31 | 1,066.23 | 880.37 | 538.49 |
| Deposits | 3,343.84 | 2,491.36 | 2,848.72 | 1,593.43 | 749.52 |
| Borrowings | 1,487.08 | 886.93 | 1,264.62 | 1,124.23 | 717.83 |
| FV | 10.00 | ||||
| EPS-Basic (₹ ) | 6.19^ | 15.49^ | 13.41 | 13.35 | 1.76 |
| EPS-Diluted (₹ ) | 6.05^ | 15.43^ | 13.3 | 13.16 | 1.76 |
| RoNW (%) | 4.61%^ | 11.78%^ | 10.43% | 10.27% | 2.13% |
| NAV(₹ )~ | 133.54 | 124.58 | 123.13 | 107.91 | 79.78 |
| Equity Post IPO | 106.13 | ||||
| IPO Price | 305 | ||||
| EPS (Post IPO) FY20 | 10.48 | ||||
| PE FY20 | 29.11 | ||||
| EPS ann on 9mFY21 | 6.89 | ||||
| PE ann 9mFY21 | 44.25 | ||||
| Market Cap | 3237 | ||||
| Price to adj BV | 2.2 |
Pros
- Suryoday Small Finance Bank Limited has a customer centric approach with a focus on financial inclusion
- It has a Diversified asset portfolio with a focus on retail operations;
- Fast evolving granular deposit franchise
- Leveraging emerging technologies to enhance digital footprint
- Strong credit processes and robust risk management framework
- Track record of strong financial performance and cost efficient operations;
- Multiple distribution channels
- Experienced leadership team, professional management and strong corporate governance.
Cons
- There has been adverse effect of COVID-19 on Asset quality.
- Overall stress many have been inadequately addressed.
- Banking business is vulnerable to interest rate risk.
Suryoday Small Finance Bank IPO: Assessment
- The investors in Suryoday Small Finance Bank development finance institutions such as IFC and DEG, private equity investors such as Gaja Capital India AIF Trust, Gaja Capital Fund II, TVS Entities, ASK Pravi Private Equity Opportunities Fund, Lok Capital Growth Fund and institutional investors like HDFC Holdings Ltd., HDFC Life Insurance Co. Ltd., IDFC FIRST Bank Ltd and Kotak Mahindra Life Insurance Co. Ltd.
- Suryoday Small Finance Bank does not have the Holding company structure, unlike some other SFBs. Post the IPO, The promoter holding will decline to 28% avoiding any requirement for further promoter dilution (30% norm)
- Post COVID SFBs are facing Headwinds.
- The bank exposure to microfinance segment is higher at over 70% of loan book at the end of December 2020.
- Issue represents 18% of post-issue capital and the IPO is mandatory under Small Finance Bank guidelines.
- The SFB had undertaken a Pre-IPO Placement of 5,208,226 Equity Shares at a price of 291.75/ – per share, aggregating to ₹ 151.95 crore.
- The Bank’s annualized EPS on post-issue equity is Rs. 6.9 for FY2021. The P/E works out 44.2 times.
- Post the IPO the book value stands at Rs 155.8, while adjusted BV is R 136.1 per share.
- Suryoday Small Finance Bank is being offered at price to Adj BV multiple of 2.2 x. Peers, Ujjivan Small Finance Bank is trading at P/ Adj BV multiple of 2.3 times and Equitas Small Finance Bank is trading at P/ Adj BV multiple of 2.4 times.
- Suryoday Small Finance Bank IPO was last reported to be commanding a meagre GMP of Rs.10 with not much deals.
- I may not apply in Suryoday Small Finance Bank IPO.
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. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.