ESAF Small Finance Bank IPO 2023: Date, Lot Size & Share Price

Established in the year 1992, ESAF is a Small Finance Bank primarily dedicated to extending financial assistance to rural and semi-urban customers. The bank's wide range of products includes micro loans, retail loans, MSME loans, loans to financial institutions, and agricultural loans. By March 2023, ESAF has expanded its presence with a network comprising 700 outlets, 743 customer service centers, 20 business correspondents, and 481 business facilitators, spanning across 21 states in India. Furthermore, the bank operates 581 ATMs strategically located across these states.

ESAF is committed to offering convenient banking solutions through various digital platforms, including an internet banking portal, a mobile banking platform, SMS alerts, and services for bill payments. Additionally, customers can benefit from RuPay branded ATM cum debit cards, enhancing their banking experience.

ESAF Small Finance Bank Limited - Journey

ESAF Small Finance Bank's journey began when its promoter, ESAF Financial Holdings Private Limited, received the RBI In-Principle Approval on October 7, 2015, to establish a Small Finance Bank (SFB). Incorporated as 'ESAF Small Finance Bank Limited' on May 5, 2016, in Thrissur, Kerala, the bank obtained the certificate of incorporation from the RoC as a public limited company under the Companies Act, 2013. Following this, the bank received the RBI Final Approval, with license no. MUM:124, to operate as an SFB on November 18, 2016. 

Subsequently, ESAF Financial Holdings Private Limited transferred its lending and financing business to the bank through a Business Transfer Agreement dated February 22, 2017. ESAF Small Finance Bank officially commenced its operations as an SFB on March 10, 2017. The bank achieved the status of a scheduled bank on November 12, 2018, as per a notification (DBR.NBD.(SFB-ESAF).No.4083/16.13.216/2018-19) issued by the RBI and published in the Gazette of India (Part III-Section 4) dated December 22 – December 28, 2018, being included in the second schedule to the RBI Act.

 Small finance banking/ Microfinance Industry in India

In recent years, the Indian banking industry has undergone significant changes to promote financial inclusion. Notably, NBFCs like Bandhan and IDFC, microfinance companies, local area banks, an NBFC, and an urban co-operative bank have received approval to establish small finance banks (SFBs). This initiative aligns with the government's focus on inclusive banking. The RBI granted licenses to 12 players, including ESAF Small Finance Bank, emphasizing the importance of financial inclusion.

As of June 30, 2023, the SFB sector has experienced substantial growth, with their advances under management (AUM) showing a remarkable 29% Compound Annual Growth Rate (CAGR) from March 31, 2018, to June 30, 2023. CRISIL MI&A estimates reveal that the top three SFBs accounted for around 60% of the total AUM, indicating a growing concentration within the sector. Furthermore, the top six players held approximately 85% of the market share by June 30, 2023. Although the pandemic initially led to cautious lending, SFBs witnessed strong AUM growth after the economy rebounded and business operations normalized.

As of June 30, 2023, the combined AUM of SFBs is estimated to have surpassed Rs. 1,900 billion. Looking ahead, CRISIL MI&A anticipates a continued robust growth, with SFBs' AUM projected to increase at a Compound Annual Growth Rate (CAGR) of approximately 22-24% between June 30, 2023, and March 31, 2025. This optimistic outlook is supported by the completion of the transition phase by most SFBs, allowing them to capitalize on their operating leverage and further contribute to financial inclusion initiatives.

The microfinance sector (Joint Liability Group portfolio) has experienced robust growth in recent years The industry’s AUM increased at a CAGR of 21% since March 31, 2018 to reach Rs. 3.55 trillion as of June 30, 2023.

Factors governing the Small finance industry in India

• Tailored products enhanced through technology and accessible information

• Access to funds at more affordable rates

ESAF Small Finance Bank Limited IPO Details

ESAF Small Finance Bank is launching an IPO worth Rs 463.00 crores, consisting of a fresh issue of 6.51 crore shares valued at Rs 390.70 crores and an offer for sale of 1.2 crore shares worth Rs 72.30 crores.

The IPO subscription period is from November 3 to November 7, 2023, with allotment expected on November 10, 2023. ESAF Small Finance Bank is set to list on BSE and NSE tentatively on November 16, 2023.

The ESAF Small Finance Bank Ltd IPO share price range is Rs. 57 to Rs. 60 per share, and the minimum application lot size is 250 shares, requiring a minimum investment of Rs 15,000 for retail investors.

Purpose of ESAF small finance Bank Ltd IPO issue

• The proceeds from the ESAF Small Finance Bank IPO will be used to strengthen the bank's Tier-I capital base, ensuring it can meet future capital needs arising from the growth in loans, advances, and investments, and comply with RBI's regulatory capital adequacy requirements.

• Listing the Equity Shares on the Stock Exchanges will provide ESAF Small Finance Bank with the advantages and benefits associated with being a publicly traded entity.

ESAF Small Finance Bank Limited  IPO Issue Key Dates:

ESAF Small Finance Bank Limited IPO Issue Lot Size

ESAF Small Finance Bank Limited IPO Reservation

ESAF Small Finance Bank Limited Investment Potential:

Qualitative Factors:

• A deep understanding of the micro loan segment, facilitating business expansion beyond the home state of Kerala.

• Emphasis on a rural and semi-urban banking franchise, catering to specific market needs.

• Expansion of the Retail Deposits portfolio, reflecting the bank's growth and stability.

• Strong customer connections established through customer-centric products, processes, and additional non-financial services tailored for Micro Loan customers.

• Adoption of a technology-driven model, leveraging digital platforms for efficient operations.

• An experienced and capable team, including a knowledgeable Board, Key Managerial Personnel, and Senior Management Personnel, ensuring strategic guidance and effective decision-making.

Quantitative Factors:

Key Performance Indicator

Risk Factors:

• High concentration risk exists in Kerala and Tamil Nadu, where 66% of total gross advances and 83% of total deposits are centered.

• As of June, 75% of advances were unsecured, exposing the bank to potential financial vulnerabilities.

• Non-compliance with 17 out of 272 risk-based supervision requirements by March raises the risk of penalties from the RBI.

• The bank heavily depends on micro loans, constituting 75% of advances, making them susceptible to fluctuations in demand.

• Reliance on correspondents for 75% of gross advances adds operational vulnerability.

• A significant attrition rate of 24% in the fiscal year 2022-23 poses challenges in staff retention and operational stability.
  

In conclusion, ESAF Small Finance Bank's IPO, valued at Rs 463.00 crores, marks a significant milestone for the institution. Fueled by their deep understanding of the micro loan segment and commitment to rural and semi-urban banking, ESAF is poised for substantial growth. Investors, with the subscription period open from November 3 to November 7, 2023, have a unique opportunity to join this journey. With a strong presence spanning 21 states, 700 outlets, and 581 ATMs, ESAF's IPO showcases their dedication to financial inclusion. As they prepare to list on both BSE and NSE, ESAF Small Finance Bank is set to make a lasting impact on the banking sector, making their IPO a compelling prospect for investors looking to be part of a thriving financial institution's success story.

Frequently Asked Questions

1. What is ESAF Small Finance Bank's IPO about?

ESAF Small Finance Bank is launching an IPO worth Rs 463.00 crores, offering a fresh issue of 6.51 crore shares and an offer for sale of 1.2 crore shares.

2. When is the subscription period for ESAF Small Finance Bank IPO?

The subscription period is from November 3 to November 7, 2023.

3. What is the IPO price range and minimum investment requirement?

The ESAF Small Finance Bank IPO share price range is Rs.57 to Rs.60. The minimum application lot size is 250 shares, requiring an investment of Rs 15,000 for retail investors.

4. When is the allotment date and listing date for ESAF Small Finance Bank IPO?

Allotment is expected on November 10, 2023, and the bank is set to list on BSE and NSE tentatively on November 16, 2023.

5. What are the key qualitative factors driving ESAF Small Finance Bank's growth?

ESAF's growth is fueled by their understanding of the micro loan segment, focus on rural and semi-urban banking, strong customer connections, technology-driven operations, and an experienced team ensuring strategic guidance.

 

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