Utkarsh Small Finance Bank IPO Opens for Subscription with Soaring 64% GMP; Should You Subscribe?

Utkarsh Small Finance Bank IPO Opens for Subscription with Soaring 64% GMP; Should You Subscribe?

Utkarsh Small Finance Bank’s initial public offering (IPO) opened for subscription on July 12. The IPO consists of a fresh issue of 20 crore shares, amounting to Rs 500 crore. After the listing, Utkarsh CoreInvest, the promoter of Utkarsh Small Finance Bank, will hold a 69.28% stake in the company. 

The price band for the IPO has been set at Rs 23-25 per equity share. The grey market premium for Utkarsh Small Finance Bank shares surged by 64% on Wednesday, with a premium of Rs 16 over the upper end of the IPO price, suggesting a potential listing price of Rs 41 per share. Investors can now subscribe to the IPO and have an opportunity to be a part of the bank’s growth story.

Before the opening of the IPO, Utkarsh Small Finance Bank successfully raised Rs 222.75 crore from 20 anchor investors on July 11. The subscription period for the IPO will end on July 14. The allotment of units is scheduled for July 19, and the bank is anticipated to be listed on the stock exchanges on July 24. This timeline provides investors with a clear schedule for the various stages of the IPO process, allowing them to plan their investment decisions accordingly.

Utkarsh Small Finance Bank (USFB) is a comprehensive financial institution that provides a range of products and services to meet the diverse needs of its customers. The bank offers various asset products, including micro-banking loans, retail loans, wholesale lending, housing loans, commercial vehicle/construction equipment loans, and gold loans. These offerings cater to individuals, businesses, and other entities requiring financial assistance.

In addition to its lending activities, USFB also offers a variety of deposit accounts, such as savings accounts, current accounts, and term/recurring deposit accounts. The bank extends its services beyond traditional banking, providing non-credit offerings like ATM-cum-debit cards, bill payment systems, distributed third-party point-of-sale terminals, mutual funds, and insurance products. This diverse range of services allows USFB to cater to the financial needs of its customers and provide them with a comprehensive banking experience.

Should you apply for the Utkarsh Small Finance Bank IPO?

ACMIIL: Subscribe 

According to ACMIIL, Utkarsh Small Finance Bank (USFB) is considered one of the leading small finance banks, with an average financial performance. The bank’s prospects are influenced by the monetary policies of the Reserve Bank of India (RBI) and the Indian government. The sustainability of current margins is a concern, although the IPO seems attractively priced based on the financial performance of FY23.

The management of USFB is acknowledged for its solid understanding of the microfinance segment and its presence in rural and semi-urban areas. The bank’s focus on growing deposits, particularly retail deposits, is expected to drive future growth. At the upper price band of Rs. 25 per share, the stock is valued at 1.12 times its FY23 book value (based on fully diluted post-issue equity). Given these factors, it is recommended to subscribe to the IPO from a long-term perspective.

Reliance Securities: Subscribe for long-term

According to Reliance Securities, Utkarsh Small Finance Bank (USFB) is actively working to enhance its business by gaining deeper insights into customer trends and developing tailored products for different customer segments. The bank aims to drive growth through diversification of its product offerings, customer segments, and geographical reach, leveraging technology, processes, and data analytics. 

USFB has shown improvement in its Net Interest Margins (NIMs) and Non-Performing Assets (NPAs) over the past three years, indicating strong earnings growth. Based on the financials of FY23, the IPO is valued at 6.8 times Price-to-Earnings (P/E) ratio and 1.1 times Price-to-Book Value (P/BV) ratio. Given these factors, it is recommended to subscribe to the IPO for the long term.

Hensex Securities: Subscribe

According to Hensex Securities, Utkarsh Small Finance Bank (USFB) operates in multiple states with a wide network of banking outlets, including a significant presence in unbanked rural centers (URCs). The bank serves a large customer base, primarily located in rural and semi-urban areas, with a focus on unbanked and underbanked segments. USFB has a substantial gross loan portfolio among Self-Help Groups (SFGs) and aims to maintain a strong capital adequacy position.

The bank has not raised any bridge loan from other financial institutions and has been focused on growing its deposits, particularly retail deposits. Based on these factors, Hensex Securities recommends subscribing to the IPO for potential listing gains and long-term investment.