Utkarsh Small Finance Bank which has filed preliminary papers with markets regulator Sebi to raise Rs 1,350 crore through an initial share sale, has the lowest
bad loans ratio among peers.
The bank’s deposits and disbursements grew at a CAGR of 54.48 per cent and 33.66 per cent, respectively during FY18-20.
The lender’s gross loan portfolio has grown at 44% CAGR since its start in FY18.
Loan book has remained stagnant in the last six months till September due to the pandemic, in line with its peers such as AU Small Finance Bank Ltd and Equitas Small Finance Bank Ltd.
Its gross non-performing assets are down to 0.71% as of March 2020 from 1.85% two years before that, but up from 0.64% in September 2020. About Rs 26.9 crore loans were not labelled as bad due to the Covid moratorium.
Collection efficiency
Collection efficiency is down with the bank able to collect 79.28% of its dues as against 90-95% rate before the pandemic.
The bank has the lowest level of bad loans among peers and is better poised to show faster improvement once the pandemic ends.
Deposits
The bank’s deposits grew by 14% during April-September with the share of its low-cost CASA deposits going up to 14.46% as of September, which will help in margins.
While the portfolio is dominated by microfinance assets, growth in newer segments has risen and the bank’s main focus is to diversify the asset portfolio.
The issue
The Initial Public Offer (IPO) comprises a fresh issue of equity shares worth Rs 750 crore and an offer of sale to the tune of Rs 600 crore by promoter Utkarsh Coreinvest Ltd, according to the Draft Red Herring Prospectus (DRHP) filed with Sebi.
The Varanasi-headquartered lender said it may also consider raising Rs 250 crore through a pre-IPO placement which would be in consultation with the lead managers to the issue.
The utilisation
The Proceeds from the fresh issue would be utilised to augment the Tier 1 capital base to meet future capital requirements.
As on September 30, 2020, the small finance bank across 528 banking outlets served 2.74 million customers, majorly located in rural and semi-urban areas in Bihar, Uttar Pradesh and Jharkhand that have a significant untapped market.