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Suryoday Small Finance Bank’s Rs 582 crore initial public offering (IPO) opens for subscription on Wednesday. The company has fixed a price band of Rs 303-305 for the public offer, which will close on March 19.
Brokerages hold a mixed view on the IPO. According to LKP Securities, the stock is valued at 2.28x P/BVPS at the upper price band with the current book value per share of Rs 133.5. Factoring the good return ratios, FY20 return on assets and return on equity of 11.3% and 2.5%, Suryoday Small Finance Bank is worth subscribing.
The company on Tuesday raised a little over Rs 170 crore from anchor investors ahead of an initial share-sale. 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.
The bank has proposed to utilise the net proceeds from the fresh issue towards augmenting its capital base to meet future capital requirements. The small finance bank has over 20 institutional investors with a mix of institutional investors, development funds, and private equity investors.
As of March 2020, the net worth of the bank stood at around Rs 1,000 crore with a capital adequacy ratio of 30%. It has a deposit base of more than Rs 2,800 crore and a gross loan portfolio of around Rs 3,700 crore.
Commenting on the IPO, Rajiv Mehta, Lead Analyst, Institutional Equities, YES Securities said, “We do not have a positive view on this issue as asset quality severely impacted by Covid. The overall stress is inadequately addressed. The company has not so credible loan assets diversification. There is limited success on CASA mobilisation and in the reduction of funding cost. Profitability is higher than other small finance banks but subjected to high volatility. IPO valuation at par with listed stronger franchisees like Equitas SFB and Ujjivan SFB-when adjusted for franchise and execution capabilities, it becomes unattractive.”