Suryoday Small Finance Bank IPO to open on 17 March

Suryoday Small Finance Bank’s IPO (initial public offering) will open this week on 17th March and close on 19th March. Suryoday small finance bank IPO price of issue will be between ₹303 to ₹305 per share. The bank’s IPO comprises a fresh issue of 81.50 lakh shares and an offer-for-sale (OFS) of up to 1.09 crore equity shares. Until this point, no grey market activity has been observed in Suryoday Small Finance Bank IPO shares.

Suryoday Small Finance Bank IPO OFS comprises of these shareholders:

• Up to 48.37 lakh equity shares held by International Finance Corp.
• Roughly 20 lakh equity shares held by Gaja Capital Fund II Ltd.
• 18 lakh shares held by DWM (International) Mauritius Ltd.
• 5 lakh shares held by HDFC Holdings Ltd.
• 5 lakh shares held by IDFC First Bank.
• 1 lakh shares held by Americorp Ventures Ltd.
• 86 lakh shares held by Kotak Mahindra Life Insurance Company.
• 06 lakh shares held by Gaja Capital India AIF Trust.

Suryoday Small Finance Bank IPO: Registrar, Bid lot size

For a minimum of 49 shares in equity and in multiples thereafter, an investor can make bids to the bank’s IPO. Considering the share price, this translates into a minimum investment of ₹14,945. An amount not greater than 50% of the net issue has been reserved for QIBs — qualified institutional investors — while retail investors have been guaranteed 35% of the IPO’s portion, and non-institutional investors receive the remaining 15%.

About 5 lakh equity shares will also be reserved for eligible employees in addition to a discount of ₹per share only for those bidding in the employee reservation portion. The lead managers for book-running the Suryoday Small Finance Bank IPO are Axis Capital Ltd, IIFL Securities, ICICI Securities, and SBI Capital Markets Ltd. The issue of an IPO has to have a registrar which will be Kfin Technologies Private Ltd for the Suryoday Small Finance Bank IPO.

Suryoday Small Finance Bank listed peers

Those that have been listed as industry peers in the Suryoday Small Finance Bank IPO are CreditAccess Grameen Ltd, Ujjivan Small Finance Bank, Bandhan Bank Ltd, Spandana Sphoorty Financial Ltd, and AU Small Finance Bank. The lowest industry P/E ratio is of Spandana Sphoorty Financial Ltd at 12.14x. The highest industry P/E ratio is by AU Small Finance Bank at 48.34x. Hence, the average P/E ratio for the industry peers is 25.15x.

Suryoday Small Finance Bank’s Performance

It has been proposed by the Small Finance Bank that the net proceeds from the fresh issue of the IPO will be used to augment the Suryoday Small Finance Bank’s Tier — 1 capital base. The goal of doing so is to meet the bank’s future capital requirements. For the quarter ended December 31, 2020, Suryoday Small Finance Bank also posted a profit of ₹54.8 crores. But it is worth keeping in mind that, as of last year in March, the gross bad loans that were given out by Suryoday Small Finance Bank had totaled ₹101,25 crores.

This made for about 2.79% of gross advances. Alternatively, its non-performing assets were listed at ₹20,37 crores or about 0.57% of its net advances. In the financial year 2020, the bank’s net interest income was at ₹490.90 crores against ₹340.37 crores about a year ago. Accordingly, its net profit was ₹111.20 crores which is a steep rise from the ₹90.40 crores in the prior year. Deposits with the bank were at ₹2,848.71 crores compared with ₹1,593.42 crores a year prior and any advances for the period stood at ₹3,531.94 crores from ₹2,679.58 crores.

The Bottom Line

Financial experts claim that the Suryoday Small Finance Bank IPO price appears to be reasonable considering the industry standard. it’s no surprise that the year 2020 has been hard on small financial banks. However, currently in India, Suryoday Small Finance Bank is among the industry’s leaders as a small finance bank. Its position is reflected in its deposit growth, yields, NIMs, RoA, and having one of the lowest cost-to-income ratios compared to other banks.

With respect to its peers, the P/BV of the Suryoday Small Finance Bank IPO price was 2.28 in December of 2020. Additionally, the company appears to be in good hands when it comes to both management as well as its backing from institutional investors. This is why experts argue that Suryoday Small Finance Bank’s issue price is nearly in-line with the unlisted (Pre-IPO) market.