IPO Note - Suryoday Small Finance Bank Ltd By Choice Broking
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Salient features of the IPO:
* Suryoday Small Finance Bank Limited (SSFB) started operations as SFB on Jan 23’ 2017.
* Prior to commencement of operations as a SFB, SSFB operated as an NBFC – MFI carrying out microfinance operations.
* SSFB has a network of 554 banking outlets across 13 states and UT in country providing services to 1.44 mn customers
Valuation:
At higher price band of Rs305, the issue is valued at P/BV of 2.0x (on post issue BVPS).
Below are few key observations of the issue:
* SSFB commenced operations as an SFB on Jan 23’ 2017 pursuant to receipt of RBI’s final approval. Prior to commencement of operations as a SFB, the company was operated as an NBFC – MFI carrying out micro-finance operations.
* Public issue is brought mainly to comply the RBI’s regulation to list SFB within three years of from reaching the net worth of Rs5,000 mn. SSFB is required to be listed by Nov 29’ 2020 but due to bank request, the RBI gave six months extension to May 2020 for listing.
* Micro loan categories as inclusive finance constituted 70.4% of gross loan portfolio in 9MFY21. SSFB disburses micro loans under the joint lending group model (JLG) to customers in unbanked and underbanked predominately in urban and semi-urban locations. Ticket size of unsecured micro loan under JLG ranges between Rs10,000 and Rs52,500 predominately extended to woman customers. Average tenure of loan is up to two years and bank earned interest between 20.5% - 25.5% per annum on these loans.
* The bank is gradually diversifying the loan portfolio across other secured categories. Over the past years, SSFB started disbursing affordable housing loans, secured business loans to SME/MSME/Corporates, CV loans and unsecured business loans to micro/small enterprises and self-employed individuals.
* CV loans comprised 9.4%, affordable housing loan at 6.3% and secured business loans at 3.6% of the gross loan portfolio as on 9MFY21.
* Coming to distribution front, SSFB has a network of 554 banking outlets across 13 states and UT in country providing services to 1.44 mn customers. Business is largely skewed towards four states namely Maharashtra, Karnataka, Tamil Nadu and Odisha due to high presence of banking outlets in the respective states.
* Owing to micro loans to unbanked region and weaker section, SSFB's average "priority sector" loans, as a percentage of average net banking credit (ANBC) was 114.1% as on Dec 31’ 2021.
* Gross advances portfolio stood at Rs39,082 mn in 9MFY21 which grew at a CAGR of 35% since FY18. The bank is aggressively making disbursement in CVs and affordable housing segment, the share of whose rose to 9.4% in 9MFY21 (0.5% in FY18) and 6.3% (1.3% in FY18).
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