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Industry : Private Banks

Utkarsh Small Finance Bank View all IPOs

Price Band

Rs. 23 – Rs. 25

Utkarsh Small Bank is going public with a Fresh Issue. The issue opens on 12th July 2023.

MOJO CALL

Avoid

Neutral

Robust Financials

The company’s financials have been robust as it has grown its revenue by 28% over two years and has maintained healthy profit margins. Over the last two years, the company’s advances and deposits have grown significantly, and have done well to operate at a Net Interest Margin of 9.57%.
The company has been efficient with its assets, as seen by its ROA of 2.37%, which is the second-best among its peers. Over the previous two years, the company has diversified its product portfolio by decreasing its commitment to microfinance and boosting it to retail and wholesale loans.
The company is doing well in terms of cost savings, and its deposit costs have decreased despite a higher interest rate environment in which depositors have begun to prefer term deposits that pay higher interest rates. The company's net profit was low in FY22 due to Covid but then climbed significantly in FY23. We expect the company to sustain this going forward.

Fair Valuation

Based on the upper price band, it will trade at a P/B of 1.11x, the lowest among its peers despite having one of the highest ROAs.
We believe the company can provide good capital appreciation.

Issue Details

Issue Opens	12th July 2023
Issue Closes	14th July 2023
Price Band	Rs. 23 – Rs. 25
Issue size (Upper Band)	Rs. 500 Cr
Issue Type	FRESH ISSUE
Market cap (based on upper band)	Rs. 2740 Cr
Sales- March 2023 (Rs./Crs)	2804 Cr
Net Profit - March 2023 (Rs./Crs)	405 Cr
Industry	Private Banks
Promoters	Utkarsh Coreinvest Ltd
Lead Manager	Icici Securities

Details

Fresh Issue – Rs. 500cr

Increasing Tier-1 Capital base to meet future capital requirement

Meeting the expenses related with the issue

Utkarsh Small Finance Bank is a private bank that primarily lends to individuals and businesses.

Their product mix includes:
1. Microfinancing
2. Vehicle Loans
3. Mortgage Loans
4. MSME
5. Large & Mid-corporate Loans

In the last two years, the company's deposits have increased by 35% and its advances have increased by 26%.

Loan Book by Product:
Products	FY 23	FY 22	FY 21
Microbanking Loans	66%	75%	82%
Housing Loans	4%	4%	4%
Retail Loans	11%	8%	6%
Wholesale Lending	11%	9%	6%
Business Correspondent	3%	2%	2%
Construction Equipment and Commercial Vehicle	4%	2%	0%
Overdrafts, Staff Loans & Gold Loans	1%	1%	1%

Over the last two years, the company's sales increased by 26%, the highest among its peers.

After having negative cash flow from operations in FY21, the company has generated positive cash flow from operations for the two subsequent years.

The company’s Loan book and Advances grew significantly in the last two years.

In the last two years, the company has been able to expand its profitability, evident by the expansion of its Net Interest Margin.

Despite having one of the best ROAs among its rivals, the company has the lowest PB ratio.

Rs./Crs	FY 23	FY 22	FY 21
Sales	2505	1849	1581
Net Profit	405	61	112