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Fincare Small Finance Bank IPO: Launch Date, Share Price, Size, GMP & Review

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Fincare Small Finance Bank – About the Company

Incorporated in 1995 in Gujarat, Fincare Small Finance Bank is a digital-first approach bank with a focus on unbanked and under-banked customers, mainly in rural and semi-urban areas. Fincare also provides banking services and access to savings and other financial products to retail individual customers, MSMEs and other unorganized entities.

Operating with 8,114 employees, Fincare Small Finance Bank is catering its small finance banking service with a widespread network of 528 banking outlets situated across 16 states and 38,809 villages. It has more than 219 business correspondents and 108 ATMs with 2.7 million customers and 2.68 million deposit accounts.

Fincare Small Finance Bank operates with the motive of financial inclusion with the aim to offer individuals and business owners affordable financial products and services that can meet their needs as per their affordability.

The main business objective of this Fincare bank is to make savings, credit and other financial products accessible for unbanked and under-banked individuals, MSMEs and unorganized entities, mainly in rural areas, by leveraging the latest technology and last-mile distribution to a maximum number of customers.

The MD & CEO and CFO of the Fincare Bank have experience in the financial services industry with a track record of working with the Fincare group for between 9 to 12 years. Moreover, the bank also has a strong and experienced management team consisting of a 20-member leadership team in addition to an executive management team comprising over 30 members.

Fincare Small Finance Bank IPO Objectives

The main objective of Fincare Small Finance Bank IPO is to use the funds raised to buy the sell new shares to enhance its capital base in tier-1 cities and to meet future capital requirements.

Fincare Small Finance Bank IPO Details:

IPO Open Date To Be Updated
IPO Close Date To Be Updated
Listing Date To Be Updated
Face Value Rs. 10 per share
Price To Be Updated
Lot Size To Be Updated
Issue Size Rs. 1330 crore
Offer For Sale Rs. 1000 crore
Fresh Issue Rs. 330 crore
Issue Type Book Built Issue IPO
Listing At BSE, NSE
QIB Shares Offered Not more than 50% of the Offer
NII (HNI) Shares Offered Not less than 15% of the Offer
Retail Shares Offered Not less than 35% of the Offer

 

Fincare Small Finance Bank IPO Issue Price & Size

Fincare Small Finance Bank IPO issue price is not known yet as the IPO issue price has not been declared yet. However, as per the DRHP Prospectus filed with SEBI, the issue size will be around Rs. 1330 crore IPO constraining Rs. 330 crore in fresh equities and Rs. 1,000 crore in offer for sale equity.

Fincare Small Finance Bank IPO Launch Date

The launch date of Fincare Small Finance Bank IPO is also not known as any official announcement has not been made by the company or the management. However, as soon as the IPO launch date is declared, it will be made available to the investors.

Fincare Small Finance Bank Financial Statements:

Particulars (Rs. in Million) FY23 FY22 FY21 CAGR
Interest Earned 17,441.19 14485.74 12510.59 18.07%
Interest Expended 6536.75 5697.82 5500.48
Net Interest Income 10904.44 8787.92 7010.11 24.72%
Net Interest Margin (%) 10.72% 11.05% 9.87%  
Other Income 2,266.77 1,961.63 1,256.51  
Operating Income 19707.96 16447.37 13767.10 19.65%
Operating Expenses 8,740.52 6467.96 4632.81
Operating Profit 4430.69 4281.59 3633.81 10.42%
Provisions for NPA & other Assets 3131.01 4224.14 2835.24  
EBITDA 1513.72 258.64 1634.28 -3.76%
Depreciation 214.04 201.19 170.08
Profit Before Taxes 1299.68 57.45 1464.20
Current & Deferred Taxes 263.28 -30.25 332.81
Net Profit After Taxes 1036.40 87.70 1131.39 -4.29%
Net Profit Margins 5.26% 0.53% 8.22%
Earnings Per Share (EPS) Rs. 4.59 0.38 5.55
Key Ratios FY23 FY22 FY21  
CASA Ratio 33% 36.30% 23.76%  
GNPA Ratio 3.25% 7.79% 6.42%
Net NPA Ratio 1.30% 3.55% 2.30%  
Return on Equity 8.60% 0.72% 11..55%  
Return on Assets 0.94% 0.10% 1.48%
Operating profit to Assets Ratio 4.00% 4.67% 4.77%
Return on Net Worth 8.40% 0.80% 11.90%
Average cost of deposits 6.86% 7.31% 8.16%
Total Provisions to Gross Advances 2.41% 5.12% 5.75%
Deposits to total of deposit & borrowing 74.26% 68.68% 79.16%

Source: DRHP

Fincare Small Finance Bank Financial Performance

The income from the interest of the Fincare bank has grown at a CAGR of 18.07% from Rs. 1251 crore in FY21 to Rs. 1744 crore in FY23. However, thanks to better net interest margins, the Net Interest Income of the bank grew at a CAGR of 24.72% during the same period.

In FY21 the Net Interest Margin of Fincare Small Finance Bank was 9.87% which has improved to 10.72% in FY23. The operating income of the Fincare bank grew at a CAGR of 19.65% from FY21 to FY23 in which income from interest and other income was included.

While owing to a high increase in operating costs, the operating income of the Fincare bank has grown merely 10.42%. And owing to high provisions against NPS and other assets, the EBITDA of the bank has shown a negative growth of 3.76% CAGR during two years, bringing down the EBITDA to Rs. 151.37 crore in FY23 from Rs. 163.43 crore in FY21.

At the bottom line, the Net Profit of the Fincare bank has shown a small but negative CAGR of 4.29% for the same period. The high operating cost and provisions, the Net Profit Margins of the bank have declined from 8.22% in FY21 to .26% in FY23.

Checking the quality of the asset, the Fincare Bank has improved both Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA). In FY21 the GNPA Ratio was 6.42% which has come down to 3.25%, while the NNPA has also improved much better and decreased from 2.3% in FY21 to 1.3% in FY23. The CASA Ratio of the bank was 23.76% in FY21 and increased to 33% in FY23.

Fincare Small Finance Bank IPO Promoters & Shareholding of the Company

FBSL is the promoter of the Fincare Small Finance Bankwith a shareholding of 78.58% in the bank. However, there are various other investors in the list having stakes in this microfinance bank the other top three are Wagner Limited, True North Fund V LLP and Indium IV (Mauritius) Holdings Limited holding 2.48%, 2.48% and 2.34% respectively.

Fincare Small Finance Bank Shareholdings:

S.No. Name of the Shareholder No. of Shares % of pre-Offer shareholding
1 FBSL 173,489,568 78.58
2 Wagner Limited 5,480,130 2.48
3 True North Fund V LLP 5,159,355 2.34
4 Indium IV (Mauritius) Holdings Limited 5,004,870 2.27
5 Omega TC Holdings Pte. Ltd. 2,601,570 1.18
6 LeapFrog Rural Inclusion (India) Ltd 1,519,290 0.69
7 Kotak Mahindra Life Insurance Company Limited 1,465,440 0.66
8 Edelweiss Tokio Life Insurance Company Limited 1,358,910 0.62
9 Bharti Axa Life Insurance Company Limited 531,000 0.24
10 Silver Leaf Oak (Mauritius) Limited 407,655 0.18
11 TATA Capital Financial Services Limited 238,980 0.11
12 Zuno General Insurance Limited 223,470 0.10
  Total 197,480,238 89

 

Why Invest in Fincare Small Finance Bank IPO?

For investing in such a small bank you need various reasons, as there bank is involved in borrowing and lending business, especially to individuals and small business owners in rural and semi-urban areas. But nowadays such small microfinance is growing very rapidly and doing well with impressive growth in loans advancing and recovering the same with interest.

Fincare Small Finance Bank also works with impressive financial growth and strong asset quality making this one of the considerable options in the IPO market. However, every business has risks in operating the business but with the help of its strength, it can minimize the impact of such and is poised to grow in the coming future with better efficiency and productivity.

Strengths:

  • Fincare Small Finance Bank operates with a focus on financial inclusion that is mainly driven by digital banking and in respect of the same, it has adopted a large-scale digital solution that is helping the customers to avail the services more efficiently.
  • The bank is working with a customer-centric approach to offer affordable financial products and services to meet the needs of businesses and individuals.
  • The bank has a long track record of serving rural customers, especially microloan borrowers and offering financial products covering the entire lifecycle of such customers.
  • As per the CRISIL report, Fincare SBF had the highest growth rate among peers between 2017 and 2020 in advances and enjoys the status of having the best Return on Equity (ROE) and Return on Assets (ROA)ratios among the Small Finance Banks in India in FY20.
  • The top management of Fincare Bank like the MD & CEO and CFO both are experienced in the financial services industry and working with the Fincare group for the last nine years and 12 years, respectively.
  • Though, owing to the increase in the operating expenses the Net Profit of the Bank has not shown a positive growth in the last two years but, thanks to improved Net Interest Margins the Net Interest Income has improved from FY21 to FY23.
  • The bank has improved the quality of its assets in the last two to three years with a focus on CASA and retail deposits. The GNPA and NPA of the bank improved with impressive rates showing the strength and capability of the bank to find and lend creditable customers.

 

Risks:

  • Most of the banking outlets and a significant portion of its advances of Fincare Small Finance Bank originate from four states. This kind of geographically concentrated operation is risky for the bank to ensure the revenue from the customers located in these regions.
  • In the micro-financing and lending business, there is too much competition in the market with various rivals offering similar services at better pricing. Hence, expanding into other regions or increasing its financing and loaning business in new markets is another challenge for the company.
  • Owing to large networks and banking outlets relying on third-party service providers like correspondents operating banking outlets poses various unexpected risks in dealing with such entities.
  • The bank is operating with a digital-first approach, hence its major focus is to offer its services through digital platforms to customers making the financing procedure fast and effortless. These digital platforms are also highly vulnerable to cyber-attacks like hacking, phishing and threats from viruses and malware that can steal sensitive data of the customers will also impact the business of the bank.
  • At the financial performance end, the income from interest earned is no doubt increasing and net interest margins improved. But the operating cost of the Fincare Bank is rising rapidly reducing the Net Profit Margins of the bank which can be a concerning factor if the bank is unable to control its overheads.

Also Read: What are the Risk Factors Involved in Applying for an IPO

Fincare Small Finance Bank IPO Grey Market Premium

The Grey Market Premium (GMP) of the Fincare Small Finance Bank IPO is not known yet as the official date of launching the IPO has not been declared by the company. GMP is the premium price over the issue price along with that the stock of the company is likely to list in the secondary market.

Though the GMP is not the authenticated criteria to know the listing price of any stock launched into the IPO. As per the demand and supply of shares in the primary market, the GMP can be increased or decreased and keeps fluctuating in the grey market till the date of listing.

Also Read: What is Grey Market Premium in IPO: How is GMP Calculated &Reliable

Fincare Small Finance Bank IPO Review & Analysis

Microfinancing is relevantly risky, as 40% of the borrowers are first-time borrowers who don't have any previous track record of borrowing and paying the loans with the banks. Apart from that there are various other risks that are also associated with operating into such micro-financing business.

However, overpowering such threats, Fincare Bank is operating efficiently in the market with the potential to grow further making this company one of the interesting bets for investment. The investment criteria are fully dependent on the valuation of the stock of the company which is not possible now as the IPO price of the bank is not disclosed yet.

Also Read: What to Check Before Buying IPO: Things to Know & Is it Safe

Once the issue price is known it would be possible to calculate the valuation of stock and compare the same with peer group companies. If Fincare Small Finance Bank IPOis available at a lower price or cheaper valuation compared to its nearest listed rival then you can buy the stock with a listing gain as well as a long-term investment point of view.

However, if the IPO price is issued at a higher valuation you can either avoid the same or apply in the IPO with a long-term perspective. Also, wait until the stock is listed in the secondary market and the price comes down at a fair valuation that can give returns.

Also Read: What to Know Before Investing in Stocks: 10 Things to Consider

How to Apply for Fincare Small Finance Bank IPO?

To apply for Fincare Small Finance Bank IPO or any other IPO, you should have a demat account and trading account to hold the shares if you get the allotment. If you don’t have these two accounts, you can apply to open a new trading and demat account with Moneysukh. You just need a few documents to verify your identity and complete the KYC procedure to open these accounts. Once done you can follow the steps given below to apply for an IPO.

Steps to Apply for Fincare Small Finance Bank IPO:

Step 1: Wait for the date Fincare Small Finance Bank IPO opens for online bidding.

Step 2: Now open trade.moneysukh.com and log in with your User ID & password.

Step 3: Here find the IPO section and select the Fincare Small Finance Bank IPO.

Step 4: Now you have to fill in the various details like price, quantity, and so on.

Note:When you apply in any IPO, always bid at the cutoff price before submitting your application. 

Step 5:Now make the payment and submit your IPO application is successfully.

How to Check Fincare Small Finance Bank IPO Allotment Status?

After the bidding process in the Fincare Small Finance Bank IPO, the allotment process is conducted by the company to decide and allocate the shares to investors. The shares are allotted and transferred into the demat account of the investors before the listing.

Also Read: How to Open Demat Account: Benefits and Documents Required

And chances of getting the allotment of shares become low when IPO is oversubscribed overall, especially in the retail category. However, retail investors not getting the allotment in IPO can try in the HNI category having a better chance of allotment.

Also Read: How to Apply for IPO in HNI Category: Benefits & Procedure

Despite the oversubscription, if you get the shares allocated into your demat account you can sell them on the listing day and enjoy the profit. However, if you have not been allotted any shares, your IPO application money will refunded into your bank account. If you applied through the Application Supported by Blocked Amount (ASBA) Procedure, then the fund will be unblocked into the bank account that you used at the time of applying.

Also Read: How to check IPO allotment status on NSE, BSE through Moneysukh

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