Utkarsh IPO Update: Launch Date, Issue Price, GMP & Review

Learn Team
July 12, 2023

About the Company

Utkarsh CoreInvest Limited (formerly Utkarsh Micro Finance Limited) is the promoting institution for 'Utkarsh Small Finance Bank Limited’. Utkarsh Micro Finance Limited started its operations way back in September 2009 to provide financial and non-financial services in its area of operations to the unbanked population who had the skills but were in need of capital, particularly in Uttar Pradesh and Bihar. The bank was incorporated as a wholly-owned subsidiary in 2016 and was included in the second schedule to the RBI Act as a scheduled commercial bank. The bank is led by Managing Director and CEO, Mr. Govind Singh, with over 25 years of experience in the banking and financial services sectors. The bank operates in 26 states and Union Territories with 830 banking outlets and 15,424 employees.

The bank has more than 35 lakh customers, primarily in rural and semi-urban areas, primarily in Bihar and Uttar Pradesh, which have the best asset quality but low and moderate credit penetration in Fiscal 2022. The bank is diversifying its product portfolio to include non-microbanking loans and growing its secured loan portfolio. The bank offers a range of financial products and services, including microbanking loans, retail loans, wholesale lending, housing loans, commercial vehicle and construction equipment loans, and gold loans.

IPO Objectives

Bank proposes to use the Net Proceeds from the Issue to augment its Tier-I capital base and meet future capital requirements. This will be achieved through growth in assets, loans/advances, and investment portfolios, and compliance with regulatory requirements. The proceeds from the Issue will also be used to cover expenses related to the Issue.

IPO Details

IPO Open Date	July 12, 2023
IPO Close Date	July 14 2024
Listing Date	July 24, 2023
Face Value	Rs. 10 per share
Price	Rs. 23 - Rs. 25
Lot Size	600 shares
Issue Size	Rs. 500 crores

Fresh Issue	200,000,000 share
Offer For Sale	NIL

Issue Type	Book Built Issue IPO
Listing At	BSE, NSE
Anchor Investor Shares Offered	44.55%
QIB Shares Offered	29.70%
NII (HNI) Shares Offered	14.85%
Retail Shares Offered	9.90%

IPO Launch Date

The Utkarsh Small Finance Bank Limited IPO will be open between July 12 to July 14, 2023. Investors can apply for this IPO during this period, and no application will be accepted after the closing date of the Utkarsh Small Finance Bank Limited IPO. Along with the IPO launch date, the dates for IPO allotment and listing will also be announced.

Financial Statements:

	FY23	FY22	FY21
Total Revenues	2,804.29 cr	Rs728.48 cr	Rs636.91 cr
Revenue growth	15.08%	14.38%	37.00%
Profit after tax (PAT)	404.50 cr	61.46 cr	111.82 cr
PAT Margins	14.42%	3.02%	6.56%
Total Borrowings	2,349.48 cr	2,571.94 cr	2,607.83 cr
RONW (%)	20.22%	3.91%	8.17%

Financial Performance

Key Performance Indicators (KPIs)		Fiscal 2021	Fiscal 2022	Fiscal 2023
Operation	Banking Outlets	558	686	830
	Gross Loan Portfolio	84156.6	106307.25	139571.08
	Gross Loan Portfolio Growth (%)	26.34%	26.32%	31.29%
	Secured Advances as % of Total Advances	13.82%	21.99%	33.08%
	Total Deposits (Rs. in million)	75075.68	100741.83	137101.4
	Total Deposits Growth (%)	43.41%	34.19%	36.09%
	CASA Ratio (%)	17.68%	22.37%	20.89%
	CASA + Retail Term Deposits Ratio (%)	57.51%	59.64%	61.55%

Capital	Total Capital Ratio (CRAR) (%)	21.88%	21.59%	20.64%
	Tier 1 Capital Ratio (%)	19.98%	18.08%	18.25%
	Cost of Deposits (%	7.89%	6.92%	6.71%
	Cost of Funds (%	8.70%	7.47%	6.96%

Asset Quality	Gross NPA (%)	3.70%	6.10%	3.23%
	SMA 1 %	2.62%	1.59%	0.77%
	SMA 2 %	1.14%	0.88%	0.70%
	Provision Coverage Ratio(%)	65.49%	63.62%	88.29%
	Standard Restructured Advances (%	3.13%	1.26%	0.22%
	Net NPA (%)	1.33%	2.31%	0.39%

Profitability	Net Profit	11.1815	6.1462	40.4502
	Yield on Advances (%)	20.64	19.57	19.88
	Net Interest Margin (%)	8.2	8.75	9.57
	Credit Cost Ratio (%)	3.97	5.03	2.61
	Cost to Income Ratio (%	56.54	58.9	54.15
	Return on Total Average Assets (%)	9.99	4.14	22.84

Promoters & Shareholding of the Company

Utkarsh CoreInvest Limited is a promoter of the bank, holding 84.75 % of total pre-Issue paid up Equity Share capital.

Strengths:

Sound understanding of microfinance segment

Utkarsh CoreInvest Limited, a NBFC, has been serving customers in the microfinance segment since its inception in Fiscal 2010. The company focuses on financial inclusion for unserved and underserved segments in rural/semi-urban areas of Uttar Pradesh, Bihar, Jharkhand, Madhya Pradesh, Chhattisgarh, and Uttarakhand.

Growing deposits

The company offers a range of deposit products, including savings accounts, salary accounts, current accounts, recurring and fixed deposits, and locker facilities, catering to retail customers from all segments. Growth in deposit-only customers increased from 0.38 million as of Mar 31, 2021 to 0.86 million as of Mar 31, 2023. The growth in deposits provides stable access to low-cost funding and longer tenure resources, reducing their cost of funds from 8.27% in Fiscal 2021 to 7.47% in Fiscal 2022 and 6.96% in Fiscal 2023.

Diversified distribution network

As of March 31, 2023, the bank had 830 banking outlets across 26 states and Union Territories, covering 253 districts in India. The bank has also internal classified 579 outlets to focus on growing its microbanking portfolio, with a significant microbanking franchise in Uttar Pradesh and Bihar. The bank leverages partnerships with banks and DSAs to grow its asset portfolio and has agreements with 13 BCs and 321 DSAs to source retail loans against properties across various locations.

Focus on risk management

The bank uses technology and data analytics to manage credit risks, including decentralized loan sanctioning and stringent credit history checks. The credit assessment process is automated, and the bank has developed a scorecard for secured and unsecured retail loans.

Stable growth with cost efficient operational performance

The banks Gross Loan Portfolio has grown significantly, reaching approximately 14000 cr at 31.0% CAGR between 2019 and 2023. Disbursements have increased from Rs. 59,140.08 million in 2021 to Rs. 90,462.79 million in 2022, and Rs. 124,428.94 million in 2023. Deposits have also grown consistently. The bank is well above the regulatory capital requirements, having a SLR, CRR and CAR of 31.53%, 5.33% and 20.64%, respectively, as of March 31, 2023. The company's net profit for the year was Rs. 1,118.15 million, Rs. 614.62 million, and Rs. 4,045.02 million, respectively.

Risks:

Concentration of advances

A significant portion of their advances in the microbanking segment are towards customers located in the states of Bihar and Uttar Pradesh, and any adverse changes in the conditions affecting the region can adversely impact our business, financial condition, results of operations and cash flows. As of March 31, 2023, advances in Bihar represented 30.88%, and Uttar Pradesh represented 25.98% of the company's Gross Loan Portfolio.

Concentration of deposits

Bank deposits depend on a limited number of customers, and a loss of such customers could materially and adversely affect our deposit portfolio, funding sources, financial condition, results of operations, and cash flows. The top 20 depositors roughly account for 21.04% of their Total Deposits. Whereas the top 5 depositors account for roughly 9% of their deposits.

Unsecured advances

A majority of their advances, including our microbanking loan portfolio, are unsecured and are not supported by any collateral that could help ensure repayment of the loan. Their Unsecured loans as of March 31, 2023, stood at 66.92% of total advances.

How to Apply for Utkarsh Small Finance Bank Limited IPO

Applying for the IPO became hassle-free since Moneysukh launched its online trading platform for retail customers. If you have an account with Moneysukh you can easily apply for this IPO otherwise open a trading and demat account here and follow the steps.