Kerala-based ESAF Small Finance Bank (SFB) is set to file a draft prospectus by December-endfor a 1,000 crore initial public offering (IPO), two people aware of the matter said, requesting anonymity.

In 2015, ESAF Microfinance and Investments was one of the 10 lenders to receive an in-principle nod from the Reserve Bank of India (RBI) to set up a small finance bank.

“The bank is likely to file its draft prospectus with Sebi (Securities and Exchange Board of India) this month. It plans to raise 1,000 crore through the IPO, which will be a mix of primary and secondary share sale," said one of the persons mentioned above, requesting anonymity as he is not authorized to speak with the media. “The company could also raise part of the proceeds through a pre-IPO funding round of around 200 crore," he said.

Investment banks ICICI Securities, Axis Capital, IIFL Securities, and Edelweiss Financial Services are advising ESAF on the share sale, the person said.

E-mailed queries sent to ESAF SFB, Edelweiss, and Axis Capital remained unanswered, while IIFL Securities and ICICI Securities chose not to comment.

ESAF’s plans to go public follows the stellar IPO of Ujjivan SFB earlier in December, which saw a subscription of more than 165 times—the highest among all IPOs in 2019. Another SFB, Equitas Small Finance Bank, has also filed its draft prospectus with the market regulator on 16 December for a 1,000 crore IPO.

Besides Ujjivan SFB, Jaipur-based AU Small Finance Bank Ltd is the only other listed public small finance bank. AU SFB went public in 2017. Other SFBs that have started work on their IPOs include Fincare SFB and Utkarsh SFB, which aims to hire investment banks to advise on its 500 crore initial share sale, Mint reported on 18 September.

ESAF SFB has 436 banking outlets and 208 ATMs, which are spread across 14 states in India but are concentrated in Kerala, Tamil Nadu, and Karnataka. The bank is focused on the retail banking business with a presence in microfinance, housing finance, business loans, loan against property, gold loans and providing financing solutions for marginal customers who are underserved by formal financing channels.

Between April-September 2019, ESAF SFB’s total income rose 37% from the year-earlier to about 728.87 crore. Profit jumped nearly threefold on a year-on-year basis to 92.43 crore during the period. In terms of asset quality, the bank’s gross non-performing assets to total advances stood at 1.76% as of six months ended 30 September, compared to 3.37% in the corresponding period last year. The bank’s capital adequacy ratio stood at 25.69% as of 30 September.

As on 31 March 2019, ESAF Financial Holdings Pvt. Ltd held a 65.63% stake in ESAF SFB, while its founder owned 7.29% and ESAF Swasraya Multi-State Agro Co-operative Society Ltd held 4.99%. Other shareholders include PNB Metlife India Insurance, which holds 4.99%, Muthoot Finance Ltd (4.38%), Bajaj Allianz Life Insurance Co. (4.08%), PI Ventures Llp (2.04%), ICICI Lombard General Insurance Co., which holds 1.46%, and individual investors who hold the remaining stake.

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