BackSuryoday Small Finance Bank’s listing reflects waning IPO frenzy
Suryoday Small Finance Bank’s proforma bad loans in December quarter at 9.3% was the highest among peers. Proforma bad loans capture the true picture of asset quality as they adjust for the judicial standstill on asset recognition
PremiumMUMBAI: Suryoday Small Finance Bank Ltd’s listing pain shows that investors are now looking beyond making a quick buck to the troubles that are inherent in the business of lending to small borrowers. Shares of the lender traded 4% lower today than its issue price of Rs305 apiece.
This is the fourth stock to be trading below the issue price of the initial public offer. We noted that euphoria surrounding IPOs may finally be petering out in this piece on Thursday. Another company Kalyan Jewellers also traded sharply lower than its issue price.
Clearly, Suryoday too has fallen prey to this receding IPO optimism. But in the case of the lender, investors may also be focusing on troubles that surround small finance banks at present. To be sure, expectations of listing gains were low from the stock. While most brokerages recommended investors to subscribe, the disclaimers on asset quality were evident.
Suryoday Small Finance Bank’s proforma bad loans in December quarter at 9.3% was the highest among peers. Proforma bad loans capture the true picture of asset quality as they adjust for the judicial standstill on asset recognition. What’s more is that Suryoday’s operations are concentrated in Maharashtra, Tamil Nadu, and Odisha although the lender has diversified its presence in other states.
A fresh surge of covid cases in Maharashtra has resulted in select districts going into temporary lockdowns and this could impact collections for the lender.
Further, the lender does not match up to its peers on asset quality. A strong point for Suryoday has been its high loan growth since it began operations. The bank’s gross loan portfolio has grown at a compounded annual growth rate of 46.98% in the three years to FY20. Coupled with fast diversification of its portfolio away from micro finance, the lender offers value to investors. But in the short-term investors cannot ignore the impact of pandemic on loan growth.
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