Utkarsh IPO: Should you subscribe to the issue? Here's what brokerages say | Mint
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Business News/ Markets / Stock Markets/  Utkarsh IPO: Should you subscribe to the issue? Here's what brokerages say
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Utkarsh IPO: Should you subscribe to the issue? Here's what brokerages say

Utkarsh Small Finance Bank's IPO opens on July 12 and ends on July 14, with a price band of ₹23 to ₹25 per share. The bank raised ₹222.75 crore from anchor investors. Brokerages recommend subscribing to the IPO for listing gains and long-term investment.

Utkarsh Small Finance Bank IPO: The company has fixed the price band at ₹23 to ₹25 per equity share for the proposed initial public offer. Premium
Utkarsh Small Finance Bank IPO: The company has fixed the price band at 23 to 25 per equity share for the proposed initial public offer.

Utkarsh Small Finance Bank's (Utkarsh SFB) initial public offer (IPO) opens for subscription on Wednesday, July 12 and ends on Friday, July 14. The company has fixed the price band at 23 to 25 per equity share for the proposed initial public offer. 

On Tuesday, July 11, Utkarsh Small Finance Bank raised 222.75 crore from 20 anchor investors. The allocation of 8.91 crore equity shares to anchor investors, at an upper price band of 25 per share, was finalised, the company stated in its exchange filing.

Aditya Birla Sun Life Mutual Fund (MF), Edelweiss MF, ICICI Prudential MF, Kotak Mahindra MF, Goldman Sachs, Massachusetts Institute of Technology Basic Retirement Plan Trust, and others were among the anchor investors.

Utkarsh Small Finance Bank IPO is entirely a fresh issue of equity shares aggregating up to 500 crore with no offer for sale (OFS) component, according to the red herring prospectus (RHP). The face value of each equity share is 10.

To improve its bank's tier I capital base and meet future capital needs, the issue's proceeds will be put to use. Its tier-1 capital base was 1,844.82 crore, or 18.25 percent, as of March 2023.

The book running lead managers of the public offering are ICICI Securities Ltd, and Kotak Mahindra Capital Company Ltd, whereas the registrar to the issue is KFin Technologies Ltd.

Also Read: Utkarsh Small Finance Bank IPO opens tomorrow: 10 key things to know

What do brokerages say?

Motilal Oswal Financial Services

The brokerage stated that Utkarsh SFB, one of the top SFBs, has strong financials, good asset quality, and healthy return ratios in its report. It appears that the issue is reasonably priced at 1.1x FY23 ABV (on a fully diluted basis). The public offer might spark some interest given the present strong market and significant demand for SFB stocks. The brokerage advises clients to subscribe for IPO listing gains as a result.

Reliance Securities

The brokerage claims that Utkarsh SFB is constantly working to enhance its operations through deeper understanding of consumer trends and the creation of tailored solutions for specific customer segments. With the aid of technology, processes, and data analytics, it aims to accelerate expansion by diversifying its product offerings, target markets, and geographic reach.

Earnings growth is still robust because NIMS have improved and NPA have been on a downward trend over the past three years. The brokerage advises subscribers to subscribe to this issue for the long term because, based on FY23 financials, the IPO is valued at 6.8x P/E and 1.1 times P/BV.

LKP Securities

“At higher price band ( 25), the stock is valued at 1.8(x) P/BVPS with current book value per share of 18. Factoring the superlative return ratios, FY23 ROAA/ROAE of 2.42%/22.84%. We believe that Utkarsh Small Finance Bank is worth subscribing. We recommend to Subscribe," said the brokerage in its report.

Swastika Investmart Ltd

According to the brokerage, India's small finance bank (SFB) market is expanding quickly, and Utkarsh Small Finance Bank is one of the top players. The company has a proven track record of expansion, and its financial performance has improved recently.

Utkarsh SFB is in a good position to profit from the expansion of the SFB industry since it has a priority on underserved demographics. The company's balance sheet is solid, and the IPO is priced at a fair valuation. There are some risks to take into account, though, including the level of competition and the possibility of asset quality issues.

"Overall, we believe that the IPO is a good opportunity for investors who are looking for exposure to the growth of the SFB sector. So, we have Subcribe rating for this IPO," the brokerage said in its report.

Geojit Financial Services Ltd

“At the upper price band of 25, Utkarsh SFB is available at a P/Bv of 1.4x FY23, which appears reasonably priced compared to peers. Considering its resilient performance post COVID, consistent growth in loan book and deposits, healthy return ratios, best cost to income ratio, pan India presence and promising industry outlook, we assign a ‘Subscribe’ rating on a short to medium term basis," the brokerage said in its report. 

Anand Rathi Research

According to the brokerage, SFB's future prospects depend on the RBI's monetary policy and the Indian government. One of the bank's key strengths is its capacity for cost-effective delivery of products and services, and among SFBs with gross loan portfolios more than 60 billion, it had the lowest cost-to-income ratio.

With a market valuation of 27,400 million following the issue of equity shares and a return on net worth of 20.22%, the company is valued at the upper price band at a P/B of 1.39x.

The brokerage rates the IPO with a "Subscribe- Long term" recommendation since it thinks the company is fairly valued.

SBI Securities 

Utkarsh, at the Upper / Lower price band of 25/ 23 is valued at 1.1x/1.0x of its FY23 book on post-issue capital. While compared with its close peers on similar valuation parameters, the bank is fairly priced. We recommend investors to subscribe the IPO for listing at cut-off price," said the brokerage. 

 

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Published: 12 Jul 2023, 11:27 AM IST
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