Analysts advised investors to subscribe to the issue for the long term given its strong loan portfolio and lowest cost-to-income ratio.
At the upper price band, the company is valued at a P/B of 1.39x, with a market cap of Rs 2,740 crore post-issue of equity shares and a return on net worth of 20.22%.
“We believe that the company is fairly priced and recommend a subscribe-long term rating to the IPO,” said Anand Rathi. Utkarsh Small Finance Bank is one of the leading SFBs and has posted decent financial performance in the past few years.
While the topline has remained healthy, with a CAGR of 26% over FY21-23, there was muted growth in the FY22 bottomline following general market trends after the pandemic. Its net NPAs stood at 1.33%, 2.31% and 0.39% during FY21, FY22 and FY23, respectively.
“Utkarsh SFB is making constant efforts to improve its business with deeper insights into customer trends and develop customized products for its customer segments. With NIMs and NPAs in a declining trend over the last three years, growth in earnings remains strong,” said Reliance Securities.
“On FY23 financials, the IPO is valued at a 6.8x P/E and 1.1 times P/BV; we recommend subscribing to this issue for the long term,” the brokerage said.Incorporated in 2016, Utkarsh commenced operations in 2017 and its product suite includes a range of deposit products, including saving accounts, salary accounts, current accounts, recurring and fixed deposits and locker facilities.
The bank recorded the third fastest gross loan portfolio growth between fiscal 2019 and fiscal 2023 among its peers with a gross loan portfolio of more than Rs 6000 crore.
For the year ended March 2023, the company recorded a total income of Rs 2,804 crore, while net profit for the same period stood at Rs 404 crore.
Proceeds from the fresh issue will be utilised to augment the lender’s Tier-1 capital base to meet future capital requirements.
ICICI Securities and Kotak Mahindra Capital Company are the book-running lead managers to the issue.
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