Looks like it is raining heavily not only in India but also on Dalal Street.
By the way, here on Dalal Street, it is raining something different.
You don't feel that IPO-like sales have come into the market?
And like always, today we have brought you another IPO review of a company named - Utkarsh Small Finance Bank.
And today we will tell you-
So let's get started.
Utkarsh Small Finance Bank IPO will open on 12th July, Wednesday and you can bid for this IPO till 14th July, Friday.
This IPO of ₹ 500 crore will be a completely fresh issue and by using this capital, the bank wants to strengthen its capital base.
Like every time, I will let you know the rest of the important details and dates.
So, let us first know what the company does.
Utkarsh Small Finance Bank Limited is an Indian Small Finance Bank headquartered in Varanasi, Uttar Pradesh.
The main focus of Utkarsh Small Finance Bank or SFB is to provide microfinance services to the unserved and under-served areas in UP and Bihar.
The main difference between microfinance banks and other commercial banks is that microfinance banks provide small loans to people
who do not have access to banking facilities and also do not have assets against which a commercial bank can give them collateral-free loans.
As per the latest RBI guidelines, microfinance loans or collateral-free loans should be given only to those whose household income is less than ₹3lacs
And also in the microfinance segment, the bank disburses loans through the 'Joint Liability Group Model', ie JLG model.
In the JLG model individuals can take loans without any collateral but the group ensures that the loan is repaid.
Such community and group support makes it easier for the borrower to get credit and also promotes credit discipline.
In this, Utkarsh SFB's primary target is women households, to whom they disburse loans from ₹6,000 to ₹1,00,000 for agriculture and allied activities.
The SFB segment witnessed the third fastest gross loan portfolio growth between 2019 and 2023, according to a Crisil report.
Utkarsh SFB has done a lot of strategic planning and has expanded its operations to states
where it thought it could better leverage the experience of its promoter NBFC company Utkarsh Coreinvest Ltd.
As on March 31, 2023, the bank has a total of 830 banking outlets across 26 states and union territories with 15,424 employees.
Their main focus is still on rural and semi-urban areas.
27.35% of their banking outlets are located in URC ie Unbanked Rural Centres.
If you see the regulatory requirement, it is only 25%, and the bank has surpassed to it.
As we have seen, Utkarsh SFB primarily serves rural and semi-urban customers mainly based in Bihar and UP
with a customer base of around 35.9 Lakhs, both credit and deposit based
It forms a significant portion of the gross loan portfolio of States Bank.
30.8% of their loan portfolio comes from Bihar and 25.98% from UP.
But Utkarsh is trying its best to strengthen its presence in new geographies of SFB for
It is partnering with new business correspondents and direct selling agents whose key role will be in unlocking new geographies for the bank.
If we talk about the asset side product portfolio of the bank, then there are different types of products available in it.
Utkarsh SFB offers Microbanking Loans, Retail Loans, Home Loans, Commercial Vehicle Loans, Construction Equipment Loans & Gold Loans.
The bank also extends its wholesale loan service to SMEs ie small and medium enterprises and medium-sized and large corporates.
Under the segment-wise revenue of Utkarsh SFB by FY23, the microfinance loan segment accounts for 66.03% of their gross loan book
10.99% from the retail segment, 11.08% from the wholesale ie MSME, and 3.72% from the housing segment.
The rest 8.21% of the loan book is made up of their vehicle, construction, and gold segments.
Utkarsh SFB offers deposit accounts, including savings accounts, current accounts, and various types of fixed and recurring deposit accounts.
Utkarsh SFB has consistently increased its deposits from FY21 to FY23.
It had 7507.56 crore deposits in FY21, in FY22 it was ₹10.074.18 crores and in FY23 it increased to ₹13710.14 crore.
The bank also offers non-credit services to its customers such as ATM-cum-debit cards, bill payment systems, mutual funds, and insurance products.
Now if we talk about the management of the bank, Mr. Govind Singh, MD & CEO of Utkarsh Small Finance Bank
has more than 25 years of experience in the banking and financial services sector.
The financial position of Utkarsh SFB is quite strong.
Capital to risk-weighted assets ratio ie CRAR as on March 31, 2023, stands at 20.64% (Tier I capital 18.25%).
This ratio is a measure of how well the depositors' capital is protected reflecting the stability and efficiency of the bank or financial company.
The RBI regulations are also stricter on the bank's provisioning and write-off policy.
Its gross NPAs to gross advances at 3.23% and net NPAs to their net advances at 0.39%.
An NPA for any bank or financial firm is a loan or advance for which the principal and interest due has remained overdue for more than 90 days.
As per the guidelines, any bank or NBFC has to disclose its NPA number.
There are 2 terms used a lot in this industry to refer to NPAs - one is Gross NPAs and the other is Net NPAs.
Gross NPA is an absolute number that tells you the total value of non-performing assets of any bank or NBFC.
And Net NPA tells the value of the amount that comes after deducting the provision from your gross NPA.
The bank has various funding sources, including its certificate of deposit program and subordinated non-convertible Tier II bonds.
The financial products have positive ratings from credit rating agencies.
Now if we talk about the industry, does this SFB have any advantage over other NBFCs?
CASA ie Current Account-Savings Account and other retail deposits can be considered as a source of cheap funds for SFBs.
Due to this, SFB has significantly expanded its product portfolio.
These cheap funds help them compete with other NBFCs.
It is estimated that from FY 2018 to FY 2023, CASA deposits of SFBs have grown at 66% CAGR.
This can help them compete with NBFCs.
If we talk about the AUM of SFB, it is believed that it can grow at a CAGR of 29% from FY18 to FY23 and can grow at 22% in the coming time.
It is also believed that the deposits of SFBs in private and public sector banks are also increasing rapidly.
From FY18 to FY23, this deposit showed a growth rate of 58% CAGR!
But did you know that India's top 6 players, as on December 31, 2022, are covering 84% of the industry's advances?
And Utkarsh SFB has an 8% share in it.
Under the microfinance lending segment, the industry's gross loan portfolio is expected to grow at 18-20% CAGR over the 3 years,
with a 23% CAGR growth from FY17 to FY23.
Let me now tell you about the major strengths and weaknesses of Utkarsh SFB.
Utkarsh SFB has the second-highest RoA in the SFB segment.
Return on assets tells us how well a bank or financial firm uses its assets to generate profit.
To calculate this ratio, we divide the net income of the financial firm by the average total assets.
Apart from this, if we talk about Net Interest Margin i.e. NIM, Utkarsh SFB has the fourth highest NIM in FY23.
Net interest margin is an important parameter that measures the profitability of banks.
In simple language, if the net interest margin is understood,
it is the difference between the income from the interest of a bank or financial institution and the interest paid on their lending or deposits.
In addition, the bank has the highest Liquidity Coverage Ratio or LCR in the SFB segment in FY23.
The LCR of Utkarsh SFB stands at 375.82% against the statutory requirement of 90%.
The Company has fairly high-quality liquid assets.
And their strong capital base position of 20.64% CRAR ratio and liquidity profile in terms of LCR, can help them grow their business.
An impressive aspect of Utkarsh SFB is its continued focus on the micro-banking loan segment.
The bank has tried to diversify a lot over the years,
the micro-banking loans segment still constituted 66% of its gross loan portfolio at the end of FY23.
Second, as on March 31, 2023, their bulk deposits account for 48.60% of their total fixed deposits.
And hence one of the challenges before Utkarsh SFB is that
if there is partial or complete withdrawal of bulk deposits, it may adversely affect the business operations of the bank.
Let us now look at the financial position of the company.
Let us now see the main information related to the company's IPO.
So this was a detailed analysis of the business and IPO of Utkarsh Small Finance Bank Limited.
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We remind you that this video is for educational purposes only and is not a recommendation to buy or sell of any kind.
See you in the next video. Happy investment. Bye!