Small bank in IPO queue already creating lot of buzz in grey market
Stock prices of Suryoday Small Finance Bank (SFB) have surged in the grey market after the lender received a nod from capital markets regulator Sebi to float its initial public offering (IPO). According to dealers of the unofficial market for unlisted shares, the IPO approval has boosted sentiment on the counter.
The unlisted shares traded at Rs 300-320 per share in off-market last week rising from Rs 260-280 in October and Rs 220-230 in March. The stock has surged up to 25 per cent in last three months and 45 per cent in last nine.
Jasbir Singh, proprietor of Meera Associates, a Pune-based boutique firm, said the stock may move further northward in the coming days. “The stock has gained momentum after receiving the IPO approval. We expect the IPO to be price at around Rs 325-350,” he said.
The bank, which had filed its preliminary papers for the IPO in October, obtained Sebi’s observation on December 23, an update with the markets watchdog showed on Monday. Sebi’s observation is very necessary for any company to launch public issues like IPO, follow-on public offer and rights issue.
“The bank has shown superior growth over the years with a strong recovery ratio. We find it better than recently listed or other unlisted peers,” Singh said. “Robust liquidity and strong market sentiments will add to the attractiveness of the company.”
Suryoday SFB generated Rs 854 crore revenue in FY20 compared with Rs 599.25 crore in FY19 and clocked profit after tax (PAT) of Rs 110 crore in FY20 compared to Rs 86.6 crore in the previous year. However, gross NPA surged to 2.79 per cent from 1.81 per cent during this period.
The IPO comprises fresh issuance of 1,15,95,000 equity shares and an offer for sale of up to 84,66,796 shares by existing shareholders, draft papers filed with Securities and Exchange Board of India (Sebi) showed.
Investors that would be offering their shares through the OFS (offer for sale) route include International Financial Corporation (IFC), Gaja Capital, HDFC Holdings, IDFC First Bank, Kotak Mahindra Life Insurance Company, DWM (International) Mauritius and Americorp Ventures.
Abhay Doshi, Founder of Unlistedarena.com, said the bank is backed by strong investors and parentage. “Alongside, the management quality is very strong, which is what makes it a decent value pick,” he said.
The bank’s net worth as on March 31, 2020 stood at Rs 1,066 crore, up 21 per cent from the year-ago period. The company had a net worth of Rs 880 crore last year. Deposits have gone up from Rs 1,593 crore in FY19 to Rs 2,848 crore in FY20.
Axis Capital, ICICI Securities, SBI Capital Markets and IIFL Securities are the merchant bankers for the issue. Shares of the bank will be listed on BSE and NSE.