Utkarsh Small Finance Bank aims at Rs 500-600 cr IPO by Dec 2020

Utkarsh Small Finance Bank plans to hit the capital markets by December 2020, keeping to the Reserve Bank of India’s (RBI) mandate of going public within three years of launch of bank operations.

Tentatively, the bank is eyeing to mop up Rs 500-600 crore from its planned Initial Public Offer (IPO), a top bank official said here.

“The ground work for the IPO is being readied. We should be able to file the prospectus and other necessary documents with Sebi (Securities & Exchange Board of India) by April 2020. As per the RBI norms, we have to get listed by June 2021. Ideally, we are aiming at listing by December 2020 but we have kept a buffer of a few months keeping in view the market volatility”, said Govind Singh, managing director & chief executive officer of Utkarsh Small Finance Bank.

The proceeds of the IPO would be used to fund the bank’s expansion. The small finance bank has a nationwide network of 470 branches. A hundred more branches are expected to be added before the launch of IPO.

The Varanasi-headquartered new generation micro lender offers small ticket loans beginning from Rs 10,000 to Rs 25 lakh. About 90 per cent of its credit goes to priority sectors like agriculture, micro, small & medium enterprises (MSMEs) and housing.

As of now, the RBL Bank backed Utkarsh Small Finance Bank is adequately capitalised with a capital adequacy ratio over 23 per cent. Still, the bank plans to raise fresh Tier-II capital.

“We aim to raise Rs 200 crore over the next two to three months. Though we are well capitalised, we don’t want our capital adequacy ratio to fall below 20 per cent”, said Singh.

Among the small finance banks, AU Small Finance Bank has gone public with Rs 1900 crore IPO in June 2017. Equitas Small Finance Bank Ltd and Ujjivan Small Finance Bank Ltd listed their parent companies, Equitas Financial Holdings Ltd and Ujjivan Financial Services Ltd, respectively, and are yet to list their SFB units to meet RBI requirements.

Singh, is upbeat on the future of small finance banks unlike some payments banks that have folded up in the recent past.

“Small finance banks are offering the last mile credit and are here to stay and grow. Utkarsh is growing at the rate of 50-60 per cent each year in total business. Unlike payments banks which have no scope for deployment (of credit), we go the doorstep of the customers, serving the unserved and underserved areas. We don’t see any impact of the economic slowdown on our operations”, he added.

Utkarsh Small Finance Bank has attained a total business of Rs 97 billion, added up by deposits and advances. By the end of March 2020, the bank plans to reach a business of Rs 125-130 billion. The bank serves 2.2 million customers.

The bank plans to offer loans for two-wheelers shortly and is eyeing to tap the pre-owned vehicles segment. In the next fiscal year, it aims to foray into new credit areas like gold loans, student loans and personal loans.

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