MUMBAI : RBL Bank-backed Utkarsh Small Finance Bank (USFB), which mainly gives microfinance loans in Bihar and Uttar Pradesh, has begun work on its initial public offering (IPO), three people aware of the matter said.
“The bank is presently in the process of appointing investment banks for its proposed IPO, which is expected to be around ₹500 crore in size,” said one of the three people, all of whom spoke under condition of anonymity.
Established in 2009, USFB is wholly owned by Utkarsh Coreinvest Ltd (erstwhile Utkarsh Micro Finance Ltd) and counts CDC Group Plc, the development finance institution of the UK government, as its largest shareholder holding a 14% stake.
Its other shareholders include Faering Capital and RBL Bank, which hold 9.9% each, followed by International Finance Corporation, Norwegian Microfinance Initiative AS, Swiss development financier responsAbility Investments AG and Aavishkaar Goodwell, a microfinance institution-focused private equity firm.
Emails sent to Utkarsh’s managing director and chief executive officer Govind Singh remained unanswered.
Utkarsh Coreinvest received a final small finance bank (SFB) licence from the Reserve Bank of India (RBI) in November 2016 and started operations as an SFB in January 2017.
As of March 2018, the Varanasi-based bank had a loan portfolio of ₹4,740 crore, with 88% of its portfolio comprising microfinance loans mainly concentrated in Uttar Pradesh and Bihar, which together accounted for 72% of its portfolio.
Besides micro loans, USFB also offers loans in other segments, including wholesale lending that made up 6%, followed by micro, small and medium enterprises (MSMEs) at 4%, and business correspondent loans and affordable housing loans, which comprised 1% each of the USFB’s overall asset portfolio.
The bank had a deposit base of ₹3,278 crore with retail deposits accounting for 27%, as of 28 February. In terms of asset quality, the bank’s gross non-performing assets rose to 2.51% as on 31 December 2018 from 1.85% in FY18.
The bank, with operations in 11 states through 438 branches in 136 districts, is one of the 10 entities to receive the central bank’s in-principle approval to start SFB operations in September 2015.
Based on RBI norms, which mandate SFBs to list within three years of the launch of their operations, UFSB has until January 2020 to go public.
Further, SFBs are also required to bring down their promoter shareholding to at least 40% within five years of commencement of operations.
The development comes as SFBs rush to meet the RBI’s regulatory requirements for IPOs and reduce their foreign shareholding.
While AU Small Finance Bank Ltd went public in a ₹1,900 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. For Equitas and Ujjivan, it means they must list their SFBs by September 2019 and January 2020, respectively.
On 2 June, Mint reported that unlisted banks such as Karnataka-based Fincare Small Finance Bank Ltd and Mumbai’s Suryoday Small Finance Bank Ltd have started work on going public. Even Thrissur-based ESAF Small Finance Bank has also started working towards its IPO, according to a 22 August report on VCCircle.
Besides these, Punjab-based Capital Small Finance Bank Ltd is yet to announce its IPO plans but raised ₹43 crore from mid-market private equity firm, Amicus Capital artners, to fund its expansion plans.