Suryoday Small Finance Bank lists at 4% discount over issue price

Shares of (SFB), on Friday, made a weak debut at the bourses, listing at Rs 292, a 4 per cent discount over its issue price of Rs 305 per share on the National Stock Exchange (NSE). On the BSE, the stock opened 4 per cent lower at Rs 293, falling further to Rs 278.80, nearly 9 per cent lower against its issue price.

At 10:09 am, Suryoday SFB was trading at Rs 288.90, down 6 per cent from its issue price. It hit a high of Rs 295.50 on the BSE, so far. Around 1.5 million equity shares have changed hands on the counter on the NSE and BSE.

The initial public offer (IPO) of Suryoday SFB had managed to get good response from the retail investors and qualified institutional buyers (QIBs). The issue was subscribed 2.37 times as the retail individual investors’ portion was subscribed 3.09 times and of the qualified institutional buyers (QIBs) portion by 2.18 times. The non-institutional investors’ portion was subscribed by 1.31 times, according to exchange data.

Suryoday SFB proposes to utilise the net proceeds from the fresh issue towards augmenting its Tier – 1 capital base and to meet future capital requirements. However, analysts that covered the IPO share mixed views and were split between high valuations and good return ratios.

“What concerns us is that with proforma GNPA (gross net performing assets) at 9.3 per cent, Suryoday SFB’s pool of bad loans is the highest among listed peers. While the collection efficiency improved to above 100 per cent (inclusive finance at 112.5 per cent in December), re-surge of Covid cases in key business states such as Maharashtra and Karnataka to weigh on revival and further weaken assets quality,” said Choice Broking in a note.

At a higher price band, the company is valued at P/BV of 2x post-issue BVPS which appears expensive given weak assets quality outlook, concentrated business to some states, low CASA share and small business size. Asked valuation is in line with peers Equitas and Ujjivan SFB but these banks are significantly large in size and have superior fundamentals than Suryoday SFB, the brokerage firm said in IPO note.

The company is placed at a little bit higher valuation as compared to its peers. However, it is expected that the company is going to get benefited from the overall growth in demand of commercial vehicle loans and affordable housing finance which results in improvement in overall return ratios. Additionally, we also expect operating parameter to improve further at a healthy rate owing to improvement in NIM, asset quality, brokerage firm Anand Rathi had said.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Source link