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Kerala-based ESAF Small Finance Bank hopes to get approval for its Draft Red Herring Prospectus (DRHP) from the SEBI by next month, but will launch its Initial Public Offering (IPO) based on market conditions.
‘Awaiting SEBI approval’
“We filed the DRHP in the first week of January and are expecting approval from the SEBI next month. We don’t have any time pressure as such. Once we get the final approval, then depending on the market situation, we will decide on the timing,” K Paul Thomas, Managing Director and CEO, ESAF SFB, told BusinessLine .
ESAF SFB had filed DRHP with the SEBI in January for an IPO that comprises fresh issue worth ₹800 crore and an Offer for Sale (OFS) of up to ₹176.2 crore.
Under Reserve Bank of India norms, SFBs have to list within three years of reaching a net worth of ₹500 crore.
Gireesh CP, Chief Financial Officer, ESAF SFB, said the bank has until July 2021 to list on the bourses. With an expected growth rate of 30 per cent to 35 per cent over the next three years, ESAF SFB is hopeful that the infusion of fresh capital, along with profitability, will take care of capital requirements for the next three years.
After capital infustion, ESAF plans to focus more on the existing branches and deepen their reach and, going forward, the bank may expand its presence beyond the 17 States where it has a presence at present.
According to Gireesh, the bank has a capital adequacy ratio of 24 per cent against the regulatory requirement of 15 per cent and its internal benchmark of 18 per cent. ESAF SFB is also working on a roadmap to dilute promoter stake to 40 per cent, which has to be done by March 2022.
“We have already diluted promoter stake by 22 per cent, and the promoter holding is only 78 per cent,” said Thomas.
Depending on the pricing, the IPO will help further dilute stake by about five per cent to six per cent.
Meanwhile, the bank is also working on a roadmap for the existing shareholders at the holding company level to exit.
“We are planning something on that on how to meet both the goals — promoter exit and stake dilution.
“The details are not yet out, but we are exploring various options,” added Thomas.
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