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Utkarsh Small Finance Bank IPO: Issue subscribed over 100 times on final day; QIB portion most booked

Utkarsh Small Finance Bank IPO: Issue subscribed over 100 times on final day; QIB portion most booked

The initial public offering (IPO) of Utkarsh Small Finance Bank received significant investor interest and strong demand. The IPO, valued at Rs 500 crore, concluded on Friday with a subscription of 101.91 times the offer size. This indicates that the total bids received were nearly 102 times the number of shares available for subscription.

The strong subscription figures for Utkarsh Small Finance Bank’s IPO demonstrate the high level of investor confidence and interest in the offering. It is noteworthy that this is the second IPO in the current year to receive more than 100 times subscription. Prior to Utkarsh SFB, IdeaForge Technology’s IPO was subscribed 106.06 times in the preceding month.

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A successful IPO subscription is typically indicative of investor confidence in the company’s prospects and can be an encouraging sign for the stock’s performance in the market. It indicates that there is a high demand for the company’s shares among investors.

Furthermore, it is worth mentioning that IdeaForge Technology’s IPO, which also received strong subscription figures, witnessed a remarkable market debut with its stock experiencing a listing pop of 94 percent. This means that the stock’s price surged by 94 percent compared to its IPO price when it started trading on the stock exchange.

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Based on the strong subscription for Utkarsh Small Finance Bank’s IPO and the positive market debut of IdeaForge Technology, there is potential for a favorable market response and a potential increase in Utkarsh Small Finance Bank’s stock price when it begins trading on the stock exchange.

The shares of Utkarsh Small Finance Bank were observed trading at a premium of over 60 percent in the grey market, indicating strong investor interest and potential for a positive debut on Dalal Street (the Indian stock market). The stock is expected to be listed on July 24.

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As per data from the Bombay Stock Exchange (BSE), the IPO of Utkarsh SFB received a total of 12,28,46,22,600 bids, which is significantly higher than the issue size of 12,05,43,477 shares. This demonstrates the immense demand and interest from investors.

The qualified institutional buyers (QIBs) category experienced the highest demand, with a subscription of 124.85 times, while the non-institutional investor (NIIs) category saw a subscription of 81.64 times. The retail investor category had a subscription rate of 72.10 times, and the employee reserved category witnessed a subscription of 16.58 times.

These subscription figures indicate the strong demand across all investor categories, including institutional investors, non-institutional investors, retail investors, and employees. It underscores the broad-based interest in the IPO and the positive sentiment surrounding Utkarsh Small Finance Bank.

Considering the significant premium in the grey market and the robust subscription figures across investor categories, there are favorable indications for a successful and potentially lucrative market debut for Utkarsh Small Finance Bank’s shares when they begin trading on July 24.

The IPO of Utkarsh Small Finance Bank consisted entirely of a fresh sale of 20 crore equity shares. Investors were able to place bids for a minimum of 600 equity shares and in multiples thereof.

Several brokerages have given a ‘Subscribe’ rating to the IPO, recommending investors to participate with a long-term perspective. They have cited the IPO’s attractive pricing as a key factor in their positive outlook. However, one analyst suggested considering booking profits on the listing day if the gains exceed 25 percent.

LKP Securities stated, “At the higher price band of Rs 25, the stock is valued at 1.8 times Price-to-Book Value per Share (P/BVPS), considering the current book value per share of Rs 18. We recommend ‘Subscribing’ to the issue.”

The ‘Subscribe’ rating from brokerages suggests that the IPO offers good investment potential, considering factors such as pricing, valuation, and the company’s growth prospects. However, investors should carefully evaluate their own investment goals, risk appetite, and consider the recommendations provided by financial experts before making investment decisions.

It is important to note that while brokerages have given positive recommendations, including a ‘Subscribe’ rating, market conditions and investor sentiment can impact the actual performance of the IPO and subsequent listing gains. Investors should assess their investment strategy and consult with their financial advisors for personalized advice based on their specific financial circumstances.

Arihant Capital Markets has assigned a ‘Subscribe for Long term’ rating to the Utkarsh Small Finance Bank IPO. The firm highlighted the company’s exceptional performance in FY23, its strong position among competitors with the highest liquidity coverage ratio, and the second lowest net non-performing asset (NPA) ratio in FY23.

Canara Bank Securities also provided a ‘Subscribe’ rating, stating that the issue is available at a price-to-book value per share (P/BVPS) of 1.12 times, which is comparatively lower than its peer competitors. However, it mentioned that future net interest margin performance might experience pressure due to an increase in the cost of funds.

Rajan Shinde, a Research Analyst at Mehta Equities, recommended investors to subscribe to the issue with a long-term perspective and anticipated healthy listing gains. Shinde further advised booking profits if the listing gains exceed 25 percent on the listing day, considering the positive market sentiments.

Utkarsh Small Finance Bank, headquartered in Varanasi, operates across 26 states and Union Territories in India. It has 830 banking outlets and employs 15,424 individuals as of March 31, 2023. With a customer base of 3.59 million, the bank primarily serves rural and semi-urban areas, particularly in Bihar and Uttar Pradesh.

To summarize, Arihant Capital Markets, Canara Bank Securities, and Mehta Equities have recommended subscribing to the Utkarsh Small Finance Bank IPO. They have highlighted the company’s strong financial performance, competitive positioning, and growth prospects. Additionally, they have provided insights on the P/BVPS valuation and suggested potential listing gains.

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