Suryoday Small Finance Bank shareholders lost 7% of their investment within minutes of listing

• Shares of Suryoday Small Finance Bank listed on the stock exchanges at ₹292 per share, which is over 4% less than the issue price.
  
• The company’s initial public offer (IPO) was oversubscribed by 2.37 times.
  
• It intends to use proceeds of the IPO towards bolstering its Tier-1 capital -- essentially boosting its financial strength and meeting its future capital requirements.
  

Shares of Suryoday Small Finance Bank debuted at ₹292 per share, which is over 4% lower than its issue price of ₹305.

At 10:05 am, the share price of Suryoday Small Finance Bank was hovering around ₹283, down by 7% over the issue price.

The ‘new-age’ small finance bank floated its ₹581 crore initial public offer (IPO) earlier this month. The IPO was oversubscribed by 2.37 times, with retail investors leading the fray.

Suryoday Small Finance Bank (SSFB) plans to boost its Tier-1 capital from the proceeds of the IPO. This, it says, will be used for meeting future capital requirements.

Tier-1 capital refers to the core capital of a bank that consists of equity shares and retained earnings. It is used to measure the bank’s financial strength and its capital adequacy.

The grey market premium for SSFB’s shares was hovering in the negative, meaning the grey market expected the bank’s shares to list lower than the issue price. It is worth noting that grey market premium is not an official measure of market premium.

SSFB commenced its microfinance operations in 2009. It received the small finance bank (SFB) licence from the Reserve Bank of India (RBI) in 2016.

Prior to getting approval to operate as a small finance bank from the Reserve Bank of India, SSFB operated as a non-banking finance corporation and offered small ticket-size loans to women from weaker sections of the society.

SSFB serves customers in the unbanked and underbanked categories. It has been serving these segments for over a decade now.

“Suryoday Small Finance Bank is among the leading SFBs in India in terms of net interest margins, return on assets, yields and deposit growth and had the lowest cost-to-income ratio among SFBs in India in fiscal 2020,” a report by Axis Capital said.

Explaining the extent of SSFB’s operations, a HDFC Securities reported states, “As of December 31, 2020, SSFBL’s customer base was 1.44 million and its employee base comprised 4,770 employees and it operated 554 Banking Outlets including 153 Unbanked Rural Centres.”

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