Utkarsh Small Finance Bank IPO to open on July 12 – All you need to know

• The Varanasi-based bank aims to raise as much as ₹500 crore via the initial public offering.
  
• The IPO opens on July 12 and will close on July 14.
  
• The bank plans to use the net proceeds towards augmenting its tier-I capital base to its future capital requirements.
  

Utkarsh Small Finance Bank has fixed a price band of ₹23-25 a share for its public issue, which will open on July 12 and close on July 14. The Varanasi-based bank aims to raise as much as ₹500 crore via the initial public offering, and the bids for anchor investors will open on July 11.

Investors can bid for a minimum of 600 equity shares and in multiples of 600 equity shares thereafter.

The bank plans to use the net proceeds towards augmenting its tier-I capital base to its future capital requirements.

“They (capital requirements) are expected to arise out of growth in the bank’s assets, primarily the bank’s loans/advances and investment portfolio and to ensure compliance with regulatory requirements on capital adequacy prescribed by the RBI from time to time,” the bank said in its Red Herring prospectus.

Source: RHP

About the bank

Utkarsh commenced operations in 2017 and its product suite includes a range of deposit products including saving accounts, salary accounts, current accounts, recurring and fixed deposits, and locker facilities.

As of March 2023, the lender's operations were spread across 26 states and Union Territories with 830 banking outlets serving 3.6 million customers majorly located in rural and semi-urban areas primarily in Bihar and Uttar Pradesh.

The bank's gross loan portfolio has grown to ₹13,957.11 crore as of March 31, 2023, from ₹8,415.66 crore as of March 31, 2021.

Its disbursements increased to ₹12,442.89 crore in fiscal 2023 from ₹5,914.01 crore in fiscal 2021. Also, deposits surged to ₹13,710.14 crore from ₹7,507.57 crore during the period.

Risk factors

The bank said in its RHP that it is subject to inspections by regulatory authorities, including by the RBI and non-compliance or adverse observations may have a material adverse effect on its business, financial condition, results of operation or cash flows.

The bank’s former auditors, Haribhakti & Co. LLP, Chartered Accountants, have been debarred by the RBI India from undertaking audit assignments for entities regulated by them for two years, with effect from April 1, 2022.

“A significant portion of our advances in the microbanking segment are towards customers located in the states of Bihar and Uttar Pradesh, and any adverse changes in the conditions affecting the region can adversely impact our business, financial condition, results of operations and cash flows,” the bank said in its RHP.

The bank has received a show cause notice from SEBI regarding alleged non-compliance of provisions of Companies Act 2013. It may result in penal actions, the bank said, adding that its non-convertible debentures are listed on BSE.

“Our profit after tax declined from ₹111 crore in FY21 to ₹61 crore in FY22. While our profit after tax was ₹404 crore in FY23, there can be no assurance that we will be able to maintain profitability in the future,” the bank said.

(With inputs from PTI)