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Please refer to important disclosures at the end of this report
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1
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. Company has
over a decade experience in serving customers in the unbanked and under-
banked segments in India and promoting financial inclusion. Over the years, it
has diversified loan portfolio to include non-micro banking loans thereby
reducing dependence on micro banking business.
Positives: (a) Customer centric approach with a focus on financial inclusion (b)
Diversified asset portfolio with a focus on retail operations (c) Fast evolving
granular deposit franchise (d) Leveraging emerging technologies to enhance
digital footprint (e) Strong credit processes and robust risk management
framework (f) Track record of strong financial performance and cost-efficient
operations. (g) Multiple distribution channels.
Investment concerns: (a) The continuing impacts of COVID-19 are highly
unpredictable and could be significant, and may have an adverse effect on the
company’s business, operations and future financial performance. (b) Business
is currently significantly dependent on advances to inclusive finance (JLG)
customers and any adverse developments in the microfinance sector could
adversely affect the business. (c) Banking business is vulnerable to interest rate
risk, and any inability to manage interest rate risk could adversely affect the
financials of the company.
Outlook & Valuation: Suryoday SFB has posted strong growth in NII of 72.1%
CAGR between FY18-20 though 9MFY2021 numbers were adversely impacted
due to the Ciovid-19 pandemic. While reported GNPA and NNPA stood at
0.8% and 0.3% at the end of Q3FY21, proforma GNPA and NNPA stood at
9.3% and 5.4% respectively. However CAR of 41.1% at the end of 9MFY2021
provides comfort. At the higher end of the price band the stock would be
trading at P/BV of 2.25x fully diluted post issue book value of `136 per share.
While we believe that valuations are reasonable asset quality will be an issue in
the near to medium term and hence have a NEUTRAL rating on the issue.
Y/E March (` cr)
FY2018
FY2019
FY2020
NII
166
340
491
% chg
-
105%
44%
Net profit
11
90
111
% chg
-
687%
23%
NIM (%)
8.1%
12.1%
11.3%
EPS (`)
1.7
11.1
12.8
P/E (x)
179.1
27.5
23.8
P/ABV (x)
77.4
106.4
123.5
RoA (%)
0.5%
3.1%
2.4%
RoE (%)
2.1%
12.7%
11.4%
Subscribe
Issue Open: March 17, 2021
Issue Close: March 19, 2021
QIBs 50% of issue
Non-Institutional 15% of issue
Retail 35% of issue
Promoters 28.0%
Others 72.0%
Fresh issue: 0.82cr sh.
Issue Details
Face Value: ` 10
Present Eq. Paid up Capital: ` 98.0cr
Offer for Sale: 1.1cr sh.
Post Issue Shareholding Pattern
Post Eq. Paid up Capital: ` 106.1cr
Issue size (amount): ` 578-582cr
Price Band: ` 303-305
Lot Size: 49 shares and in multiple thereafter
Post-issue implied mkt. cap: * ` 3216cr - **` 3237cr
Promoters holding Pre-Issue: 30.3%
Promoters holding Post-Issue: 28.0%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Jyoti Roy
+022 39357600, Extn: 6842
Jyoti.roy@angelbroking.com
Suryoday Small Finance Bank Ltd
IPO Note | Banking
March 16, 2021
2
Marc
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Suryoday Small Finance Bank Ltd | IPO Note
March 16, 2020
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Company background
Company started its operations as an SFB on January 23, 2017 pursuant to receipt
of the RBI Final Approval. Prior to commencement of operations as an SFB, it has
operated as an NBFC – MFI carrying out microfinance operations and operated
the joint liability group-lending model for providing collateral-free, small ticket-size
loans to economically active women belonging to weaker sections. The average
“priority sector” loans, as a percentage of average ANBC for Fiscal 2018, 2019
and 2020 was 99.1%, 112.1% and 103.7%, respectively. It has commenced
microfinance operations in 2009 and has since expanded operations across 12
states and union territories, as of July 31, 2020. As of July 31, 2020, the bank has
a customer base was 1.43 million and operates in 482 Banking Outlets including
137 Unbanked Rural Centres.
Issue details
IPO is a mix of OFS & issue of Fresh Equity Shares. The issue would constitute fresh
issue of upto 81,50,000 shares and an OFS of upto 1,09,43,070 shares in the
price band of `303-305 per share.
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
29,734,732
30.3
29,734,732
28.0
Public
68,246,094
69.7
76,396,094
72.0
Total
97,980,826
100.0
106,130,826
100.0
Objectives of the Offer
Augmenting the Bank’s Tier – 1 capital base to meet the Bank’s future
capital requirements
To receive the benefits of listing of the Equity Shares on the Stock
Exchanges.
Key Management Personnel
Baskar Babu Ramachandran is the Managing Director and Chief Executive Officer
of our Bank. He holds a bachelors degree in mechanical engineering from the
University of Madras and a master’s degree in business administration from the
Pondicherry University. Prior to co-founding Suryoday Micro Finance Private
Limited, he was associated with various companies including GE Capital
Transportation Financial Services Limited as the vice-president- quality and
operations and HDFC Bank Limited as assistant vice president.
Ramachandran Rajaraman is the Part-time Chairperson and Independent Director
of Bank. He holds a bachelor’s degree in science from the University of Madras,
master’s degree in science from the University of Madras and a post graduate
diploma in financial management from the University of Madras. He has over 38
years of experience in commercial banking and finance.
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Suryoday Small Finance Bank Ltd | IPO Note
March 16, 2020
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Y/E March (` cr)
FY18
FY19
FY20
9MFY20
9MFY21
Net Interest Income
166
340
491
361
353
- YoY Growth (%)
-
105%
44%
-
-2%
Other Income
38
67
87
63
65
- YoY Growth (%)
-
76%
31%
-
3%
Operating Income
204
407
578
424
418
- YoY Growth (%)
-
100%
42%
-
-1%
Operating Expenses
131
191
272
188
232
- YoY Growth (%)
-
45%
43%
-
23%
Pre - Provision Profit
72
217
306
236
187
- YoY Growth (%)
-
199%
41%
-
-21%
Prov. & Cont.
55
74
152
58
117
- YoY Growth (%)
-
35%
106%
-
102%
Profit Before Tax
18
143
154
178
70
- YoY Growth (%)
-
700%
8%
-
-61%
Prov. for Taxation
6
52
43
52
15
- as a % of PBT
36%
37%
28%
29%
22%
PAT
11
90
111
127
55
- YoY Growth (%)
-
687%
23%
-
-57%
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Suryoday Small Finance Bank Ltd | IPO Note
March 16, 2020
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Y/E March (` cr)
FY18
FY19
FY20
9MFY20
9MFY21
Equity
67
82
87
86
89
Reserve & Surplus
471
799
980
989
1,102
Networth
538
880
1,066
1,075
1,191
Deposits
750
1,593
2,849
2,491
3,344
- Growth (%)
-
113%
79%
-
34%
Borrowings
718
1,124
1,265
887
1,487
Other Liab. & Prov.
150
163
185
136
329
Total Liabilities
2,156
3,761
5,365
4,589
6,350
Cash Balances
31
48
61
74
89
Bank Balances
176
228
777
108
744
Investments
311
664
808
893
1,511
Advances
1,569
2,680
3,532
3,361
3,782
- Growth (%)
-
71%
32%
-
13%
Fixed Assets
14
19
39
31
43
Other Assets
55
122
148
122
180
Total Assets
2,156
3,761
5,365
4,589
6,350
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Suryoday Small Finance Bank Ltd | IPO Note
March 16, 2020
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Y/E March
FY2018
FY2019
FY2020
Profitability ratios (%)
NIMs
8.1%
12.1%
11.3%
Cost to Income Ratio
64.4%
46.8%
47.1%
RoA
0.5%
3.1%
2.4%
RoE
2.1%
12.7%
11.4%
B/S ratios (%)
CASA Ratio
11.0%
11.2%
11.4%
Credit/Deposit Ratio
-
131.6%
67.9%
CAR
43.4%
40.2%
35.4%
Tier I
40.2%
38.6%
34.3%
Asset Quality (%)
Gross NPAs
3.5%
1.8%
2.8%
Net NPAs
1.9%
0.4%
0.6%
Slippages
3.3%
1.2%
3.0%
Loan Loss Prov. /Avg. Assets
2.5%
2.5%
3.3%
Provision Coverage
47.4%
75.5%
79.4%
Per Share Data (`)
EPS
1.7
11.1
12.8
BVPS
79.8
107.9
123.1
ABVPS (70% cover.)
77.4
106.4
123.5
DPS
0.0
0.0
0.0
Valuation Ratios
PER (x)
179.1
27.5
23.8
P/ABVPS (x)
3.9
2.9
2.5
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Suryoday Small Finance Bank Ltd | IPO Note
March 16, 2020
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Research Team Tel: 022 - 39357800 E-mail: research@angelbroking.com Website: www.angelbroking.com
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