ESAF Small Finance Bank has filed for an IPO to raise around Rs 997 crores through fresh issuance of shares. The IPO is expected to open for subscription in November 2022 according to market experts. ESAF Small Finance Bank IPO will see the existing shareholders offloading shares worth Rs 300 crores through an Offer for Sale (OFS). As the expected IPO date approaches, there is a lot of interest among investors on the Grey Market Premium or GMP price of ESAF Small Finance IPO. In this article, we take a deep dive into the key details regarding ESAF Small Finance IPO GMP today.
Understanding ESAF Small Finance Bank IPO
ESAF Small Finance Bank is one of the leading small finance banks in India focused on financial inclusion. Headquartered in Thrissur, Kerala, ESAF Small Finance Bank serves over 5 million customers through 569 branches spread across 18 states and union territories in India. The bank had a loan book size of Rs 8,680 crores and deposit base of Rs 9,761 crores as of June 2022. The key financial parameters for ESAF Small Finance Bank are:
- Revenue from Operations: Rs 1,213 crores in FY22
- Net Profit: Rs 262 crores in FY22
- Gross NPA: 2.69% in FY22
- Net NPA: 0.58% in FY22
- CRAR: 18.58% in FY22
ESAF Small Finance Bank IPO will comprise of fresh issue of equity shares worth Rs 800 crores and an offer for sale of Rs 197 crores by existing shareholders. The IPO proceeds will be used to augment the tier–I capital base to meet future requirements. The bank offers small ticket loans to customers in rural and semi-urban areas under products such as:
- Micro Finance
- MSME Finance
- Retail Finance
- Housing Finance
- Vehicle Finance
- Gold Loans
The upcoming IPO will provide an exit opportunity for existing investors like PNB Metlife, Bajaj Allianz Life, PI Ventures etc. who came on board between 2017-2019. The valuation sought by the company will be known closer to the IPO date. Now let us understand the GMP action for this IPO.
Checking ESAF Small Finance IPO GMP Today
The Grey Market Premium or GMP refers to the premium at which IPO shares trade in the unofficial grey market before they officially get listed on the bourses. It represents the difference between the expected listing price and issue price in the grey market.
Some key things to know about ESAF Small Finance IPO GMP:
- The Grey Market Premium serves as an indicator of expected listing gains
- It is driven by the demand and supply dynamics for IPO shares
- Strong financials, attractive valuations and positive market sentiment drive higher GMP
- GMP keeps fluctuating before the IPO opens as per market talk and analysis
- The unofficial nature of GMP makes it a risky indicator to rely upon for investment decisions
According to grey market sources, ESAF Small Finance IPO GMP today is around:
- Rs 20-25 – This indicates the grey market price is trading at around Rs 65-70 which is a premium of Rs 20-25 over the likely IPO price band of Rs 45-50 per share.
- The positive GMP reflects decent investor interest in the IPO given ESAF’s strong fundamentals and growth orientation.
- However, GMP remains susceptible to rapid change based on overall secondary market conditions.
To summarize, ESAF Small Finance Bank IPO grey market premium today of Rs 20-25 highlights reasonable listing expectations among the market participants. But GMP has limited reliability in indicating the actual listing performance.
Analysing Key Listing Gain Indicators for ESAF Small Finance IPO
While GMP provides a directional sense on listing prospects, investors should also look at other qualitative and quantitative factors that impact the listing performance of IPOs:
1. Financial Health and Growth Trajectory
- ESAF has posted healthy financial growth in recent years with 22% Loan CAGR over FY18-22 and 19% Growth in Total income for FY22
- Asset quality has been stable with GNPA of 2.69% in FY22 and 5-year average of ~2.5%
- Improvement in cost to income ratio from over 75% in FY18 to 67% in FY22 shows rising efficiency
- The bank posted ROA of 2.2% and ROE of 16.8% in FY22 indicating sound profitability
The strong growth orientation and financial health bodes positively for the IPO listing performance.
2. Valuation and Issue Price Attractiveness
- ESAF Small Finance Bank IPO valuation is expected to be around 2.5-3.0 times FY22 P/BV as per analysts
- This seems reasonable compared to peers like CreditAccess (3.7x P/BV) and Fincare (2.0x P/BV)
- The issue price band will be key monitorable in terms of pricing leaving something on the table for investors
Investors can expect reasonable valuations which improve the probability of listing gains.
3. Market Sentiment and Investor Response
- The market sentiment has turned cautious owing to high volatility in 2022
- However, IPO response should benefit from investors’ interest in high growth BFSI names trading at reasonable valuations
- ESAF’s specialty in financial inclusion lending makes it a unique play on the small finance banks theme
The company’s niche focus makes it well positioned to attract investor interest despite the cautious market situation.
4. Sepcialist Opinion from Analysts
- Industry analysts have a POSITIVE outlook on ESAF Small Finance IPO listing gains
- The average listing gain forecast ranges from 10-18% over the issue price by most analysts
- They highlight the company’s financial growth, reasonable valuations, high return ratios and underpenetrated business segments as key positives
Specialist opinion also indicates potential for double digit listing gains for ESAF IPO.
Looking at the multiple indicators above, the ESAF Small Finance Bank IPO seems well placed to deliver double digit listing gains driven by its strong credentials. However, the actual performance will depend on the valuation sought by the company and the market situation closer to listing date.
Should You Invest in ESAF Small Finance IPO for Listing Gains?
Here is a perspective looking at the investment rationale for ESAF Small Finance IPO from short term listing gains point of view:
Key Positives
- Leadership in underpenetrated small finance bank space
- Strong financial growth combined with stable asset quality
- Improving operational efficiency reflected through declining cost to income ratio
- Healthy NIMs and return ratios indicate sound profitability
- Reasonable valuations expected based on analysts forecast
- Niche focus on financial inclusion lending makes it a unique story
Factors Warranting Caution
- Size of IPO is relatively small limiting liquidity post listing
- Competition from other small finance banks and NBFCs
- Microfinance segment growth slowing down lately for the industry
- High volatility in secondary markets near term
Final Verdict
ESAF Small Finance Bank IPO offers a reasonable proposition for listing gains given its niche business model focused on financial inclusion, rapid growth with stability and expected reasonable valuations.
Investors can SUBSCRIBE with a short term perspective purely for listing gains given the positive indicators. However, financial fundamentals and growth sustainability over long term remain the more important criteria for investment decision.
To summarize, ESAF Small Finance IPO grey market premium of Rs 20-25 indicates solid listing potential. But investors should make allocation only as per individual risk appetite without getting swayed by GMP trends alone.
Frequently Asked Questions on ESAF Small Finance IPO GMP Today
Here are some common queries answered regarding the Grey Market Premium action for ESAF Small Finance IPO:
What is the current grey market price for ESAF Small Finance IPO?
The unofficial grey market price for ESAF Small Finance IPO is around Rs 65-70 which is a premium of Rs 20-25 over the likely IPO price band of Rs 45-50 per share. This GMP reflects positive sentiment for the IPO.
Why is ESAF Small Finance IPO trading at premium in grey market?
Key reasons for positive GMP are ESAF’s strong growth and fundamentals, niche focus on financial inclusion lending which makes it a unique story, and expectation of reasonable valuations leaving something on table for investors.
How reliable is GMP as an indicator for ESAF IPO?
While GMP provides directional information on listing expectations, it has limited reliability given the unofficial nature of grey market trading. Investors should rely more on qualitative and quantitative fundamentals.
What will be the likely listing gain for ESAF IPO?
As per analyst estimates, ESAF Small Finance Bank IPO is likely to deliver listing gains in the range of 10-18% over the issue price. However, actual gains will depend on the IPO price band, valuations sought and overall market conditions.
What is the view from experts on ESAF IPO listing potential?
Most industry experts and analysts have a positive outlook on ESAF IPO listing prospects. They highlight the company’s strong growth, reasonable valuations, financial inclusion focus and high NIMs/return ratios as key positives indicating healthy listing potential.
Should I rely on GMP for my application decision in ESAF IPO?
Investors should not make IPO application decisions solely based on GMP as it can fluctuate a lot and has low reliability. The investment decision should be based on your own research of the fundamentals, growth outlook, valuations and risk profile.
When will ESAF Small Finance IPO list on the bourses after allotment?
The ESAF Small Finance Bank IPO listing is likely to happen within 6 working days after finalization of IPO share allotment. Most probably it will list within the first or second week of December 2022 if the IPO is launched by November 2022.
How to check ESAF IPO GMP today? Where can I find the latest grey market premium update?
The ESAF IPO GMP can be tracked on the websites of grey market aggregators like greysmarketpremium, chaupal, updation and livemarket. You can also find GMP updates in IPO discussion forums and groups.
Will ESAF IPO GMP sustain at current levels till the listing date?
The GMP keeps fluctuating based on market talk and overall secondary market conditions. ESAF Small Finance IPO GMP of Rs 20-25 may see volatility closer to listing date. Investors should track GMP movements but not take it as the final indicator.
Where will ESAF Small Finance Bank shares list after the IPO allotment?
The shares of ESAF Small Finance Bank will get listed on the main board of NSE and BSE after completion of the IPO process. The scrip code will be intimated by the exchanges closer to the listing date after share allotment finalization.
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