Suryoday SFB IPO subscription status: Suryoday SFB IPO subscribed 42% on Day 1
Against 1,35,15,150 shares available for sale, the issue received applications for 56,32,648 shares by 5:00 pm.
The primary purpose of the IPO is to meet RBI’s listing requirement within three years of starting banking operations. Unfortunately, Suryoday SFB is forced to launch its issue amid a pandemic that has left it with more than a few chinks in its armour.
Rajiv Mehta, Lead Analyst – Institutional Equities at Yes Securities, said he does not have a positive view on this issue for various reasons. He said the company’s asset quality has been severely impacted by Covid and overall stress inadequately addressed; at the same time its loan assets diversification is not credible enough.
According to him, limited success on CASA mobilization and in reduction of funding cost, volatility in profits, asking valuation at par with listed stronger franchisees like Equitas SFB and Ujjivan SFB–all these when adjusted for franchise and execution capabilities, it becomes unattractive.
The bank has already undertaken a pre-IPO placement of 5,208,226 shares. It issued these shares at Rs 291.75 to SBI Life Insurance Company, Axis Flexi Cap Fund, Axis Equity Hybrid Fund and Kiran Vyapar. The company garnered Rs 152 crore from these investors.
“At the upper price band of Rs 305, the issue is valued at 2.6 times pre-IPO placement and 2.2 times Dec’20 P/ABV post-IPO, adjusted for pro forma NNPAs and RSA. In comparison, larger listed SFBs like Ujjivan is valued at 2.6 times ABV and Equitas at 2.4 times,” said Anand Dama, analyst at Emkay Global, assigning a ‘sell’ rating.
However, not everyone is negative and some see value on subscribing for long term. Their view is supported by best in class capital adequacy ratios, which will be augmented more by proceeds from the IPO.
“We feel the bank would continue to face challenges in the near term however its medium to long term outlook remains bright. Going ahead, the bank’s focus remains on growing secured portfolios in non-MFI such as commercial vehicles and housing loans, also expanding distribution channels as well as increasing geographical presence will remain their top priorities. Investors can subscribe for the long term,” said Nirvi Ashar of Religare Broking.
