Varanasi-based Utkarsh Small Finance Bank has surprised investors with a stunning performance on its July 21 debut, as the stock spiked 92 percent despite sharp correction in equity markets, majorly led by technology stocks. The BSE Sensex fell nearly 900 points.
The stock, as expected, opened with a 60 percent rally at Rs 40 on the NSE, against issue price of Rs 25 per share. Initially, it saw some profit taking and hit a day's low of Rs 37.20, but given the reasonable valuations and huge appetite, it immediately got back above opening price and gradually extended gains.
As the demand was huge, the stock in late morning deals hit the highest level of the day at Rs 48 and was locked in upper circuit of 20 percent for the remaining part of the session.
Generally, exchanges decide the circuit limit for every new listing and for this, the upper-lower circuit limit was 20 percent i.e. Rs 48 and 32, respectively, over the opening price of Rs 40. The closing price on the BSE was Rs 39.95.
In terms of volumes, the stock traded with volume of 1.51 crore equity shares on the BSE and 26.54 crore shares on the NSE.
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This was the second stellar listing in current calendar year after Ideaforge Technology which had ended listing day with 92.8 percent gains on July 7.
Utkarsh Small Finance Bank, one of the fastest growing small finance bank in terms of gross loan portfolio, has raised Rs 500 crore via public issue which comprised only a fresh issue. The price band for the offer was Rs 23-25 per share.
The bank has reduced its micro-banking business to 66 percent of gross loan portfolio at the end of March FY23 from 82 percent in FY21, and diversified loan portfolio. Microbanking loans grew at a CAGR of 16 percent, while the non-micro banking loans comprising retail-wholesale, housing, gold, housing, commercial vehicle & construction equipment loans increased at a CAGR of 77 percent during FY21-FY23 though on a low base.
The small finance bank, which has presence in 26 states and union territories with 830 banking outlets, recorded profit growth at a CAGR of 90 percent and net interest income at a CAGR of 35 percent during FY21-FY23, with healthy asset quality with gross non-performing assets at 3.2 percent and net non-performing assets at 0.4 percent at the end of FY23.
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"We believe the bank would continue to deliver steady growth in coming years with a healthy liquidity profile and cost-efficient risk management leading to improved asset quality," said Prashanth Tapse, research analyst, senior VP Research at Mehta Equities, who had expected 50-60 percent listing gains mainly on the back of reasonable valuations when compared to its peers, investor friendly pricing and strong management focus towards microfinance business.
Risk takers can continue to hold the stock for long term, he advised, as he sees an abundance of growth opportunities in microfinance in the area where Utkarsh enjoys the market share.
After listing at such a level, Anubhuti Mishra, Equity Research Analyst at Swastika Investmart also suggests booking this gain; however, aggressive investors can choose to buy during any subsequent dip.
"The bank has a strong track record of growth, and its financial performance has been improving in recent years. Utkarsh SFB is well-positioned to benefit from the growth of the SFB sector, as it has a strong focus on underserved segments of the population," she said.
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