ESAF Small Finance Bank IPO Final subscribed 73.15 times

The IPO of ESAF Small Finance Bank opened on 03rd November 2023 and closed for subscription on 07th November 2023. The stock of the company has a face value of ₹10 per share and the price band for the book building IPO has been set in the band of ₹57 to ₹60. The IPO of ESAF Small Finance Bank Ltd will be a combination of fresh issue and an offer for sale (OFS). Let us start with the fresh issue portion first; which comprises the issue of 6,51,16,667 shares (651.17 lakh shares approximately), which at the upper price band of ₹60 per share will translate into fresh issue size of ₹390.70 crore. The offer for sale (OFS) portion of the IPO of ESAF Small Finance Bank Ltd comprises the sale of 1,20,50,000 shares (120.50 lakh shares), which at the upper price band of ₹60 per share will translate into an offer for sale (OFS) size of ₹72.30 crore.

The OFS selling will be by the promoter shareholders and investor shareholders. Out of the 120.50 lakh shares OFS, promoter ESAF Financial Holdings will offer 82.10 shares while investor shareholders (PNB Metlife Insurance and Bajaj Allianz Life Insurance) will offer the remaining 38.40 lakh shares. As a result, the overall IPO of ESAF Small Finance Bank Ltd will comprise of the issue and sale of 7,71,66,667 shares (771.67 crore shares approximately), which at the upper price band of ₹60 per share will translate into total IPO issue size of ₹463 crore. The net proceeds from the IPO fresh issue portion will be utilized by the bank to augment its Tier-1 capital adequacy; which is essential to meet future capital requirements for expanding the asset book. The IPO will be lead managed by ICICI Securities, DAM Capital Advisors (formerly IDFC Securities), and Nuvama Wealth Management. Link Intime India Private Ltd will be the registrar to the issue.

How subscriptions evolved in the IPO period

While the QIB portion and the HNI / NII portion picked up traction on the last day, the overall journey was quite slow for the retail investors. In fact, the QIB portion got fully subscribed only on the second day of the IPO while the HNI / NII portion and the retail portion got fully subscribed on the first day of the IPO itself. Even the overall IPO saw subscription book filling up 1.85 times, at the close of the first day of the IPO itself. The IPO was kept open for a total period of 3 days. The table below captures the day-wise progress in IPO subscription.

As can be seen from the above table, the overall IPO got 73.15 times subscribed at the close of the third and final day of the IPO on 07th November 2023. The IPO had been kept open for 3 days in all.

Rapid update on the overall IPO response

The IPO saw fairly tepid to regular flows on Day-1 and Day-2, with most of the action visible only on Day-3 of the IPO. However, the IPO did close with relatively healthy subscription numbers at the close of Day-3. In fact, the IPO of ESAF Small Finance Bank Ltd got fully subscribed on the first day of the IPO itself. As per the combined bid details put out by the BSE at the close of Day-3, ESAF Small Finance Bank Ltd IPO was subscribed 73.5X overall, with best demand coming from the QIB segment, followed by the HNI / NII segment and the retail segment in that order. In fact, the institutional segment and the HNI / NII segments saw some very good traction on the last day. The HNI portion did do well and a lot of the surge of funding applications and corporate applications did come in on the last day of the IPO. Retail portion was relatively strong, although it was fully subscribed on Day-1 of the IPO itself. Firstly, let us look at the details of overall allocation.

Having understood the allocation of shares across various categories, Let us look at how the subscription data played out for the IPO at an overall level and at a more granular level.

As of close of 07th November 2023, out of the 577.28 lakh shares on offer in the IPO, ESAF Small Finance Bank Ltd saw bids for 42,230.08 lakh shares. This implies an overall subscription of 73.15X overall. The granular break-up of subscriptions was in favour of the QIB investors followed by the HNI / NII investors and the retail investors in that order. QIB bids and NII bids typically gather most of the momentum on the last day, and that was the case in this issue also in the case of QIB bids. Both the QIB and the NII bids picked momentum on the last day and added to its heft of the previous days. Here are the details of the category-wise subscription.

Data Source: BSE

Subscription status of QIB Portion

On 02nd November 2023, ESAF Small Finance Bank Ltd completed the bidding for its anchor allocation. There was a robust response as the anchor investors participated through the process of book building. A total of 2,25,24,998 shares were allotted to the anchor investors. The allocation was done at the upper IPO price band of ₹60 per share (including premium of ₹50 per share) which resulted in an overall allocation of ₹135.15 crore. The anchors absorbed 29.11% of the total issue size of ₹463 crore.

The QIB portion (net of anchor allocation as explained above) had a quota of 158.07 lakh shares of which it has got bids for 27,428.94 lakh shares at the close of Day-3, implying a subscription ratio of 173.52X for QIBs at the close of Day-3. QIB bids typically get bunched on the last day and while the heavy demand for the anchor placement had given an indication of the institutional appetite for the ESAF Small Finance Bank Ltd IPO subscription overall, the actual demand did turn to be quite robust for the IPO.

Subscription status of HNI / NII Portion

The HNI portion got subscribed 84.37X (getting applications for 10,002.31 lakh shares against the quota of 118.55 lakh shares). That is a relatively strong response at the close of Day-3 largely because this segment normally sees the maximum response bunched on the last day. Bulk of the funded applications and corporate applications, come in on the last day of the IPO, and that was visible as the overall HNI / NII portion added to its heft on the last day of the IPO. Apart from the QIB portion, even HNIs saw good traction on the last day.

Now the NII/HNI portion is reported in two parts viz. bids below ₹10 lakhs (S-HNI) and bids above ₹10 lakhs (B-HNI). The bids above the ₹10 lakh category (B-HNIs) typically represents most of the major funding customers. If you break up the HNI portion, the above ₹10 lakh bid category got subscribed 91.68X while the below ₹10 lakh bid category (S-HNIs) got subscribed 69.74X. This is just for information and is already part of the overall HNI bids explained in the previous para.

Subscription status of Retail Individuals

The retail portion was subscribed just 16.97X at the close of Day-3, showing relatively strong appetite. It must be noted that retail allocation is 35% in this IPO. For retail investors; out of the 276.62 lakh shares on offer, valid bids were received for 4,694 lakh shares, which included bids for 4,004.12 lakh shares at the cut-off price. The IPO is priced in the band of (₹57 to ₹60 per share) and has closed for subscription as of the close of Tuesday, 07th November 2023.