The initial public offers of at least four small finance banks are on the anvil as the lenders look to meet regulatory guidelines ahead of RBI’s deadline.
Small finance banks such as Fincare, Jana, Utkarsh and ESAF were looking to list their shares in FY21, the public issue plans were delayed due to the Covid pandemic and unfavourable market conditions. Several of these lenders had even requested the RBI to extend the timeline for listing.
However, with economic growth picking up and recovery in investor sentiment, small finance banks have returned to complete their capital raising plans within their respective timelines, hoping for better valuations than a year ago, industry experts said.
The improvement in market sentiment amid a backlog of public issues has led to increased activity in the primary market, with a 13-year high of 14 companies launching their IPO in September to cumulatively raise ₹11,821 crore.
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28 other companies have received SEBI’s nod for their public issue and another 32 companies have filed their DRHP. Other than SFBs, proposed financial company IPOs include EbixCash, IndiaFirst Life Insurance, NSDL, Muthoot Microfin and Fedbank Financial Services.
SFB Listing status
Utkarsh SFB listed in July 2023 whereas Fincare SFB received SEBI’s approval for its IPO in September 2023. Further, Jana SFB and ESAF SFB refiled their draft papers with SEBI for the public offer in July 2023 and Capital SFB in September 2023.
In addition to Utkarsh SFB, there are four listed SFBs, namely AU SFB, Equitas SFB, Ujjivan SFB and Suryoday SFB.
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Regulatory norms require small finance banks to be listed within three years of their net worth touching ₹500 crore. An internal working group had recommended extending the timeline for listing for SFBs to six years from three years or within 10 years of commencing operations. However, the RBI, in November 2021, only allowed this for any new such banks that may be set up and existing SFBs were expected to meet the three-year deadline.
Of the unlisted SFBs, the six-year timeline will be applicable for Unity SFB, whereas both Shivalik SFB and North East SFB still have a net worth of below ₹500 crore as per latest available data.