There will be a rush of initial public offers (IPOs) from niche banks in the next six to nine months. Six small finance banks (SFBs) are expected to tap the capital market with IPOs aggregating up to ₹6,000 crore.

The SFBs – Equitas (commenced operations in September 2016), ESAF (March 2017), Fincare (July 2017), Suryoday (January 2017), Utkarsh (January 2017) and Jana (March 2018) – have firmed up listing plans.

RBI guidelines

The reason for the above mentioned SFBs to go in for listing is that they have reached an inflection point, whereby the Reserve Bank of India (RBI) guidelines require them to do so within three years of their net worth reaching ₹500 crore. On an average, the IPO size of these SFBs is expected to be up to ₹1,000 crore each, including an offer for sale (OFS) by existing promoters in some cases.

Of the 10 entities that have started SFB operations, only two – AU (commenced operations in April 2017) and Ujjivan (February 2017) – have got listed so far.

“The listing is more for complying with the regulatory requirements. However, it also comes with an added advantage of visibility, which is very important for us.

“The good thing is that SFB as a model has got established reasonably. So, there are no questions about the feasibility or sustainability or growth of SFBs,” said a top SFB official.

Approval from SEBI

ESAF SFB hopes to get an approval from SEBI for its Draft Red Herring Prospectus (DRHP) by next month. It will launch its IPO based on market conditions.

The bank had filed its DRHP with SEBI in January this year for an IPO comprising fresh issue worth ₹800 crore and an Offer for Sale (OFS) of up to ₹176.2 crore. Gireesh CP, Chief Financial Officer, ESAF SFB, said the bank has until July 2021 to list on the bourses under the RBI norms.

The board of directors of Equitas SFB (ESFB) had, on September 10, 2019, approved an IPO and listing of the equity shares to comply with the RBI’s licensing guidelines.

Subsequently, the bank filed a DRHP with SEBI on December 16, 2019, and the stock exchanges (NSE and BSE).

Equitas Holdings, the parent company of ESFB, in its third quarter earnings statement, said: “The bank has received the in-principle approval from the stock exchanges and is awaiting approval from SEBI as on date. Having regard to the forgoing, the management is confident of listing of the shares of the bank by March 31, 2020.”

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