Suryoday Small Finance Bank lists at 4% discount over issue price

Shares of Suryoday Small Finance Bank (SFB), on Friday, made a weak debut at the bourses, listing at Rs 292, a 4 per cent discount over its issue price of Rs 305 per share on the National Stock Exchange (NSE). On the BSE, the stock opened 4 per cent lower at Rs 293, falling further to Rs 278.80, nearly 9 per cent lower against its issue price.

At 10:09 am, Suryoday SFB was trading at Rs 288.90, down 6 per cent from its issue price. It hit a high of Rs 295.50 on the BSE, so far. Around 1.5 million equity shares have changed hands on the counter on the NSE and BSE.

The initial public offer (IPO) of Suryoday SFB had managed to get good response from the retail investors and qualified institutional buyers (QIBs). The issue was subscribed 2.37 times as the retail individual investors’ portion was subscribed 3.09 times and of the qualified institutional buyers (QIBs) portion by 2.18 times. The non-institutional investors’ portion was subscribed by 1.31 times, according to exchange data.

Suryoday SFB proposes to utilise the net proceeds from the fresh issue towards augmenting its Tier – 1 capital base and to meet future capital requirements. However, analysts that covered the IPO share mixed views and were split between high valuations and good return ratios.

"What concerns us is that with proforma GNPA (gross net performing assets) at 9.3 per cent, Suryoday SFB’s pool of bad loans is the highest among listed peers. While the collection efficiency improved to above 100 per cent (inclusive finance at 112.5 per cent in December), re-surge of Covid cases in key business states such as Maharashtra and Karnataka to weigh on revival and further weaken assets quality," said Choice Broking in a note.

At a higher price band, the company is valued at P/BV of 2x post-issue BVPS which appears expensive given weak assets quality outlook, concentrated business to some states, low CASA share and small business size. Asked valuation is in line with peers Equitas and Ujjivan SFB but these banks are significantly large in size and have superior fundamentals than Suryoday SFB, the brokerage firm said in IPO note.

The company is placed at a little bit higher valuation as compared to its peers. However, it is expected that the company is going to get benefited from the overall growth in demand of commercial vehicle loans and affordable housing finance which results in improvement in overall return ratios. Additionally, we also expect operating parameter to improve further at a healthy rate owing to improvement in NIM, asset quality, brokerage firm Anand Rathi had said.