Utkarsh SFB extends post-debut rally; zooms 125% against issue price

Shares of Utkarsh Small Finance Bank (SFB) rallied 17 per cent to hit a new high of Rs 56.30 on the BSE in Monday’s intra-day trade, extending gains from its strong market debut on Friday.

With today’s surge, the stock price of the small finance bank has more-than-doubled or zoomed 125 per cent against its issue price of Rs 25 per share. It surged 92 per cent on the first day of its listing.

At 11:23 am; Utkarsh SFB was quoting 16 per cent higher at Rs 55.68 as compared to a 0.06 per cent gain in the S&P BSE Sensex. A combined 83.7 million shares had changed hands on the NSE and BSE.

Utkarsh SFB is the 3rd fastest growing SFB in terms of gross loan portfolio (GLP), recording 31 per cent CAGR over FY19-23 to Rs 14,000 crore. Its main offering is micro-banking loans (66 per cent of GLP as of FY23 vs 82 per cent in FY21) which the bank reduced over the years in order to diversify its portfolio. It is well diversified geographically with presence in 26 states/union territories with 830 banking outlets.

Utkarsh SFB also offers savings/current accounts, deposit accounts, non-credit offerings viz. debit cards, bill payments and distribute third-party products to retail customers which provides access to low-cost funding and longer tenure resources profile. Its deposit base stood at Rs 13,700 crore as of FY23. Strong relationship with its micro-banking customers allows the bank to cross sell its other asset products that cater to the entire customer lifecycle.

Brokerage firm InCred Equities believe given the strong return profile and growth potential, the stock has strong re-rating potential.

Utkarsh has reported RoA of 2.4 per cent and RoE of 22.8 per cent in FY23. However, the bank is gradually shifting from high yield business (MFI lending) to moderate yield ones which may impact its overall yields and margins in mid to long tenure. Though reduction in bulk deposits may provide some relief however overall return profile will moderate gradually, the brokerage had said in an IPO note.

"The company 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. After listing at such a level, we will suggest booking this gain; however, aggressive investors can choose to buy during any subsequent dip," said Anubhuti Mishra, Equity Research Analyst at Swastika Investmart after the listing of Utkarsh SFB.