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PE-backed Suryoday Small Finance Bank gets SEBI nod for IPO
Photo Credit: VCCircle

Suryoday Small Finance Bank Ltd (SFB) has received regulatory approval to float an initial public offering (IPO).

The Securities and Exchange Board of India (SEBI) issued final observations to Suryoday SFB’s proposal on December 23, according to information on the market regulator’s website.

This takes the number of companies to receive regulatory approval for an IPO so far this year to 26. SEBI had cleared 28 IPO proposals last year, 72 in 2018 and 46 proposals in 2017.

Suryoday SFB counts Sarva Capital, TVS Capital, German development finance institution DEG and Swiss investor responsAbility Investments among 20 its institutional backers. It had filed its draft prospectus with SEBI on October 1.

The IPO is an offering of a tad more than 20 million shares through a combination of primary and secondary sale. The IPO size is estimated to be Rs 650-700 crore ($88-95 million), two people directly aware of the matter told VCCircle.

Of the total, Suryoday is likely to raise about Rs 375-400 crore via a fresh issue of shares while International Finance Corporation (IFC), homegrown private equity firm Gaja Capital and US PE firm Americorp Ventures, along with other institutional investors, will cumulatively sell nearly 8.5 million shares.

Other investors selling their shares include Polaris Banayan Holdings Pvt. Ltd, HDFC Holdings Ltd, Kotak Mahindra Life Insurance Co Ltd and IDFC First Bank Ltd.

Suryoday began banking operations in January 2017. It was one of 10 companies to get approval from the Reserve Bank of India in September 2015 to launch a small finance bank. It raised Rs 248 crore ($35.8 million) from three promoters and a clutch of existing and new investors in April last year.

Suryoday SFB had earlier planned to raise about Rs 1,300-1,400 crore via an IPO. However, it likely trimmed its offering size owing to the coronavirus impact on economies, businesses, capital markets, trade and travel. 

A successful IPO will make Suryoday SFB join listed peers Ujjivan SFB, AU Small Finance Bank and Equitas SFB.

Suryoday SFB will use the net fresh proceeds from the IPO to augment its capital base to meet future capital requirements and strengthen its loan book. It did not disclose the quantum in the draft prospectus. 

VCCircle exclusively reported in May this year that Suryoday SFB had raised Rs 62 crore ($8 million) in equity from some of its existing investors.

Axis Capital, ICICI Securities, IIFL Securities and SBI Capital Markets are merchant bankers tasked with arranging and managing the share sale.

The lender was originally incorporated as Suryoday Micro Finance Pvt. Ltd in November 2008 by its founder Baskar Babu Ramachandran, who currently serves as the managing director and chief executive officer. 

It commenced operations in 2009, carrying out microfinance operations and catering to the unbanked and underbanked segments in India to promote financial inclusion. It started its operations as an SFB in January 2017 after the central bank’s final approval. 

Suryoday SFB has presence in 12 states and union territories, and a customer base of 1.43 million as of July 2020. The bank has a network of 482 banking outlets and 3,949 employees. 

Metropolitan customers accounted for nearly one-third of its gross advances, while customers in urban and semi-urban areas accounted for 29.72% and 30.80% of its gross advances for the year ended March 2020. 

Its offerings include commercial vehicle loans, affordable housing loans, micro business loans, unsecured micro and small enterprise and small and medium enterprise loans, secured business loans, financial intermediary group loans and other loans. 

The bank’s gross loan portfolio has grown at a compound annual rate of 47% in the last three financial years to Rs 3,710.84 crore at the end of March 2020. 

On the liability side, it offers products and services such as current accounts, savings accounts, salary savings accounts and a variety of deposit accounts including recurring deposits and fixed deposits.

Its deposits grew to Rs 2,848.71 crore at the end of March 2020 from Rs 749.52 crore at the end of March 2018. Retail deposits accounted for 54.44% of total deposits.

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