ESAF eyes aggressive loan growth after capital boost

KOCHI: ESAF Small Finance Bank is gearing itself up to expand its loan book following its IPO that raised Rs391 crore in fresh equity, according to K Paul Thomas, ESAF’s MD and chief executive officer (CEO).

The bank came out with Rs463 crore IPO in November, comprising fresh issuance of shares worth Rs391 crore and an offer for sale (OFS) worth Rs72 crore.

ESAF Small Finance Bank that reported a net profit of Rs140.12 crore for the quarter that ended September 30, 2023, had a paid up capital of Rs449.47 crore, CAR of 20.57 per cent and net worth pf Rs1979.21 crore as of September 30, 2023.

But with the IPO, the capital base of the bank has expanded substantially taking the capital adequacy ratio (CAR) from the earlier 20.57 per cent to close to 25 per cent against the required 15 per cent.

Talking to myfinpoint recently, K Paul Thomas explained that the IPO has likely boosted the capital adequacy ratio (CAR) of the bank to a level that is far more than required.

“It’s true we will have a conservative approach to the CAR, but it doesn’t mean that we will maintain a CAR as high as 24 or 25. We will always strive to maintain a CAR at around 18 per cent so that the bank will not have too much of idle capital,” added K Paul.

This will obviously require the bank to expand its loan base. In order to expedite the loan growth, K Paul said, the bank is coming out with more verticals so that the bank can have an increased focus on different types of loans.

On the general complaint from the market that ESAF SFB charges high interest rates for loans, the CEO argued that the bank’s cost of fund and operational cost are far more than any other scheduled banks.

“Our loans are small ticket size; our staff is required to reach out to each borrower’s house for the repayment collection on a weekly basis and this involves not only a lot of work but a lot of expense too,” he said.

On the increasing NPA, he said the spurt in bad loans since June is quite one-off and this will revert to the normal level by the next quarter itself