Why ESAF going slow on IPO application

KOCHI: Why is ESAF Small Finance Bank dragging its feet on the much-publicised IPO?

It’s now four months since the deadline for ESAF’s initial public offering (IPO) expired on October 20, 2022, being the second time in as many years.

The lapsed IPO was to have a fresh issue component of Rs800 crore and an offer for sale (OFS) to the tune of Rs197.78 crore.

The promoters who had planned to offload shareholding through the OFS route were PNB MetLife, Bajaj Allianz Life, PI Ventures and John Chakola.

Informed sources told myfinpoint.com that the bank is unlikely to approach Sebi, the market regulator with a fresh application for IPO before the FY23 financials are published, which means the application will have to wait for a couple of months more.

There were no hints available that ESAF would let the October-20 IPO deadline to lapse.

Calls to ESAF Small Finance Bank during the last few weeks prior to the October 20 deadline (2022) were invariably returned by the management with the stock reply, “We are working on the IPO and we hope we will be able to open the issue before October 20, the day when the Sebi approval expires.”

As everyone knows, the ESAF IPO had failed to catch up with the deadline then, leading to the expiry of SEBI approval.

However, the market believed ESAF would hasten the processes and approach SEBI with a fresh application for a yet another attempt for IPO.

Soon after the expiry of the October 20 deadline, the chief executive of the bank, Paul Thomas, had told the media that the bank would approach Sebi in December (2022) with a fresh IPO application.

Though the two-month gap up to December indicated by the CEO had surprised many at that time, it’s now well past mid-February, the market still remains fingers crossed as to when will ESAF put in the next application.

Why IPO

It’s not the requirement for additional capital that has necessitated ESAF for an IPO; rather it has more to do with a Reserve Bank of India’s (RBI) regulatory requirement for Small Finance Bank.

The said regulation stipulates that all small finance banks have to list their shares on a stock market within three years of achieving Rs500 crore net worth, which expired in July 2021.

ESAF SFB has a paid up capital of Rs449.47 crore and a reserve of Rs957.32 crore as of March 31, 2022, and a comfortable capital adequacy ratio (CAR) of 21.18 per cent as of September 30, 2022.