ESAF Small Finance Bank will soon refile its initial public offering (IPO) document but cut the size of the float by half to Rs 500 crore in the face of volatile market conditions, chief executive officer K Paul Thomas said in an interaction with Indianbankingnews.com.

ESAF had earlier filed for an IPO worth nearly Rs 1,000 crore and got the nod from market regulator Sebi in October 2021. But the Kerala-based small finance bank couldn’t complete the process and the timeline based on earlier filings lapsed. 

As per the regulatory requirement, the IPO needs to open within a year of approval or issuance of observations by Sebi.

The promoter holding will come down to below 40% after the completion of the public float. “We were earlier looking to raise Rs 998 crore via IPO but now are trimming that to around Rs 500 crore. The money will be utilised for business growth. The promoter holding will also come down to below 40% but the exact position will be known once we file the DRHP (draft red herring prospectus),” said Thomas.

The earlier IPO filing of Rs 997.78 crore included a fresh issue of equity shares worth Rs 800 crore and an offer-for-sale of Rs 197.78 crore from existing investors.

“The focus after that has been to strengthen our balance sheet, improve our asset quality, clean up the books and expand our footprint. All of these we have done and are ready for the IPO,” said Thomas.

ESAF will add 50 branches in FY24, keeping in line with the 125 that were opened in FY23 and 25 in FY22.

The plan is to penetrate the under-banked and unbanked pockets in the country. A growth of 25-30% is targeted on both the asset and liability side in the current financial year.

In FY23, ESAF’s total business (including advances under collection management) grew 23.22% to Rs 30,996.89 crore as against Rs 25,155.76 crore a year ago. Deposits grew 14.44% to Rs 14,665.63 crore and gross advances rose 16.38% to Rs 14,118.13 crore, as of 31 March 2023.

ESAF, which has a concept of agency banking, has 2,200 agents reaching out its banking services to unbanked regions areas. School teachers, professors and medical professionals who are retired act as agents in the agency banking model. They help customers operate a micro ATM.

“Setting up ATMs or branches everywhere is expensive. Under the agency banking concept, we have micro ATMs. This gives us a solid last-mile connectivity in the far-flung regions,” said Thomas.

Loan collections will eventually be pushed through this. As most of ESAF’s depositors are senior citizens, doorstep banking comes in very handy. “All microloans are being dispensed and repaid in the field itself. Even for retail banking, we are planning to start the service,” Thomas said.