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Prabhudas Lilladher Report
Prabhudas Lilladher recommends AVOID to Suryoday Small Finance Bank Ltd. IPO as return ratios remain sub-optimal, the lower collection efficiency of 82% in December 2020 and high gross non-performing assets (pro-forma) of 9% remain a risk to profitability.
We believe valuations of 2.2x 9MFY21 BV & 2.0x FY21E BV factors in the business scalability and likely could have better entry point ahead.
SSFB focuses on the underbanked & underserved lending market with a relatively small AUM at Rs 39.0 billion.
It has been diversifying from MFI (70% of loans with Joint Liability Group model) towards secured loans like CV, affordable housing and business loans which now account for 16% of loans.
SSFB is getting listed to meet RBI guidelines with a fresh issue of Rs 2.4 billion and OFS of Rs 3.3 billion and unlike Equitas/Ujjivan, SSFB does not have any issue of holdco structure.
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