Analysis, guides and explainers on India's unlisted market — from IPO pipelines to ESOP liquidity.
Tamilnad Mercantile Bank is the only unlisted bank in India and one of the oldest banks in Tamilnadu. It provides a gamut of services such as personal banking, corporate banking, and NRI services. Apart from this the Tamiland Bank also gives loans to MSME, and Agriculture sector. <!--more--> As per news sourced from Financial Express, the Tamilnad Bank has posted good financial results in FY19-20. If you see the overall credit growth of the Indian banking sector, it is just 7% last year i.e. in FY19-20. The TMB bank has shown total loan growth of 4.5% which is somewhere reflecting the problem in the Indian banking industry due to slowdown in the economic activities in our country. <span style="font-size: 14pt;"><strong>Financial Highlights of FY19-20</strong></span> <table style="width: 73.511%;" width="348"> <tbody> <tr> <td style="text-align: center; width: 27.069%;" width="131"><strong>Particulars(Cr)</strong></td> <td style="text-align: center; width: 21.8965%;" width="112"><strong>2019-20</strong></td> <td style="text-align: center; width: 24.6552%;" width="105"><strong>Growth</strong></td> </tr> <tr> <td style="text-align: center; width: 27.069%;">Total Business</td> <td style="text-align: center; width: 21.8965%;">65061</td> <td style="text-align: center; width: 24.6552%;">4.58%</td> </tr> <tr> <td style="text-align: center; width: 27.069%;">Total Deposits</td> <td style="text-align: center; width: 21.8965%;">36825</td> <td style="text-align: center; width: 24.6552%;">4.81%</td> </tr> <tr> <td style="text-align: center; width: 27.069%;">Total Advances</td> <td style="text-align: center; width: 21.8965%;">28236</td> <td style="text-align: center; width: 24.6552%;">4.51%</td> </tr> <tr> <td style="text-align: center; width: 27.069%;">Operating Profit</td> <td style="text-align: center; width: 21.8965%;">995</td> <td style="text-align: center; width: 24.6552%;">12.53%</td> </tr> <tr> <td style="text-align: center; width: 27.069%;">Net Profit</td> <td style="text-align: center; width: 21.8965%;">407.69</td> <td style="text-align: center; width: 24.6552%;">9.99%</td> </tr> <tr> <td style="text-align: center; width: 27.069%;">Net-Worth</td> <td style="text-align: center; width: 21.8965%;">3979.55</td> <td style="text-align: center; width: 24.6552%;">9.99%</td> </tr> <tr> <td style="text-align: center; width: 27.069%;">Gross NPA</td> <td style="text-align: center; width: 21.8965%;">3.62%</td> <td style="text-align: center; width: 24.6552%;">-0.7</td> </tr> <tr> <td style="text-align: center; width: 27.069%;">Net NPA</td> <td style="text-align: center; width: 21.8965%;">1.8</td> <td style="text-align: center; width: 24.6552%;">-0.6</td> </tr> <tr> <td style="text-align: center; width: 27.069%;">PCR</td> <td style="text-align: center; width: 21.8965%;">80%</td> <td style="text-align: center; width: 24.6552%;">7.14%</td> </tr> </tbody> </table> Tamilnad Bank has a total loan book size of 28236 Cr as of 31.03.2020. In FY19-20, the bank has shown an operating profit of ~1000 cr and PAT of ~400 cr. The TMB bank has ROE of 10.28% in FY19-20, anything above 10% is considered good. Gross NPA has also come down by 0.70 basis points which is excellent. <span style="font-size: 14pt;"><strong>Valuation</strong></span> As of 31.03.2020, the total equity of the Tamilnad bank is 142.51 Cr and with FV of 10, the total shares outstanding are 14.251 Cr. Total Net-Worth as on 31.03.2020 is 3979 Cr. Book Value = 279 As of 25.06.2020, the current unlisted price of TMB bank is 385. Accordingly, it is available at P/B of 1.37x ( undervalued ) as compared to other same size banks in the listed space.
As per information sourced from Entracker.com, Mr. Anubhav Sharma, former head of NPCI is all set to join Paytm. If this goes through well, it will help immensely for Paytm to compete against Google Pay and Phone Pay in the digital payment business specially UPI, where Paytm is lagging in terms of the number of transactions. <!--more--> Founded in 2008, the NPCI is a non-profit organization established by Reserve Bank of India & Indian Banking Association and responsible for all the retail payments and settlement systems in India. UPI, the payment gateway architecture is also made by NPCI. Paytm in the last 3-4 months has seen top-executives exiting the company from Mutual Fund, Insurance, Payment, and Gaming business. Let us see how things unfold for Paytm going forward. As of now, things are looking quite choppy as far as business of Paytm is concerned.
As per information sourced from Economic Times, UTI AMC got the approval from SEBI to bring 3000 cr IPO. The approval of the IPO was pending for long due to some observation found by SEBI in the DRHP. <!--more--> State Bank of India, LIC, Bank of Baroda, and PNB hold 18.24% shares each and T Rowe Price holds 26% as on 31.03.2019, in UTI AMC. As of 31.07.2019, the total AUM of UTI AMC was 1.60 Lakh Cr. The IPO will be total OFS wherein, State Bank of India (SBI), Life Insurance Corporation (LIC), and Bank of Baroda are offering to sell 1,04,59,949 shares each, while Punjab National Bank (PNB) and T Rowe Price International are planning to offload 38,03,617 shares each. <span style="font-size: 14pt;"><strong>Why is UTI AMC bringing IPO?</strong></span> If you see the business model of AMC, they actually don't require much money to run their day to day operation unlike any other company. So why they are coming with an IPO. The answer is the regulatory issue. As per SEBI regulation, the SBI, LIC, BOB, and PNB all run their mutual fund businesses. If any entity is running a mutual fund business, then it can't have more than 10% holding in any other mutual fund company. UTI AMC being a mutual fund company in itself, so all these stakeholders have to reduce their holding. <span style="font-size: 14pt;"><strong>Current UTI AMC Valuation in Unlisted Market</strong></span> The current market price of UTI AMC is 975 in the unlisted market. At this price, the valuation is around ~12360 cr. This looks fully priced in as compare to listed players like HDFC AMC or Nippon AMC.
The board of Indian Commodity Exchange (ICEX), in consultation with Sebi, has appointed a forensic auditor to probe the alleged misuse of a market-making scheme run by the bourse to increase liquidity in derivatives contracts of steel, paddy, diamond, and rubber since October last year. The scheme stands suspended as of now. <!--more--> The audit has been mandated on the basis of two anonymous email complaints received by the public interest directors of the ICEX board and the Securities and Exchange Board of India (Sebi) in March-April this year. The complaints allege that certain key management personnel (KMP) of ICEX in collusion with the market makers misappropriated funds allotted for the so-called liquidity enhancement scheme (LES). The forensic audit will be undertaken by Chokshi & Chokshi LLP and the terms of reference include the misuse of LES; whether board members were in sync with the KMP; examining trading data from September 2020 onwards in contracts like steel, paddy, etc.; compliance issues and conflict of interest of KMP, among others. Senior partners of Chokshi & Chokshi were not available for comment. The audit will lay bare the facts and establish the veracity of the complaints, which are not of the whistle-blower type. Sanjit Prasad, CEO of ICEX, was not available for comment. He has been asked to proceed on leave by the board until after the audit findings are released. The findings are likely to be out by July. On the allegation of “truck” between the KMP and market makers, a person in the know said that one market maker was incentivized for providing two-way quotes in each of the four commodities and that the entire process for LES was undertaken in consultation with the board, as per Sebi norms. “The public interest directors were apprised of the payout being done each month to the market makers under the LES. The payout was audited by an independent auditor,” he claimed. ICEX’s CEO Prasad, who earlier worked with MCX and MCX-SX (now MSEI) at a senior level, joined the bourse in August 2018. The key shareholders of ICEX, which began operations in September 2017 after a three-year hiatus, are Reliance Exchangenext and Indiabulls Housing Finance who between them hold around 24% equity of the stock exchange. A proposed stake purchase by energy exchange IEX in ICEX has been put on hold in the context of the forensic audit. <span style="font-size: 14pt;"><strong>Note: The news is source from Economic Times without any changes in the original content.</strong></span>
As per information received from Nazara Technology management, they have put an additional 14.5 Cr in Halaplay, a fantasy gaming company. It has bought these stakes worth Rs. 14.5 Cr from Kae Capital. This is not a cash deal but in the form of a swap of equity shares. With this deal, Nazara Technology will become the majority shareholder in the company. <!--more--> <span style="font-size: 14pt;"><strong>What is a swap of equity shares?</strong></span> This type of deal is ideal in case the company doesn't want to put direct money for buying stakes instead gives its equity shares. <strong>Example</strong> Let us suppose the total valuation of Nazara Tech is Rs.100 and Halaplay is Rs.50. Now Nazara tech wants to acquire 100% stakes in the Halaplay. They have the following two options: <strong>1</strong>. Pay Rs. 50 and acquire 100% stakes. <strong>2.</strong> Swap its equity shares in the ratio of 1:2 with Halaplay shareholders. The ratio is 1:2 has arrived because Nazara Tech is valued 2x as compared to Halaplay. Nazara chooses the second option. After this deal, Halaplay shareholders will get equity shares of Nazara Technology. <span style="font-size: 14pt;"><strong>Other investments in Halaplay?</strong></span> In 2017, Nazara Technology had invested first time in Halaplay. After that, Delta Corporation, a listed entity, had also invested in 2019. Now, again in 2020, Nazara Technology has bought stakes in Halaplay. <span style="font-size: 14pt;"><strong>What is Halaplay?</strong></span> Founded in 2017 by Swapnil Saurav, Prateek Anand, Ananya Singhal, and Aman Kesari in 2017, it is a fantasy gaming company. In Halaplay, you can form a team, play Cricket, Football, and Kabbadi and win prizes. They cover services and leagues across all ODI, Test, T20s International Matches, and few domestic leagues. Also, they cover EPL, La Liga, ISL, Champions Trophy, Euro Cup, World Cup matches in football. <span style="font-size: 14pt;"><strong>UnlistedZone View</strong></span> <span style="font-size: 12pt;">We at <a href="http://www.unlistedzone.com">UnlistedZone.com</a> are in the view that all these acquisitions which Nazara is currently doing from the last 18 months will make it a leader in the gaming space, and will command hefty valuation in the coming years. </span>
Capital Small Finance bank the fastest-growing small finance bank in Punjab has once again given excellent financial performance in FY19-20. <!--more--> <span style="text-decoration: underline;"><strong><a href="https://unlistedzone.com/shares/buy-sell-share-price-capital-small-finance-bank-sfb-unlisted-shares/">To know more about this bank visit our page.</a></strong></span> <strong><span style="font-size: 14pt;">Financial Highlights of FY19-20</span></strong> <strong>(i)</strong> The advances have grown from 2608 Cr to 3325 Cr in FY20. Excellent growth of 27% in the loan book. <strong>(ii) </strong>The deposits have grown from 3667 Cr to 4446 Cr in FY20. Excellent growth of 21% in the deposit.. <strong>(iii)</strong> The bank has opened 21 branches in FY20 and the total count has gone up from 129 to 150. <strong>(iv)</strong> The Gross NPA and Net.NPA is at 1.86% and 0.39%, slightly up from last year, but quite manageable. <strong>(v)</strong> The Net-worth of the bank stands at 402 Cr as of 31.03.2020. <strong>(vi)</strong> Book Value= 120 per share. <strong>In the unlisted market at CMP of 260 per share, the share trading at P/B multiple of 2.16x( reasonable).</strong> <strong><span style="font-size: 14pt;">Funding Alert</span></strong> In the month of Nov-19, the company has raised 84 crore equity capital from mid-market private equity (PE) firm Oman India Joint Investment Fund (OIJIF), which will hold a 9.9% stake in the bank. The funding round also saw participation from Bengaluru-based PE fund, Amicus Capital Private Equity, and Amicus Capital Partners India Fund, which had invested <span class="webrupee">₹</span>38 crores in June and <span class="webrupee">₹</span>5 crores, respectively, taking the total fundraising of the lender to <span class="webrupee">₹</span>134 crores. Existing investor, Pi Ventures LLP also participated in the round.
The world of unsecured lending has received a jolt due to COVID-19. Most of the companies are struggling to keep up the revenue due to low demand in the market. The low demand and falling revenue have forced companies to retort to the sacking of employees to cut down the expenses.<!--more--> This has put an overcast over the prospect of lending companies as to whether they will able to recover interest and the principal of loans from these employees. The answer to this question will become clear once the 6 months of moratorium gets over. This has made lending companies shying away in giving credit at this present time due to stress in the various consumer sector. In the meanwhile, we heard in the streets that <strong>Paytm</strong> is looking to foray into giving small credits to buyers for the purchase of grocery and retail goods. Paytm has tied up with Clix Capital and Arthimpact for loan disbursement. The credit could be up to 1 lakh for esteem customer. The facility will be initially open for most active Paytm users. The past usage data of the client will help Paytm in assigning different credit. Paytm has tied up with thousands of neighbors store owners, and retail outlets to deliver the items on a credit basis. <span style="font-size: 14pt;"><strong>UnlistedZone Takeaway</strong></span> The Paytm over the years has faced extreme competition from Google Pay, and Phone Pay in payment apps categories. The UPI introduced in 2017 has completely removed wallet concept of Paytm from the scene. Google Pay and Phone Pay have used UPI in their favor and have earned big market share. Paytm late entry in UPI has made it a laggard in gaining the market share. We all know the credit card business is having an excellent model and if this becomes a hit for Paytm, the lost glory can be achieved again. However, the path would not be so easy, the Watspp Payment app which can hit India anytime would be a huge hurdle for Paytm. Watsapp through FB has already tied up with Reliance Retail to order grocery from the app and they will also give credit similar to what Paytm is looking into. So. next 1-2 years would be make and break for Paytm and for its investors. Can management prowess of Vijay Shekhar able to compete with likes of Walmart, Google and FB would be an interesting battle to watch out.
The discussion stocks for the article are: 1. Reliance Retail, and 2. Religare Health Insurance <!--more--> Before we explain why these two stocks are over-valued, just look at the price movement in the last one year. In that period, the price has appreciated ~70% in both the scripts. Price appreciation is not the problem, but buying at these levels can prove to be risky, as the Risk/Reward ratio is not favorable. <table width="440"> <tbody> <tr> <td style="text-align: center;" width="158"><strong>Price</strong></td> <td style="text-align: center;" width="125"><strong>Reliance Retail</strong></td> <td style="text-align: center;" width="157"><strong>Religare</strong></td> </tr> <tr> <td style="text-align: center;" width="158">01.06.2019</td> <td style="text-align: center;" width="125">560</td> <td style="text-align: center;" width="157">38</td> </tr> <tr> <td style="text-align: center;" width="158">01.06.2020</td> <td style="text-align: center;" width="125">950</td> <td style="text-align: center;" width="157">65</td> </tr> </tbody> </table> <span style="font-size: 14pt;"><strong>Reliance Retail</strong></span> In the month of Nov-19, Reliance Retail was valued around 3-3.25 lakh cr, when Reliance Industries, the parent company of Reliance Retail has offered to swap its shares with Reliance Retail in the ratio of 1:4. At that time, the fair value of Reliance Retail share came out to be 600-650. However, that price was eventually rejected by the shareholders in the AGM on 21.01.2020. From thereon, in the unlisted market, the price of Reliance Retail is on the upsurge and currently, trading at 950 per share, valuing the company at 4.75 lakh cr. Now question is, whether Reliance Retail is worth buying at 4.75 lakh cr of value? Let us check out! The best indicator to value the retail business is to calculate <strong>EV/EBITDA</strong> and then compare it with the peers in the listed space to know the real value. We have taken Dmart as a peer from the listed space. <table width="440"> <tbody> <tr> <td style="text-align: center;" width="158"><strong>Parameters (cr)</strong></td> <td style="text-align: center;" width="125"><strong>Reliance Retail</strong></td> <td style="text-align: center;" width="157"><strong>Dmart</strong></td> </tr> <tr> <td style="text-align: center;" width="158">EV</td> <td style="text-align: center;" width="125">5,00,000</td> <td style="text-align: center;" width="157">1,55,016</td> </tr> <tr> <td style="text-align: center;" width="158">EBITDA</td> <td style="text-align: center;" width="125">9600</td> <td style="text-align: center;" width="157">2189</td> </tr> <tr> <td style="text-align: center;" width="158">EV/EBITDA</td> <td style="text-align: center;" width="125">52</td> <td style="text-align: center;" width="157">68</td> </tr> </tbody> </table> The EV/EBITDA of Dmart is slightly on the upper side but then we have to factor in the superior margins of 8% in the case of Dmart and only 4% for Reliance Retail. The 2x margins and management prowess give Dmart edge over Reliance Retail in the valuation front. Therefore, we can conclude that the Reliance Retail is fully valued at the current market price of 950. <strong>The fair value for investment is somewhere around 700-750, where we will get valuation comfort and margin of safety, both.</strong> <span style="font-size: 14pt;"><strong>Religare Health Insurance</strong></span> The health insurance businesses are valued by comparing the market cap of the company with Gross Written Premium (GWP). <span style="text-decoration: underline;"><strong>Last year HDFC ERGO bought 49% stakes in Apollo Munich at 1347 cr and had given a value multiple of 1.2 times the gross written premium of FY19.</strong></span> Therefore, in the Insurance business, the value multiple below 2 is considered as fair value. The Religare Health Insurance in the first 3 quarters of FY20 has collected a GWP of ~1700 cr and we are expecting an annual GWP of ~2000 Cr. On the basis of HDFC ERGO and Munich deal, the Religare Health Insurance may get valuation around 3000-3500 cr. As of 31.03.2019, the paid-up equity of Religare Health Insurance stands at 688.54 Cr. <strong>The fair value per share would be somewhere around 45-50</strong>. Below is the valuation table showing the value multiple at which Apollo Munich deal has been done and Religare Health Insurance at current market price of 65. <table> <tbody> <tr> <td style="text-align: center;" width="158"><strong>Parameter</strong></td> <td style="text-align: center;" width="125"><strong>Apollo Munich</strong></td> <td style="text-align: center;" width="157"><strong>Religare Health</strong></td> </tr> <tr> <td style="text-align: center;" width="158">Mcap/GWP</td> <td style="text-align: center;" width="125">1.25</td> <td style="text-align: center;" width="157">2.21</td> </tr> </tbody> </table> Therefore, the current unlisted price of 65 looks costly. The business models of the above two companies are excellent but the present valuation is not giving comfort. Therefore, as an investor, you should be careful in buying these scripts at current levels.
We have seen how COVID-19 has impacted the broader market in the last 3-4 months. The Nifty fell from 12000 to 10000 in anticipation of poor growth forecast in the FY2020-21. The effect of this was also seen in the unlisted market.<!--more--> Therefore, to gauze the impact, we at <a href="http://www.unlistedzone.com">UnlistedZone.com</a> have done the market research and list out the difference in the market cap of Top 20 stocks of the unlisted market in the period of the last 4 months. The below study shows that the unlisted market has become reasonable in terms of valuation. (<strong>Figures are in Cr</strong>) <table width="777"> <tbody> <tr> <td style="text-align: center;" width="191"><strong>Share Name</strong></td> <td style="text-align: center;" width="82"><strong>Feb-20</strong></td> <td style="text-align: center;" width="77"><strong>Jun-20</strong></td> <td style="text-align: center;" width="139"><strong>Equity Shares</strong></td> <td style="text-align: center;" width="144"><strong>Mcap in Feb-2020</strong></td> <td style="text-align: center;" width="144"><strong>Mcap in June-2020</strong></td> </tr> <tr> <td style="text-align: center;">HDB Financial</td> <td style="text-align: center;">1100</td> <td style="text-align: center;">750</td> <td style="text-align: center;">78.24</td> <td style="text-align: center;">86064</td> <td style="text-align: center;">58680</td> </tr> <tr> <td style="text-align: center;">Nazara Tech</td> <td style="text-align: center;">700</td> <td style="text-align: center;">550</td> <td style="text-align: center;">2.8</td> <td style="text-align: center;">1960</td> <td style="text-align: center;">1540</td> </tr> <tr> <td style="text-align: center;">Hero-Fin Corp</td> <td style="text-align: center;">1050</td> <td style="text-align: center;">800</td> <td style="text-align: center;">12.154</td> <td style="text-align: center;">12762</td> <td style="text-align: center;">9723</td> </tr> <tr> <td style="text-align: center;">Studds Accessories</td> <td style="text-align: center;">800</td> <td style="text-align: center;">600</td> <td style="text-align: center;">1.98</td> <td style="text-align: center;">1584</td> <td style="text-align: center;">1188</td> </tr> <tr> <td style="text-align: center;">TMB Bank</td> <td style="text-align: center;">450</td> <td style="text-align: center;">375</td> <td style="text-align: center;">14.25</td> <td style="text-align: center;">6413</td> <td style="text-align: center;">5344</td> </tr> <tr> <td style="text-align: center;">Barbeque Nation</td> <td style="text-align: center;">900</td> <td style="text-align: center;">785</td> <td style="text-align: center;">1.3992</td> <td style="text-align: center;">1259</td> <td style="text-align: center;">1098</td> </tr> <tr> <td style="text-align: center;">Suryoday Small Finance bank</td> <td style="text-align: center;">350</td> <td style="text-align: center;">268</td> <td style="text-align: center;">8.659</td> <td style="text-align: center;">3030.65</td> <td style="text-align: center;">2320.612</td> </tr> <tr> <td style="text-align: center;">B9 Bira</td> <td style="text-align: center;">1400</td> <td style="text-align: center;">1100</td> <td style="text-align: center;">3.97</td> <td style="text-align: center;">5558</td> <td style="text-align: center;">4367</td> </tr> <tr> <td style="text-align: center;">Bharat Hotel</td> <td style="text-align: center;">250</td> <td style="text-align: center;">160</td> <td style="text-align: center;">7.6</td> <td style="text-align: center;">1900</td> <td style="text-align: center;">1216</td> </tr> <tr> <td style="text-align: center;">CSK</td> <td style="text-align: center;">33</td> <td style="text-align: center;">30</td> <td style="text-align: center;">30.815</td> <td style="text-align: center;">1016.895</td> <td style="text-align: center;">924.45</td> </tr> <tr> <td style="text-align: center;">Reliance Retail</td> <td style="text-align: center;">800</td> <td style="text-align: center;">950</td> <td style="text-align: center;">498</td> <td style="text-align: center;">398400</td> <td style="text-align: center;">473100</td> </tr> <tr> <td style="text-align: center;">Cochin International</td> <td style="text-align: center;">225</td> <td style="text-align: center;">200</td> <td style="text-align: center;">38.25</td> <td style="text-align: center;">8606.25</td> <td style="text-align: center;">7650</td> </tr> <tr> <td style="text-align: center;">Religare Health Insurance</td> <td style="text-align: center;">52</td> <td style="text-align: center;">65</td> <td style="text-align: center;">68.854</td> <td style="text-align: center;">3580.408</td> <td style="text-align: center;">4475.51</td> </tr> <tr> <td style="text-align: center;">Fino-Paytech</td> <td style="text-align: center;">125</td> <td style="text-align: center;">110</td> <td style="text-align: center;">9.85</td> <td style="text-align: center;">1231.25</td> <td style="text-align: center;">1083.5</td> </tr> <tr> <td style="text-align: center;">HDFC Security</td> <td style="text-align: center;">8500</td> <td style="text-align: center;">7500</td> <td style="text-align: center;">1.56</td> <td style="text-align: center;">13260</td> <td style="text-align: center;">11700</td> </tr> <tr> <td style="text-align: center;">Merino Industries</td> <td style="text-align: center;">2000</td> <td style="text-align: center;">1500</td> <td style="text-align: center;">1.047</td> <td style="text-align: center;">2094</td> <td style="text-align: center;">1570.5</td> </tr> <tr> <td style="text-align: center;">Paytm</td> <td style="text-align: center;">16000</td> <td style="text-align: center;">12000</td> <td style="text-align: center;">5.73</td> <td style="text-align: center;">91680</td> <td style="text-align: center;">68760</td> </tr> <tr> <td style="text-align: center;">Kurl-On Enterprise</td> <td style="text-align: center;">850</td> <td style="text-align: center;">650</td> <td style="text-align: center;">3.64</td> <td style="text-align: center;">3094</td> <td style="text-align: center;">2366</td> </tr> <tr> <td style="text-align: center;">MSEI</td> <td style="text-align: center;">1.3</td> <td style="text-align: center;">1.1</td> <td style="text-align: center;">48.052</td> <td style="text-align: center;">62.4676</td> <td style="text-align: center;">52.8572</td> </tr> <tr> <td style="text-align: center;">NCL-Buildtek</td> <td style="text-align: center;">270</td> <td style="text-align: center;">220</td> <td style="text-align: center;">0.5789</td> <td style="text-align: center;">156.303</td> <td style="text-align: center;">127.358</td> </tr> </tbody> </table>
Utkarsh Small Finance Bank offers a gamut of Banking products & services which also includes Micro, Small and Medium Enterprise (MSME) Loans, Housing Loans (HL), Wholesale Lending, Deposit Accounts (CASA, FD & RD), Insurance, Mutual Funds, Remittances, Institutional, Government and TASC services.<!--more--> Utkarsh also offers a wide range of payment services which include Debit Cards, ATMs, POS Payments, Digital offerings like Internet Banking, Mobile Banking, and payments through NEFT, RTGS, and IMPS. After a quick intro, let us now quickly moves on to the financial performance of Utkarsh Small Finance Bank in FY19-20. <strong>Important Metrics:</strong> <strong>1</strong>. <strong>Loan Book Growth</strong> The loan book has increased from 4668 Cr to 6281 Cr in FY19-20. The bank has shown a staggering growth of 35% loan book growth. <strong>2</strong>. <strong>Deposits Growth</strong> It has increased from 3791 Cr to 5235 Cr in FY19-20. 3. <strong>NIM</strong>- Net Interest Margin = [Interest Earned - Interest Expended/ Loan outstanding] The NIM of Utkarsh Small Finance bank stands at <strong>11.59%</strong> in FY19-20. Last year it was <strong>10.68%.</strong> An increase in NIM is always positive for the bank and shows banks' margins are increasing on loan given. 4. <strong>Gross NPA</strong> The Gross NPA has increased from 0.71% to 1.39%. However, the figure is quite manageable. 5. <strong>CRAR - Credit to Risk-Weighted Assets</strong> CRAR is an important regulatory measure from RBI which banks need to maintain all the time. The minimum CRAR requirement as per RBI is 15% for Small Finance Bank. Utkarsh Small Finance Bank has 24.14% of CRAR in FY19-20 which is well above the regulatory requirement. 6. <strong>Revenue</strong> It has gone up to 1406 Cr in FY19-20 as compared to 929 Cr last year. <strong>Excellent growth of 51% in topline</strong>. 7. PAT It has gone up to 186 Cr in FY19-20 as compared to 93 Cr last year. <strong>Excellent growth of 100% in the bottom-line.</strong> So, we at UnlistedZone in the view that bank has performed outstandingly well in FY19-20. <strong>Valuation of Utkarsh Small Finance Bank and Utkarsh Coreinvest:</strong> For our users, we at UnlistedZone would like to clarify that Utkarsh Small Finance Bank shares are not available anywhere in the Unlisted Market. However, the shares of holding company i.e. Utkarsh Coreinvest are available. The Utkarsh Small Finance Bank has issued 2.22 Cr fresh equity in FY19-20 to its holding company Utkarsh Coreinvest Limited at Rs. 27 per share. Book Value as of 31.03.2020= 13.42. As on 03.06.2020, in the listed market, Ujjivan Small Finance Bank is currently trading at P/B of 2.67x. So, if we give the same P/B value to the Utkarsh Small Finance Bank, the share value comes out to be 35 per share, and the valuation of the bank comes out to be ~ 2600 Cr. If we give Holdco discount of 50% to the holding company i.e. Utkarsh Coreinvest Limited, then it may be valued somewhere around ~ 1300 Cr. The outstanding paid-up equity of Utkarsh Coreinvest Limited is 97.2 Cr. <strong>Accordingly, as on 03.06.2020, the fair value of Utkarsh Coreinvest per-share comes out to be approximately 135 per share. </strong> <strong>Source:</strong> <strong><a href="https://unlistedzone.com/storage/knowledge-logo/LODR-financial.pdf">Annual Results of Utkarsh Small Finance Bank</a></strong> <strong><a href="https://www.utkarshcoreinvest.com/assets/policy/2018-19.pdf">2019-Annual Report of Utkarsh Coreinvest </a></strong>
<strong>1.</strong> As per information received from exchanges, the Religare Enterprises Limited has divested its stakes in <strong>Religare Health Insurance limited</strong>. Religare Enterprise is the promoter of the company.<!--more--> <strong>2.</strong> M/s. Kedaara Capital Fund II LLP, acquiring such shares through its subsidiary M/s. Trishikhar Ventures LLP (jointly referred to as ‘Kedaara’). <strong>3.</strong> Kedaara Capital Fund has invested total Rs. 567.31 cr. which comprises of primary capital infusion of Rs. 300 cr. in RHICL- <em><strong>this amount will go to Religare Health Insurance for business expansion</strong></em> and Rs. 267.31 cr for the purchase of RHICL shares from existing shareholders of RHICL- <em><strong>this amount will go to </strong><strong>Religare Enterprise Limited.</strong></em> <strong>4.</strong> Post this deal, the shareholding of Religare Enterprise Limited will reduce to 72.02% on a paid up capital basis in <strong>Religare Health Insurance Limited.</strong> <strong>5</strong>. <span style="text-decoration: underline;"><strong><a href="https://unlistedzone.com/stake-sale-in-religare-health-insurance-by-rel-07-02-2020/">You can also check the last report we published on Religare Health regarding this deal.</a></strong></span>
Suryoday - ‘Sunrise’ in Sanskrit, signifies new dawn. It has received a Micro-Finance license from RBI in 2008, and within 8 years converted into a successful Small Finance Bank.<!--more--> <strong>FY19-20 Performance:</strong> <strong>(i)</strong> The company has shown exemplary performance in the year FY19-20 wherein, it has clocked <strong>Revenue</strong> of 854 Cr and <strong>PAT</strong> of 110 Cr as compared to 597 Cr and 86 Cr last year, respectively, representing a stupendous growth. <strong>Revenue contribution (Cr):</strong> <div class="table-overflow-init"> <table width="465"> <tbody> <tr> <td style="text-align: center;" width="64"><strong>Year</strong></td> <td style="text-align: center;" width="152"><strong>Retail</strong></td> <td style="text-align: center;" width="116"><strong>Treasury</strong></td> <td style="text-align: center;" width="133"><strong>Corporates</strong></td> </tr> <tr> <td style="text-align: center;">FY19</td> <td style="text-align: center;">590</td> <td style="text-align: center;">44</td> <td style="text-align: center;">8.15</td> </tr> <tr> <td style="text-align: center;">FY20</td> <td style="text-align: center;">813</td> <td style="text-align: center;">70</td> <td style="text-align: center;">28</td> </tr> </tbody> </table> </div> <strong>(ii)</strong> The loan book has grown from 3761 Cr to 5264 Cr in FY20. <div class="table-overflow-init"> <table> <tbody> <tr> <td style="text-align: center;" width="64"><strong>Year</strong></td> <td style="text-align: center;" width="152"><strong>Retail</strong></td> <td style="text-align: center;" width="116"><strong>Treasury</strong></td> <td style="text-align: center;" width="133"><strong>Corporates</strong></td> </tr> <tr> <td style="text-align: center;">FY19</td> <td style="text-align: center;">1623</td> <td style="text-align: center;">1239</td> <td style="text-align: center;">11</td> </tr> <tr> <td style="text-align: center;">FY20</td> <td style="text-align: center;">2897</td> <td style="text-align: center;">1347</td> <td style="text-align: center;">51</td> </tr> </tbody> </table> </div> <strong><span style="font-size: 14pt;"><span style="font-size: 12pt;">(iii) NIM - It represents how much is the net earning of the bank on loans given in the market.</strong> Formula- <span style="font-size: 14pt;">( Interest Earned- Interest Expensed)/Loan book <div class="table-overflow-init"> <table width="544"> <tbody> <tr> <td style="text-align: center;" width="64"><strong>Year</strong></td> <td style="text-align: center;" width="152"><strong>Interest Earned</strong></td> <td style="text-align: center;" width="131"><strong>Interest Expensed</strong></td> <td style="text-align: center;" width="133"><strong>Loan book</strong></td> <td style="text-align: center;" width="64"><strong>NIM</strong></td> </tr> <tr> <td style="text-align: center;">FY19</td> <td style="text-align: center;">530</td> <td style="text-align: center;">191</td> <td style="text-align: center;">2769</td> <td style="text-align: center;">12.24%</td> </tr> <tr> <td style="text-align: center;">FY20</td> <td style="text-align: center;">766</td> <td style="text-align: center;">276</td> <td style="text-align: center;">3531</td> <td style="text-align: center;">13.88%</td> </tr> </tbody> </table> </div> The NIM has increased from 12.24% in FY19 to 13.88% in FY20- <span style="font-size: 14pt;"><em><strong>Good Sign</strong></em> <strong><span style="font-size: 14pt;">Analytical Ratios:</strong> <div class="table-overflow-init"> <table width="347"> <tbody> <tr> <td style="text-align: center;" width="64"><strong>Ratios</strong></td> <td style="text-align: center;" width="152"><strong>2020</strong></td> <td style="text-align: center;" width="131"><strong>2019</strong></td> </tr> <tr> <td style="text-align: center;">CAR</td> <td style="text-align: center;">29.57%</td> <td style="text-align: center;">35.02%</td> </tr> <tr> <td style="text-align: center;">D/E</td> <td style="text-align: center;">3.86</td> <td style="text-align: center;">3.09</td> </tr> <tr> <td style="text-align: center;">G.NPA</td> <td style="text-align: center;">2.79%</td> <td style="text-align: center;">1.81%</td> </tr> <tr> <td style="text-align: center;">N.NPA</td> <td style="text-align: center;">0.57%</td> <td style="text-align: center;">0.44%</td> </tr> <tr> <td style="text-align: center;">ROE</td> <td style="text-align: center;">11.21%</td> <td style="text-align: center;">14.26%</td> </tr> <tr> <td style="text-align: center;">ROA</td> <td style="text-align: center;">2.53%</td> <td style="text-align: center;">2.58%</td> </tr> </tbody> </table> </div> <strong>(a)</strong> ROE has reduced in FY20 to 11.21% from 14.26%. <strong>(b)</strong> D/E is manageable. <strong>(c)</strong> G.NPA and N.NPA are under control. <span style="font-family: georgia, palatino, serif; font-size: 14pt;"><strong>Business Impact Due to COVID-19</strong> As per management commentary, the loan disbursement in the lock-down period is sluggish and likely to improve as lock-down is removed in phases. The Bank has made an additional provision of 65.99 crores (Retail banking 57.43 crores and Corporate banking 8.56 crores) for the potential impact of CoVID-19 as of March 2020. <em><strong>This provision is equivalent to 60% of FY20 PAT.</strong></em> <span style="font-size: 14pt;"><strong>UnlistedZone Review:</strong> The two important parameters to check the performance of the bank is loan growth and ROE. <strong>Loan growth</strong>( in FY20) = 27% (<em><strong>Excellent</strong></em>) <strong>ROE</strong> (in FY20) = 11.48% (<em><strong>Good</strong></em>) <strong>Valuation</strong>- The book value of Suryoday Small Finance Bank in FY20 stands at 123 per share. The latest price of the Suryoday Small Finance Bank in unlisted market is 260. <strong>P/B = 2.11x </strong><em>( Cheaper than AU Small and Ujjivan Small bank)</em> <strong><a href="https://unlistedzone.com/comparison-of-unlisted-and-listed-small-finance-bank-11-04-2020/">Check out here the comparison of Suryoday Small Finance Bank with listed peer i.e. AU Small Finance Bank and Ujjivan Small Finance Bank</a></strong> <strong>Last 5 years performance of the Suryoday Small Finance Bank</strong> <div class="table-overflow-init"> <table width="448"> <tbody> <tr> <td style="text-align: center;" width="64"><strong>Particulars(Cr)</strong></td> <td style="text-align: center;" width="64"><strong>FY15</strong></td> <td style="text-align: center;" width="64"><strong>FY16</strong></td> <td style="text-align: center;" width="64"><strong>FY17</strong></td> <td style="text-align: center;" width="64"><strong>FY18</strong></td> <td style="text-align: center;" width="64"><strong>FY19</strong></td> <td style="text-align: center;" width="64"><strong>FY20</strong></td> </tr> <tr> <td style="text-align: center;" width="64">Advances</td> <td style="text-align: center;" width="64">582</td> <td style="text-align: center;" width="64">983</td> <td style="text-align: center;" width="64">834</td> <td style="text-align: center;" width="64">1596</td> <td style="text-align: center;" width="64">2711</td> <td style="text-align: center;" width="64">3531</td> </tr> <tr> <td style="text-align: center;" width="64">Gross NPA</td> <td style="text-align: center;" width="64">0.13%</td> <td style="text-align: center;" width="64">0.18%</td> <td style="text-align: center;" width="64">6.15%</td> <td style="text-align: center;" width="64">3.15%</td> <td style="text-align: center;" width="64">1.81%</td> <td style="text-align: center;">2.79%</td> </tr> <tr> <td style="text-align: center;" width="64">Revenue</td> <td style="text-align: center;" width="64">180</td> <td style="text-align: center;" width="64">225</td> <td style="text-align: center;" width="64">255</td> <td style="text-align: center;" width="64">325</td> <td style="text-align: center;" width="64">599.25</td> <td style="text-align: center;" width="64">854</td> </tr> <tr> <td style="text-align: center;" width="64">PAT</td> <td style="text-align: center;" width="64">19.9</td> <td style="text-align: center;" width="64">27.14</td> <td style="text-align: center;" width="64">15.1</td> <td style="text-align: center;" width="64">10.1</td> <td style="text-align: center;" width="64">86.6</td> <td style="text-align: center;" width="64">110</td> </tr> </tbody> </table> </div> The IPO as per RBI regulation was supposed to come in 2020. However, due to COVID-19 impact, it may be postponed to next year. <strong><span style="font-size: 14pt;">Source: </strong><strong><a href="https://unlistedzone.com/storage/knowledge-logo/Audited_FR_2019-20.pdf">Audited Financial Results of FY19-20</a></strong>
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