Utkarsh Small Finance Bank Announces Rs 950 Crore Rights Issue at 37.5% Discount

Utkarsh Small Finance Bank has taken a significant step to bolster its capital base through a rights issue. The bank's board of directors has approved the issuance of equity shares on a rights basis, aiming to raise up to ₹949.08 crore. This move is expected to strengthen the bank's financial position and support its growth initiatives.

Key Details of the Rights Issue

Utkarsh Small Finance Bank has set the price for its Rs 950 crore rights issue at Rs 14 per share, representing a 37.5% discount to Wednesday's closing price. The bank will issue approximately 68 crore equity shares with a face value of Rs 10, with the record date fixed for October 14.

The board meeting finalized the following terms for the rights issue:

Particulars	Details
Issue Size	67,79,13,784 fully paid-up equity shares
Face Value	₹10.00 per share
Issue Price	₹14.00 per share (including ₹4.00 premium)
Total Amount	Up to ₹949,07,92,976
Rights Entitlement Ratio	8 equity shares for every 13 shares held

Timeline and Trading Details

The rights issue is scheduled with the following key dates:

Issue Opening Date: October 22
Last Date for On-Market Renunciation: October 28
Issue Closing Date: November 5
Record Date: October 15

Shareholders should note that the last date for off-market renunciation of Rights Entitlements (REs) is set for October 31. The bank will make arrangements with NSDL and CDSL for the crediting of REs in dematerialized form to eligible shareholders' demat accounts.

Impact on Share Capital

Post the rights issue, assuming full subscription, the bank's paid-up share capital is expected to increase significantly:

Pre-Issue: 1,10,16,09,900 fully paid-up equity shares
Post-Issue: 1,77,95,23,684 fully paid-up equity shares

Ownership Structure and Stock Performance

The promoter Utkarsh CoreInvest holds a 68.92% stake in the bank, while institutional investors hold 13.14% and small investors own 17.94%. The stock closed at Rs 22.40 on BSE Wednesday, down 64% from its all-time high of Rs 62.75.

Financial Performance

The bank's gross non-performing assets ratio increased to 11.4% at the end of June from 2.8% a year earlier, resulting in a net loss of Rs 239 crore in the first quarter. Unsecured loans comprise about 55% of the bank's total portfolio of Rs 19,224 crore.

Professional Guidance

Utkarsh Small Finance Bank has appointed DAM Capital Advisors Limited as the advisor and CMS IndusLaw as the legal counsel for this rights issue. These appointments underscore the bank's commitment to ensuring a smooth and compliant capital raising process.

Regulatory Compliance

The bank has received in-principle approvals from both the BSE Limited and the National Stock Exchange of India Limited for the proposed rights issue. This development aligns with the regulatory requirements and paves the way for the successful execution of the capital raise.

Investors and stakeholders are advised to refer to the official Letter of Offer for comprehensive details about the rights issue terms and conditions.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
-0.92%	+1.77%	-0.33%	-18.22%	-47.80%	-54.94%

Utkarsh Small Finance Bank has reported significant changes in its loan portfolio and deposit composition for the quarter ended September 30, reflecting a strategic shift in its business model.

Loan Portfolio Restructuring

The bank's gross loan portfolio witnessed a slight decline of 2.3% year-on-year, settling at ₹18,655.00 crore. This decrease was primarily driven by a substantial reduction in Joint Liability Group (JLG) loans, which fell by 28.4% to ₹7,613.00 crore. In contrast, the non-JLG loan portfolio saw a robust growth of 30.3%, reaching ₹11,042.00 crore.

Deposit Growth and Composition

Despite the contraction in the loan book, Utkarsh Small Finance Bank reported a 10% growth in total deposits, which stood at ₹21,447.00 crore. The deposit mix showed a notable shift towards retail:

Deposit Type	Amount (₹ Crore)	YoY Change
CASA Deposits	4,478.00	+17.3%
Retail Term Deposits	12,257.00	+28.8%
Bulk Term Deposits	4,712.00	-23.5%

The CASA (Current Account Savings Account) ratio improved to 20.9% from 19.6% a year ago. More significantly, the combined CASA and retail term deposits ratio surged to 78% from 68.4%, indicating a stronger and more stable deposit base.

Key Performance Indicators

Collection Efficiency: The bank maintained a robust collection efficiency of 98.6% for its microbanking loan portfolio.
Liquidity Coverage Ratio: As of September 30, the bank's liquidity coverage ratio stood at a comfortable 219%.

Strategic Implications

The substantial reduction in JLG loans coupled with the growth in non-JLG loans suggests a deliberate move by Utkarsh Small Finance Bank to diversify its loan portfolio and potentially reduce risk. The shift towards retail deposits, particularly the growth in CASA and retail term deposits, indicates a focus on building a more stable and cost-effective funding base.

Rights Issue Announcement

In a separate development, the bank's board has approved a ₹950.00 crore rights issue, with details yet to be finalized. This capital raise could potentially support the bank's growth plans and strengthen its balance sheet.

Market Response

The market responded positively to these developments, with the bank's shares closing 2.1% higher at ₹22.23. However, it's worth noting that the current share price remains below the IPO price of ₹25.00.

As Utkarsh Small Finance Bank continues to evolve its business model, investors and industry observers will be keenly watching how these strategic shifts impact the bank's profitability and growth trajectory in the coming quarters.