Two Small Finance Banks (SFBs) - Fincare and Utkarsh - filed their DRHPs with SEBI in early August - within a week of each other! Both are IPOing since they have to - they are mandated (per RBI guidelines) to go public within 3 years of crossing networth of Rs. 500 crores, and they've both hit this timeline.
Not here to give you buy/ sell recommendations for the IPOs, but will instead articulate a framework to help you evaluate SFBs - including the business model and the key factors this business is sensitive to.
Background: Utkarsh & Fincare SFB
Basic overview
Fincare and Utkarsh both commenced operations as small finance banks (SFBs) in 2017, after receiving their SFB licenses from the RBI.
Let's start with some basics - what are SFBs? They are a separate category of banks created with the idea of furthering the financial inclusion agenda. Here are some rules SFBs have to abide by:
Not here to give you buy/ sell recommendations for the IPOs, but will instead articulate a framework to help you evaluate SFBs - including the business model and the key factors this business is sensitive to.
Background: Utkarsh & Fincare SFB
Basic overview
Fincare and Utkarsh both commenced operations as small finance banks (SFBs) in 2017, after receiving their SFB licenses from the RBI.
Let's start with some basics - what are SFBs? They are a separate category of banks created with the idea of furthering the financial inclusion agenda. Here are some rules SFBs have to abide by:
- 75+% loans to priority sectors - i.e. underserved sectors (40% for other banks)
- 50+% loans with ticket sizes of