Postponement of 21-22 financials, AGM raises doubts
By CL Jose
KOCHI/November 04-2022: The deferment of IPO by ESAF Small Finance Bank for the second time in as many years is feared to have in store more than meets the eye, according to informed sources.
The RBI is understood to have asked ESAF to conclude the IPO at the earliest.
More intriguing is the inordinate delay in the disclosure of the audited financials for 2021-22 and the annual general meeting (AGM) of shareholders for the same period. True, management has already taken approval on this from the Registrar of Companies (RoC).
In fact, ESAF was mandatorily required to list its shares in July 2021 itself, as part of another regulation, which stipulates that all small finance banks have to list thier shares on a stock market within three years of achieving Rs500 crore net worth.
ESAF, which is now readying for a third try by filing IPO application within a few weeks, is likely to prune the size of the issue from Rs997.78 crore earlier planned as the market is expected to stay muted for some time more.
Moreover, the bank is not in dire need for capital as it enjoys a comfortable capital adequacy ratio (CAR) or CRAR of 20.31 per cent as of June end, though it has fallen from 25.02 per cent a year ago.
It’s reliably learnt that the bank was keen to run the IPO before the 2021-22 financials are published.
Market analysts fear the audited 2021-22 financials could have some ‘unsavoury details’ that could have poured cold water on the issue process momentum if it had progressed as planned.
However, officials of the bank management remain tight-lipped on the details and the reaosons led to the current scenario..
The latest available data shows that ESAF’s gross NPA was at 6.16 per cent, down from 10.39 per cent a year ago, and net NPA was at 3.76 per cent.
There were reports that several small finance banks and NBFCs have burnt their fingers on micro finance loans that are given away without security.
ESAF Bank’s lion’s share of loans are essentially microfinance loans, which by definition is mostly unsecured though the pricing of these loans could be even up to 25 per cent,
Though the bank has taken approval from Registrar of Companies (RoC) to postpone the announcement of the 2021-22 audited report and the annual general meeting (AGM) of the shareholders, market analysts have not taken it sympathetically.
A top official of ESAF, in an effort to give an explanation to the deferment of IPO once again, told businessbenchmark.news that the bank was mandated to appoint one more auditor as a new RBI guideline stipulates the bank to run joint audit once the assets crossed Rs15,000 crore – ESAF’s assets are at Rs17,707.56 crore as of June end.
“Since Sebi requires the IPO documents to be certified by both auditors (including the new), and as the new auditor can’t sign it until and unless it completes audit of at least one quarter, there arises a confusion. In fact, this has led to the postponement of the AGM,” he explained.
