ESAF Small Finance Bank stock makes bumper debut; should investors buy more, hold or book profit?

ESAF Small Finance Bank shares opened at Rs 71 on NSE and Rs 71.9 on BSE

After ESAF Small Finance Bank stock made a bumper debut on November 10, few analysts now suggest booking profit as they expect limited upside while some advise holding shares for the long term.

The stock listed at a 19.8 percent premium over the IPO price of Rs 60 per share. The shares opened at Rs 71 on NSE and Rs 71.9 on BSE.

Prashanth Tapse, Sr VP Research at Mehta Equities believes the premium listing is justified on the back of investor-friendly pricing and reasonable IPO valuations when compared to peers.

“We recommend allotted investors to look for booking profits and post listing we expect limited upside,” said Tapse.

Considering the bank’s focus on high potential rural and semi-urban centres, customer-centric product offerings and high customer retention which ensures repetitive business, Shreyansh Shah, Research Analyst, StoxBox remains positive on the company’s outlook.

Also Read: ESAF Small Finance Bank makes stellar debut, stock lists at 20% premium to IPO price

“At attractive valuations, we advise investors who have received allotment to hold their shares from a medium to long term perspective,” said Shah.

Considering the reasonable valuation and the bank’s better performance in terms of its net-non performing asset (NNPA) and net interest margin (NIM), Shivani Nyati, Head of Wealth, Swastika Investmart advised investors to maintain their stop loss at Rs 60 and wait for further upside, whereas those with a medium to long-term perspective can hold the stock.

Through the IPO, the bank raised Rs 463 crore. It will use the net proceeds from the issue to augment the bank's Tier–I capital base to meet future capital requirements and to increase business, which is primarily onward lending.

Also Read: Tata Technologies IPO: Company in talks with Morgan Stanley, Blackrock, US hedge funds

On the financial front, the bank’s net profit surged 452 percent to Rs 302.33 crore in FY23 compared to Rs 54.73 crore in the year-ago period. On the asset quality front, gross non-performing assets fell by 451 bps on-year to 1.65 percent and net NPA dropped 297 bps YoY to 0.81 percent at the end of the June FY24 quarter.

ESAF Small Finance Bank provide loans to rural and semi-urban customers. The bank's products consist of micro, retail, agricultural and MSME loans and loans to financial institutions. The bank has a network of 700 banking outlets (including 59 business correspondent-operated banking outlets), 767 customer service centres and 559 ATMs spread across 21 states and two union territories.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.