Utkarsh SFB attracts big investors with rights issue of Rs 949 crore

Utkarsh Small Finance Bank plans to allot shares to a group of investors, including a fund house run by Madhusudan Kela, the Massachusetts Institute of Technology and HDFC Life, through a rights issue of Rs 949 crore, the lender said on Friday.

The other investors include FLC Investco, Kotak Mahindra Life Insurance and ICICI Prudential Life Insurance.

The bank received applications from new investors for about 450 million fully paid shares, covering two-thirds of the issue, as promoter Utkarsh CoreInvest relinquished its right to issue.

The development led to a surge in investor interest in the bank, with its share price rising by almost 20% on the BSE. The stock eventually closed at Rs 21.51, up 17.61% from its previous closing price.

India Capital Fund and WhiteOak Capital are also among the 38 entities that filed on the opening day of the rights issue.

Cohesion MK Best Ideas Sub-Trust has applied for over 5.71 crore shares, the highest interest shown by any investor. This would translate into a little over 3% stake in the bank if the rights issue of around 68 crore shares were fully subscribed. The issue price was fixed at Rs 14 per share. The Singularity Holdings along with two other group funds have applied for 5.68 crore shares of face value of Rs 10. Kotak Mahindra Life Insurance has applied for over 4.21 crore shares, ICICI Prudential Life Insurance has applied for 3.57 crore shares and HDFC Life Insurance has applied filed for about 1.47 crore shares of .

The full issue price is payable at the time the application is submitted. The issue closes on November 3.

Currently, Utkarsh CoreInvest owns 68.92%, while 13.14% is held by institutional investors. The balance 17.94% is in the hands of small investors.

Meanwhile, RBL Bank last week said it had received approval from the regulator to make fresh investments in Utkarsh Small Finance Bank through the latter’s rights issue. RBL Bank did not hold a direct stake in Utkarsh SFB until the end of September, while it owns 8.64% of Utkarsh CoreInvest.

Utkarsh, which is under financial pressure, is in the process of a reverse merger with its promoter. The gross non-performing asset ratio stood at 11.4% at the end of June, compared to 2.8% a year ago. The transfer stress translated into a net loss of Rs 239 crore for the first quarter of the fiscal.

About 55% of the bank’s total portfolio of Rs 19,224 crore consists of unsecured loans.