As expected, you have filed for an IPO as per the RBI guidelines. You are a small finance bank and you have just migrated into the lending and borrowing business completely and after you did that, slowdown hit the economy. So what is happening to your business?
There is one thing I need to say as we start. The bank has filed a DRHP, there is a limitation on what I can discuss in the public domain at this stage. Obviously, once things move ahead, we can talk a little bit more. But to answer your question, we had our first quarter results about two weeks ago and the business has been very good.
It has been one of the best quarters we have had and business continues to be good. Now the economy is slowing and there are signs all around. We are very watchful. It may take some time to affect our customers and our customer base and so we have to be vigilant in order to make sure that we take the right action and provide the right support needed for the market.
With the listing of the small finance bank (SFB), there are some concerns about the prospects of the holding company. What will this mean for the holding company and for the shareholders as well? You are looking at Rs 1,200 crore. How much will be the fresh issue?
The draft red herring prospectus that was filed on Friday, has the issue at Rs 1,200 crore. That is the maximum amount but it can be anything within that. And it is the first stage of the IPO process. There are several steps to be done before we get to final issuance of the IPO. Until we get there, a lot of speculation is currently taking place in the market. It would be best to wait until the final numbers are given on how we are going about it.
A couple of months will be required for that to be finalised. In the meantime, we are looking at minimum possible dilution of the holding company shareholding. Right now the bank is a wholly owned subsidiary and so the shareholding dilution will be minimal.
How much do you need to bring it down to and is there a commitment that this is the minimum you need to bring it down to, in the coming quarters and years?
The minimum requirement of an IPO from the Sebi side is 10%. That is something that we would do. When the SFB licenses were issued, the Reserve Bank of India had put in the condition required that the SFBs after three years of operation with a capital of Rs 500 crore or above would have to list at the end of the third year or by the end of the third year. That is the part which we are trying to address and the three years will be completed on January 31st 2020.
We hope that this listing would be completed by that date because for us the date set by RBI in the licensing are important because we are going through a journey and each step of the journey having your slate clean is very important. So, in the next phase of our journey in year five we intend to apply for a universal bank license and this will help us in that direction.
What will be the shareholding post the IPO and what will be the level of promoter holding in the company? Also, what does this mean really for existing shareholders because I am sure they are wondering about it as well?
Yes, as I said it is a bit early. In terms of the final amount, we have given percentages because we have given Rs 1,200 crore as the upper limit. So depending upon market conditions, the price etc will be determined at the time we launch the IPO, but the holding company shareholding will come down very marginally and it will continue to hold the bulk of the shares.
So, the structure will not be very different. It will be a way to get listed and then the capital which is raised would be used by the bank for its growth. That is how we see it. We do not need to take too much capital from the market at this stage because we have a good level of capital already. This money which comes in would be used for growth in the next two to three years.
How are you assessing growth for FY20, given the kind of challenging environment we are in, not in terms of liquidity, but the will to lend. What kind of growth numbers do you plan to achieve and how are you planning to garner more market share?
Yes, we cannot give too forward looking numbers. At the end, when we presented our 2018-2019 numbers, we gave an indication to the market of where we are heading that was at the end of May. We still stand by that and our first quarter results confirm that we are moving in that direction. The growth levels which we projected for this current year continue to hold good and we believe we will be able to achieve it.
If you ask me how we are able to garner that during the current slowdown in the market, there are a few things which are helping the small finance banks. The NBFC slowdown is benefiting the small finance banks because in the last couple of years, the small finance banks were getting their act together, setting up branches, the systems and everything.
At that time, some of the MFIs, some of the NBFCs took away a little bit of market share from the SFBs. Now with the slowdown in NBFCs, it is time for the SFBs to take back that market share and that is just a balancing out of the situation and right now that will benefit us. If the slowdown is a prolonged slowdown, then the whole economy will be a little tired. That is something that we need to watch out for. If it is a short-term slowdown, it is business as usual and we expect the year to be a good one.
Does it seem like this is going to be a prolonged slowdown?
We are not seeing any signs in our segment. We are hoping that the government will be able to put forward the right measures to get the economy back on track.
Hopefully, it will be a short term one and things will move back and will pick up because foreign investment and other things hopefully will come back into the country and the rest of the investors will look to pushing up and getting the economy back on stream.
I know you cannot talk about an AUM growth guidance, but would you see the mix between microfinance and non-microfinance book shaping up?
Yes, we have mentioned that also earlier. I can say that the micro finance book is growing fairly well but the other businesses because that started from a small base, are growing a little faster. At the end of last year, the mix was 85:15 and now that 85 will come down a little bit, the 15 will grow and that is how we see that going forward.
Now that we are a full bank with all the banking products and services including all the services that we give for deposit taking, you will see a more and more balanced structure, although the bread and butter focus will be the micro banking portfolio but as part of the overall portfolio that will come down.
