The Bank – who they are    

Initially operating from the small town of Varanasi in Uttar Pradesh, India, Utkarsh was established in 2009 as a Micro Finance Institution. Over the years it has evolved into a Small Finance Bank with the objective of creating “umeed” (hope) amongst the unbanked population by providing micro, small and medium enterprise (MSME) loans, housing loans (with a specific focus on affordable housing), savings accounts and other essential financial services to the under-served low-income rural and semi-urban population in north and east India. The micro-banking segment accounts for about 66 per cent. of the bank’s gross loan portfolio.


On 12 July 2023, the initial public offering (“IPO”) of Utkarsh Small Finance Bank opened for bidding and closed on 14 July 2023. The INR 500 Crore (roughly GBP 47 Million) IPO received a stellar response in the three days of bidding. Proceeds from the fresh issue will be used to augment Utkarsh’s Tier-1 capital base to meet future capital requirements.

Both the National Stock Exchange (“NSE”) and BSE listed the stock on 21 July 2023. Thanks to its strong demand in the grey market, the shares were listed at INR 39.95 on BSE and INR 40 on NSE, a 60% premium over the IPO price band of INR 23 to 25 per share (having a face value of INR 10 each). The lender’s stock soared on market debut, closing at INR 48.

The market – recent equity landscape for Indian financial institutions

Between 2007 to 2020, India’s Banking, Financial Institution, and Insurance (“BFSI”) sector listed roughly 27 IPOs. At the start of 2021 itself, around 13 companies in the sector were expected to go public. Not all ended up launching IPOs, but the market was surely optimistic. Further, 2022 saw the BFSI sector commanding 18% of India’s PE-VC investments (with investments of USD 9.7 billion).

The larger recent IPOs include PB Fintech, the parent of PolicyBazaar and lending platform PaisaBazaar, which had its shares listed with a premium of 17.35%, whereas Fino Payments Bank’s stock was listed at a 5.65% discount over its issue price.

The opportunity – what it means for Small Finance Banks / Microfinance Institutions

Looking at Utkarsh’s huge subscription figures, evidently, investor appetite is as robust, if not more for such Small Finance Banks and Micro Finance Institutions seeking equity investment. India’s mission of accelerating financial access and inclusion is penetrating through to the average investor. From the perspective of international counsel, it is heartening to see market confidence in Small Finance Banks which provide critical support to MSMEs. The opportunities which stem from this IPO are numerous and complement Utkarsh building a larger loan book.  As a result, further capital markets activity on the debt side, such as note programme issuances or securitisations could be on the horizon.

These opportunities will be invaluable for the smaller banks who may otherwise believe that access to such scales of capital injections and structured finance products is reserved for large, sophisticated players. Over the last few years, several other banks have been looking to tap the market, and for them, Utkarsh’s successful IPO should certainly indicate umeed.