ESAF Small Fin

Expand its geographic presence and penetrate deeper into its existing geographies

Penetrate deeper into its existing geographies.

Increase its deposits and in particular its NRI deposits and CASA

Increase its deposits and in particular its Retail Deposits.

Provide a comprehensive suite of banking products catered to the needs of its diverse customer base

Continue to grow its Micro Loans while increasing its other categories of advances both in absolute terms and as a percentage of its total AUM.

Increase fee-based income by expanding its third-party product and service offerings

Continue to grow its Micro Loan business.

Continue to leverage technology and customer data analytics

Expand its retail loan business.

Increase its MSME loans.

Grow its agriculture loan business.

Increase fee-based income by cross-selling, expanding third-party products and service offerings and expanding its feebased offerings.

Continue to leverage technology and customer data analytics.

Deep understanding of the microfinance segment, which has enabled the bank to grow its business outside of Kerala, its home state

Its understanding of the micro loan segment, which has enabled the bank to grow its business outside of Kerala, its home state.

Strong rural and semi-urban banking franchise

Strong rural and semi-urban banking franchise.

Fast growing retail deposit portfolio with low concentration risk

Fast-growing Retail Deposit portfolio with low concentration risk.

Strong customer connect driven by its customer centric products and processes and other non-financial services for microfinance customers

Strong customer connections driven by its customer centric products and processes and other non-financial services for Micro Loan customers.

Technology driven model with an advanced digital technology platform

Technology-driven model with an advanced digital technology platform.

Experienced Board and Key Management Personnel

Experienced Board and Key Management Personnel.

Its business is significantly dependent on Micro Loans and any adverse developments in the microfinance sector could adversely affect its business, financial condition, results of operations and cash flows.

A majority of the Bank advances are unsecured. If its unable to recover such advances in a timely manner or at all, the financial condition, results of operations and cash flows may be adversely affected.

The Bank incur significant operating expenses and any increase in these operating expenses without a corresponding increase in its Net Interest Income and other income combined will adversely affect the Bank financial condition, results of operations and cash flows.

The Bank could be subject to various sanctions and penalties by the RBI for failing to comply with the requirement to list the Equity Shares on a stock exchange in India before July 31, 2021.

Its business correspondents (which includes ESMACO, a Promoter Group and Group Entity, and Lahanti, a Group Entity) have sourced the majority of its advances. All of the Bank Business correspondents work for it on a nonexclusive basis. If any of its business correspondents and in particular ESMACO prefer to promote the competitors` loans over the Bank loans or the agreements between us and them are terminated or not renewed, it would adversely affect its business, financial condition, results of operations and cash flows.

The Bank is in non-compliance with certain Risk Based Supervision ("RBS") Tranche III requirements and if the RBI imposes penalties on it for this non-compliance, it could adversely affect its reputation, business, financial condition, results of operations and cash flows.

The Bank is subject to inspections by various regulatory authorities, including by the RBI, PFRDA, IRDA and National Pension System Trust. Inspection by the RBI is a regular exercise for all banks and financial institutions. Regulators and external auditors appointed by a regulator have observed various non-compliances by it in the past and have required it to, among other things, take corrective actions and pay compensation. Non-compliance with the observations of such regulators could adversely affect its business, financial condition, results of operations and cash flows.

The Bank is subject to stringent regulatory requirements and prudential norms. If its unable to comply with such laws, regulations and norms it may have an adverse effect on the Bank business, financial condition, results of operations and cash flows.

If the Bank is unable to control the level of gross NPAs in its portfolio effectively or if its unable to improve the Bank Provisioning Coverage Ratio, its business, financial condition, results of operations and cash flows could be adversely affected.

The Bank non-convertible debentures are listed on the BSE and its subject to rules and regulations with respect to such listed non-convertible debentures. If the Bank fail to comply with such rules and regulations, its may be subject to certain penal actions, which may have an adverse effect on the business, results of operations, financial condition and cash flows.

Volatility in interest rates could cause the Bank Net Interest Margin to decline and adversely affect its results of operations and cash flows. In addition, an increase in interest rates results in a decrease in the value of the fixed income investments and as a result of the RBI-mandated reserve requirements, the Bank is also more structurally exposed to this risk than banks in many other countries.

The bank may face asset liability mismatches, which could affect the Bank liquidity and consequently may adversely affect its financial condition, results of operations and cash flows.

COVID-19 has had and could continue to have an adverse effect on the Bank business, financial condition, results of operations and cash flows.

The Bank and its Promoters are involved in certain legal proceedings, any adverse developments related to which could adversely affect the Bank reputation, business and cash flows.

There is an ongoing criminal proceeding involving the Bank Individual Promoter and if these proceedings are determined against him, it could have a material adverse effect on its reputation.

The RBI has in the past sought clarifications on acquisition of shares by certain members of the Promoter Group (who are also the Bank Group Entities). Its cannot assure you that the holding structure will not be subject to additional scrutiny by the RBI in the future.

The Bank depends on its brand recognition. Negative publicity about the Bank brand, third parties who use the "ESAF" brand, including the Bank Corporate Promoter, and third parties whose products its distribute could damage the Bank reputation and, in turn, the business, financial condition, results of operation and cash flows.

If the Bank fail to successfully enforce its intellectual property rights or are unable to renew the bank trademark licencing agreement, its business, results of operations and cash flows would be adversely affected.

Its business is concentrated in South India, particularly in the states of Kerala and Tamil Nadu, and any adverse change in the economy of South India could have an adverse effect on its financial condition, results of operations and cash flows.

If the Bank is unable to secure funding on acceptable terms and at competitive rates when needed, it could have a material adverse effect on its business, financial condition, results of operations and cash flows.

The Indian finance industry is intensely competitive and if the Bank is unable to compete effectively it would adversely affect its business, financial condition, results of operations and cash flows.

If the bank fail to effectively manage the bank growth, its business may be adversely affected.

If the bank fail to increase its Retail Deposits Ratio, and in particular the Bank CASA Ratio, Its may have a higher cost of funds than the primary competitors, which could adversely affect the Bank ability to compete for market share for loans unless its decrease the Bank Net Interest Margin.

Weaknesses, disruptions or failures in IT systems could adversely affect its business.

The bank may face cyber threats attempting to exploit the Bank network to disrupt services to customers and/ or theft of sensitive internal data or customer information, which may cause damage to its reputation and adversely affect of the financial condition, results of operations and cash flows.

The Bank has introduced several new products and services since April 1, 2017 and its cannot assure you that such products and services will be profitable in the future. Further, the Bank may be unable to successfully diversify its product portfolio or enter into new lines of business, which may adversely affect the Bank business, financial condition, results of operations and cash flows.

The bank may be unable to maintain or renew certain of its statutory and regulatory permits, licences and approvals required to operate its business.

Deterioration in the performance of any industry sector in which the Bank have significant exposure may adversely affect its financial condition, results of operations and cash flows.

If the Bank risk management policies are ineffective, it could adversely affect its business, financial condition, results of operations and cash flows.

The Bank could be subject to volatility in income from its treasury operations, which could have an adverse effect on the Bank results of operations and cash flows.

The Bank is exposed to operational risks, including employee negligence, petty theft, burglary and embezzlement and fraud by employees, agents, customers or third parties, which could harm its reputation, business, financial condition, results of operations and cash flows.

Banking companies in India, including it, may be required to report financial statements as per Ind AS in the future. Differences exist between Ind AS and Indian GAAP. In the future, if its required to prepare the Bank financial statements in accordance with Ind AS, there is a possibility that its financial condition, results of operations and cash flows could be worse than if its prepared of the financial statements in accordance with Indian GAAP.

If the bank breach third-party intellectual property rights it could have an adverse effect on the Bank reputation, business, financial condition, results of operations and cash flows.

If the bank fail to adapt to technological advancements in the financial services sector, it could affect the performance and features of the Bank products and services and reduce its attractiveness to customers.

The Bank lease or licence all of its business premises and any failure to renew such leases or licences or their renewal on terms unfavourable to it may adversely affect of the business, financial condition and results of operations and cash flows.

Some of the Bank lease/ license agreements have not been registered.

Any non-compliance with mandatory AML, KYC and CFT laws and regulations could expose it to liability and harm the Bank business and reputation.

The Bank is required to comply with certain restrictive covenants under its financing agreements. Any non-compliance may lead to, amongst others, accelerated repayment schedule, securitization of assets charged and suspension of further drawdowns, which may adversely affect its business, financial condition, results of operations and cash flows.

The Bank has negative cash flows generated from operating activities for Fiscals 2023 and 2022 and its may experience negative cash flows from operating activities in the future.

The bank may face labour disruptions that would interfere with the Bank operations and have an adverse effect on the business, financial condition, results of operations and cash flows.

The Bank depends on the accuracy and completeness of information about customers and counterparties and any misrepresentation, errors or incompleteness of such information could cause its business to suffer.

The Bank is dependent on its Key Managerial Personnel, Senior Management Personnel and other key personnel, and the loss of, or the Bank inability to attract or retain, such persons could adversely affect its business, financial condition, results of operations and cash flows.

Two of the Bank Directors are on the board of directors of companies engaged in a line of business similar to that of the Banks. Any conflict of interest that may occur as a result could adversely affect its business, financial condition, results of operations and cash flows.

If the bank were to incur a serious uninsured loss or a loss that significantly exceeds the limits of the the Bank insurance policies, it could have an adverse effect on the financial condition, results of operations and cash flows.

Any non-compliance with law or unsatisfactory service by the third-party service providers engaged by it for certain services could have an adverse effect on its business, results of operations and cash flows.

The Promoters will continue to exercise significant influence over the Bank after the completion of the Offer.

The Bank Promoters, certain of its Directors, Key Managerial Personnel and Senior Management Personnel and the relatives of the Key Managerial Personnel and Senior Management Personnel have interests in it other than reimbursement of expenses incurred and normal remuneration or benefits.

The Bank has in the past entered into related party transactions and may continue to do so in the future, which may potentially involve conflicts of interest with the equity shareholders.

The Insurance Regulatory and Development Authority of India ("IRDAI") and SEBI have issued orders to two of the Bank Selling Shareholders, namely, PNB MetLife and Bajaj Allianz respectively, directing them to pay certain penalties and imposing certain restrictions on them. While they have complied with the said orders, there is no assurance that the IRDAI or SEBI will not take any further action against PNB MetLife and Bajaj Allianz and any such action could adversely affect its reputation.

The Bank has in this Draft Red Herring Prospectus included certain non-GAAP financial measures and certain other selected statistical information related to its operations and financial condition. These non-GAAP financial measures and statistical information may vary from any standard methodology that is applicable across the financial services industry, and therefore may not be comparable with financial or statistical information of similar nomenclature computed and presented by other financial services companies.