With a subscription bigger than this year's blockbuster IPO of Indian Railway Catering and Tourism Corporation (IRCTC), Ujjivan Small Finance Bank was expected to clock a strong listing today. And the stock listed as per expectations. Share of Ujjivan Small Finance Bank made its market debut at a premium of 59 % to the issue price of Rs 37. On NSE, Ujjivan Small Finance Bank stock made listing gain of 58.78%, opening at Rs 58.75 compared to the issue price.
The stock of microfinance lender listed a premium of 56.75% over the issue price on BSE. It opened at Rs 58 on BSE. After the allotment in Ujjivan Small Finance Bank IPO, many were left empty handed. The allotment process for IPO was carried out from December 9 to December 11. The IPO received bids for 2,053.5 crore shares on the final day of IPO against the issue size of 12.39 crore shares. Now, that the stock is available in the primary market, is it a wise move to buy the share? Here's a look at what brokerages and analysts said about the stock.
Geojit is positive on the stock in long run. The brokerage said, "The experience of Ujjivan Financial Services as an erstwhile microfinance institution, coupled with the ability to address mass market customers will further aid USFB to be among the leading SFBs in India. At the upper price band of Rs 37, Ujjivan Small Finance Bank is available at price to book value of 2.5 times FY19, which is at a significant discount to its peers." The brokerage gave a 'SUBSCRIBE' rating to the issue with a long-term perspective.
Rahul Agarwal, Director at Wealth Discovery/EZ Wealth favoured subscribing to the issue for long-term price appreciation, as the IPO was priced at attractive valuations as compared to its peers. "At the upper price band of Rs 37, Ujjivan Small Finance Bank is valued at 2.8 times its Q2FY20 book value (Pre-IPO). On post dilution basis the lender is valued at nearly 2.3 times of book value, which we believe is attractive as it is available at a significant discount to its peers.
Our view is that investors should subscribe to the issue for long-term price appreciation, as the IPO is priced at attractive valuations as compared to its peers. Given its strong fundamentals, the IPO offers a significant margin of safety and investors can also expect a significant listing gain," Agarwal said
KRChoksey Research in a note said that the bank has performed well over the years and is expected to grow its business further with its product innovation strategy and customer-centric approach. There was robust growth in advances/deposits of 21.7 percent/229.4 percent CAGR (FY17 to FY19) where loan to deposit ratio was 1.43 in FY19.
The brokerage said it expects the lender to get the benefits from its digital advanced technology developments. Also, it focuses more on the middle-income segment of India to serve the unserved and underserved customers. The brokerage believes the bank is expected to be profitable in the long run.
By Aseem Thapliyal