The initial public offer (IPO) of Ujjivan Small Finance Bank will open today. Price band for the IPO has been fixed at Rs 36-Rs 37. Ujjivan Small Finance Bank plans to raise Rs 750 crore through the issue, which will close on December 4. The proposed date for listing of the bank on bourses is December 12. The bank has raised Rs 303.75 crore from anchor investors.
It has finalised the allocation of 8,20,94,594 shares at Rs 37 apiece to 18 anchor investors. Government of Singapore, Monetary Authority of Singapore, CX Partners Fund, Aberdeen, HDFC Life Insurance Company, Bajaj Allianz Life Insurance Company, Sundaram Mutual Fund, Goldman Sachs India, ICICI Prudential participated in the anchor investor bidding, the bank said.
One can apply for the issue in a lot of 400 equity shares and in multiples of 400 shares thereafter. Lead managers for the IPO are IIFL Holdings Limited, JM Financial Consultants Private Limited and Kotak Mahindra Capital Company Limited. Shareholders of the parent firm Ujjivan Financial Services Limited can place bids for the IPO at a discount of Rs 2 per equity share on the issue price.
Microfinance lender Ujjivan Financial Services was listed public in 2016, after getting an in-principle licence from the Reserve Bank of India to start a small finance bank.
Ujjivan Small Finance Bank had filed draft papers with Sebi in August and obtained the regulator's observations on October 16. The proceeds of the issue will be utilised towards augmenting the company's capital base to meet future requirements.Ujjivan Financial Services had raised Rs 300 crore in February from a clutch of investors, including HDFC Life and Sundaram MF, in a pre-IPO placement. The funding valued the company at around Rs 2,000 crore. After listing on BSE and NSE, Ujjivan Small Finance Bank will join peers like AU Small Finance Bank.
Jaikishan Parmar, senior equity research analyst, BFSI at Angel Broking said, "Ujjivan Small Finance Bank (USFB) is a mass market focused SFB in India, catering to unserved and underserved population segments of the country. USFB is well diversified with presence across 24 states and union territories and is catering to over 4.94 million customers as on September 30, 2019.
At the upper end of the price band, USFB is valued at 2.8 times its Q2FY2020 book value (Pre-IPO) and on post dilution basis at 2.3 times of book value, which we believe is attractive considering similar businesses are trading at higher valuations. Moreover, experienced management, pan-India presence, and pristine asset quality provides comfort. We recommend a subscribe to the issue."
ICICI Direct in a note said, "USFB had a steady ride in terms of advances growth along with maintaining asset quality. There was a continued focus on garnering retail liability along with building CASA base. We have a subscribe recommendation on the stock. Further, at the IPO price band of Rs 36-37, the stock is available at a P/BV of around 2.2x (post issue) at the upper band on the first half of FY20 basis."
Geojit gave a 'subscribe' rating to the issue. "The experience of UFSL 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, USFB is available at price to book value of 2.5 times FY19, which is at a significant discount to its peers and we have a 'SUBSCRIBE' rating with a long-term perspective."
Rahul Agarwal, Director at Wealth Discovery/EZ Wealth said, "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 time 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."
By Aseem Thapliyal