The IPO of Ujjivan Small Finance Bank, which has seen strong response from retail investors, closes today. The ₹750 crore IPO had opened on Monday at a price band of ₹36-37 per share. Ujjivan Small Finance Bank will use most of the IPO proceeds for increasing its Tier-1 capital base to meet its future capital requirements. The lot size in Ujjivan Small Finance Bank IPO is 400 shares. Investors can apply for a minimum of 400 shares and in multiples thereafter. Or in other words, the minimum application amount for retail segment at upper price band of ₹37 per shares is ₹14,800.
The maximum subscription amount for retail investor is ₹2 lakh. So investors in the retail category can apply for a maximum of 13 lots.
The initial public offer of Ujjivan Small Finance Bank was subscribed 4.86 times on the second day of subscription on Tuesday.
The ₹750 crore initial public offer (IPO) received bids for 60,29,84,400 shares against the total issue size of 12,39,58,333 shares, as per data available with the NSE.
As of 10:45 today, the issue was subscribed 5.55 times.
Allotment and listing date:
Ujjivan Small Finance Bank share allotment is likely to be finalised on December 9, 2019 and listing on BSE and NSE is likely on December 12, 2019, according to brokerages.
Karvy Computershare Private Limited is the registrar of Ujjivan Small Finance Bank IPO.
Ujjivan Small Finance Bank has presence across 24 states and union territories and served over 4.94 million customers as on September 30, 2019. It offers loans to micro banking customers, agriculture and allied loans, MSE loans, affordable housing loans, financial institutions group loans, personal loans, and vehicle loans.
“Ujjivan Small Finance Bank’s assets under management grew at a CAGR of 32% over FY2017-19. In 2017, when Ujjivan Small Finance Bank started operation as small finance bank, its majority portfolio (97.5%) was concentrated towards micro finance. However, as of Q2 FY2020, it contributes 79.2% and other major contributors are affordable housing (9.4%) and SME (6.5%),” Angel Broking said in a note. Angel Broking has a subscribe rating to the issue.
Many other brokerages have recommended subscribe to the Ujjivan Small Finance Bank IPO.
“Ujjivan is a play on the microfinance growth story. So far, it has effectively managed to grow assets with decent asset quality profile. However, going forward trajectory of business model will change with buildup of non-microfinance loans and ramp of retail liabilities which shall be an uphill task for the new management in the wake of tough competition in the market space,” says Anusha Raheja, analyst at LKP Securities, which has a subscribe rating on the IPO.
Also, Ujjivan Small Finance Bank will have to reduce down the promoter stake further to 40% over the next 2 years from levels of 84% post IPO as per RBI guidelines which will be a hangover in the medium term, she adds.
“In this backdrop, in our view, the bank is not likely to trade at higher multiples. Our back of the envelope calculation suggests, the bank is trading at 1.6 times FY22 earnings. Given reasonable valuations, we recommend subscribe to the issue,” she added.
Reliance Securities also has a subscribe rating. “Ujjivan Small Finance Bank high share of MFI loans has been a positive for its asset quality in the current environment where we have seen rise in stress most other segments. Recent appointment of Nitin Chugh (former digital banking head of HDFC Bank) should aid the bank’s liability and non-MFI asset profile, in our view. At the higher price band of ₹37, the issue is priced at 2.1 times price to book value (including post IPO capital), which makes it an attractive investment opportunity,” the brokerage added.
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