BackUjjivan Financial shares rise 10.29% in stock market debut
Intraday, the stock rose as much as 16.19%, charting a positive start, as was the case with Equitas Holdings last month
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Mumbai: Microfinance lender Ujjivan Financial Services Ltd saw its shares rise as much as 16.19% on market debut, charting a positive start, as was the case with Equitas Holdings Ltd late last month. The increase in stock price follows a splendid response to its three-day initial public offering (IPO) that was subscribed close to 41 times.
Ujjivan, the second of the 10 small finance bank (SFB) licensees to go public, listed at ₹ 227 a share on the BSE, from its offer price of ₹ 210 a share. The scrip touched a high and low of ₹ 244 and ₹ 217.05, respectively, in intraday trade.
Shares closed at ₹ 231.60 apiece on BSE, up 10.29%.
The company allotted shares to investors at the upper end of its ₹ 207-210 per share price band.
On Monday, the Reserve Bank of India (RBI) said that the aggregate investment ceiling for foreign institutional investors under the portfolio investment scheme shall remain at 49%. The RBI has further advised that the aggregate limit for NRI investment shall not exceed 10%.
Analysts expected a positive listing for Ujjivan, citing a combination of its growth prospects, the assets under management (AUM) size, geographical reach and valuation which is cheaper than peer company Equitas.
Equitas’s shares jumped nearly 23% on their trading debut on 21 April, a week after its ₹ 1,525 crore public offering was subscribed more than 17 times. The stock is now quoting about 30% higher than its issue price of ₹ 110 per share and is valued around 2.4 times its price-to-book value (P/Bv).
Domestic brokerage Angel Broking Ltd valued Ujjivan’s stock about 1.8 times its diluted P/Bv of ₹ 118 (2.1 times pre-dilution) based on its December quarter earnings.
“The company has decent return on equity and return on assets of 19.9% and 3.6%, respectively. Although return ratios might get a bit compressed post the company’s conversion to an SFB, we expect the same to scale up subsequently," Angel Broking analysts Siddharth Purohit and Chintan Shah said in a client note.
In the grey market on Monday, Ujjivan’s shares were quoting nearly ₹ 38-40 above its allotment price.
PTI reported on 1 May that Ujjivan proposed to set up 100 bank branches in unbanked locations as mandated by the RBI while issuing the guidelines for SFBs.
“We need to have 25% of bank branches in unbanked areas. Currently, we have none. Due to operational factors our existing branches are mostly next to PSU (public sector undertaking) bank branches," Ujjivan’s managing director and chief executive Samit Ghosh was quoted as saying in the PTI report.
The company has time till April 2017 to meet all regulatory guidelines and start SFB operations.
Bangalore-based Ujjivan is the third-largest microfinance company by AUM. It has 2.77 million active customers through 470 branches across 24 states in India, according to information made available in the red herring prospectus (RHP).
The company received strong demand from all classes of investors as its IPO was subscribed 40.7 times the shares on offer. Institutional investors subscribed for 33.8 times the shares reserved for them; retail investors and high networth individuals subscribed 3.9 times and 135.4 times the shares earmarked for them, respectively.
The issue, which opened on 28 April, was restricted only to domestic institutional investors (DIIs). It comprised sale of fresh shares worth ₹ 358.16 crore and an offer for sale of up to 24.9 million shares by existing foreign shareholders.
Foreign investors selling their shares through the IPO included World Bank arm International Finance Corp., impact investment funds Elevar Equity Llc and India Financial Inclusion Fund, Dutch development finance institution FMO, Sarva Capital, Women’s World Banking Capital Partners, Wolfensohn Capital Partners and Mauritius Unitus Corp. They helped Ujjivan lower its foreign shareholding to around 45% from 77% before the launch of its public issue.
RBI guidelines do not permit foreign ownership of more than 49% in SFBs. These banks offer basic banking services, accept deposits and lend to underserved sections, including small business units, small and marginal farmers, micro and small industries, and entities in the unorganized sector.
In February, Ujjivan raised fresh capital to the tune of ₹ 292 crore in the so-called pre-IPO round. The company expects to start its SFB operations in the first quarter of 2017, the company said.
For the nine months ended December, Ujjivan reported a profit of ₹ 122.3 crore on revenue of ₹ 729.6 crore.
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