Mumbai: Ujjivan Financial Services Pvt. Ltd, the microfinance lender that was granted a provisional licence to convert into a small finance bank, is looking to file its draft share sale prospectus with the capital markets regulator before December-end, according to two people aware of the development.

The firm plans to raise around 1,500 crore through its initial share sale, said the first person cited above, requesting anonymity.

On 19 October, Mint reported that Ujjivan had hired investment banks and was planning an IPO.

“The company is looking to file the papers before December-end, but there are slight chances that it might spill over to the first week of January," said the person cited above.

A major chunk of the funds raised will comprise sale of shares by Ujjivan’s private equity investors, while the firm will also raise a small amount to fund its business, said the second person mentioned above, also requesting anonymity.

The company declined to comment on its IPO plans.

Ujjivan, in which foreigners owned 88.69% as on 31 March, has to ensure that overseas shareholding in the company drops to 49%, one of the conditions that the company has to meet to become a small finance bank. The share sale is aimed at raising funds and giving overseas investors an opportunity to sell their stakes in the microfinance lender founded by veteran banker Samit Ghosh.

Ujjivan is the second of the 10 companies that won Reserve Bank of India (RBI) approval for setting up small finance banks to initiate work on selling shares to the public. Chennai-based microfinance lender Equitas Holdings Ltd filed share sale documents with the regulator Securities and Exchange Board of India (Sebi). It is planning to raise about 2,000 crore through its IPO. Equitas filed its draft IPO paper with Sebi on 16 October.

Small finance banks and microfinance institutions are expected to raise as much as 4,000-5,000 crore over the next 12 months, either through the public markets or private equity, according to a September report by investment bank Avendus Capital.

Founded in 2006, Ujjivan’s investors include International Finance Corp. (IFC), UK’s development finance institution CDC, venture capital firm Sequoia Capital and home-grown private equity fund CX Partners.

CDC is currently the biggest shareholder in the company with a 12.69% stake, followed by IFC and CX Partners, which own 11.84% and 10.69%, respectively.

On 16 September, RBI issued small finance bank licences to Ujjivan, Equitas, Janalakshmi Financial Services Pvt. Ltd, Au Financiers (India) Ltd, Capital Local Area Bank Ltd, Disha Microfin Pvt. Ltd, ESAF Microfinance and Investments Pvt. Ltd, RGVN (North East) Microfinance Ltd, Suryoday Micro Finance Pvt. Ltd and Utkarsh Micro Finance Pvt. Ltd. Eight of the 10 are microlenders. Many have significant foreign holdings because of early investments from private equity funds and multilateral institutions and will have to comply with the RBI’s rules to convert into small finance banks.

In January, Ujjivan raised 600 crore from a clutch of investors including CDC, CX Partners, NewQuest and a unit of the Bajaj Group.

In the year ended 31 March, Ujjivan’s revenue rose 72% to 599.3 crore from a year earlier. Net profit rose 38% to 75.8 crore from 55 crore. It disbursed loans worth 4,328 crore in the year and had a network of 423 branches across the country.

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