Mumbai: Shares of Ujjivan Financial Services Ltd on Wednesday closed 10.2% higher, its biggest gains in eleven month, after its subsidiary was given a scheduled bank status.

The Reserve Bank of India (RBI) has granted a scheduled bank status to its subsidiary Ujjivan Small Finance Bank Ltd, according to a filing on exchanges.

During the day, the stock hit a high of 361.60 and rose as much as 11.23%. The script closed at 58.15—a level last seen on 3 May, on the Bombay Stock Exchange (BSE), up 10.17%, its maximum gains since 22 September 2016, from previous close. India’s benchmark Sensex Index rose 0.82% to closed at 31646.46 points.

“This status will enhance the market acceptability of the bank in its effort to garner institutional deposits at a competitive price and participate more actively in the inter-bank market. It also opens the door for issuing Certificate of Deposits (CDs), which will be an important source of funding." , said Samit Ghosh managing director and chief executive officer of Ujjivan Finance.

The stock listed in May 2016 and since then it surged over 70%. So far this year, the shares have rallied 11.33%.

Of the 13 brokers tracking the Ujjivan stock on Bloomberg, as many as 7 recommended a ‘buy’ rating, 3 asked its investors to ‘sell’ the stock and 3 have a ‘hold’ rating.

Ujjivan Small Finance Bank has commenced its operations since February 2017 and it has 65 full fledged brick and mortar branches operating in eight states and two union territories.

The bank planning to convert 160 existing branches and 29 new unbanked rural centres by the end of fiscal year 2017-18 and the remaining branches will be converted over a period of two years as per RBI approval, it said in a release.

On August 3, the company reported a net loss of Rs75 crore during the first quarter FY18 against a profit of Rs17.37 crore during the same period last year. The financial services company reported losses on account of poor recovery of loans following demonetisation, and its transition from a microfinance institution to a small finance bank.

Ujjivan Financial Services reported gross non-performing loans of 6.2% as a percentage of the loan book in the quarter ending June from 3.7% in the quarter ending March.

Close