The IPO of Ujjivan Small Finance Bank opened on Monday for subscription amid strong demand. The lender is looking to raise ₹750 crore through this issue. The bank has set a price band of ₹36-37 per share and the issue closes on Wednesday. The bank will utilise the proceeds of IPO for increasing its Tier-1 capital base to meet its future capital requirements and towards meeting the expenses in relation to the issue. As of 5 pm on Day 2, the issue was subscribed 4.67 times.
Ujjivan Small Finance Bank IPO - Lot Size
Investors have to apply for a minimum of 400 shares and in multiples thereafter. The minimum application for retail segment at upper price band for one lot ₹14,800. Investors in the retail category can apply for a maximum of 13 lots. The maximum application money for retail (upper price band for 13 lot) is ₹1,92,400.
The maximum subscription amount for retail investor is ₹2 lakh.
Allotment and listing date:
According to brokerages, the 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.
Ujjivan Financial Services Limited is the promoter of Ujjivan Small Finance Bank, which started operations in February 2017. According to RBI guidelines, Ujjivan Small Finance Bank is required to list its equity shares on the stock exchanges within three years from the date of commencement of business.
Ujjivan Small Finance Bank, which is a mass market focused bank catering to the financially unserved and underserved segments, serves over 49 lakh customers across 24 states and union territories. Its gross loan book stands at ₹12,864 crore and the deposit base at ₹10,130 crore as of September 30, 2019. In FY19, it had reported a profit of ₹199 crore, with net interest margin of 10.9%.
"Ujjivan Small Finance Bank's gross NPA was the lowest among the small finance banks at 0.85% of gross advances and the provision coverage ratio (PCR) was high at 72% in FY19," Geojit Financial Services said in a note.
Ujjivan Small Finance Bank offers loans to micro-banking customers that include group loans and individual loans, agriculture and allied loans, MSE loans, affordable housing loans, financial institutions group loans, personal loans, and vehicle loans. It also distributes third party insurance products.
On the liability side, Ujjivan Small Finance Bank offers savings accounts, current accounts and a variety of deposit accounts. The ability of small finance banks to take deposits gives them an edge of having a lower cost of funds compared to that of NBFCs and micro-finance institutions, says Geojit Financial Services.
What Analysts Say
Angel Broking recommends subscribe to the Ujjivan Small Finance Bank IPO issue. "At the upper end of the price band, Ujjivan Small Finance Bank is valued at 2.8 times its Q2FY2020 book value (Pre-IPO) and on post dilution basis at 2.3 time of book value, which we believe is attractive considering similar businesses are trading at higher valuations," the brokerage said in a note.
"Moreover, experienced management, pan-India presence, and pristine asset quality provides comfort. We recommend a subscribe to the issue," it added.
Geojit Financial Services has a subscribe rating on Ujjivan Small Finance Bank IPO, citing attractive valuations as compared to its peers.