Ujjivan Small Finance Bank IPO opens on Monday: Key things to know before you invest in it

The initial public offering (IPO) of Ujjivan Small Finance Bank (USFB) is all set to hit the Dalal Street on December 2, Monday. The IPO will be open for three days. The issue will close for subscription on December 4 (Wednesday).

The USFB has finalised the allocation of 8,20,94,594 shares at Rs 37 per share, which is the upper limit of the price band for the IPO.

Kotak Mahindra Capital Company, IIFL Securities and JM Financial are IPO issue's book running lead managers.

The Ujjivan Small Finance Bank is the subsidiary of Ujjivan Financial Services Ltd (UFSL). It is the 12th company launching an IPO in FY20.

Ujjivan SFB IPO: 10 things to know about it

On October 7, 2015, promoter UFSL received the RBI's approval to set up an SFB, following which it incorporated Ujjivan SFB, as a wholly-owned subsidiary. The Ujjivan SFB obtained the RBI's Final Approval on November 11, 2016, and commenced its operations on February 1, 2017.

The UFSL is an NBFC which came into existence in 2005. The aim of Ujjivan Financial Services Ltd is to provide a full range of financial services to the 'economically active poor' who are not adequately served by the financial institutions. Ujjivan Financial Services got listed in 2016.

IPO detail

Ujjivan Small Finance Bank has launched the IPO with a price band of Rs 36-37 per equity share. Each share will have a face value of Rs 10.

There will be a reservation price of Rs 75 crore worth of shares for subscription by eligible shareholders of Ujjivan Financial Services. They will get shares at a discount of Rs 2 per share.

Minimum bid lot is 400 equity shares, and in multiples of 400 equity shares thereafter.

Fundraising

With this public issue, the Ujjivan Small Finance Bank is aiming to raise Rs 750 crore. The lender has already raised Rs 250 crore through pre-IPO placement of 71,428,570 equity shares.

Objective of the IPO

The bank wants to raise Rs 750 crore to bolster its Tier-I capital base to meet its future capital requirements.

Shareholding and management

Ujjivan Financial Services (UFSL) is the promoter of the company, holding 1,44,00,36,800 equity shares (representing 94.40 per cent of paid-up equity capital). It also included one equity share each held by Samit Kumar Ghosh, Carol Furtado, Sudha Suresh, Rajat Singh, Ittira Davis and Premkumar G, as nominees on behalf of UFSL, who is the beneficial owner of such equity shares.

Samit Kumar Ghosh is the Managing Director and Chief Executive Officer of the bank while Sunil Vinayak Patel is the part-time chairman and independent director. Jayanta Kumar Basu and Mona Kachhwaha are non-executive directors while Chitra Kartik Alai is the non-executive nominee director. Sachin Bansal, Biswamohan Mahapatra, Prabal Kumar Sen, Nandlal Laxminarayan Sarda, Vandana Viswanathan, Mahadev Lakshminarayanan and Luis Miranda are independent directors.

Financial history

The Ujjivan SFB gross advances (including securitization/IBPC) have grown from Rs 6,383.98 crore as of March 31, 2017, to Rs 11,048.59 crore as of March 31, 2019, and were Rs 12,863.64 crore as of September 30, 2019.

The Bank's deposits have risen from Rs 206.4 crore as of March 31, 2017, to Rs 7,379.44 crore as of March 31, 2019, and were Rs 10,129.85 crore as of September 30, 2019.

As of September 2019, bank's percentage of gross NPAs to gross advances was 0.85 per cent while its percentage of net NPAs to net advances was 0.33 per cent.

 The bank's profit after tax for fiscal 2018 was Rs 6.86 crore and Rs 199.22 crore for 2019. Whereas, its PAT stood at Rs 187.11 crore for the six months ended September 2019.

Furthermore, Ujjivan SFB's long term bank facilities have been rated A+; stable by CARE Ratings, its certificate of deposits have been rated A1+ by CRISIL.

Asset products

As of September 30, 2019, USFB has served 4.94 million customers and operated from 552 banking outlets that included 141 banking outlets in unbanked rural centres and has operated four asset centres. It had a network of 441 ATMs (including 18 ACRs), two 24x7 phone banking units based in Bengaluru and Pune, and a mobile banking application as of September 2019.

Risk factors

1. It has a limited operating history as an SFB and future financial and operational performance cannot be evaluated on account of its evolving and growing operations.
2. The USFB has recently introduced several new products and services and they are unable to assure whether the products and services would be profitable in the future.
3. USFB's micro banking loan portfolio, personal loans, and certain categories of their MSE loans lack support by any collateral that could help ensure repayment of the loan.