Ujjivan SFB raises Rs 304 cr from anchor investors; here’s what analysts say on IPO

NEW DELHI: Ujjivan Small Finance Bank, whose initial public offering (IPO) will hit Dalal Street on Monday, has raised Rs 303.75 crore in anchor allotment. The SFB has finalised allocation of 8,20,94,594 shares at Rs 37 per share, which is the upper limit of the price band for the IPO.

Government of Singapore, CX Partners Fund 2, Goldman Sachs India, Aberdeen Standard Asian Smaller Companies Fund, HDFC Life Insurance, Sundaram Mutual Fund and Bajaj Allianze Life Insurance are among the key anchor investors.

A total of six mutual funds through 33 schemes bade for the anchor portion. They included schemes of ICICI Prudential, Sundaram MF, BNP Paribas, UTI, AB Sun Life and Edelweiss AMC.

The price band for the Rs 750 crore SFB issue has been fixed in the Rs 36-37 range. The issue comes on the heels of the CSB Bank offer, which received an overwhelming 87 times subscription earlier this week.

Ujjivan Small Finance Bank’s holding company Ujjivan Financial Services got listed in 2016. The Ujjivan Small Finance Bank was to list within three years of getting bank licence from RBI even when the holding company is listed.

Here is what the brokerages say on the issue:

ICICI Securities: Subscribe

The brokerage said the SFB, led by the promoter business, started with a substantial proportion of MFI loans. But, there has been a continuous focus on increasing share of non-MFI segment via introduction of new products including affordable loans, MSE loans and auto loans, it said. “USFB had a steady ride in terms of advances growth along with maintaining asset quality. There was continued focus on garnering retail liability along with building CASA base,” it said while recommending a 'subscribe' rating on the issue.

Angel Broking: Subscribe

At the upper end of the price band, the SFB is valued at 2.8 times its Q2FY2020 book value (Pre-IPO) and 2.3 times on post dilution basis and Angel Broking finds the valuations attractive, considering similar businesses are trading at higher valuations. "Moreover, experienced management, Pan-India presence, and pristine asset quality provides comfort,” it said.

Geojit Financial Services: Subscribe

This brokerage believes that the experience of Ujjivan Financial Services as an erstwhile microfinance institution, coupled with the ability to address mass market customers will further aid the bank to lead SFBs in India. The brokerage finds the valuations at a significant discount to its peers. It has a ‘SUBSCRIBE’ rating on the issue with a long-term perspective.

Emkay Global Financial Services: No rating

Brokerage Emkay Global values the bank at 1.5 times September 2021 adjusted book value (ABV), while the IPO at the higher price band of Rs 37 valued it at a slight premium valuation of 1.7 times September 2021 ABV. “The bank has gradually diversified into other products and recently into crop loans for small farmers. We believe this is a step in the right direction but will have to tread with caution given rising systemic/agri stress. Its recent decision to stop unsecured SME lending in view of higher NPAs is a testimony to our fears. DRHP red-flags a host of operational/compliance lapses. We believe new management will need to ramp up operational/compliance standards to avoid regulatory ire,” it said.