Ujjivan Financial IPO to raise up to Rs 882 crore

Foreign shareholding to come down to 45%, from 77%

Ujjivan Financial Services, granted an in-principle licence from the Reserve Bank of India (RBI) for a Small Finance Bank (SFB), plans to raise Rs 882 crore via an Initial Public Offer (IPO) of equity.While Rs 358 crore will be raised by a new issue, the rest will bean offer for sale of 24.9 million equity shares to existing shareholders. The issue opens on April 28 and closes on May 2; the price band is Rs 207-210.

The company raised Rs 292 crore in a pre-IPO placement. After this, the foreign shareholding will come down to 45  per cent (including employee stock options) from the earlier 77 per cent. Some lenders such as Ujjivan and Equitas had to tap the markets even before they launched operations to reduce their foreign shareholding to below 49 per cent as mandated by RBI.

This is because the foreign  shareholding rules for SFBs are the same as the foreign direct investment (FDI) one for private sector banks. At present, private  banks can have foreign shareholding of up to 49 per cent through the automatic route and can go up to 74 per cent after approval from the Foreign Investment Promotion Board (FIPB). At end-December 2015, the assets under management of Ujjivan were Rs 4,540 crore and gross non-performing assets were 0.15 per cent of the total.

The management said their market share in the segment was 11.15 per cent, the third largest non-bank finance company/micro finance institution in loan disbursement as of end-September 2015.

“We are looking at starting of operations by the first quarter of the next financial year. We will be building on our strengths and also build a core banking system and treasury operations,” said Sudha Suresh, chief financial officer.

In the near term, she said, profitability at the bank might be under pressure but will benefit from the reduced cost of funding. The  IPO proceeds will be used to augment the capital base. Kotak Investment Banking, Axis Capital, ICICI Securities, IIFL and Karvy are the lead book-managers.

Last year, RBI had granted SFB licences to 10 of 72 applicants. These SFBs will be similar to existing commercial lenders and will undertake basic banking activities such as accepting deposits and lending to the un-served and under-served sections.