Ujjivan Small Finance Bank extends gains; surges 65% against issue price

The stock of the lender saw a stellar listing at the bourses on December 12, 2019. Issued at a price of Rs 37, the shares got listed at Rs 58 apiece on the BSE, a 57% premium against the issue price

Shares of Ujjivan Small Finance Bank extended their gains to second straight day, up 4.5 per cent to Rs 61.10, in the early morning deals on Tuesday. The stock has zoomed 65 per cent against its issue price of Rs 37, and is 19.45 per cent off its recent low of  Rs 51.15 apiece hit on December 13, 2019.

At 10:15 am, the stock was up 3.59 per cent at Rs 60.55 per share. In comparison, the S&P BSE Sensex was ruling near at record high levels of 41,230.05, up 283.83 points or 0.71 per cent.

The stock of the Ujjivan Financial Services-controlled lender saw a stellar listing at the bourses on December 12, 2019. Issued at a price of Rs 37, the shares got listed at Rs 58 apiece on the BSE, a 57 per cent premium against the issue price. The initial public offering (IPO) of the lender was subscribed more than 170 times. The institutional investor portion saw 114x oversubscription, high-net worth individual (HNI) segment saw 486x oversubscription and the retail portion was subscribed nearly 50x.

"The experience of Ujjivan Financial Services as an erstwhile microfinance institution, coupled with the ability to address mass market customers will further aid USFB to be among the leading SFBs in India. At the upper price band of Rs 37, the is at P/BV of 2.5x FY19, which is at a significant discount to its peers," wrote analysts at Geojit Financial Services in an IPO note. 

According to analysts, those who are eyeing short-term gains may book profit at Rs 78 levels while those who have long-term investment horizon should stay put and accumulate the stock gradually.

"Those who are in for long haul should gradually "add" the stock to their portfolio as the valuations are extremely attractive. Further, the company's prospects, too, look promising," said Narendra Solanki, Head- Fundamental Research (Investment Services) at Anand Rathi Shares & Stock Brokers.

"Within 3 years of operation, USFB has been able to improve funding mix towards deposit and CASA ratio of 12 per cent. In FY2017, out of total borrowing, only 3 per cent was sourced through term deposit and reached to 76 per cent in Q2FY2020.  To mobilize retail deposits, USFB is offering higher term deposit rate.," said analysrts at Angel Broking in a review note. They remain positive on the small finance bank's experienced management, Pan-India presence, and pristine asset quality provides comfort.