Ujjivan Financial, Ujjivan SFB surge up to 18% in 2 days on heavy volume

The entire merger process is expected to be completed within a time-frame of 7-8 months i.e. by October-November 2023, Ujjivan Small Finance Bank said.

Shares of Ujjivan Financial Services (UFSL) and Ujjivan Small Finance Bank (SFB) hit their respective 52-week highs, surging up to 8 per cent on the BSE in Tuesday’s intra-day trade amid heavy volume. In past two trading days, the stock prices of these companies have rallied up to 18 per cent.

Among individual stocks, Ujjivan SFB hit a multi-year high at Rs 52.20, up 8 per cent in intra-day trade today, and has soared 18 per cent in past two days. The stock had hit a record high of Rs 62.80 on December 12, 2019. A combined 25.56 million shares representing 1.3 per cent of total equity of the Bank changed hands on the NSE and BSE till 09:41 AM.

Shares of UFSL hit a seven year high of Rs 513.75, up 4 per cent on the BSE in intra-day trade. In past four trading days, the stock has surged 16 per cent. The stock had hit a record high of Rs 547 on July 28, 2016.

Ujjivan SFB expects to complete the reverse merger of the holding company, UFSL soon, while the process to identify the successor of the current MD (internal/ external) is on. In consideration of the proposed merger, the Bank will allot to the shareholders of UFSL as on the record date, 116 equity shares of the Bank, for every 10 equity shares held by such shareholders of UFSL.

The Bank on March 09, 2023 received the no-objection letters from stock exchanges, basis which a joint application has been filed with the National Company Law Tribunal (NCLT) on March 29, 2023, by the Bank and the Holding Company.

The Bank is now awaiting the orders from the NCLT on convening the meetings of the shareholders and creditors. Post receipt of all regulatory approvals, the Bank will initiate processes relating to finalisation of record date, approval from Registrar of Companies (ROC), issue of shares etc. to affect the reverse - merger. The entire process is expected to be completed within a time-frame of 7-8 months i.e. by October-November 2023, Ujjivan SFB said in its FY23 annual report.

Ujjivan SFB’s accelerated focus on brand building, new customer acquisition and retail granular deposits, coupled with ongoing investments in distribution and digital initiatives, is likely to keep operating costs elevated in the medium term, according to analysts at HDFC Securities.

The management also guided for a catch-up in deposit repricing, which is likely to result in higher funding costs, the brokerage firm said in June quarter result update, adding they watch out for the trajectory of funding costs and sustainability of asset yields, given the limited room for repricing in the MFI portfolio.

Analysts at Emkay Global Financial Services believe the Bank needs to ramp-up its liability profile as well as efficiently manage the new Management transition. Key risks: Macro/micro disruption leading to slower than expected growth; higher NPAs with seasoning of the MFI/SME book and KMP attrition, the brokerage firm said in result update. It has ‘Buy’ rating on the stock with a target price of Rs 58 per share.