Ujjivan Small Finance Bank makes strong debut, lists at 57% premium

Shares of Ujjivan Small Finance Bank (USFB) made a strong market debut on Thursday and listed at Rs 58, a 57 per cent premium against its issue price of Rs 37 per share on the BSE.

The stock quickly extended its gains and rallied as high as Rs 62.80 per share intra-day on the exchange. It, however, pared some gains on account of profit booking to end the day at Rs 55.90, up 51 per cent against the issue price, on the BSE and Rs 55.30 on the NSE. A combined 26.6 crore shares changed hands on the counter on both exchanges.
 

The Rs 750-crore initial public offering (IPO) of USFB, the subsidiary of microfinance lender Ujjivan Financial Services, saw a massive subscription of 166 times. The IPO received bids for around Rs 76,000 crore.

The issue saw the highest subscription among all IPOs since January 2018. Ujjivan Small finance attracted huge subscriptions from all categories of investors because of its attractive valuation and strong asset quality.

The IPO of Ujjivan Small Finance Bank received bids for 20,538 million shares against the issue size of 12.4 crore shares. The quota reserved for qualified institutional buyers (QIBs) was subscribed 111 times, the non-institutional investor (NII) quota 473 times and the retail quota 49 times.

“With the diversified loan book across regions, healthy net interest margin (NIM), focus to expand quality loan book, stable assets quality with high PCR, USFB is the well managed SFB. Annualized ROE/RoA expanded to 19.4 per cent and 2.5 per cent in FY20. At the higher price band of Rs 37, the issue is available at P/ABV of 2.5 times which looks reasonable considering the fundamentals of the company”, the brokerage firm Choice Equity Broking said in IPO note.

“USFB’s healthy growth prospects and increased share of fee-based revenue streams should continue to aid its return ratios, even as rising share of non-MFI loans impacts its NIM. Its high share of MFI loans has been a positive for its asset quality in the current environment where we have seen rise in stress most other segments. Recent appointment of Mr. Nitin Chugh (ex-HDFCB Digital Banking Head) should aid the Bank’s liability and non-MFI asset profile, in our view,” analysts at Reliance Securities said in a note.