Street cheers for Ujjivan Small Finance Bank as stock soars 50% on debut

Continuing with the recent trend of stellar listings, Ujjivan Small Finance Bank (SFB) saw its stock soar close to 70 per cent on its debut, on Thursday. The stock had attracted huge demand in its initial public offering (IPO) last week. It closed its first day at Rs 55.3, which was Rs 18.3 or 50 per cent higher than its issue price of Rs 37. 

The Ujjivan SFB stock touched a high of Rs 62.8 and low of Rs 53 on the National Stock Exchange, where over Rs 1,400 crore worth of shares changed hands. Ujjivan SFB’s Rs 750-crore IPO garnered nearly 170x subscription, with huge demand from both retail and institutional investors.

Analysts said a reasonable valuation, stable asset quality, and the brisk pace of business growth were factors that attracted investors.

“The experience of Ujjivan Financial Services as an erstwhile microfinance institution, coupled with the ability to address mass market customers, will further help it become a leading player in the SFB space. With strong asset quality and attractive valuation, we have a positive view on a long-term perspective,” said Vinod Nair, head (research), Geojit Financial Services. 

Ujjivan SFB raised Rs 750 crore through its IPO to augment its capital base. The primary reason for listing was to meet the central bank's guidelines on small finance banks. Ujjivan SFB is a wholly-owned subsidiary of Ujjivan Financial Services. The central bank has mandated all SFBs to be listed as standalone entities within three years of commencing business. 

Following the IPO, Ujjivan Financial Services' stake in the bank has declined from 100 per cent to 84 per cent. Interestingly, even as Ujjivan SFB’s shares soared 50 per cent, the stock of parent company Ujjivan Financial Services ended 3.3 per cent lower at Rs 329. 

At present, Ujjivan Small Finance Bank has a market cap of Rs 9,661 crore. Ujjivan Financial’s market cap is only Rs 3,993 crore, even as its stake in the SFB is valued at Rs 8,115 crore. Some market players called this an “unusually high holding company discount”.

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