Street cheers for Ujjivan Small Finance Bank, IPO sees 170x subscription

The initial public offering (IPO) of Ujjivan Small Finance Bank (SFB), on Wednesday, saw 170x demand over the number of shares on offer. The institutional investor portion saw 114x oversubscription, high-net worth individual (HNI) segment saw 486x 
oversubscription and the retail portion was subscribed nearly 50x.

Market players said the encouraging listing day performance of new listings such as IRCTC and CSB Bank, coupled with Ujjivan SFB’s high growth potential, attracted investors towards the maiden offering.

The Rs 442-crore IPO generated bids worth nearly Rs 76,000 crore. Ujjivan SFB’s total issue size was around Rs 750 crore. However, it had allotted a little over Rs 300 crore to anchor investors ahead of its IPO.

Ujjivan SFB will raise the IPO proceeds to augment its capital base. However, the primary reason for listing was to meet the RBI guidelines on small finance banks.

Ujjivan SFB is a wholly owned subsidiary of Ujjivan Financial Services. The central bank has mandated all small finance banks to be listed as standalone entities within three years of commencing business. 

Following the IPO, Ujjivan Financial Services’ stake in the bank declined from 100 per cent to 84 per cent. Shares of Ujjivan Financial Services rose 4 per cent on Wednesday. 

According to investment bankers, the issue was of over 16 million applications, making it one of the most-subscribed IPOs. Bankers said given the high demand, only 1 out of 36 retail investors will get an allotment. 

The price band for the issue was Rs 36-Rs 37 per share. The IPO was entirely a fresh fund raise by the bank. At the IPO price, Ujjivan SFB will be valued at around Rs 6,300 crore on a post-issue basis. The issue was priced at over two times its estimated 2020-21 book value.

Most analysts recommended investors to subscribe to Ujjivan SFB’s IPO. “At the IPO price, Ujjivan SFB is valued at 2.3x book value (at the end of September 2020 quarter), which we believe is attractive, considering similar businesses are trading at higher valuations. We recommend a subscribe to the issue,” Angel Broking had said in a note.

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