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Ujjivan Small Finance Bank: Analysts still bullish despite bumper listing

Ujjivan Small Finance Bank (SFB) got off to a solid start at the bourses on Thursday as the shares got listed at Rs 58 apiece on the BSE, a 57 per cent premium against the issue price of Rs 37 per share on the BSE. The stock rallied further to hit a high of Rs 62.80 in the intra-day trade. 

The initial public offering (IPO) of the lender, which was open for subscription during December 2-4, was subscribed more than 170 times at a price band of Rs 36-37 per share. The institutional investor portion saw 114x oversubscription, high-net worth individual (HNI) segment saw 486x oversubscription and the retail portion was subscribed nearly 50x.

Most brokerage houses tracking the bank had assigned 'subscribe' rating to the IPO citing its steady ride in terms of advances growth along with decent asset quality. "There was continued focus on garnering retail liability along with building current and savings account ratio (CASA) base. We have a SUBSCRIBE recommendation on the stock. Further, at the IPO price band of Rs 36-37, the stock is available at a P/BV of ~2.2x (post issue) at the upper band on H1FY20 basis," analysts at ICICI Securities had said in a pre-IPO note.

Investment strategy

The rational strategy, as per analysts, is to wait for a few days and let the price settle before taking any decision. Those who are eyeing short-term gains can book profit at Rs 78 levels while those who have long-term investment horizon should stay put and accumulate the stock gradually.

It is advisable to wait for a while because there has been many instances in the past where after stellar listing, the euphoria in the stock has fizzled out, said Narendra Solanki, Head- Fundamental Research (Investment Services) at Anand Rathi Shares & Stock Brokers. "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," the analyst added. 

The recent acceleration in assets under management (AUM) growth is likely to sustain with the bank now focusing on new secured product offerings like Micro and Small Enterprises (MSE) and Affordable Housing over Micro finance Institutions (MFI), which have relatively lower yields but also lower cross-cycle credit costs, said Nirmal Bang Securities. The brokerage expects H1FY20 ROA/ROE of 2.5 per cent/19.6 per cent to sustain going ahead. 

Gaurav Garg, Head of Research at Capital Via, suggests that the investors should hold the stock for now and once it reaches Rs 78 levels, they can book profit. The analyst feels that the counter is likely to touch the level maximum by next month.


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