IPO Update: Ujjivan Financial dips on filing for small bank IPO

Ujjivan Financial Services announced its decision to launch IPO of the company’s subsidiary Ujjivan Small Finance Bank (USFB). Reacting to this news, the stock of the company on Monday fell by nearly 8 per cent during intraday trade.

USFB filed Draft Red Herring Prospectus (DRHP) with the SEBI for the proposed IPO with a likely dilution of 10 per cent. The initial public offering is for equity shares having a face value of Rs. 10 each of UFSB. This fresh issue comprises of USFB’s equity shares aggregating to Rs. 1,200 crore. It also includes a reservation of up to Rs. 120 crore equity shares for eligible shareholders of Ujjivan Financial Services Limited (USFL). USFB has appointed Kotak Mahindra Capital Company Limited, IIFL Securities Limited and JM Financial Limited as the Lead Managers for the issue. In the DRHP filed by the company, it stated that the focus of USFB will be towards financial inclusion in the country and the company intends to use the proceeds of this issue to augment its capital base for any future requirements.

Even as an IPO of a subsidiary company is thought to be a positive move, the market feared that listing of the small finance bank would put pressure on the stock of parent company. Analysts feel this is negative for shareholders of the microfinance lender. More clarity on USFB IPO pricing is yet to be given. But the listing of USFB means dilution and holding company discount for existing shareholders.

On Monday, the stock of Ujjivan Financial Services closed at Rs. 280.35 per share, down by 1.32 per cent or Rs. 3.75 per share. The intra-day low was Rs. 261.7. The 52-week high is Rs. 371.5 and 52-week low is Rs. 166.8 on BSE.