India: IPO-bound Ujjivan SFB Seeks More Time To Reduce Promoter Shareholding

Ujjivan Small Finance Bank, which is set to launch its initial public offering (IPO) next week, is seeking an extension from the Reserve Bank of India to bring down its promoter shareholding, bank officials said. The bank will start discussions with the regulator once the listing is over.

“Within five years, we have to reduce the shareholding to 40%. We will take it up with RBI. If they still insist that we have to reduce to 40% within five years, then we will look at OFS (offer for sale) or acquisition one year after this IPO,” Samit Ghosh, managing director & chief executive officer, told reporters.

Ujjivan Small Finance Bank has fixed a price band of ₹36-37 per share for its IPO opening on 2 December. The proposed issue will see promoter shareholding falling to 85% post the IPO. It will comprise a fresh issue of equity shares aggregating up to ₹750 crore. A portion of the issue aggregating up to ₹75 crore is set apart for eligible Ujjivan Financial Services shareholders, on a proportionate basis.

“We don’t want to acquire just to build our book. We are looking at something which brings new talent, new way of doing things like a tech company or a specialised NBFC, which does business where we are not doing business,” he added.

Ujjivan SFB had been exploring a reverse merger of its parent company with itself before the IPO. The bank’s parent Ujjivan Financial Services Ltd went public in 2016, after receiving an in-principle licence from RBI to start a small finance bank. The RBI later asked the promoter holding company to list its small finance bank unit to comply with its norms, which mandate that a small finance bank with a net worth of more than ₹500 crore must be listed within three years of the launch of operations.

“Within RBI guidelines, the reverse merger or allowing the promoter to reduce the shareholding to zero, is already a part of the clarification. So, that still stands. What we were asking for is not wait five years and do it earlier. That’s been turned down. After five years, it’s still possible, subject to RBI’s comfort with us in the sense they will look at annual audit or our compliance records,” he said.

Ujjivan SFB has a gross loan book size of ₹12,863.60 crore, with microfinance loans constituting 79.2% of the total loan book and MSME loans accounting for 6.5%.

This article was first published in livemint.com