India: Ujjivan SFB Surges As Much As 70% In IPO

Ujjivan Small Finance Bank Ltd., backed by investors including Aberdeen Standard Investments and Monetary Authority of Singapore, rallied as much as 70% after the lender raised funds in the most-subscribed IPO of 2019.

Investor demand exceeded shares on offer by 166 times as the lender got bids for 20.53 billion shares versus an issue size of 124 million shares. The shares were sold in a price band of 36-37 rupees each.

Ujjivan Small’s stellar listing extends the streak of robust returns logged by new entrants this year. Indian Railway Catering & Tourism Corp.’s initial share sale in October attracted bids for 112 times the offer size and the stock went on list at double the sale price.

Last week, CSB Bank Ltd., backed by billionaire Prem Watsa, had the best debut for an Indian lender since 2006.

Key Insights

• The company, an unit of microfinance lender Ujjivan Financial Services Ltd., caters to unserved and underserved segments. It started as a microfinance lender but has diversified by entering the non-microfinance business.
• The IPO by the lending arm of Ujjivan Financial Services Ltd., its holding company, was required to comply with the Reserve Bank of India’s licensing norms. The bank has to pare its promoter shareholding to 40% within five years of operations. Ujjivan Financial was listed in 2016.
• The fundraising will help the bank bolster its Tier-I capital
• Ujjivan Small Finance had about 5 million customers at the end of September.

Market Reaction

• Ujjivan Small Finance shares climbed as high as 62.80 rupees before trading at 54 rupees at 11:23 a.m. in Mumbai, up 47% from the IPO price.
• “The sector is under-penetrated and offers big scope for growth,” said Mona Khetan, Mumbai-based analyst at Reliance Securities Ltd. The stock is “fairly priced” after the listing gains, she said.
• Here are some of the top gainers among IPOs over the past two years:

Bloomberg