Ujjivan will be the second of the ten small finance licensees to sell shares to the public.
Ujjivan Financial Services is set to become the third microfinance institution after SKS Microfinance and Equitas Holdings to list on bourses.
Ujjivan will be the second of the ten small finance licensees to sell shares to the public.
The IPO which will remain open from April 28 to May 2 has a price band of Rs 207 to Rs 210 per equity share for face value of Rs 10. The issue will help the company raise Rs 875-882 crore. While Rs 358.16 crore would come from fresh issue of shares the rest will be from an offer for sale of over 2.49 crore shares by existing shareholders.
Samit Ghosh, founder and managing director of Ujjivan, said, "IPO ensures public ownership of a company that is expanding in rural India with 470 branches and 2.6 million customers spread across 24 states. It will also help diversify our funding sources and move us closer to set up the small finance bank for which we have a provisional licence."
Proceeds of the fresh issue will be used for on-lending. One of the conditions for microfinance institutions receiving the RBI's in-principle approval to convert into a small finance bank is to reduce foreign shareholding to under 49%.
Through this IPO, Ujjivan will reduce its foreign shareholding from the current 77% to 44-45% with big foreign investors like Elevar, IFC and Sarva Capital selling their stakes either wholly or partially . The company had an original foreign shareholding of about 90%. After the pre-IPO placement, the foreign holding of the company came down to 77%. With Rs 4,600 crore of assets under management, Ujjivan said it would soft-launch the small finance bank by early 2017.
Converting to a small finance bank comes with challenges as its entire loan book is unsecured individual lending and group guarantee model where borrowers form a joint liability group. The group lending will have to converted to individual lending and asset backed loans would have to be created. Know your customer (KYC) norms have to be adhered to. Though Ujjivan lends at 22%, its repayment are almost 100%, leading to very low NPAs.
Kotak Investment Banking, Axis Capital, ICICI Securities and IIFL are the book running lead managers to the issue. The shares will be listed on BSE and NSE.
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