IPO : The Ujjivan Small Finance Bank

IPO : The Ujjivan Small Finance Bank

Ujjivan Small Finance Bank Limited (USFB) is a mass market focused small finance bank in India, catering to financially unserved and underserved segments and committed to building financial inclusion in the country.The companies Promoter, Ujjivan Financial Services Limited (UFSL) commenced operations as an NBFC in 2005 with the mission to provide a full range of financial services to the `economically active poor` who were not adequately served by financial institutions. On October 7, 2015, UFSL received RBI In-Principle Approval to set up a Small Finance Bank(SFB), following which it incorporated Ujjivan Small Finance Bank Limited as a wholly-owned subsidiary. UFSL, subsequent to obtaining RBI Final Approval on November 11, 2016 to establish and carry on business as an SFB, transferred its business undertaking comprising of its lending and financing business to our Bank, which commenced its operations from February 1, 2017.

Ujjivan Small Finance Bank has a diversified portfolio with branches spread across 24 states and union territories and a customer base of 4.72 million as of June 30, 2019. Apart from the network of branches, ATMs and Automated Cash Recyclers, the bank has a phone banking unit that services customers in eleven languages, a mobile banking application that is accessible in five languages as well as internet banking facility for individual and corporate customers.

USFB Loan Product

1. Agriculture and allied loans

2. Affordable housing loans

3. Loans to micro banking customers

4. Personal loans

5. Financial institutions group loans

6. Vehicle loans

7. MSE loans

The bank has a diversified portfolio offering savings, current & deposit accounts, Aadhaar enrolment services, ATM-cum-debit cards, point of sales terminals, and distributing 3rd party insurance products. USFB is focussed on digital platform and provides bill payments, SMS banking, mobile banking, RuPay Platinum debit cards, internet banking, biometric ATMs services digitally. The bank also allows registering savings account on UPI based mobile applications. It has an automated tablet-based loan origination system, digitalised credit processing and automated receipt collection system to reduce the turn around time of customers.

Competitive Strengths

1. Serving mass-market segment of unserved and underserved

2. Multiple delivery channels

3. Pan-India presence

4. Digitally advanced platform

5. An established risk management framework

Company Financials

Recommendation

1. USFB has maintained its asset quality along with sustainable business growth.
2. This bank is planning to grow microfinance segment in order to de risk its portfolio.
3.  This bank has deep understanding of its audience. 
4. Diversified operation. 
5. Bank offers its customers differentiated and customised products that include micro loans, agriculture and allied loans, MSE loans, Financial institutions group loans etc. 
6. On first day, it got 1.06 times subscribed. 
7. Grey Market price is Rs 17 to Rs 18.

Verdict

In my view one should apply at least 1 lot for this IPO for listing gains only.  I don't think this stock is to be kept for long term preview. 

Sources: Various publications

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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