Ujjivan Small Finance Bank Ltd. share price target

Ujjivan Small Finance Bank (USFB) has started the operations in Feb 2017 and had Building blocks in place for next phase of upsurge the most diversified portfolio, spread across 24 states and union territories as of March 31, 2019 among the 10 SFB players in India. With a total loan book of Rs.128.6bn as of Sept '19, it's the third largest SFB among the 10 SFB players that got the license. Asset products as of Sep'19 comprises: (i) loans to micro banking customers that include group loans and individual loans, (ii) agriculture and allied loans, (iii) MSE loans, (iv) affordable housing loans, (v) financial institutions group loans, (vi) personal loans,...

TTM Price to Book of 2.8 (IPO Price), it is valued below its peers. With the regulatory hiccups out of the way, the management can focus on growth of the core business. We expect the company to grow NII & Profitability at a CAGR of 25% over the next 3 years, with well managed NPAs. We expect ROA & ROE to reach 2% & 15% respectively over the next 3 years.

Given all the growth prospects, we are bullish on Ujjivan SFB & We recommend a subscribe for the IPO.

Having a strong management team, It has the most diversified portfolio spread across 24 states & union territories. Thus, this diversified operations allow to de-risk business by mitigating political and state-specific risks. Further, as a result of geographic spread, it helps to reduce concentration risk and diversify loan portfolio.

Being the leading SFB’s amongst peers in India, Ujjivan has maintained strong Asset quality with lowest GNPA (Gross Non- performing Assets) levels at 0.85% and higher provisioning at 72% during sep.2019. Apart from having a strong presence in the country’s microfinance sector; the bank has started focusing on the retail loan segment.

As per our estimates, on the upper price band of ` 37, post issue estimated P/BV for FY20 translates to 2.18x. which is quite lower compared with the 4x-5x P/BV ratio that the industry commands. Considering asset quality, growth in advances & deposits, expansions plans, corporate governance, we recommend to subscribe for long term as well as listing gains.

Ujjivan Small Finance Bank Ltd (USFB), promoted by Ujjivan Financial Services Ltd (UFSL), is a mass market focused small finance bank (SFB), catering to the unserved & underserved segment. USFB is doing an IPO to meet the RBI regulation which requires the SFB to list within a period of 3 years. Currently, the holding promoter company UFSL is listed which will have 83.3% stake in USFB post IPO. As per RBI guidelines, the promoter is required to reduce its shareholding in SFB to 40% within a period of 5 years from the date of commencement (1st Feb, 2017 for USFB) of business operations. This could act as an overhang on the stock. However, once the IPO process is completed, USFB will consult the RBI on the reverse merger...

As of Sept 30, 2019, they had a network of 441 ATMs (including nine ACRs), two 24/7 phone banking units based in Bengaluru and Pune that service customers in 11 languages, and a mobile banking application that is accessible in five languages as well as internet banking facility for individual and corporate customers. Their Gross Advances (including securitization/ IBPC) have grown from 6383.9 Cr as of FY17 to 12863.6 Cr as of H1FY20. Their deposits have increased from 2, 06.4 Cr as of FY17 to 10129.8 Cr as of H1FY20. PAT was at 6.8 in FY18 to 187.1 Cr in H1FY20.Their long term bank facilities have been rated CARE A+;...

Pan-India presence: As of September 30, 2019 the company was present in 24 states and union territories encompassing 232 districts in India. As of September 30, 2019, it operated from 552 Banking Outlets that included 141 Banking Outlets in URCs (of which seven were business correspondent centres) and additionally operated four Asset Centres. Its...

Ujjivan Small Finance Bank | Industry: BFSI Ujjivan is a play on the MFI growth story. So far, it has effectively managed to grow assets with decent asset quality profile. However, going forward trajectory of business model will change with buildup of non-MFI loans and ramp of retail liabilities which shall be an uphill task for the new management in the wake of tough competition in the market space. Also, the bank will have to...

IPO NOTE

Ujjivan Small finance Bank (USFB) is a mass market focused SFB in India, catering to unserved...

Ujjivan Small Finance Bank Limited IPO Note Issue Open: December 02 December 04, 2019, Price Band: Rs. 36 37 (Discount of Rs 2 per share for eligible UFSL shareholders bidding in shareholders reservation portion), Issue Size: 202,702,703 eq shares * (Inculding UFSL shareholder reservation)