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Ujjivan Small Finance Bank IPO

About the company:

Promotor: Ujjivan Financial Services Limited (UFSL)

Ujjivan Small Finance Bank (USFB) is a mass-market focused SFB in India, catering to unserved and underserved segments and committed to building financial inclusion in the country. It’s Promoter, UFSL (Ujjivan Financial Services Ltd.) 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. UFSL’s erstwhile business was primarily based on the joint liability group-lending model for providing collateral-free, small ticket-size loans to economically active poor women. UFSL also offered individual loans to Micro and Small Enterprises (“MSEs”) and adopted an integrated approach to lending, which combined a customer touchpoint similar to microfinance, with the technology infrastructure and related back-end support functions similar to that of a retail bank.

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

On October 7, 2015, UFSL received RBI In-Principle Approval to establish an SFB (Small Finance Bank), following which it incorporated Ujjivan Small Finance Bank Limited as a wholly-owned subsidiary. UFSL, after 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 USFB, which commenced its operations from February 1, 2017.

The bank is included in the second schedule to the Reserve Bank of India Act, 1934 as a scheduled bank on July 3, 2017. In the short period that it has been operational as an SFB, it is among the leading SFBs in India in terms of deposits, advances, branch count and geographical spread, as of March 31, 2019.

Customer Base:

As of September 30, 2019, USFB served 4.94 million customers and operated from 552 Banking Outlets that included 141 Banking Outlets in Unbanked Rural Centres (“URCs”) (of which seven were business correspondent centres) and additionally operated four Asset Centres. In Fiscal 2019 alone, we operationalized 287 Banking Outlets. As of September 30, 2019, it had a network of 441 ATMs (including 18 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.

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:

Objects of the Issue:

USFB proposes to utilize the Net Proceeds from the Issue towards following objects:

1. Augmenting the Bank’s Tier — 1 capital base to meet our Bank’s future capital requirements 2. Meeting the expenses in relation to the Issue 3. Receive the benefits of listing the Equity Shares on the Stock Exchanges

Issue size:

The original issue size was planned for Rs. 1150 cr. but as USFB has already mobilized Rs. 299.19 cr. while issuing 85483667 shares at Rs. 35 in November 2019 (as pre-IPO placements), the net issue size stands Rs. 750 cr. (including UFSL shareholders quota). Initial equity was issued at par. The average cost of acquisition of shares by the promoters is Rs. 10 per share. Post issue its current paid-up equity capital of Rs. 1525.52 cr. will stand enhanced to Rs. 1728.22 cr.

Suggestion: Subscribe for the long term. Source: Bloomberg, ET & Chittorgarh.

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