Ajcon global has come out with its report on Ujjivan Financial Services IPO. The research firm has recommended to "SUBSCRIBE" the IPO in its research report as on April 27 , 2016.
Ujjivan Financial Services (“Ujjivan”) started their operations as an NBFC in 2005 with the mission of providing a full range of financial services to the economically active poor who are not adequately served by financial institutions. The company’s business is Primarily based on the joint liability group-lending model for providing collateral free, small ticket size loans to economically active women.
The company also offers individual loans to Micro & Small Enterprises (“MSEs”). On 7th October 2015, Ujjivan has received in-principle approval from the RBI to set up a Small Finance Bank (“SFB”). The company offers a diverse range of loan products to cater to the specific requirements of their customers. Company’s products can be classified under two broad categories, namely, Group Loans and Individual Loans. Depending upon the end use, these products can be further sub-divided into Agricultural, Education, Home Improvement, Home Purchase and Livestock Loans. All of their assets under management (“AUM”) fall under the priority sector lending norms prescribed by the RBI. In addition to loan products, they also provide non-credit offerings comprising of life insurance products, in partnership with insurance providers such as Bajaj Allianz Life Insurance Co., Kotak Mahindra Life Insurance Co. and HDFC Life Insurance Co.
Objects of the issue
Fresh Issue - Upto 42,023,609 (Upper price band) - 42,270,787 (Lower price band) Equity Shares (Utilise the Net Proceeds from the Fresh Issue towards augmenting its capital base to meet future capital requirements).
At the upper end of the price band of Rs. 210, the IPO is valued at ~2.2x at FY16 Post issue P/BV which is reasonable. With due consideration to factors like a) Leading MFI with a deep pan-India presence, b) experienced leadership and strong corporate governance; c) robust technology driven operating model, d)comprehensive understanding and successful track record with underserved customer segment offering significant growth opportunities, e) effective risk management and improved efficiencies, f) customer and product profile has significant synergies with the SFB business and can enable access to larger customer base and enhance revenue generation & capital raising options, g) strong execution track record, g) impressive NIM and RoA with decent RoE, h) strong asset quality with NPAs under control, we recommend investors to “SUBSCRIBE” the issue.
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