LKP Research has come out with its report on Ujjivan Small Finance Bank. The research firm has recommended to "Subscribe'' the IPO in its research report as on December 01, 2019
LKP Research's IPO report on Ujjivan Small Finance Bank
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 reduce down the promoter stake further to 40% over the next 2 yrs from levels of 84% post IPO as per RBI guidelines which will be a hangover in the medium term. In this backdrop, in our view, the bank is not likely to trade at higher multiples.
Valuation and Outlook
Our back of the envelope calculation suggests, the bank is trading at 1.6x FY22e. Given reasonable valuations, we recommend SUBSCRIBE to the issue.
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