Prabhudas Lilladher 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 November 28, 2019
Prabhudas Lilladher's IPO report on Ujjivan Small Finance Bank
Ujjivan Small Finance Bank (SFB) a subsidiary of Ujjivan Financial Services is the 3rd largest SFB in AUM terms commencing operations in Feb’17. Bank has been able to ramp up reasonably well on both liabilities as well as assets and is coming back on track post facing issues in micro finance business from demonetization. It is trying to diversify its asset towards nonMFI (79% mix) from improved product offerings in the mass market segment compared to its earlier position of cater to lower end of the pyramid. Bank is getting listed to meet the RBI guidelines with fresh issue of Rs750mn (Rs250mn already raise pre-IPO). Post money raise, bank trades at 2.0x FY20E & 1.7x FY21E ABV on upper band of Rs37, which in our view is fairly priced on back of weaker liability profile, higher cost/assets and is yet to establish a franchise. We recommend subscribe only with a long term view.
Valuation and Outlook
At the upper band of Rs37, bank will trade at 1.9x FY20 BV of Rs 19 and 1.7x FY21 BV of Rs22 which seems to be fairly priced but with limited upside in near to medium term as it has to demonstrate on many parameters and sustainability and hence we recommend to subscribe to the issue with only long term and play the value in bank rather than holding company (which is listed as well).
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