Ujjivan SFB to reverse-merge holding firm


Price band for the bank’s ₹750-crore initial public offering is ₹36-₹37 per share

Ujjivan Small Finance Bank, which is coming out with an initial public offer on December 2, will reverse-merge the listed holding company after two years.

In an interaction with The Hindu, Samit Ghosh, MD and CEO of the bank, said that the Reserve Bank of India (RBI) had asked the bank to apply for the reverse merger after it completed five years of operations. The bank started operations in February 2017. The holding company, Ujjivan Financial Services, is also listed.

On Wednesday, the small finance bank announced its initial public offering to raise ₹750 crore. The bank has raised ₹250 crore through pre-IPO placement.

The IPO, with a price band of ₹36 to ₹37 per equity share, will open on December 2 and close on December 4, 2019. Ujjivan SFB has appointed Kotak Mahindra Capital Company, IIFL Securities and JM Financial as the book running lead managers to the issue. While the IPO will primarily help meet regulatory requirements, the bank will utilise the funds in two years.

“IPO is primarily for regulatory requirement to list the bank, but given the growth of our business, we will be utilising the fund within two years,” Mr. Ghosh said. “After the IPO, the promoters’ holding will come down from 100% to 84-85%.”

Bank may request review

Ujjivan Financial Services is the promoter of Ujjivan SFB and has 100% stake in the bank. The bank will also have to bring the promoters’ holding to 40% by 2022, but may request the regulator to review the norm.

According to RBI norms, small finance banks need to list the entity within three years of having ₹500 crore capital.

“Our deadline was January 31,” Mr. Ghosh, who is retiring by the end of the month, said. The new MD & CEO Nitin Chugh, a former HDFC Bank executive heading digital banking, will take charge on December 1.

On whether the lender had any plans to convert itself into a universal bank, Mr. Ghosh said they would look at it after completing five years as a small finance bank.

“After completion of five years, we can apply for universal bank licence. We will look at it at that time. Since the capital requirement of a universal bank is much lower, our ability to leverage is much better in [a] universal bank,” Mr. Ghosh said.

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Printable version | Jan 25, 2020 7:47:28 PM |

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