Overseas firms looking to invest in Ujjivan Small Finance Bank via IPO

Overseas investment firms such as Elevar Equity Mauritius and NewQuest Asia Investments may be looking to invest in Ujjivan Small Finance Bank through its Rs 1,200-crore initial public offering, which is likely before November.

The two are existing investors in Ujjivan Financial Services--the publicly listed holding company of the bank--along with International Finance Corporation and CX Partners.

"Many existing investors of Ujjivan are showing interest in the bank's IPO," Ujjivan Small Finance Bank’s managing director Samit Ghosh told ET. "There is fair amount of interest from new investors as well, although there are concerns over governance issues in the BFSI (banking financial services and insurance) sector."

As per Reserve Bank of India's mandate, the bank has to be listed by February.

The bank had filed its draft red herring prospectus with market regulator Securities & Exchange Board of India in August this year. Shareholders of Ujjivan Financial Services will get preference to buy shares.

Ghosh said that investors have enquired about the health of the Indian economy, which has slowed, with first-quarter GDP growth falling to 5 per cent, the lowest in 25 quarters. The World Bank has slashed India's FY20 growth forecast to 6 per cent from its earlier estimate of 7.5 per cent.

Discerning investors are following the BFSI sector closely ever since IL&FS’s default last year.

"The good thing is Indian microfinance is unimpacted by economic cycles. And, today we (Ujjivan Small Finance Bank) have much more clarity on how we plan to shape our future," said Ghosh, who is slated to retire on November 30. As per the bank’s succession plan, chief executive-designated Nitin Chugh will take over from December 1.

The bank has more than doubled its second-quarter net profit to Rs 93 crore compared with the year-ago period’s Rs 44 crore, riding on higher net interest income.

The bank has shown 55 per cent growth in its advances portfolio with stable asset quality.

“We continue to focus on overall cost structure and have retained cost to income ratio within 70 per cent on account of increased top line and strong cost control measures. Asset quality continues to be stable despite multiple states grappling with floods,” Ghosh said.

Gross advances of the bank rose to Rs 12,864 crore while gross non-performing assets ratio improved to 0.9 per cent against 1.9 per cent a year ago. Net interest income grew 49 per cent at Rs 388 crore. Net interest margin remained almost flat at 10.8 per cent in the second quarter compared with 11 per cent a year ago.

With the bank diversifying into housing and two-wheeler loans, the share of its secured portfolio has risen to 19.4 per cent of the total loans compared with 9 per cent a year ago, providing better balance to risks.

The bank’s deposit base reached Rs 10,130 crore at the end of September, with retail deposits at 41.9 per cent to the total. The share was 30 per cent in the comparable period last year.

Capital adequacy ratio of the bank stood at 18.8 per cent as on September, of which tier-I capital was 18.1 per cent.