The initial public offering of Ujjivan Small Finance Bank Ltd, a unit of lender Ujjivan Financial Services Ltd, was fully subscribed on the first day of the share sale on Monday thanks mainly to demand from retail investors.
The offering of 123.95 million shares, excluding the anchor allotment portion, received bids for about 201.42 million shares at the end of the first day, stock-exchange data showed. This means the book was subscribed 1.63 times.
The quota reserved for retail investors was subscribed 8.6 times. The portion set aside for non-institutional investors – comprising corporate bodies and wealthy investors – was covered nearly 43% while institutional investors bid for 23% of the shares reserved for them. The IPO will close on Wednesday.
Ujjivan SFB is seeking Rs 6,394.42 crore ($895.6 million) in valuation from the IPO, which would result in roughly 11.73% stake dilution.
The Rs 750-crore offering is entirely a fresh sale of shares. At the upper end of the Rs 35-37 price band, the company will issue a total of 202.7 million shares. This includes the anchor investors' portion.
Ahead of the IPO, the lender raised Rs 303.75 crore ($42.31 million at current exchange rates) from anchor investors including Singapore sovereign wealth fund GIC Pte Ltd and homegrown private equity firm CX Partners ahead of its initial public offering. The company allotted a total of 82.09 million shares at Rs 37 apiece to 18 investors, it informed stock exchanges on Saturday.
GIC, which has a large public equities portfolio in India and has participated in several IPOs as an anchor investor, bought 14.86 million shares worth Rs 55 crore. CX Partners, which invests through its sector-agnostic fund, purchased 13.51 million shares worth Rs 50 crore.
Other marquee institutional investors include Scottish investment firm Aberdeen, Goldman Sachs and IIFL Special Opportunities Fund, which had previously subscribed to Ujjivan SFB’s shares in a pre-IPO round a fortnight ago. The lender had then raised Rs 250 crore by diluting a 4.75% stake.
Asset managers who participated in the anchor allotment were Sundaram Mutual Fund, ICICI Prudential Asset Management Company, Edelweiss Mutual Fund, BNP Paribas Mutual Fund, Aditya Birla Sun Life Mutual Fund and UTI Mutual Fund. HDFC Life Insurance Co Ltd and Bajaj Allianz Life Insurance Co were the local insurers who participated in the anchor allotment.
Anchor investors, also known as cornerstone investors, are institutions that accept a one-month lock-in for a sizeable allocation of shares. Their participation highlights investors’ confidence in an IPO and sets a benchmark for the investor community at large.
The company will use the net proceeds from the issue to augment its tier-1 capital for future requirements to grow its operations and comply with regulatory norms for enhanced capital base as may be prescribed in the future.
Ujjivan SFB will join listed peers such as PE-backed AU Small Finance Bank Ltd, Equitas Holdings as well as its parent Ujjivan Financial on stock exchanges.
Chennai-based Equitas, which has a market value of Rs 3,614.13 crore, listed its shares in April 2016, followed closely by Ujjivan Financial.
Bengaluru-based Ujjivan Financial launched small finance banking operations in February 2017 after transferring the business to Ujjivan SFB, a new entity. The group had received in-principle approval from the Reserve Bank of India in October 2015 to establish a small finance bank.
Kotak Mahindra Capital Co, IIFL Securities and JM Financial are arrangers and managers to the share sale.