Bengaluru-based microfinance firm Ujjivan Financial Services Ltd has filed its draft red herring prospectus with the capital markets regulator Securities and Exchange Board of India (SEBI) for its initial public offering (IPO).
The proposed issue will make Ujjivan the second MFI in the country after Equitas Micro Finance to get in-principal nod from RBI to raise money through a public offer and the third MFI after SKS Microfinance to hit the bourses.
The move comes just months after Ujjivan itself got in-principle approval from RBI to start a small finance bank as it tries to reduce foreign shareholding to 49 per cent to comply with norms for the new niche set of banks.
The firm plans to raise Rs 650 crore (just under $100 million) through a fresh issue of shares besides giving part and full exits to several private investors. It said that it may raise Rs 450 crore by selling shares to institutional investors ahead of the IPO which would thereby reduce the size of the fresh issue size.
Given the last share issue to new investors such as CDC a year ago, the offer for sale may be worth at least Rs 365 crore. However, how big a premium the company may command would decide if it would be bigger than Equitas or match up to Rs 1,654 crore issue floated by SKS in 2010.
Two of every three firms that went public last year churned out better returns than the 30-stock benchmark Sensex last year.
Here's a snapshot of Ujjivan’s IPO:
- Fresh issue of shares to raise up to Rs 650 crore and an offer for sale of up to 24.9 million equity shares.
- Bankers: Kotak Mahindra Capital, ICICI Securities, Axis Capital and IIFL.
Objects of the issue
The money to be raised through the fresh issue of shares will be used for augmenting the company's capital base. It would also allow the firm to reduce the foreign holding in the company.
- Incorporated in 2005, Ujjivan started operations as an NBFC with a joint liability group lending model for providing collateral free and small ticket-size loans to women. It also offers individual loans to micro and small enterprises.
- It is led by Samit Ghosh who also serves as CEO and MD and holds just 1 per cent of the total issued and paid up share capital of the company. A Wharton graduate, Ghosh had served at HDFC Bank, Standard Chartered Bank in Dubai and Citibank in India, Dubai and Bahrain before founding Ujjivan.
- As of September 30, 2015, it had 469 branches across 24 states and union territories.
- It plans to float a wholly owned subsidiary and transfer the existing business to it, which will in turn be the proposed small finance bank.
- For the financial year ended March 31, 2015, the company's consolidated revenue was Rs 611.88 crore against Rs 357.66 crore in FY14. Its net profit rose by 30 per cent last year to Rs 114.5 crore. Its assets under management (AUM) as of September 30, 2015, stood at Rs 4,088 crore making it the third largest NBFC-MFI in India in terms of loans disbursed. It also became the largest MFI in terms of geographical spread.
The firm counts around a dozen venture capital, private equity and development financial institutions as private investors. Around 89 per cent stake of the firm is held by foreign investors including overseas incorporated bodies.
CDC, IFC and CX Partners are the top three shareholders of the firm with 12.69 per cent, 11.84 per cent and 10.69 per cent equity stake. In the proposed offer for sale, Elevar, IFC, Caspian, FMO and Sarva Capital are part-exiting while Women’s World Banking Capital Partners, Unitus and Wolfensohn Capital intend to sell all their shares.