The initial public offering of Bengaluru-based microfinance firm Ujjivan Financial Services Ltd drew a massive response on the third and final day of the issue with investors making bids for 40.66 times the shares on sale.
Ujjivan joins microfinance peer Equitas Holdings Ltd and diagnostics firm Thyrocare Technologies Ltd in attracting investors by the droves over the past month. While the IPO of Equitas was covered more than 16 times, Thyrocare’s issue was oversubscribed 72 times. The investors’ big appetite for primary market offerings comes even as the secondary market has oscillated between gains and losses over the past month.
Ujjivan’s offering of about 2.97 crore shares received bids for almost 120.63 crore shares, according to stock-exchange data.
Earlier, the firm had raised Rs 265 crore ($40 million) from a bunch of anchor investors including Edelweiss-controlled hedge fund Forefront Capital at the upper end of the Rs 207-210 price band. The firm also attracted a number of mutual fund and asset management arms of insurers as anchor investors.
Ujjivan becomes the second microfinance institution, after Equitas, with in-principle approval to launch a small finance bank to go public. The in-principle approval from the Reserve Bank of India requires small finance banks to pare their foreign shareholding to 49%. Foreign investors owned almost 89% of Ujjivan before the pre-IPO placement and currently hold about 77%. After the IPO, their stake will fall to 45%.
The company aims to raise Rs 358 crore by selling fresh shares while the offer for sale from overseas investors, who are exiting or paring their stakes, is worth about Rs 527 crore. The offer for sale includes share sales from investors, including Elevar Equity, International Finance Corporation and Sarva Capital.
Ujjivan had earlier planned to mop up Rs 650 crore through the fresh share issue in the IPO but it trimmed the targeted amount after raising almost Rs 292 crore via a pre-IPO placement, according to its red herring prospectus. The company plans to use proceeds from the fresh share issue to augment its capital base.
The company is seeking a valuation of as much as Rs 2,500 crore ($375 million) in the IPO.
Ujjivan had filed its draft papers with the Securities and Exchange Board of India in January and received the capital markets regulator's approval in March.
Overall, Ujjivan will be the fourth microlender to be listed on the stock exchanges; SKS Microfinance made its debut in 2010 while Satin Creditcare is the another MFI listed on the bourses. Equitas, the holding company for the fifth-largest microlender in the country, saw its share price soar on market debut last month.
Kotak Mahindra Capital, Axis Capital, ICICI Securities and IIFL Holdings are the lead managers to the Ujjivan IPO.