India: Ujjivan Financial Services raises $43m in pre-IPO round

Visual from Ujjivan website

Ujjivan Financial Services Ltd, the micro-lender which has won a provisional licence to convert itself to a small finance bank, has raised over Rs.300 crore from a clutch of investors in a private placement round ahead of its planned initial public offering (IPO). The funding values the firm at around Rs.2,150 crore, according to data from the firm’s filings with the registrar of companies on Tuesday.

On 6 February, Mint had reported that the micro-lender was in talks to raise funds from domestic investors in a so-called pre-IPO round of fund raise.

According to the documents, the firm has raised Rs.312.4 crore from almost 33 domestic investors including mutual funds, insurance firms, family offices and high net-worth individuals (HNIs).

The domestic institutions, which participated in the fund raise include insurance firms such as HDFC Standard Life Insurance Co. Ltd, Shriram Life Insurance Co. Ltd, Bajaj Allianz General Insurance Co. Ltd, Kotak Mahindra Old Mutual Life Insurance Co. Ltd and mutual fund Sundaram Asset Management Co. Ltd.

Collectively, these institutions have invested Rs.214 crore in the round, with HDFC Standard Life signing the biggest cheque of Rs.75 crore. HNIs and family offices contributed the rest of the sum.

Shares were allocated to investors at Rs.205 apiece, resulting in a price-to-book value multiple of 2.1 times, documents show. Price-to-book value multiple is a ratio used to value financial institutions.

The pre-IPO fund-raising is a fresh issue of shares, so it will reduce the size of the primary offering which was earlier planned by the firm.

According to the draft IPO papers filed by the company, it originally planned to raise Rs.650 crore as primary capital through its IPO. The pre-IPO fund-raising will bring the overall size of the IPO down to around Rs.1,200 crore, from the planned issue size of around Rs.1,500 crore.

Apart from the primary fund raise, several private equity investors in the company, including World Bank arm International Finance Corp. and the Netherlands’ development finance institution FMO, will sell part of their shareholding through an offer for sale.

Ujjivan, in which foreigners owned a stake of 88.69%, as of 31 March, has to ensure that overseas shareholding in the company drops to 49%, one of the conditions it has to meet to become a small finance bank.

The public share sale is aimed at raising funds and giving overseas investors an opportunity to sell their stakes in the microfinance firm founded by former banker Samit Ghosh.

Ujjivan is the second of 10 small finance bank licensees to initiate work on selling shares to the public.

Chennai-based microfinance lender Equitas Holdings Ltd filed its share sale documents with the capital market regulator in October and received approval on 11 January.

Ujjivan filed its draft IPO papers on 31 December and is awaiting approval.

Small finance banks will offer basic banking services, accept deposits and lend to unserved, underserved sections including small business units, small and marginal farmers, micro and small industries, and entities in the unorganized sector.

The company disbursed loans worth Rs.4,328 crore in fiscal year 2015 and has a network of 423 branches across the country.

Also Read:

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India: Microfinance lender Ujjivan to submit IPO papers before year-end

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