Shares of Ujjivan Financial Services fell nearly 8 percent on Monday after the company filed a draft red herring prospectus with the Securities and Exchange Board of India (Sebi) to list its subsidiary Ujjivan Small Finance Bank (USFB).
The stock fell as much as 7.8 percent to Rs 261.70 per share on BSE. At 9:25 am, the stock was trading 4.4 percent lower at Rs 271.7 compared with 0.63 percent (236 points) gain in BSE Sensex at 37,586.
USFB plans to launch an initial public offering (IPO) at a face value of Rs 10 each, aggregating up to Rs 1,200 crore. The bank has appointed Kotak Mahindra Capital Company, IIFL Securities and JM Financial as book-running lead managers to the issue.
The proposed issue includes a reservation of equity shares totaling up to around Rs 120 crore for subscription by eligible Ujjivan Financial shareholders, the BSE filing said, adding that the issue is subject to receipt of requisite regulatory approvals, market conditions, and other considerations.
The company will use the proceeds of the issue to augment its capital base for future requirements.
Ittira Davis, managing director and chief executive officer of Ujjivan Financial Services, in an interview with CNBC-TV18, said that the funds from the IPO of Ujjivan Small Finance Bank will be used to strengthen the bank’s capital.
He also added that the minimum dilution expected by Sebi is 10 percent in the IPO and the Reserve Bank of India (RBI) is reviewing USFB’s incorporation and licence condition.
Edelweiss put Ujjivan Financial Services put the stock under review and advises investors to hold on to the stock until clarity on USFB IPO pricing emerges. The brokerage said that it has a positive business outlook on USFB and that listing Of USFB will mean dilution and holding company discount for existing shareholders.