Ujjivan Small Finance Bank IPO to give a whopping return on listing date! Should you go for it?

Ujjivan IPO: The Ujjivan Small Finance Bank IPO (Initial Public Offer) opened for subscription today and it got around 40 per cent subscribed in just two hours. According to stock market experts, this enthusiastic response by the share market investors to the Ujjivan Bank IPO is because of the ideal valuation, strong asset quality of the Ujjivan SFB and NBFCs losing their business to the small banks. Importantly, they said that Ujjivan SFB IPO would give at least 20 per cent return to the investor on it's listing day itself

Giving details about the fundamentals of Ujjivan SFB, ICICI Direct report says, "USFB had a steady ride in terms of advances growth along with maintaining asset quality. There was a continued focus on garnering retail liability along with building CASA base. We have a subscribe recommendation on the stock. Further, at the IPO price band of Rs 36-37, the stock is available at a P/BV of around 2.2x (post issue) at the upper band on the first half of the FY20 basis."

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Expecting strong business model that would help Ujjivan IPO, Prakash Pandey, MD & CEO at Plutus Advisors said, "Ujjivan IPO will have a strong subscription as the banking sector has strong support model under the RBI guideline. After the NBFC crisis, people who used to invest in NBFCs have started to move their money from NBFCs to SFBs because there is RBI to regulate. Ujjivan Small Finance Bank has attracted good bank deposits from its customers as it is giving more than 8 per cent interest rate on deposits from one year to less than 2 years." 

Pandey said that its valuation is also attractive and it is expected to open at least 20 per cent higher than the Ujjivan IPO price citing,"It would open at around Rs 42-43 per Ujjivan share on its listing date. One can subscribe to the Ujjivan IPO."

The Ujjivan IPO will remain open for subscription till 4th December 2019. Ujjivan Small Financial Bank IPO price band is Rs 36-37 and the Ujjivan Bank will use issue proceeds for augmenting its Tier – 1 capital base to meet its future capital requirements.