Ujjivan Financial Services Ltd. - IPO Note - IIFL

Issue Opens: 28-Apr-16, Issue Closes: 02-May-16, Price Band: Rs207-210

Ujjivan is one of the leading MFIs in the country with a deep pan-India presence. As of December 31, 2015, the Gross AUM of Ujjivan was Rs 4,589cr spread across 24 states and union territories and 209 districts. The company served over 2.77 million active customers through 470 branches and 7,862 employees. The business is primarily based on the joint liability group lending model to economically active women. The company also offers individual loans and the share of it has been increasing with the management focused on converting group lending customers to individual lending customers. Ujjivan is amongst the 10 companies in India to receive in-principle approval from the RBI to set up a small finance bank (SFB) on October 7, 2015.

Underpenetration of micro credit to drive robust growth for MFIs

As per CRISIL Research (Microfinance, November 2015), AUMs of non-Andhra Pradesh MFIs is expected to rise at 30-34% CAGR, while total AUMs of all MFIs (including those in AP) will rise at 29-31% over FY15-18. The growth in loan portfolio will be driven by non-AP states, where micro-credit penetration is low. Commercial Banks are finding it more comfortable to lend indirectly to borrowers through MFIs who are specialized institutions.

Transitioning into a SFB

Ujjivan is well positioned for the transition from microfinance operations to banking operations given its resources, operational strength and capabilities. In order to satisfy the criteria for corporate structure, ownership and control prescribed under the SFB Guidelines, Ujjivan would float a wholly owned subsidiary and transfer the existing business to the subsidiary, which will, in turn, be the proposed SFB.

Key strengths of Ujjivan

1) Leading MFI with a deep pan-India presence; 2) Strong track record of financial performance; 3) Experienced leadership and strong corporate governance; 4) Robust technology driven operating model 5) Robust risk management framework 6) Focus on employee welfare.

Source : Equity Bulls

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