Ujjivan Small Finance Bank on Thursday made a stellar debut on stock markets. The bank’s shares listed at a premium of 57% over the issue price of ₹37 a share on the S&P BSE Sensex. The lender shed some of its listing gains on account of profit-booking by investors, declining around 5% from its opening price of ₹58 per share during the early trade.

The mass-market small finance bank opted for an initial public offering (IPO) to comply with the Reserve Bank of India (RBI) norms—to list within three years of receiving a banking licence. The promoter and holding company, Ujjivan Financial Services, diluted its stake in Ujjivan Small Finance Bank from 94.4% to 80% via shares sale. Moreover, Ujjivan Financial Services needs to dilute its stake in the bank to 40% in the next two years as per the RBI regulations.

Ujjivan Small Finance Bank’s ₹750-crore IPO opened for subscription between December 2 and December 4 with price band fixed at ₹36-37 a share. In fact, it was the most subscribed IPO this calendar year. The issue was subscribed 166 times against the issue size of 124 million shares. The portion allotted for non-institutional investors was subscribed a whopping 473 times, while the qualified institutional buyers category was subscribed 111 times, and the retail category 49 times.

Analysts say the IPO was a hit with investors mainly due to its attractive pricing, the lender’s strong asset quality, and the promoter’s market share in rural areas. The IPO is valued at a price-to-earnings ratio of 16.5, which places it favourably against peers like AU Small Finance Bank.

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