A bunch of foreign private equity (PE) shareholders in small finance bank licensee Ujjivan Financial Services Ltd have sold a total stake of around 3% in the company to domestic investors, two people aware of the development said.
In all, these foreign PE investors, including impact investor Lok Capital’s second fund Sarva Capital, have sold a stake worth around Rs150 crore in the past few weeks, said one of the two persons, requesting anonymity as he is not authorized to speak to the media.
The identity of the other investors besides Lok Capital could not be ascertained immediately. Axis Capital was the advisor to the selling shareholders, the first person cited above added.
The stake sale was necessitated by the need to lower foreign shareholding to the maximum 49% allowed by the Reserve of India (RBI) in a small finance bank. Strong investor interest in Ujjivan’s stock had caused foreign shareholding to exceed the threshold.
At the time of Ujjivan’s initial public offering (IPO) in April, foreign shareholding stood at 77%. Through the IPO, Ujjivan lowered it to around 44%. The Rs885 crore IPO, which opened on 28 April, was subscribed 40 times. Since its listing, Ujjivan’s share price has gained 117% to Rs456.8 on Friday.
“Post the company’s listing in May, the stock had seen strong buying action from foreign investors and the foreign shareholding climbed above the permissible limit of 49%,” said the second person cited above, also requesting anonymity.
On 15 June, RBI issued a notice barring foreign institutional investors, foreign portfolio investors, and non-resident Indians from buying shares in Ujjivan. A similar notice was issued in July in the case of another listed small finance bank licensee, Equitas Holdings Ltd.
According to data available on stock exchanges, as of 30 September, foreign shareholders held a 50.5% stake in Ujjivan. Foreign investors in Ujjivan before the company went public included the International Finance Corp., CX Partners, India Financial Inclusion Fund, Sequoia Capital, CDC Group and NewQuest Capital.
“The stake has been sold by PE funds such as Sarva Capital, and a couple of others, whose shares are locked in. The buyers too are domestic investors who have a lock-in on their shares. These are investors who had bought Ujjivan shares in its pre-IPO round,” said the second person.
In February, Mint reported that Ujjivan raised more than Rs300 crore from a clutch of investors in a private placement round ahead of its IPO.
Domestic institutional institutions which participated in the fund-raising included 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, according to documents filed by the firm with the registrar of companies.
The Economic Times reported last week that some foreign shareholders in Ujjivan were selling their stakes to bring the ownership structure in line with RBI requirements.
An email sent to Sarva Capital (Lok Capital) on Friday did not elicit any response. Calls made and text messages sent to Ujjivan managing director and chief executive Samit Ghosh went unanswered. Axis Capital declined to comment on the development.
Ujjivan is one of the 10 entities that have received in-principle approval to convert to a small finance bank. In September 2015, RBI issued small finance bank licenses to Ujjivan, Equitas, Janalakshmi Financial Services Pvt. Ltd, Au Financiers (India) Ltd, Capital Local Area Bank Ltd, Disha Microfin Pvt. Ltd, ESAF Microfinance, and Investments Pvt. Ltd, RGVN (North East) Microfinance Ltd, Suryoday Micro Finance Pvt. Ltd and Utkarsh Micro Finance Pvt. Ltd.
Small finance banks will offer basic banking services, accept deposits and lend to underserved and unserved sections, including small business units, small and marginal farmers, micro and small industries, and entities in the unorganized sector.
Ujjivan expects to start small finance bank operations by the first quarter of the next calendar year.
As of 31 December 2015, Ujjivan had served more than 2.77 million active customers through 470 branches across 209 districts. It is present in 24 states. Ujjivan’s loan book stood at Rs5,851 crore as of 30 June 2016.
