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In an interview with Joel Rebello, Ujjivan’s CEO designate Nitin Chugh said the capital raised will be used in the next two-and-a-half years following which it will look to reduce promoter stake in its listed holding company. Edited excerpts:
What is the reason to float this IPO now?
As part of the licensing conditions, the bank has to list within three years even when the holding company is listed. We had requested the RBI that since the holding company is listed and this is the only business it has, in spirit, the bank was listed. However, they clarified that the bank also has to list since it is a licensing condition. We analysed various permutations and combinations and decided to list. So this is not being done only for capital. We could have done it next year if we needed capital. But now that we are doing this IPO to comply with the licensing conditions, we will get growth capital also. Our capital adequacy will improve to about 22% from 18.5% now.
What happens to the holding company?
Their holding will drop to about 85% in the bank from 95% now. This is a fresh issue, but they are not subscribing. We also need to reduce the holding company stake to 40% within five years for which we will look at the offer for sale, but we have time for that. The holding company will also continue to be listed but we have the provision to make the promoter exit after completing five years, which is a special dispensation for SFBs and now part of the guidelines. This means that a reverse merger is possible after five years, which is also what we would like to do. We want holding company shareholders to subscribe to this issue and have reserved 10% of the issue for them and there is also a discount we are giving them. We want to protect their interest because the holding company is under pressure now. We are also getting new investors.
What are you going to use the money for?
We will use it to grow our business. We are growing our micro finance business at 35%, affordable housing and MSME loans are also growing at 100% on a small base, so business growth is not a problem and the capital will get used. We will use it at least for two-and-ahalf years and by then we will finish five years and look at the holding company. After this IPO, our post money valuation will Rs 6,400 crore. We have Rs 12,000 crore loan book out of which micro finance is 79%, affordable housing is 9.6% and MSME loans is 6.80%. Tamil Nadu is the largest state with 16.5% of our micro finance loans followed by Karnataka (14.5%) and West Bengal (13%). We will continue to expand our branches. We have 552 branches now and our approved plan is 574 branches by March.
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