Ujjivan Financial IPO details – Worth Investing

This is a second Financial service IPO coming in recent month after stellar IPO of Equitas. Ujjivan Financial Services Ltd a microfinance company coming with a initial public offer which will hit the primary market on 28 April 2016-2 May 2016 to raise Rs 875-882 crore. They firm constitute a fresh issue of Rs. 358.16 crore while existing shareholders will sell 2.49 crore equity shares.

About the Company:-

Ujjivan financial services ltd. established on December 28, 2004 at Bengaluru, Karnataka. It’s a Indian Microfinance company. The firm was started with the mission of providing a full range of financial services to the economically active poor who are not adequately served by financial institutions. The firm is mainly based on the group leading model of joint liability and provides collateral free, small ticket-size loans to economically active women. The firm also offers individual loans to Micro & Small Enterprises (“MSEs”).

The firm offer a diverse range of loan products to cater as per customers specific requirement. Their products are mainly comes under two broad categories :

Group Loans

Individual Loans

Based upon the end use of products, these products can be further sub-divided into agricultural, education, home improvement, home purchase and livestock loans.

Inspite of loan products, they also provide non-credit offerings like life insurance products, in partnership with insurance providers such as Bajaj Allianz Life Insurance Company Limited, Kotak Mahindra Life Insurance Company Limited and HDFC Life Insurance Company Limited.

Ujjivan financial had operations which are spread across 24 states and union territories, and 209 districts across all over India. Ujjivan served over 2.60 million active customers through 469 branches and 7,786 employees.

Qualitative Factors:-

They believe the following business strengths allow them to successfully compete in the industry:

• Leading MFI with a deep pan-India presence.
• Customer centric organization.
• Professional management, experienced leadership and strong corporate governance.
• Robust risk management framework.
• Focus of employee welfare.
• Robust technology driven operating model.
• Strong track record of financial performance.

Products:-

Their product line consists of loan products which can be broadly classified into group lending and individual lending products.

• Group: – These are the type of loan which is provided to group. Group loans are Business Loan, Family Loan, Top-up Loan, Education Loan etc.
• Individual: – These are the type of loan which is provided to individuals such as livestock Loan, Higher education Loan, Agriculture Loan etc.
• Housing: – These are the type of loan which are provided for task regarding house. Housing loans are Home Improvement Loan, Home Loan.
• MSE: – These are the type of loan which are provided for business purpose such loans are Business loan, Bazaar loan, Secured business loan.

Non-Credit Offerings:-

• Insurance Products
• Information Technology
• Human resources
• Intellectual Property
• Marketing
• Competition

Financial:-

Ujjivan is consistent firm in india as shown in their financial records. They achieved profit in consistent manner in each year, so their record is quite stable. They profit margin was down in 2012 but after that they are growing in upward manner and profit is not fluctuating, that’s the reason they are impressive.

Ujjivan registered 44% growth in 2013-14 with rs.1,617 crore from the last financial year. They achieved a pre-tax profit also which is of rs.83.81 crore. They had their sevices across 22 states in which they have 350 branches and serve over 1.3 million active customers.They had disbursed loans amounting to over Rs 6,800 crore with a repayment rate of above 99%. They had achieved a customer retention rate of 85%.

Valuation

EPS on the FY’15 stand at Rs 10.6. Based on that, the P/E ratio at the higher price comes at 20X. Compared to the recent Equitas IPO, which was at 25X, this seems cheaper. It is also priced lower than it competition SKS Microfinance which has a P/E of almost 35X.

Disclaimer: We are not SEBI registered advisor and this article is not an investment advice. We are not authorized to give investment advice nor do we provide it on this website. In case you are interested in investing, we would advise you to contact your advisor for the same. We cannot be held liable for any loss arising due to investment made as per this article.

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