Ujjivan SFB looking to merge with holding co, planning to seek RBI approval in October

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Ujjivan Small Finance Bank has announced that it will initiate steps for the amalgamation of the holding company, Ujjivan Financial Services with the bank. This decision came after the Reserve Bank of India allowed small finance banks to apply for a reverse merger.

Ujjivan Small Finance Bank has announced that it will initiate steps for the amalgamation of the holding company, Ujjivan Financial Services with the bank. This decision came after the Reserve Bank of India allowed small finance banks to apply for a reverse merger.
Nitin Chugh, Managing Director & CEO at Ujjivan Small Finance Bank, spoke to CNBC-TV18 about the said decision of the RBI and what it meant for the bank. He said, “For us, we finish five years in January. So, the letter that we received was at the Association for Small Finance Banks. In that letter, they have said that we can apply three months prior to completing five years, which would mean that sometime in October - October end, we can apply to Reserve Bank of India (RBI).”
“The SEBI condition really is of promoter shareholding of 20 percent for three years after listing, now that is something which is procedural in nature. According to us, we will have to go through that.”
He added, “I am not very sure about whether it (SEBI’s approval) is going to be a deal-breaker or not, because if in case the reverse merger being contingent on the SEBI approval is not going to happen, that is in case SEBI decides to hold back the dilution of the promoter shareholding, then, in that case, the next path for us, of course, is going to be promoter shareholding dilution of 40 percent within five years.”
Talking about the Q1FY22 business, Chugh said, “This quarter will be a tough one because of the second wave. However, things in July are looking a lot better, in fact even in June things were better than what they were in May. Collection efficiency did indeed improve and in July, we are seeing a fairly good recovery back both on the business as well as on the collections side.”
On second wave, he said, “In general the industry weathered the second wave a lot better than the first wave, but banks like us who have a deeper and a larger exposure to the unserved and the marginal set of borrowers, for us it has been a double whammy. So, the second wave in any case, we know the impact both on the healthcare side as well as on the economy and the livelihood so we believe that banks like us who have exposure to businesses like microfinance or small borrowers on the business loan side, will indeed be a lot more impacted than some of the universal banks which may have a smaller portfolio.”
For full management commentary, watch the video.

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