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Ujjivan Small Finance Bank may launch reverse merger to cut promoter stake, says CEO Nitin Chugh

Updated : December 12, 2019 01:49 PM IST

MD and CEO Nitin Chugh said a reverse merger with the holding company is the first choice for Ujjivan SFB, but it could also look at an acquisition.

On Ujjivan SFB’s strong stock market debut, Chugh said investors showed confidence in the bank's credibility and a very strong base.

Ujjivan Small Finance Bank is planning to start discussions with the Reserve Bank of India to work out a plan to reduce the promoter's stake in the bank to 40 percent within five years, said managing director and CEO Nitin Chugh.

Chugh said the bank is also exploring a reverse merger to cut the promoter holdings to zero. "In case we have to also go down the path of 40 percent within 5 years, we will have a plan B in the works. We have time for that and we are looking at all kinds of options,” he said in an interview with CNBC-TV18.

A reverse merger with the holding company is the first choice for Ujjivan SFB, but it could also look at an acquisition, he added. After the listing, the promoter's stake in the bank has fallen to 85 percent from 100 percent.

Bumper IPO listing

Ujjivan SFB made a strong stock market debut, rising nearly 59 percent in opening trade. The stock listed at Rs 58.75 per share on the NSE, up 58.76 percent from its IPO issue price of Rs 37 per share.

Chugh said investors showed confidence in the bank's credibility and a very strong base. "We have displayed very good outcomes in our history of 15 years and also importantly after we became a bank. The market just assigns a lot of credibility to our story,” he added.

The IPO proceeds will be used for growth, said Chugh. “This will be growth capital for us because we are growing our business lines.”

Business outlook

Chugh said the book comprised mainly microfinance when Ujjivan SFB started as a bank but, over time, it has reduced to about 79 percent as of September 2019.

"Because we are focusing on the mass market and businesses like affordable housing and MSMEs, and we are also piloting vehicle finance and personal loans, we do expect to establish some sort of a good balance between microfinance and the other lines of businesses," said Chugh, adding that Ujjivan SFB is working to create a good mix between microfinance and other lines of businesses.

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