Last updated: Oct 6, 2023 2:08 PM IST
Shares of Ujjivan Small Finance Bank rose 8.01 percent to hit a 52-week high of Rs 61.38 in early trade. The company’s market capitalization (m-cap) rose to Rs 11,957.10 crore.
This comes after the company witnessed a robust quarterly update, marked by strong loan growth and improved asset quality.
Total deposits rose 43 per cent year-on-year to Rs 29,134 crore in the September quarter, while rising 9 per cent sequentially. Receivables also rose 27 percent year-on-year and 5 percent quarter-on-quarter to Rs 26,600 crore.
Meanwhile, disbursements rose 18 percent year-on-year to Rs 5,749 crore in the last quarter. On a consecutive basis they rose by 9 percent.
The bank’s asset quality also improved as gross non-performing assets (NPAs) fell to 2.2 percent from 2.4 percent in the previous quarter. Gross NPAs stood at 4.4 percent in the same quarter of the previous fiscal.
Ujjivan SFB has delivered multibagger returns to its investors as it has earned over 100 percent returns in the past year. Meanwhile, the economy has also increased by almost 130 percent in the past six months and almost 200 percent in the past two years.
According to data from Trendlyne, the stock’s average target price is Rs 53, indicating a downside of 13 percent from current market prices. The consensus recommendation from eleven analysts for the stock is a ‘strong buy’.
The bank is also in the process of a reverse merger with its holding company, Ujjivan Financial Services Ltd.
Currently, Ujjivan Financial owns 73.68 percent of the shares and 100 percent of the preference shares in the small bank.
Following the reverse merger with the holding company, Ujjivan Financial shareholders will receive 116 Ujjivan SFB shares for every 10 shares.
The company will convene the extraordinary general meeting (EGM) of its shareholders on November 3, during the electronic voting period. According to domestic brokerage Axis Securities, the ex-date is expected to be announced after November 3.
The brokerage has recommended investors to buy Ujjivan Financial shares to create a more economical way to buy Ujjivan SFB, at a 15 percent discount. It has a buy rating on Ujjivan SFB stock with a target price of Rs 60 per share.
“This provides an opportunity to buy Ujjivan Small Finance Bank shares at a discounted rate by going long on Ujjivan Financial Services. For every share worth Rs 5,200 (520×10) of Ujjivan Financial Services, shares worth Rs 6,032 will be issued (116×52) of Ujjivan SFB,” the report said.
This provides an opportunity to buy Ujjivan SFB at a rate 15 percent lower than buying directly from the market, the brokerage said.
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