Small finance banks of the future – Ujjivan Financial Services and Equitas Holdings — are all set to tap the equity markets with initial public offerings.
Among the 10 entities that were granted ‘in-principle’ approval in September 2015 by the Reserve Bank of India to start small finance banks, eight were microfinance institutions, including Ujjivan and Equitas.
On Friday, Bengaluru-based microfinance firm Ujjivan Financial Services raised about Rs.300 crore from various entities through a pre-IPO placement.
Major investors in the placement include HDFC Life, Sundaram MF, Shriram Life, family offices & HNIs, such as the Desai brothers, a statement from Ujjivan said.
The company filed its draft red herring prospectus (DRHP) on December 31,2015, for an IPO — a combination of fresh issue of shares for up to Rs.650 crore and an offer-for-sale sale of up to 2.49 crore equity shares by eight shareholders including Elevar Equity Mauritius, International Finance Corporation, India Financial Inclusion Fund and Mauritius Unitus Corporation.
Ujjivan said the size of its fresh issue of equity shares will be reduced since the pre-IPO placement had been completed. This, however, was subject to regulatory requirements, it added.
The net proceeds will be utilised to augment the capital base of the company to meet future capital requirements, which are expected to arise out of growth in the company’s assets, primarily loans and advances, besides other investments
Ujjivan is one of the successful applicants for setting up a small finance bank. It started operations in 2005 and provides financial services to the economically active poor, besides offering individual loans to micro and small enterprises (MSEs).
Chennai-based microfinance firm Equitas plans to raise Rs.600 crore through a fresh issue of shares (besides an OFS by investors) and the issue proceeds would be invested in its subsidiaries to augment the capital base so as to meet future capital requirements arising out of growth in business.
Among Equitas’ subsidiaries, EMFL is involved in microfinance lending; EFL provides vehicle and MSE finance and EHFL is in housing finance.
Of the net proceeds, Equitas plans to invest Rs.520 crore in its subsidiaries to augment their capital base to meet their future financial capital requirements.
Of this, Equitas plans to subscribe to the equity shares of EMFL and EFL to the tune of Rs.240 crore each and the remaining Rs.40 crore in EHFL.