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Ujjivan SFB listing to have impact on holding company as well: Hemang Jani, Sharekhan

Ujjivan Small Finance Bank’s overall operating performance has been decent and in terms of NPL quality, it is about 0.85 net NPL.

ET Now|
Dec 12, 2019, 10.21 AM IST
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ETMarkets.com
Hemang Jani-Sharekhan-1200
The government is trying its bit to revive the liquidity and transmission and thereby sentiment but it has been a long time that the entire exercise was undertaken and we are yet to see any meaningful money coming back to the PSU banks or meaningful transmission happening at the ground level, says Hemang Jani, Senior Vice President, Sharekhan. Excerpts from an interview with ETNOW.

Do you expect bumper listing for Ujjivan Small Finance Bank?
Yes, g
iven the sentiment we have for IPOs and the fact that Ujjivan Small Finance Bank’s overall operating performance has been decent and in terms of NPL quality, it is about 0.85 net NPL, and at a valuation of about 2.7 times price to book on FY19 earning base with a decent growth visibility of about 18-20%, the stock should open around Rs 52.

What is more important is the impact it could have on the holding company and our broad ballpark calculation suggests that the fair value of Ujjivan would be somewhere in the range of about 350-360 basis listing of about Rs 50 for Ujjivan Small Finance Bank.

PSU banks will once again be in focus. Measures are being taken to try and improve the money flow and transmission in the near term. Do you see any impact?
The market wants to see some concrete outcomes. The government is trying its bit to revive the liquidity and transmission and thereby sentiment but it has been a long time that the entire exercise was undertaken and we are yet to see any meaningful money coming back to the PSU banks or meaningful transmission happening at the ground level.

The market would not take this too positively unless there are real numbers in the books and we have seen already that State Bank of India and some of the PSU banks have started correcting, so I am not really too positive on this development as such in terms of the impact for PSU banks.

The Bhushan Steel deal perhaps would go through now because with the IBC changes and ring-fencing on liability, JSW will now not be liable for Bhushan fraud. That I guess was the main deterrent to this particular acquisition.
Finally, there is ring fencing and there is no liability on the part of the buyer and that definitely would be a big, positive trigger for the overall sector. You might see a bit of re-rating for even some of the PSU banks. But market would want to see it finally fructify because there have been hopes and recently, in the case of Essar, unless we see the money coming back to the banks and the deal fructify, the market would not really react positively. So let us wait and see how it emerges.
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