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Ujjivan Small Finance Bank may issue bonus shares to Ujjivan Financial Services shareholders

The shares will then be listed on the stock exchanges.

, ET Bureau|
Last Updated: Nov 14, 2018, 08.10 PM IST
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The shares will then be listed on the stock exchanges.
Kolkata: Kolkata: Ujjivan Small Finance Bank may issue up to 60% of its bonus shares to the existing shareholders of the bank's holding company, Ujjivan Financial Services.

The balance 40% holding will remain with the promoter till January 2022 as per Reserve Bank of India's direction.

This is one of the options available for Ujjivan as the banking regulator directed small finance bank promoters to list their banking units separately within three years of operations. Ujjivan Financial Services, which wholly owned the bank, is a listed entity.

"Issuing of bonus shares is the most likely possibility," Ujjivan Small Finance Bank Managing Director Samit Ghosh told ET. "But we need to examine whether it will be tax efficient."

The shares will then be listed on the stock exchanges. The Ujjivan commenced banking journey in February 2017 and therefore it will have to list the banking unit latest by January 2020.

Other options available to Ujjivan promoters include doing a separate initial public offer and demerger of the holding company into the bank. The group has formed a sub-committee to examine all aspects of the listing exercise.

"IPO would be the last option," said Ghosh, adding that the demerger cannot be carried out in the current form as the holding company has no other business other than banking.

Equitas Holdings, which has also been directed by RBI to list its banking unit separately, is exploring a similar option of offering 60% ownership of Equitas Small Finance Bank to its existing shareholders.

This mechanism would prevent dilution in shareholders’ value.

Ujjivan Small Finance Bank on Wednesday reported Rs 44 crore net profit for the September quarter against a net loss of Rs 12 crore in the year ago period. Its total Income grew 24% at Rs 467 crore on a loan book of Rs 8,317 crore, which rose 25% year-on-year.

The bank’s cost of funds reduced to 8.5% in the second quarter from 8.6% as it has repaid Rs 400 crore of previous high-cost borrowing. Its net interest margin improved to 11% as against 10.2% in the year ago period.

The bank is looking to raise about Rs 350 crore of rupee-denominated tier-II debt from International Finance Corporation by March 2019. "This will serve dual purpose of providing long term funding and improve our capital adequacy," the company said.

Its capital adequacy ratio now stands at 23.8% at the end of September.

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