Ujjivan Small Finance Bank Reverse Merger: All You Need To Know

Ujjivan Small Finance Bank is in focus since the stock has rallied around 91% year to date.

This comes in the backdrop of the Bangalore-based small finance bank receiving an order last month on Sept. 8 to convene an extra-ordinary general meeting regarding the proposed scheme of amalgamation with its holding company, Ujjivan Financial Services Ltd.

The EGM is set for Nov. 3, 2023.

Ujjivan Financial Services is an NFBC-core investment company and a promoter for the bank, holding 73.68% of the equity shareholding and 100% of the preference shareholding.

Upon the culmination of the reverse merger, shareholders of Ujjivan Financial Services would stand dissolved, and the swap ratio implies that shareholders would receive 116 shares of Ujjivan SFB for every 10 shares held in Ujjivan Financial Services.

The merger was first announced on Oct. 31, 2021.

Ujjivan Small Finance is registered with the RBI as a small finance bank (SFB) and is engaged in retail banking business with a focus on financially unserved and underserved segments.

Commenting on the reverse merger, Emkay Global points out an arbitrage opportunity, wherein shareholders can get shares of Ujjivan SFB at a 15% discount by buying into shares of the holding company.

The brokerage also mentions Ujjivan SFB as the best-performing SFB/micro-finance player, with reasonable valuations at 1.6 times September 25E absolute book value.

Emkay Global has a 'buy' rating on the stock, with a target price set at Rs 58.