This means Ujjivan Small Finance Bank would issue 116 equity shares of it against 10 equity shares of Ujjivan Financial Services.
Although the merger is subject to the regulator’s final approval, the Reserve Bank of India already offered its in-principle go-ahead to the captains of the small finance banking industry when they proposed the reverse merger to bring down the promoter’s shareholding in the bank.
In a letter dated July 9, 2021, to the Association of Small Finance Banks of India, RBI allowed the reverse merger of holding
companies with the SFBs subject to final approval.
Ujjivan Financial Services, which is a holding company without any business activities apart from making investments in the bank, holds 73.68% shares in the bank.
Upon implementation of the scheme, public shareholding in Ujjivan Small Finance Bank will become 100% from 26.32% at present while the holding company or promoter would stand dissolved.
Shareholders would also benefit by holding shares in the bank and deriving value from their business directly. The bank’s turnover was at Rs 1000 crore and assets at Rs 24235 crore at the end of June, while the holding company had its turnover at Rs 1.7 crore and assets at Rs 1808 crore. Shareholders of the holding company derived their value from the bank’s business.
Shares of Ujjivan Financial Services closed Friday at Rs 248.35 while shares of the bank were at Rs 23.95 on BSE.
“The amalgamation would result in the formation of a larger and stronger entity having a greater capacity for conducting its operations more efficiently and competitively,” the bank said. “The amalgamation would avoid operational inefficiency in the group by operating one listed entity and creating synergies and resulting in a larger free public float for the combined listed entity,” it said.