Despite witnessing huge subscription, being reasonably priced and having better fundamentals, Ujjivan Financial Services witnessed a relatively tepid debut compared to its recently listed peer, Equitas Holdings.

On Tuesday, Ujjivan listed at 10.4 per cent premium to its issue price of ₹210 and closed up 10.7 per cent at ₹232.4. On April 21, Equitas Holdings had debuted at 30.9 per cent premium to its issue price of ₹110 and closed 23 per cent higher.

Ujjivan’s IPO saw overall oversubscription of 41 times compared to Equitas’ 17 times. According to Angel Broking, Ujjivan’s IPO was valued at 2.1 times price to adjusted book value considering outstanding shares pre-IPO at the upper end of the price band of ₹210.

Centrum Broking had pointed out in its IPO note that Ujjivan has better return on equity and return on assets than Equitas. Also, Ujjivan has lower gross and net non-performing assets versus Equitas.

Analysts see three reasons for this. Firstly, Ujjivan has got listed within two weeks of Equitas’ listing. “No investor would want to invest in the same kind of company and from a similar sector immediately,” said a research analyst from a brokerage firm.

According to Siddharth Purohit, analyst at Angel Broking, RBI’s draft guidelines on May 5 about “on tap” licenses for universal banking had not been unveiled when Equitas got listed. “There is possibility of new entrants coming into the sector and competition is already high. Moreover, small finance banks have more restrictions compared to universal banks,” he said.

Indices’ movements weigh

Lastly, the respective index performance has also had a rub-off effect on the debut performance. On Tuesday, Nifty Bank, Nifty PSU Bank, Nifty Private Bank and Nifty financial services closed up in the range of 0.4-0.7 per cent. When Equitas had got listed, these indices were significantly up in the range of 1.4-3.6 per cent.

Analysts are divided over their view on the two stocks in terms of which will be better in the long term. While Ujjivan has pan-India presence with no one State contributing more than 20 per cent of its assets under management, Equitas is largely concentrated in South India. Moreover, Equitas is ahead of Ujjivan in terms of business with presence in commercial vehicle finance and home loans as well.

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