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2021 was a nightmare for many banks and pharmaceutical stocks; RBL Bank, Bandhan Bank, Strides Pharma saw sharp losses this year

<ul><li>IPOs like Indigo Paints, Mrs Bectors Food, Chemcon Speciality Chemicals which got huge institutional demand during IPOs are down 14%-27% since listing.</li><li>Some of the IPOs where institutional players subscribed for more than 100 times the shares on offer, are in deep red right now.</li><li>Ujjivan Small Finance is one among such stocks, which is down 44% after more than a year of going public.</li></ul>Initial public offerings (IPOs) that get huge demand from institutional players are believed to be more valuable as investors trust their stock picking skills. However, this does not stand true in some cases. The Zomato IPO, for instance, saw institutional investors oversubscribing the issue by over 52 times. The shares of Zomato have gained over 6% since the listing. While one has to wait and watch if the stock lives up to the expectations, there are many other examples that show that the excitement of institutional investors does not assure good returns for retail investors who buy and hold shares. Some of the recent superhit IPOs like Indigo Paints, Mrs Bectors Food, Chemcon Speciality Chemicals, Ujjivan Small Finance Bank received more than 110 times subscription from qualified institutional buyers (QIBs). Commercial banks, public financial institutions, mutual fund houses and foreign portfolio investors registered with India’s market regulator Securities and Exchange Board of India (SEBI) fall under this category. These stocks ⁠— where institutional players subscribed for more than 100 times the shares offered to them during the IPO, are in deep red right now ⁠— did see a bumper listing. However, not all of them have gone on to create wealth over a longer period of time. <table style="border-width: initial; border-style: none;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Stock </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Oversubscription by institutional investors </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Change since listing </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">No of months since listing </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Tatva Chintan Pharma Chem </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">185.23x </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">7% </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Two days </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Clean Science &amp; Technology </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">156.37x </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">6.4% </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">11 days </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">G R Infraprojects </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">168.58x </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">-0.6% </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">11 days </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Shyam Metalics </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">155.71x </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">15.23% </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">1 month </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Nazara Technologies </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">103.77x </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">10.85% </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">4 months </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Laxmi Organic Industries </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">175.43x </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">59% </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">4 months </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">MTAR Technologies </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">164.99x </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">33.86% </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">4.5 months </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Indigo Paints </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">189.57x </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">-16.59% </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">6 months </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Mrs Bectors Food </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">176.85x </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">-27.89% </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">7 months </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Chemcon Speciality Chemicals </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">113.54x </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">-14.37% </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">10 months </td></tr><tr><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">Ujjivan Small Finance Bank </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">110.72x </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">-44.42% </td><td style="border-left:solid #000000 0.8333325pt;border-right:solid #000000 0.8333325pt;border-bottom:solid #000000 0.8333325pt;border-top:solid #000000 0.8333325pt;vertical-align:bottom;padding:2pt 2pt 2pt 2pt;overflow:hidden;overflow-wrap:break-word;">19 months </td></tr></tbody><tbody></tbody></table>Note: ‘x’ denotes the number of shares subscribed for, over and above the total offered Among others, Indigo Paints’ IPO also made a strong listing on exchanges as the prospects of the paints industry looked good. And it is good for players like Asian Paints, whose stock has surged 71% in the last one year. <div type="image" title="asian paint and indigo paint chart" height="900" width="1200" msid="84964395" hostid="261"></div> However, for Indigo paints the bummer came from the over $50 billion <a href="https://www.businessinsider.in/business/corporates/news/birla-is-making-asian-paints-and-berger-paints-change-colours-and-its-bad-news-for-those-who-got-shares-in-indigo-ipo-too/articleshow/80451063.cms">Aditya Birla Group</a>, which announced its intent to enter the paint business soon after the IPO. Aditya Birla group’s flagship company Grasim has announced to foray into the paint business with capital infusion of ₹5,000 crore over three years. <div type="image" title="grasim indus chart" height="900" width="1200" msid="84964418" hostid="261"></div> It was the second wave of COVID-19 pandemic that dented the stock of Ujjivan Small Finance Bank, which listed at over 50% premium to the issue price. The shares of the company have slipped 44% since listing as investors feared that many of its borrowers may not be able to repay their loans. A similar pain is visible in the bottomline of <a href="https://www.businessinsider.in/stock-market/news/britannia-tata-motors-maruti-suzuki-and[%E2%80%A6]tocks-to-watch-out-for-on-august-2/slidelist/84962973.cms">Bandhan Bank</a> ⁠— which leads in lending to the microfinance segment ⁠— which shrank nearly a third in the April-June 2021 quarter. The <a href="https://www.businessinsider.in/stock-market/news/mrs-bectors-food-ipo-investors-saw-their-money-double-on-listing-day/articleshow/79934860.cms">$73 million IPO</a> of the biscuit and bakery products maker Mrs Bectors Food was a hit⁠ — subscribed over <a href="https://www.businessinsider.in/stock-market/news/mrs-bectors-shares-are-down-32-from-the-peak-post-listing-analysts-say-it-is-still-overpriced/articleshow/80430865.cms">198 times</a>. It was the top IPO by subscription in 2020. After its listing on December 24, the stock had started declining. <a href="https://www.businessinsider.in/stock-market/news/mrs-bectors-shares-are-down-32-from-the-peak-post-listing-analysts-say-it-is-still-overpriced/articleshow/80430865.cms">Analysts </a>had said the stock was overpriced and even expected correction. <div type="image" title="bector foods" height="900" width="1200" msid="84964433" hostid="261"></div> According to an Axis Securities’ IPO note released in December, the company holds mere 1% of the market share in the branded biscuit segment, whereas its other listed peer Britannia has about 28% share of the pie. And as feared, the April-June quarter was bad even for Britannia, which saw its profit shrink by nearly 29% despite measures to curb costs. Meanwhile, Laxmi Organics has gained 59% since its listing on March 25, 2021. The company is the largest manufacturer of ethyl acetate ⁠— used as a solvent in paints and perfumes, for instance ⁠— with over 30% market share in product category. <div type="image" title="Laxmi organic" height="900" width="1200" msid="84964453" hostid="261"></div> In July, Tatva Chintan Pharma Chem, G R Infraprojects and Clean Science and Technology made a strong listing with over 100% premium. Let us see how these stocks turn out to be in the coming months. SEE ALSO: <a href="https://www.businessinsider.in/business/news/oyo-founder-ritesh-agarwal-and-zomato-founder-deepinder-goyal-invest-in-unacademy-valuation-crosses-3-billion/articleshow/84963709.cms">The founders of OYO and Zomato pump in money to make edtech startup Unacademy worth $3.4 billion ⁠— a ten fold jump in 18 months </a> <a href="https://www.businessinsider.in/business/news/exclusive-indias-largest-zinc-miner-is-eyeing-a-share-of-the-bangladesh-economic-boom/articleshow/84963388.cms">EXCLUSIVE: India's largest zinc miner Hindustan Zinc is eyeing a share of the Bangladesh economic boom </a>

Don’t subscribe to an IPO just because it saw great interest from institutional investors ⁠— Indigo Paints, Mrs Bectors Food, and Ujjivan are examples to look at

<ul><li> As part of the merger, <keyword id="3660661" type="General" weightage="80" keywordseo="clix-capital" source="Orion">Clix Capital</keyword> Services will also need to take on Suryoday <keyword id="6382595" type="General" weightage="20" keywordseo="small-finance-bank" source="Orion">Small Finance Bank</keyword>’s gross bad loans worth ₹381 crore. That's nearly a quarter of Clix Capital’s own net worth.</li><li>Both the entities are into completely different lines of business. <keyword id="9295768" type="General" weightage="20" keywordseo="Suryoday-SFB" source="Orion">Suryoday SFB</keyword> is essentially a micro-lender, while Clix Capital is a non-banking financial company that is into MSME and consumer lending.</li><li>Besides Clix Capital getting an indirect banking licence, the deal would help Suryoday SFB diversify its loan book and strengthen its digital presence.</li></ul>AION Capital-backed Clix Capital Services Pvt. Ltd., a non-bank lender, has been out in the market to acquire a banking licence since last year. After a failed attempt to acquire distressed Lakshmi Vilas Bank in November last year, it has now set its eyes on another bank ⁠— Suryoday <keyword id="3896843" type="General" weightage="20" keywordseo="small-finance-bank-ltd" source="Orion">Small Finance Bank Ltd</keyword>. The proposed merger, according to a source directly aware of the development who spoke on condition of anonymity, is in advanced stages, with Centrum Capital acting as an advisor to the deal. The development was first <a href="https://www.business-standard.com/article/companies/clix-capital-suryoday-sfb-in-merger-talks-deal-in-advanced-stage-121091300045_1.html">reported</a> by Business Standard on Sep. 13 that said, citing unnamed sources, that both parties were engaged in due diligence for the transaction. Even as the deal would help micro-lender turned banker Suryoday to expand its loan book, the deal comes at a heavy price for Clix Capital. This, as the Gurugam-based non-bank lender will also have to absorb Suryoday’s gross bad loans worth ₹381 crore. That's nearly a quarter of Clix Capital’s own net worth. The cost of the merger, and its own deteriorating asset quality due to the pandemic, will be over and above that. But experts are divided on the benefits of the merger. “There are no visible synergies between Suryoday SFB and Clix Capital, as both have completely different business models,” said <keyword id="12088598" type="General" weightage="20" keywordseo="anand-dama" source="Orion">Anand Dama</keyword>, research analyst at brokerage firm Emkay Global Securities. “The only plausible explanation for the deal is that it would help Clix Capital indirectly acquire a banking license, while Suryoday will be able to diversify its lending portfolio. But a regulatory approval for the deal could be an arduous task,” he said. There are others who believe Clix Capital will benefit from both cheaper capital, thanks to the banking licence, and new set of borrowers. After the deal was reported, Suryoday SFB’s stock jumped almost 20% to close at Rs 179.40 apiece on the BSE on Monday. <div type="javascript" title="Custom" contenttype="Image"><cdata><![CDATA[<div class="flourish-embed flourish-chart" data-src="visualisation/7252296"></div>]]></cdata></div> <cmsannotation type="cmsannotation" annotationid="What’s On The Table?" comment="subhead" text="What’s On The Table?">What’s On The Table?</cmsannotation> Suryoday SFB is essentially a micro-lender with close to 68% of its loan book worth ₹4,004 crore dedicated to providing micro-loans to women in urban and semi-urban areas, under the joint liability group model. Clix Capital, on the other hand, is mainly into small business and consumer lending that form 82% of its loan book worth ₹4,249 crore. The proposed merger, said Siji Philip, senior research analyst at Axis Securities, may mean a riskier loan book with possible pressure on asset quality metrics, which would need to be resolved over time. “If a deal fructifies, it would also mean that the combined loan book of Suryoday and Clix Capital could face asset quality headwinds and more clarity is awaited on this front. Besides, the merger will create a loan book comprising microfinance from Suryoday, and MSME (micro, small and medium enterprises) and consumer finance from Clix, which have been some of the heavily impacted segments during the pandemic,” she said. As of June 30, Suryoday reported gross non-performing assets at 9.5% of its total advances, while it wrote-off loans worth nearly Rs 79 crore. Its GNPA in the quarter ended March, too, was largely the same at 9.4%. “Delinquency in the portfolio increased due to the impact of the second Covid wave. Collections were difficult in the majority of the places across the country in April and May which led to increased PAR (portfolio-at-risk),” said <keyword id="11017591" type="General" weightage="20" keywordseo="baskar-babu-ramachandran" source="Orion">Baskar Babu Ramachandran</keyword>, managing director and chief executive at the bank during its earnings con-call on Aug. 12. <div type="javascript" title="Custom" contenttype="Image"><cdata><![CDATA[<div class="flourish-embed flourish-table" data-src="visualisation/7252787"></div>]]></cdata></div> Compare that to Clix Capital, which had gross NPA at 3.37% as on March 31, or about Rs 143 crore, as per a June 29 <a href="https://www.careratings.com/upload/CompanyFiles/PR/12072021061939_Clix_Capital_Services_Private_Limited.pdf">note</a> by Care Ratings. The asset quality numbers as on June 30, 2021 were not available in public domain for Clix Capital. <cmsannotation type="cmsannotation" annotationid="The Road Ahead" comment="subhead" text="The Road Ahead">The Road Ahead</cmsannotation> As the contours of the deal get worked out, combining Suryoday and Clix Capital may even help the two entities build a more resilient loan book, said Hemindra Hazari, an independent banking analyst. “Suryoday SFB would need to expand its loan offerings beyond microfinance to build a more resilient loan book, and a deal with Clix Capital would help it do just that,” he said. Besides helping with loan book diversification, the merger would also help Suryoday improve its digital capabilities and lower its operating costs, said Philip. Whereas Clix, said Hazari, will be able to take advantage of lower cost of funds available to a bank. “At a time when non-bank lenders are struggling with liquidity constraints, a merger would go a long way in bringing down the cost of funds,” he said. <div type="javascript" title="Custom" contenttype="Image"><cdata><![CDATA[<div class="flourish-embed flourish-table" data-src="visualisation/7252363"></div>]]></cdata></div> So far, Suryoday, focused on Maharashtra and Tamil Nadu, has expanded its book into commercial vehicles, affordable housing and small business loans. But since a bulk of its business is unsecured micro-loans, its asset quality has remained weak. Clix, however, managed to shrink its stressed corporate loan book to 18% as of fiscal 2021, compared to 27% in fiscal 2020. But despite being more efficient with its lending, the cost of capital has increased to 4.53% of total assets, as against 1.23% in the previous fiscal. The credit costs, Care Ratings said in its July note, inched up mainly due to higher provisioning costs amid the pandemic that affected the businesses of its underlying MSME and retail borrowers. The deal, said Hazari, is borne more out of need than synergy between the two lenders. “Though the Reserve Bank of India has been conservative in granting banking licences to NBFCs, acquiring or merging with a bank has become a convenient backdoor entry for some. For Clix, this is a similar opportunity, even if it means absorbing the bad loans of another bank,” he said. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/careers/news/online-pharmacy-startup-pharmeasy-is-looking-to-hire-200-engineers-in-hyderabad-pune-and-delhi-before-the-ipo/articleshow/86168091.cms">Online pharmacy Startup PharmEasy is looking to hire 200 engineers in Hyderabad, Pune and Delhi before the IPO</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/tech/news/how-to-take-screenshots-on-windows-10-8-and-7/articleshow/86168223.cms">How to take screenshots on Windows 10, 8 and 7</a>

Clix Capital's urge to be a bank must be too intense for it to merge with Suryoday

<keyword id="6383459" type="COMPANY" weightage="100" keywordseo="Ujjivan-Small-Finance-Bank">Ujjivan Small Finance Bank</keyword> (SFB) is expecting contraction in interest and fee incomes this fiscal due to business disruptions caused by COVID-19 and ensuing lockdowns, its annual report has said. The bank, however, said that the pandemic situation had a minimal impact on its books in FY 2019-20 as the nationwide lockdown was imposed in the last few days of March, by which time most of bank's collections had already come. The 2019-20 annual report said the lockdown "did impact the typically high year-end growth momentum of March, and our volumes stood lower than that envisaged earlier and significantly lower than that in the previous month, which affected the interest and fee income". The surplus liquidity carried as a buffer for the crisis period has led to a slight increase in finance cost for the last week of March, it said. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/startups/news/wework-gets-funds-from-softbank-while-india-franchise-offers-discounts/articleshow/77540098.cms">WeWork gets a new $1.1 billion cheque from SoftBank while it attempts resurrection – its India franchise is now offering discounts and a global all-access pass</a><a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/startups/news/wework-gets-funds-from-softbank-while-india-franchise-offers-discounts/articleshow/77540098.cms"></a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/auto/news/eicher-motors-registers-first-ever-net-loss-of-55-crores-in-at-least-a-decade/articleshow/77526012.cms">Eicher Motors registers first-ever net loss of ₹55 crores in at least a decade</a> The benefit of RBI dispensation on NPA recognition norms were applied on the <keyword id="117489" type="PERSON" weightage="20" keywordseo="moratorium">moratorium</keyword> portfolio, and it prevented any spike in credit cost, as per the report. "Although we shall continue to accrue interest income on the outstanding portfolio including those accounts that opt for moratorium, there will be an overall contraction in interest income and fee income on account of lower business volumes due to lockdown and adherence to social distancing norms," the bank said in it outlook for 2020-21. However, the bank said it expects a steady reduction in cost of funds due to the several stimulus measures of the RBI to enhance liquidity in the banking system. The lender added that the impact on credit cost remains to be seen at the end of the moratorium and the end of dispensation on NPA (non-performing assets) classification at the end of August 2020. Citing customer surveys, Ujjivan SFB said there have been temporary dip in household income levels in the wake of COVID-19 crisis and addressing the credit needs of this segment would help customers resurrect their businesses and livelihoods. "Given the ongoing crisis situation, we visualise it to be a good time to sensitise our customers and their families on basic savings and banking behaviour and promote goal based deposits, as our deposit rates remain attractive," it said. The bank said as digital payments have increased due to the pandemic, Ujjivan considers it as a good opportunity to expand initiatives and increase adoption to digital channels. "Our continued efforts on contactless and digital banking services will stand us in a good stead to further our outreach and build on this opportunity. Moreover, the volatility in the market yields is expected to help in the growth of institutional deposits," it said. Going forward, bank's strategy would be to manage the effects of lockdown and it will set in motion initiatives such as curtailing credit cost, re-starting business with repeat clients, scaling deposits and Sampoorna banking business. Bank's Sampoorna Family Banking solution was launched to address every household's comprehensive banking requirements, ranging from the youngest member to the senior citizens. The bank said it will also penetrate into new geographies and further push the growth of rural banking. "We will also introduce consumer durable loan, micro loan against property and use an analytics-based model to graduate group loan customers. Additionally, we will simplify our digital pre-approved loan process with the help of data analytics and expand our UPI QR based payment solutions for merchants via UPI acquirer platform and our UPI PSP Mobile app," Ujjivan SFB said in the report. Besides, the lender said that it will step up its cashless repayment further through its Money Mitra initiative and will offer banking services from neighbourhood shops and pilot cash collection points. "We are also planning to launch a voice-, video- and vernacular-based, easily navigable mobile banking app for microfinance customers to drive digital usage," it said. Moving ahead, the bank will expand the product base with new channels of loan EMI payment via popular and easy-to-use platforms -- Popular UPI apps, BBPS, CCAvenue and Billdesk and use of BC and digital pre-approved individual loans via phone banking and mobile app, it said. Also, the bank will concentrate on semi-formal and formal MSME segments, led by its diversified product offering and relationship based approach. Further, the bank said it plans to launch fintech partnerships in supply chain finance domain to provide an additional lead channel and will also introduce digital onboarding platform for improved delivery processes. During 2019-20, Ujjivan SFB registered a 28 per cent growth in its gross advances at Rs 14,153 crore as on March 30, 2020. Deposits of the bank were up by 46 per cent at Rs 10,780 crore while the retail deposits rose 73 per cent to Rs 4,724 crore. Bank's total income in FY20 jumped by 49 per cent to Rs 3,026 crore, earning net profit of Rs 350 crore, which was higher by 76 per cent from a year ago. Ujjivan SFB, which began its operations in Februray 2017, got listed into the capital market in December 2019, which was termed as one of the most subscribed IPOs in 2019. The bank with its branches spanning across 24 states and union territories had a customer base of 54.4 lakh as on March 31, 2020.

Ujjivan Small Finance Bank sees shrinking interest and fee incomes due to loan moratorium this year

New Delhi, Mar 23 () Ujjivan Small Finance Bank (SFB) on Monday said its independent director Luis Miranda has resigned from its board to abide by conflict of interest norms. The bank in a regulatory filing said that it has received a letter from Luis Miranda tendering his resignation as an Independent Director of the Bank with effect from March 22. Miranda in his letter said: "In addition to being an Independent Director of the Bank which is an Insurance Intermediary, I am also the Chairman and Independent Director of Manipal Cigna Health Insurance Company Limited, an Insurance Company. "With reference to provisions of Section 48A of the Insurance Act, 1938 which per se restricts common directorship, I understand that my continuation as common director of an Insurance Company and Insurance Intermediary may pose a potential conflict of interest." He said to uphold the principles of good corporate governance, he is resigning as an Independent Director of the Bank with effect from March 22, 2020. "Consequently, I shall also cease to be a member of various Board Committee of the Bank (Ujjivan SFB)". Ujjivan SFB said Miranda also confirmed that there are no other material reasons for his resignation other than those stated in his resignation letter. KPM NKD MRMR

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