End Term Examination – Financial Management

The paper has 3 questions carrying equal marks

Q1. a)Shayan International Ltd. has surplus cash. Its CFO decides to pay back Rs 4 per share
to investors by initiating regular dividend of Rs 1 per quarter or Rs 4 per year.The stock price
jumps to Rs 90 / share when payout is announced
i) Why does the stock price increase.
ii) What happens to the stock price when stock goes ex-dividend.
b) In the above case, assume instead that the CFO announces a stock repurchases of Rs 4 per
share instead of cash dividend.
i) What happens to stock price when repurchase is announced. Would you expect the
price to increase to Rs 90? Explain briefly
ii) Suppose the stock is repurchased immediately after the announcement. Would the
repurchase result in an additional stock price increase?
(assume the changes in dividend will result in changes in stock price also)

c) The information below gives the financial statistics of Infosys and Stock index. Comment
on its dividend policy.
Are the shares over valued?
(hint: kind of policy Infosys follows, dividend yield, d/p ratios of comparable industry, year
wise analysis)

Q 2: Read the IPO Details and answer the questions that follow
Ujjivan Small Finance Bank IPO
Incorporated in 2017, Ujjivan Small Finance Bank Limited (USFB) offers small finance
to underserved & unserved segments in India. The bank aims to work for the financial
inclusion of the country. USFB Bank is promoted by Ujjivan Financial Services Limited
(UFSL) which is an NBFC providing financial services to the economically active poor, who
are not served by the Financial Institutions.
UFSL offers small size loan products to economically poor women, individual loans to Micro
and Small Enterprises (MSEs). It follows the integrated lending approach where the company
considers technology infrastructure and back-end support functioning before lending.
USFB has a wide presence across 24 states and union territories in India. As on 30 June 2019,
it has 4.72 million customers, 474 Banking Outlets, 387 ATMs, two 24/7 phone banking
units (in Bengaluru and Pune) and 50 additionally operated Asset Centres. Customers can use
USFB mobile banking application in 5 languages.

USFB Loan Product

1. Agriculture and allied loans
2. Affordable housing loans
3. Loans to micro banking customers
4. Personal loans
5. Financial institutions group loans
6. Vehicle loans
7. MSE loans
The bank has a diversified portfolio offering savings, current & deposit accounts, Aadhaar
enrolment services, ATM-cum-debit cards, point of sales terminals, and distributing 3rd party
insurance products. USFB is focussed on digital platform and provides bill payments, SMS
banking, mobile banking, RuPay Platinum debit cards, internet banking, biometric ATMs
services digitally. The bank also allows registering savings account on UPI based mobile
applications. It has an automated tablet-based loan origination system, digitalised credit
processing and automated receipt collection system to reduce the turn around time of
customers.

Competitive Strengths
1. Serving mass-market segment of unserved and underserved
2. Multiple delivery channels
3. Pan-India presence
4. Digitally advanced platform
5. An established risk management framework

• Open: 27.75
• High - Low: 28.2 - 26.8
• Previous Close: 27.7
• Total Traded Value: 24666
• Updated On: 2020-05-15 4:00 PM

Company Promoters:
Ujjivan Financial Services Limited (UFSL) is the promoter of the company.

Company Financials:
Particulars For the year/period ended (₹ in Million)

30-Sept-19 31-Mar-19 31-Mar-18

Total Assets 1,61,078.96 137,422.15 94,728.73

Total Revenue 14,348.57 20,375.75 15,793.55

Profit After Tax 1,871.10 1,992.18 68.63

Objects of the Issue:

USFB proposes to utilize the Net Proceeds from the Issue towards following objects:
1. Augmenting the Bank's Tier - 1 capital base to meet our Bank's future capital requirements
2. Meeting the expenses in relation to the Issue
3. Receive the benefits of listing the Equity Shares on the Stock Exchanges

Ujjivan Bank IPO Details

IPO Date Dec 2, 2019 - Dec 4, 2019

Issue Type Book Built Issue IPO

Issue Size 208,333,333 Eq Shares of ₹10

(aggregating up to ₹750.00 Cr)

Face Value ₹10 Per Equity Share

IPO Price ₹36 to ₹37 Per Equity Share

Market Lot 400 Shares

Min Order Quantity 400 Shares

Listing At BSE, NSE

Ujjivan Bank IPO Tentative Date / Timetable

Bid/Offer Opens On Dec 2, 2019

Bid/Offer Closes On Dec 4, 2019

Finalisation of Basis of Allotment Dec 9, 2019

Initiation of Refunds Dec 10, 2019

Credit of Shares to Demat Acct Dec 11, 2019

IPO Shares Listing Date Dec 12, 2019

Ujjivan Bank IPO Lot Size and Price (Retail)

Application Lots Shares Amount (Cut-off)

Minimum 1 400 ₹14,800

Maximum 13 5200 ₹192,400

Ujjivan Bank IPO Promoter Holding

Pre Issue Share Holding 94.40%

Post Issue Share Holding 83.32%

• Pre-IPO Placement of 71,428,570 Equity Shares (Aggregating to ₹250 crore)

• Investors Portion: (a) QIB: 75% of the net issue (60% of QIB to Anchor Investors) (b)
NII: 15% of the net issue (c) RII: 10% of the net issue
• Shareholder category reservation: Rs 75 crore (Rs 35 per equity share)

Ujjivan Bank IPO Subscription Status (Bidding Detail)

Ujjivan Bank IPO how much subscribed?

No. of Times Issue Subscribed (BSE + N

SE)
As on Date & Ti QIB NII RII Others Total
me
 Shares Offered 56,250,000 28,125,000 18,750,000 20,833,33 123,958,33
3 3
Dec 4, 2019 19:49 110.72x 473.00x 48.97x 4.13x 165.66x
Ujjivan Bank IPO Prospectus

• › Ujjivan Bank IPO DRHP

• › Ujjivan Bank IPO RHP
Ujjivan Bank IPO Rating
2538

Ujjivan Bank IPO Listing Date

Listing Date Thursday, December 12, 2019

NSE Symbol UJJIVANSFB

Listing In B

ISIN INE551W01018

IPO Price ₹37 Per Equity Share

Face Value ₹10 Per Equity Share

Listing Day Trading Information

. BSE NSE
IPO Price ₹37.00 ₹37.00
Open ₹58.00 ₹58.75
Low ₹53.10 ₹53.05
High ₹62.80 ₹62.80
Last Trade ₹55.90 ₹55.95
Volume 16,132,554 251,414,527
Company Contact Information
Ujjivan Bank IPO Registrar
Karvy Computershare Private Limited
Ujjivan Bank IPO Lead Manager(s)
 1. IIFL Holdings Limited
2. JM Financial Consultants Private Limited
3. Kotak Mahindra Capital Company Limited
ISSUE PRICE: Rs 37 PER EQUITY SHARE OF FACE VALUE OF Rs 10 EACH
ANCHOR INVESTOR ISSUE PRICE: Rs 37 PER EQUITY SHARE
THE ISSUE PRICE IS 3.7 TIMES OF THE FACE VALUE

From details of IPO discuss the following:

1. Who were the existing shareholders. Is there any change in the shareholding pattern
of the bank.
2. Was the company raising more capital or were existing shareholder selling.
3. Was the IPO undersubscribed or over subscribed. If yes , what could be the possible
reasons.
4. Who will manage the pricing of the IPO.How does the allotment take place.
5. Did the IPO turn out to underpriced? If so, how much money was left on the
table.Discuss an IPO where money was left on the table. What could have been the
possible reasons for underpricing.

Q3 a) Zenver Ltd capital structure consist of the following:

Particulars Amount(in lakhs)
Equity shares@100 each 20
Reatined Earnings 10
9% preference shares 12
7% debenture shares 8
Total 50

The Companys EBIT is at the rate of 12% on its capital employed which is likely to remain
unchanged after expansion. The expansion involves additional finances aggregating Rs 25
lakh for which the following alternatives are available to it:

i) Issue of 20,000 equity shares

ii) Issue of 10% preference shares
iii) Issue of 8% debentures
iv) It is assumed that P/E ratios in case of equity shares, preference shares and
debenture financing would be 15,12 and 10 respectively. Which of the following
alternatives will you adopt and why.Tax rate is 35%

Q3 (b) Why do debt ratios of firms differ across industry. Pick up two firms from 2 different
industry and compare their debt ratios giving reasons for the variation.(300 words)

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